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Property trust Dexus (ASX: DXS) has announced its third and largest asset sale in Sydney in the space of six months, offloading a 50 per cent share of Grosvenor Place for $925 million.
Of that amount the trust will receive proceeds of $694 million, as half of the investment - or a quarter of the asset itself - belongs to the Dexus Office Partnership in which the overarching group holds 50 per cent.
The deal comes hot on the heels of Dexus' $273 million sale of 60 Miller Street, North Sydney announced earlier this month, representing a 3 per cent premium to its book value at the end of FY20.
The group also exchanged contracts to sell 45 Clarence Street, Sydney for $530 million in late June.
Today's announced sale therefore takes recent asset sale proceeds to almost $1.5 billion, bolstering the balance sheet to account for investments including Ford's new distribution centre in Melbourne and a 50-50 stake in a state-of-the-art clinical and research facility within Adelaide's BioMed City precinct.
However, the group notes today's sale specifically will initially be used to pay down debt.
Dexus reports the Grosvenor Place sale was at a five per cent discount to the property's book value at 30 June, reflecting the current vacancy and short term leasing risk in the asset.
The purchaser is an existing co-owner of the property and the sale is subject to Foreign Investment Review Board (FIRB) approval, with settlement expected in early 2021.
"This transaction continues our asset recycling strategy, realising value for both Dexus and our Dexus Office Partner," Dexus chief investment officer Ross Du Vernet said.
"The sale further strengthens our balance sheet and enables us to organically fund higher return growth initiatives in our funds and development businesses.
"It also provides improved capacity to undertake capital management initiatives should there be a continued disconnect between public and private markets."
Grosvenor Place is a 44-level, Premium grade office tower with ground floor retail, designed by Harry Seidler and built in 1988. The property interest is leasehold with 78 years remaining on the ground lease.
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At 30 June 2020, the property was 89 per cent occupied and had a weighted average lease expiry (WALE) of 3.4 years.
Major customers include Deloitte and Wilsons Parking.
Dexus acquired an initial interest in Grosvenor Place in 2013, with the investment generating an unlevered annualised total return of circa 12 per cent since acquisition.
The group acquired its initial 25 per cent interest in Grosvenor Place for $271.5 million in December, 2012, and acquired the rest of its share through its takeover of the Commonwealth Property Office Fund (CPA) in 2013.
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