Dexus chases deal with Collimate Capital

The AMP Capital-developed tower at Circular Quay Picture: Toby Zerna

High-level talks between property titan Dexus and financial services company AMP on the future of Collimate Capital’s $25bn real estate operation are the surest indicator that a deal is there to be done.

Sealing a purchase would give Dexus a finger in just about every institutional real estate pie in Australia as the assets, which include interests in some of the country’s top office towers and shopping centres, are irreplaceable and would take its funds unit to the next level.

Dexus already oversees a property portfolio valued at $45.3bn and directly owns $18.3bn worth of office, industrial and healthcare properties.

Winning control of the ex-AMP Capital, now Collimate Capital, real estate platform would add about $25bn worth of assets to the $27bn worth of real estate it already manages for third party investors.

Talks are believed to involve a Darren Steinberg-led team at Dexus and AMP chiefs, with CEO Alexis George weighing an exit from at least the real estate element of Collmate Capital, with details being ironed out by head of real estate Kylie O’Connor.

The timing of any mooted deal will be crucial with AMP, advised by investment banks Credit Suisse and Goldman Sachs, seeking to lock down an exit as a complete demerger is now less likely.

Just where any deal with Dexus on real estate would leave Collimate Capital is yet to be determined with the future of the lucrative infrastructure unit also up for grabs.

The market expects property and local infrastructure to be dealt with in one line. Whatever happens Dexus will be doing what is necessary to lock in the deal and convince, if necessary, already scarred investors.

Funding a transaction could be easier than expected as price expectations for the real estate management rights could amount to several hundred million dollars. But this would rise for the Moelis-advised Dexus if infrastructure was bundled up.

The Dexus move is strengthened by it running a fund that co-owns key assets including Sydney’s Quay Quarter Tower and 33 Alfred Street.

A transaction really depends on getting the big investors in the funds comfortable about a shift to Dexus and it already has minority stakes in some of them.

Big superannuation houses seem happy enough with Dexus running an ex-AMP Capital diversified property fund which it merged its own vehicle with last year. They have been unhappy with Collimate Capital’s management of a $7.5bn office fund and have agitated for change.

Dexus also has the capacity to take on the running of the AMP Capital Wholesale Shopping Centre Fund although superannuation fund UniSuper also holds some sway over its future.

There are a lot of moving parts and credible alternatives are believed to have been put forward by managers including HomeCo. Mirvac has also been keen on running the parts of the real estate unit.

Any move will again shine a spotlight on the respective battles for the office funds and the local infrastructure businesses that were in play last year.

So while there are some twists to come the renowned Dexus operation will be keen to lock in its position on the property funds opportunity of the year.