Dexus Property Group (DXS), Australia’s biggest owner and manager of office properties, is seeking a partner to acquire and develop offices as it sells its U.S. industrial assets and draws its focus back to Australia.
“There’s never been a clear leader in the Australian office market and we aspire to that space,” Darren Steinberg, chief executive officer of Dexus, said in a telephone interview after the company’s earnings today. “We’ll look to have a large, strategic relationship in the office asset class over the next 12 to 24 months.”
Dexus today announced a venture with the National Pension Service of Korea to co-invest A$360 million ($377 million) in 13 industrial properties in Australia. The partnership could more than double in the next five years and fund industrial property developments, according to Sydney-based Dexus, which reported a 2.7 percent increase in funds from operations to A$367.8 million in the year to June 30.
The manager said it expects to exit the U.S., where it owns 24 industrial properties and three land parcels, within two years. The decision represents a move by Steinberg, who took over as CEO in March, away from the company’s earlier plan to boost its business on the U.S. West Coast.
Dexus shares slipped 2.5 percent to 97 Australian cents at the close of trading in Sydney, paring this year’s advance to 17 percent. The benchmark S&P/ASX 200 index has risen 6.8 percent in 2012.
The company, which in April agreed to sell 65 industrial properties in central U.S. to affiliates of Blackstone Real Estate Partners VII, will also divest its office building in Auckland and six industrial properties in France and Germany, Steinberg said.
Dexus sees strong demand for U.S. industrial assets and has had “a number of inbound calls since we sold the central portfolio,” Steinberg said.
Investment funds have been active buyers of industrial properties in the U.S. this year. Buyers are drawn particularly to assets in “hot-bed energy and high-tech markets” such as Austin, Texas, and California’s Silicon Valley, according to PricewaterhouseCoopers LLP. Dexus’s properties are in Dallas and San Antonio in Texas; Los Angeles; Inland Empire and San Diego in California, and Seattle.
Demand for industrial space in the U.S. is being driven by logistics providers, food and beverage companies and retailers, broker Jones Lang LaSalle Inc. said in a report this week. Demand growth is expected to outpace supply in the next few quarters, it said.
Prologis Inc. (PLD), the world’s largest warehouse owner, may sell about $800 million of U.S. properties by the end of 2012, in addition to the $470 million of property it has already sold, it said last month.
The Korea venture could also fund office developments in future, Steinberg said. Dexus is seeking to have offices make up between 80 percent and 90 percent of its balance sheet and industrial properties the rest, Steinberg said. It will grow its business by focusing primarily on offices and funds management in Australia, the company said.
Prime office values climbed 9.7 percent in the second quarter from a year earlier in Sydney, which makes up almost half of Dexus’s office assets, and office rents in the city rose 12.5 percent in the same period, according to an August report by Jones Lang LaSalle.
Dexus may also create funds that will own retail properties, Steinberg said.
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