Dexus takes over MLC Centre

Dexus takes over MLC Centre

15 March 2019

Office heavyweight Dexus has stamped its authority on Sydney’s office market, taking full control of the landmark $1.6 billion MLC Centre by buying out exiting co-owner the GPT Group, reports The Australian.

As foreshadowed by PropertyHQ last week, Dexus will now co-own the tower with the Dexus Wholesale Property Fund—with each upping their stakes from 25 per cent to 50 per cent—after buying out GPT for $800 million.

“We’ve had strong support from our unlisted capital partners for DWPF to be able to participate in the transaction,” said Dexus chief executive Darren Steinberg.

“We look forward to extracting further value for our investors as we move forward through the redevelopment and activation of the ground floor plane,” he said.

The MLC Centre occupies one of the largest freehold sites in the Sydney CBD and will directly benefit from the new Martin Place Metro Station, due for completion in 2024.

The tower is also currently under-rented, giving Dexus the opportunity to reap the benefits of rising office rents, with about 28,000 square metres expiring or to be leased by the end of FY21.

A ground floor retail development across 12,800 square metres will also allow for “positive rental reversion”, Dexus said, creating further amenity for occupants of the office tower.

Dexus bought into the tower in 2017 and has since worked with GPT on the overhaul but was surprised when the opportunity to take full control of a city landmark came up, as most premium towers are held by rival companies.

Since 2017, the property has achieved an unlevered total property return of 11.37 per cent per annum.

Dexus will fund its share of the acquisition through debt. At the same time though it has launched a fully underwritten $425 million offering of convertible notes.

The notes will pay a coupon worth 2.05 per cent to 2.3 per cent a year, payable quarterly in arrears, according to the term sheet, says the AFR.

The final coupon and exchange price is expected to be announced on March 13, following completion of the offer bookbuild.

Dexus’ decision to exercise its pre-emptive right over the half stake is a major vote of confidence for further growth in the Sydney office market, says the AFR.

Dexus is emerging as one of the prime movers of the office property boom and is also among the parties vying for QIC’s $1.8bn 80 Collins Street project in Melbourne as well as pursuing its own projects in North Sydney, a tech hub near Sydney’s Central station and in Brisbane, where it is overhauling the Eagle Street Pier precinct.

The sales of Australia’s office towers reached nearly $22 billion last year, the first time the transaction tally has breached the $20bn mark.