Dexus set to buy out MLC Centre

Dexus set to buy out MLC Centre

8 March 2019

The biggest single deal in Sydney’s commercial property market this year should be consummated next week as the country’s largest office landlord, Dexus, is expected to exercise a pre-emptive right to buy out an $800 million half-stake in the MLC Centre, says the AFR.

Senior sources say the deal is set to be struck on a yield below 5 per cent, which is broadly in line with recent book valuations of the half-stake Dexus already controls.

Dexus took a 50 per cent stake in the premium grade tower two years ago in a $722 million deal with QIC Global Real Estate. The stake changed hands on a yield of 4.5 per cent, setting a benchmark for the market.

Co-owner GPT announced in January this year it had decided to offload its half-stake in the 67-level commercial and retail landmark.

GPT is reducing its exposure to the Sydney office market and redirecting capital into office projects in Parramatta and Melbourne as well as in the logistics sector.

“The MLC Centre is one of the most prominent and striking buildings on the Sydney skyline,” said Savills Australia’s Ian Hetherington.

Located next to the Sydney Metro project’s new Martin Place station, the MLC comprises 67,408 square metres of prime office space across 57 floors, in addition to 10,305 square metres of prime retail space.

“The property occupies one of Sydney’s largest freehold sites,” said Savills Ben Azar, one of the agents marketing the tower.

“Office assets of this size and calibre are rarely offered to the market, making this an unparalleled investment opportunity,” he added.

The building is one of a wave of new towers being built in central Sydney, with Macquarie Group developing two towers next to the new Martin Place station and Investa and Gwynvill developing 60 Martin Place, notes The Australian.

To muster the capital needed, Dexus could go into action alongside its wholesale fund or recruit fresh capital through a mandate or club arrangement. An equity raising has also been mooted as an option.

The deal comes as JLL research shows that office transaction volumes in Australia surpassed $19 billion for the first time in 2018—a record result.