Dexus Joins Hands With Singapore’s GIC For $2 Billion Logistics JV

  • Nov 26, 2018 AEDT
  • Team Kalkine
Dexus Joins Hands With Singapore’s GIC For $2 Billion Logistics JV

Australian REIT Dexus expands its footprints in Australian logistics properties through the establishment of  ~$2 billion joint venture with Singapore sovereign wealth fund GIC.

On Monday, Dexus (ASX: DXS) announced that the company will create a new unlisted trust named Dexus Australian Logistics Trust (DALT) in partnership with GIC to further invest in its logistics properties business, particularly across ‘strong performing’ Sydney and Melbourne markets.

Subject to approval, the joint venture will see GIC as a foundation investor to DALT with an initial 25% investment in the core portfolio and an extension option to acquire additional 24% stakes by June 2020. The remaining 75% interest will be retained by Dexus unless acquired by GIC or other new investors over time.

DALT will perform as a Dexus’ open-ended industrial vehicle that will have a $1.4 billion core portfolio of logistics properties having a weighted average lease expiry of 5.3 years and average occupancy by income of 98%.

Dexus CEO, Darren Steinberg stated that ahead of supply chain efficiencies and upside momentum in online retail business, the company visions further opportunities within the logistics sectors.

The Joint Venture also comprises of $138 million development landbank and will have further  ~$0.5 billion on completion of three land developments acquisitions. Dexus reported that the company has retained 51% interest in JV’s development landbanks while remaining 49% interest have been taken up by GIC, providing a financial backbone to the development pipeline.

Financial Impact

With the establishment of this joint venture, Dexus’ third party asset under management will increase to $14.3 billion including diversified pooled funds as well as discrete office and industrial investment mandates. However, the transaction is expected to have no material impact on Dexus's AFFO and distribution per security in Fiscal 2019.

Source of company’s revenue will be on performance fees charged for funds and asset management services provided to the Joint venture. The fees will reportedly be calculated in March 2021 with a final wash-up and payment in March 2025.

For Fiscal 2019, Dexus maintains a guidance of distribution per security growth of circa 5%. The company further expects to reduce pro-forma gearing by 1.7% initially, or 3.3% by FY20 including the second tranche and the build-out of the Joint Venture’s development pipeline.  The company maintains a track record of developing and leasing 39 industrial development projects across 730,000 square metres in Sydney, Melbourne and Brisbane since 2010.

On this news, Dexus share price surged 2.488% to last trade at $10.710 today, i.e. 26 November 2018. Moreover, the stock has witnessed a decent performance change of +7.73% over the past one year while today as at November 26, 2018, it last traded at a PE of 6.150 x with market capitalization of $10.63 billion.


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