Dexus Plans Off-Market Bids as It Seeks More Australian Offices
“We’ll be active in the acquisition markets this year,” Darren Steinberg, Dexus chief executive officer, said in a telephone interview yesterday. “There’s a lot of interest in premium office buildings, but the depth of our management expertise, the strength of our networks and our knowledge of markets does enable us to obtain off-market positions.”
Steinberg, who took the helm at the Sydney-based company on March 1, 2012, changed direction from his predecessor, Victor Hoog Antink, who wanted to expand Dexus’s industrial property operations on the U.S.’s West Coast. Steinberg in December said the company had agreed to sell all but one of its remaining U.S. properties for $561 million, a 13 percent premium to book value, and the next day announced it had reinvested A$504 million ($534 million) in office buildings in Sydney.
Dexus is looking for office properties in Perth, Brisbane, Sydney and Melbourne, both in partnership with other groups and on its own, Steinberg said. An expectation that capitalization rates, a measure of property yield, will drop in the next 12 to 24 months, is contributing to this strategy, he said.
Dexus shares jumped 22 percent in 2012, compared with a 15 percent gain in the benchmark S&P/ASX 200 index. They’ve lost 1 percent this year.
Rents of office properties in Perth surged 12.9 percent in the third quarter of 2012 from the previous year, while Melbourne’s rose 3.4 percent, Sydney’s 3.2 percent and Brisbane’s fell 0.1 percent, according to Los Angeles-based broker CBRE Group Inc.
Even when purchases are made with partners, Dexus plans to manage the properties, Steinberg said.
“We have some very close partnerships with unlisted capital, but the key for us is to have management control,” he said.
The latest sale of Dexus’s U.S. properties followed the April 2012 divestment of 65 industrial assets in the U.S. to Blackstone Group LP for $770 million. The National Pension Service of Korea purchased the U.S. properties in December, according to a person briefed on the deal.
Dexus will maintain its Australian industrial properties, which are a “very good diversifier of our commercial portfolio,” at about 20 percent of its total assets, Steinberg said.
Dexus in August said it had established a partnership with the Korean pension to invest A$360 million in its Australian industrial assets. The partnership could grow to A$800 million in the next five years as Dexus completes industrial developments that the pension will then have the option to buy at market rates, Steinberg said.
Prime industrial property rents have returned to the levels they were at before the collapse of Lehman Brothers Holdings Inc. in 2008 and values are at a four-year high, as supply of prime warehouses remains tight, CBRE said in a release in November. Continuing buyer and tenant demand will support further improvements, it said.
With Dexus’s ratio of debt to total assets at 29 percent -- compared with a target range of 30 percent to 40 percent -- its share of acquisitions will likely be debt-funded, Steinberg said, declining to provide further details. The group, which has been seeking to diversify its sources of debt and extend debt maturities by issuing domestic medium-term notes and bonds in the U.S., will continue to do so in 2013, he said.
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