Dexus fund trades out of Mirvac offices at discount

A Dexus fund took a hit as it switched out of investing in a major office trust in a sign of tough times in the sector.

A Dexus-run property fund has quietly sold its stake in a $7bn wholesale office vehicle managed by rival Mirvac, which it had picked up out of the AMP Capital empire.

The sale was struck last month at a 9 per cent discount to the already written down value of the investment in the Mirvac Wholesale Office Fund.

The Mirvac vehicle owns interests in properties including Sydney’s Quay Quarter Tower and Melbourne’s Collins Place. Mirvac in 2022 won a proxy battle that took it away from Dexus, which acquired the bulk of the local AMP Capital real estate and infrastructure funds business.

The $7.2bn Mirvac fund had a 14.5 per cent decline in total return in 2023, according to MCSI, and last year investors were exiting at discounts as big holders cut their exposure to the offices amid a structural shift away from the area.

The sale was made by the unlisted Dexus Core Property Fund, which holds a mix of institutional grade Australian unlisted real estate and global listed real estate.

Although it has yet to flag a new home for the funds, it said one of its objectives was to diversify the unlisted assets and gain exposure to a broader range of institutional real estate investments.

The transaction was expected to generate proceeds of $91.5m, with pricing reflecting a 9 per cent discount to the December 2023 carrying value of the Dexus fund’s investment in MWOF.

The sale was about 39 per cent of the fund’s assets, and it will pour some proceeds into new investments and some into meeting redemptions.

The Dexus fund last year noted units had traded at steep discounts, and it applied a -20 per cent valuation overlay to its MWOF holding.

At its results last month, Mirvac said the fund outperformed over two, three, five and seven years. It said there was strong leasing success across the portfolio with about 55,000sq m of space either leased or under heads of agreement, reflecting the quality and premium locations.

The fund has been selling assets and Singaporean group Keppel is poised to strike one of the year’s largest office deals as it targets the purchase of a half interest in a Sydney skyscraper at 255 George St from the ­Mirvac-run fund, valuing the tower at more than $700m.

Originally published as Dexus fund trades out of Mirvac offices at discount