Blackstone eyes Dexus as it searches for takeover

Dexus owns some of the most well known Australian office towers including the MLC Centre in Sydney and 360 Collins Street in Melbourne.

Private equity firm Blackstone is understood to be actively scanning the Australian market for a large takeover opportunity — and the company said to be in its sights is the $9bn Dexus Property Group.

It is understood that Blackstone has been assessing the merits of an acquisition of the nation’s largest office landlord with help from JPMorgan, which has worked for the private equity firm in the past.

Blackstone bid for listed office manager Investa Office Fund two years ago, but its $3.26bn proposal was beaten by Canadian pension fund OMERS, which gained controlled of the company for $3.4bn through its subsidiary Oxford Properties.

It is believed the New York buyout fund was disappointed about losing out on that office portfolio, and industry observers say it would have reaped a windfall through the acquisition of IOF.

Market experts believe it would make sense for it to set its sights on a similar target.

Most of the real estate investment trusts are trading at a discount to their net tangible asset values due to the disruptions to shopping malls and offices on the back of the COVID-19 pandemic that is affecting rents.

Dexus is seen as the target that would be the easiest for a party such as Blackstone to wrap its head around, say experts, although it is thought a deal is not imminent.

Dexus owns an office portfolio worth $14.2bn and industrial properties worth $2.2bn. Its net tangible assets is currently at $10.86 per security.

For this reason, it comes as no surprise that Blackstone has been weighing a move on the business, given Dexus shares on Wednesday last traded at $8.72, with the market valuing the business at a lower price than the value of its assets overall.

The company owns some of the most well known Australian office towers including the MLC Centre in Sydney and 360 Collins Street in Melbourne.

It also has a real estate funds management operation that counts $3.3bn worth of shopping centres among its investments, $9.1bn worth of offices, $400m of healthcare-related properties and $2.7bn of industrial buildings.

With backing from pension fund partners, Dexus has aspirations for new projects such as a skyscraper near Sydney’s Circular Quay, an office project next to the city’s Central Station and a development in Brisbane’s Waterfront precinct.

It is also in asset sale mode, offloading a stake in Sydney’s $2bn Grosvenor Place office building and another property in Melbourne.

Before the onset of the pandemic, office towers were among the most sought after investments amid a low interest rate environment.

For the 2020 financial year, Dexus’ net profit fell 23.3 per cent to $983m.