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Property trust Dexus (ASX: DXS) has today announced a deal to sell a Sydney office tower to Singapore-based Peakstone for $530 million, with proceeds initially to be used to pay down debt.
The announcement involving conditionally exchanged contracts for 45 Clarence St comes on the same day as a $195 million drop in the value of Dexus' industrial and commercial property assets, representing a fall of 1.2 per cent.
Despite these falls across the portfolio generally, Dexus says expected net proceeds from the sale are consistent with the CBD property's book value at the end of 2019.
The sale will still be subject to Foreign Investment Review Board (FIRB) approval, and follows an off-market unsolicited offer from Peakstone.
"This transaction reinforces the resilience of prime quality office asset values in the Sydney CBD and enables us to recycle capital into higher returning opportunities that we expect will become more prevalent over the coming period," says Dexus CEO Darren Steinberg.
The transaction follows the completion or exchange of more than $800 million of property divestments across the group during FY20.
Dexus has also announced a new external valuation for 107 of its 118 assets, comprising 42 office properties and 65 industrial properties. While there has been a drop in value, this follows a $656 million in the portfolio in the first half of FY20.
"Our high quality property portfolios were in a strong position as we entered into a period of uncertainty driven by the onset of the COVID-19 pandemic, with their high occupancy levels, diversified tenant base, and limited new supply coming online in our key office markets," says Steinberg.
"The latest independent valuations demonstrate the resilience of our property portfolios in this uncertain environment.
"The office portfolio experienced a circa 1.5 per cent decline on prior book values as a result of the softer assumptions relating to rental growth, downtime and incentives over the next 12 months."
The decline in book values for industrial property was less marked at 0.7 per cent.
"While the operating environment remains uncertain, over the next six to 12 months we expect quality office and industrial asset values to remain resilient with pricing supported by an attractive yield spread over bonds and lower for longer interest rate environment, with some impact from a softer outlook for rental growth, downtime and incentives," says Steinberg.
"Investment demand for quality assets is expected to remain positive, with Australia well positioned for a recovery in foreign investment due to efforts relating to the control of the COVID-19 pandemic ahead of other countries and our longer term economic growth prospects."
Yesterday another property company, Mirvac (ASX:MGR) announced the value of its portfolio was tracking to be 2.8 per cent lower than the December 31 book value of $11.6 billion, with most of the decline coming from retail property.
Unlike Dexus, Mirvac's decline in office property was less pronounced than in industrial with drops of 0.4 per cent and 1.4 per cent respectively.
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