Dexus takes full ownership of MLC Centre
As expected, Dexus has exercised its pre-emptive right to acquire the 50% stake in the MLC Centre being offered by GPT. The transaction at $800M is reported to reflect a yield of 4.97% in line with the book valuations of the half-stake Dexus already controls and a 3% premium to GPT's book value.
Dexus and the Dexus Wholesale Property Fund acquired the initial half-stake in the Martin Place tower two years ago from QIC in a $722 million and will jointly acquire the GPT stake.
The Harry Seidler designed MLC Centre is of Sydney's most distinctive landmarks. It comprises a 67 level A-grade building containing 66,900 square metres of office space, 10,600 square metres of retail space and 308 car spaces.
Since Dexus acquired their initial interest in the MLC Centre in July 2017, 15,763 square metres of space has been leased across the property at average face re-leasing spreads of 29.8% and average incentives of 13.8%. As a result the property has achieved an unlevered total property return of 11.37% per annum since that acquisition.
Dexus believe that the office tower continues to be under-rented and with circa 28,000 square metres expiring or to be leased by the end of FY21 they expect to benefit from strong Sydney CBD office market fundamentals.
Dexus indicated that they will fund its share of the acquisition through debt and will concurrently launch a fully underwritten offering of A$425 million Guaranteed Exchangeable Notes (“Notes”) due June 2026, which will be exchangeable into Dexus securities at the election of the holder anytime starting 41 days from closing until 10 days prior to maturity.
For GPT, the asset has achieved an annualised return of in excess of 20 per cent per annum over the past three years and the sale of the asset allows the group to reinvest the capital into other developments in Parramatta and Melbourne.
Cushman & Wakefield and Savills were appointed to handle the sale for GPT but was always likely to be picked up by Dexus.