Sydney's biggest office landlord has gone on a $1.1 billion buying spree

The MLC Centre during Vivid. Photo: Brett Hemmings/Destination NSW

Listed property group Dexus is buying a slice of the Harry Seidler-designed MLC Centre in Sydney’s CBD, a converted warehouse at 100 Harris Street, Pyrmont, plus a Melbourne industrial property as part of a $1.1 billion acquisition spree.

Dexus signed agreements to acquire a 25% stake in the 67-floor MLC Centre at 19 Martin Place for $361.3 million, with the Dexus Wholesale Property Fund (DWPF) taking an additional 25% stake for the same price.

The two Dexus entities are buying the Queensland Investment Corporation’s half stake in the MLC Centre, valuing the building at more than $1.4 billion.

Dexus will also take a 100% stake in 100 Harris Street, where Fairfax Media has its Domain real estate business, for $327.5 million, and $16.7 on the Melbourne industrial site.

The deal increases the Dexus office portfolio’s Sydney weighting from 65% to 67%, and makes it the dominant player in the city.

Earlier this week, Dexus said its six monthly valuation results, in which 62 of its 102 properties were externally valued as at 30 June 2017, resulted in an estimated $240 million or 2.1% increase on prior book values. The Sydney properties were the best performers, delivering a combined $190 million or 3.3% increase in the value for the six months to 30 June 2017, with One Farrer Place rising by 5% and 60 Miller Street in North Sydney the standout, jumping in value 26.2% or $45 million, off the back of successful leasing.

Dexus plans to fund its latest acquisitions with a $500 million institutional placement, a non-underwritten Security Purchase Plan to eligible Dexus security holders raising up to $50 million and up to $288.6 million in debt.

Dexus CEO Darren Steinberg said the deals will introduce 65 new customers to the Dexus platform.

“These acquisitions continue our dominant positioning across Australia’s major cities and reinforce our belief that Sydney will continue to benefit from the global trend of urbanisation and enhanced infrastructure links over the coming years,” he said.

“With these transactions we’ve broadened our customer base and identified a number of future opportunities to leverage our skills to unlock additional value and accelerate growth.”

The company also sees potential development and redevelopment opportunities at MLC Centre in the medium term.

Last year, Dexus sold the nearby 20-floor office block, 39 Martin Place, along with the lease on the adjacent Martin Place Shopping Circle to the NSW government for $332 million in a compulsory acquisition as part of the construction of the Sydney Metro.

The deal represented “a significant premium to the property’s book value of $222.6 million at 30 June 2016”, the company said at the time.

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