Dexus (ASX:DXS) signs a JV deal to acquire an interest in Sydney-based skyscraper

Source:JooFotia, Shutterstock

Summary

  • Dexus has established Mercatus Dexus Australia Partnership joint venture with Mercatus Co-operative Limited, under which DXS would acquire 33.33% interest in 1 Bligh Street.
  • With the deal, Mercatus Co-operative Limited would hold 90% interest (indirect) in MDAP while Dexus would hold the rest.
  • Dexus would be the JV’s investment manager and would manage the skyscraper after the acquisition.

Australia’s leading real estate player, Dexus (ASX:DXS), has announced the establishment of the Mercatus Dexus Australia Partnership JV with Mercatus Co-operative Limited. Under the agreement, Dexus would acquire 33.33% interest in 1 Bligh Street, Sydney, for A$375 million.

1 Bligh is jointly owned by Dexus Property Group, Dexus Wholesale Property Fund and Cbus Property. It is an iconic top-grade, 29 storey building situated in Central Business District in Sydney. It is well placed in the financial core and has decent access to transport and other key facilities. Further, as of 31 December 2020, the property is 99.5% occupied with a weighted average lease expiry of 5.4 years.

With this agreement, Mercatus Co-operative Limited would now hold a 90% share in Mercatus Dexus Australia Partnership (MDAP). Dexus would have the remaining 10% interest. MDAP is designed to let any additional office acquisitions in the upcoming period. In the agreement, Dexus would be the investment manager and continue to manage 1 Bligh Street after the acquisition.

The establishment of the MDAP JV and the further acquisition of an interest in 1 Bligh Street would effectively increase the Company's effective ownership interest to 36.66%. Also, the steps taken by the Company is in line with its strategic initiative of expanding and diversifying the funds management business and simultaneously advancing the goal of being the wholesale partner of choice.

Overall, the settlement of the acquisition would depend on FIRB approval. Also, the Company's interest would be funded from its current debt facilities.

A Glance at Dexus’ Strategy

The COVID-19 pandemic had made Dexus realise the significance of having a diversified business model and strategy. In the 1H FY2021 results announcement, the Company highlighted that it would make use of the changed market environments by seeking to capitalise on counter-cyclical prospects. Dexus would focus on strategic initiatives that would help unravel the business's relative value and improve the platform for future cycles.

The Company also highlighted that it would constantly execute active leasing plans to expand office portfolio cashflow generation, boost weightings toward sectors with solid tailwinds and grow flexible workspace offering of DXS.

Stock Information: At AEDT 12:14 PM, DXS shares were trading at A$9.350, down 0.532% from the previous close. Dexus has a market cap of A$10.11 billion.

GOOD READ: Here’s why Dexus (ASX:DXS) should be on investors’ radar

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