Dexus backs super funds in high-stakes airport company skirmish

The owners of Melbourne airport are trading legal salvos with the property company that handles their accounts stepping up to protect its clients.

Dexus CEO Ross Du Vernet wants the company to manage more infrastructure assets.

Property group Dexus has upped the ante in the rift engulfing the company that owns Melbourne and Launceston airports by agreeing to wear the legal costs for its superannuation fund allies which represent the so-called Dexus investor bloc.

The ASX-listed company has been at loggerheads with some of the country’s largest investors, including IFM Investors and the Future Fund, as they have attempted to force it to sell a 27.3 per cent stake in the airports company. Dexus has been, in effect, ousted.

The dispute in the NSW Supreme Court is set to drag out as the hearing had been pushed back from early August to between November 10 and 21, and mediation November 3.

Dexus said on Tuesday it would stand behind shareholders it represented in the airport company’s ownership structure as they took their own legal action to ensure that they were not swept up in the dispute and forced to offload their holdings.

Some big superannuation funds, including REST, are part of the so-called ‘Dexus Bloc’ and have lodged claims to ensure that their stakes are not caught up in the broader legal battle.

The push to get Dexus to sell out of APAC, the company which owns both airports, is being driven by funds manager IFM, which is backed by some of the superannuation sector’s biggest names including AustralianSuper, ART, Cbus and Unisuper.

Combined, the two airports are worth about $14bn.

Terminal building in Melbourne airport. Picture: iStock

The dispute was sparked when Dexus last year sought to sell off a 9.7 per cent stake in the airport company, opening up a data room into which it invited 18 of the world’s largest investors. Its co-investors now want it out altogether.

The partial sales process was halted as the co-owners complained about the release of the information, and the Future Fund has since dumped Dexus from an administrative role in managing its interest. Dexus has denied breaching a shareholders deed at the heart of the dispute.

But other funds are backing Dexus and have taken costly advice, and could be hit with damages if they back the wrong side.

Dexus had said it will meet costs of most shareholders in its bloc, as well as any costs orders made against them if it is unsuccessful. Rest, which has held its stake for more than two decades, argued that it should not be caught up in the battle, adding that this could put its two million members at a disadvantage.

This sharpening of the contest digs Dexus further in against many of the large superannuation and investment funds that want it out of the airport they co-own.

The conflict has sparked doubts about how Dexus can push further into infrastructure and become a broader asset manager as it seeks to diversify away from its traditional office property portfolio.

The company gave a relatively bullish update on its portfolio, saying it had valued all 177 of its assets, including 29 offices and 148 industrial properties, which had resulted in a $55m boost to book values.

While this was only a 0.4 per cent bump, it underlines the recovery in the once downbeat office market. Offices lifted by 0.3 per cent, driven by market rental growth, slightly offset by marginally higher capitalisation rates and discount rates.

The industrial portfolio increased by about 0.9 per cent, with rental growth and slightly lower discount rates offsetting the impact of higher capitalisation rates.

Dexus chief executive Ross Du Vernet said it was positive to see valuation growth across the office and industrial portfolios. “We expect well-located, high-quality buildings to continue to outperform the broader market,” he said.

Originally published as Dexus backs super funds in high-stakes airport company skirmish