Dexus Property in $500m convertible bond raising as asset sales pulled

Dexus says the move to offer $500m of fully underwritten guaranteed exchangeable notes is consistent with its strategy of diversifying funding sources.

Dexus Property confirmed the launch of a $500m convertible bond raising on Monday night in what is a telling sign for the real estate industry.

The listed landlord says the move to offer $500m of fully underwritten guaranteed exchangeable notes is consistent with its strategy of diversifying funding sources.

There was mounting speculation about the move at the UBS Australasia Conference on Monday, which hosted the CEOs of some of the country’s top companies and fund managers.

The notes are being offered at a coupon of 3.5 per cent and a premium of about 30 to 32.5 per cent to a price of no less than $7.53. The floor price represents a 3.71 per cent discount to the $7.82 closing price. The final coupon and exchange price will be announced on Tuesday following the offer’s bookbuild.

Bank of America is working on the deal.

Westfield shopping mall owner Scentre launched a hybrid issue in 2020 through UBS to reduce debt.

Dexus has used the convertible bond market previously when it purchased full control of Sydney’s MLC Centre, outlaying about $800m.

Analysts say convertible bonds offer an alternative form of funding that does not appear on the balance sheet.

The raising comes at a time when corporate debt is expensive, and some say Dexus can get funds at a better price through the bonds.

Analysts say Australia’s largest office landlord does not need to raise equity.

Yet a number of landlords have recently withdrawn assets for sale, with buyers unprepared to meet vendor expectations.

It is understood that Dexus is no exception, with a number of assets offered around Sydney.

The group has a heads of agreement arrangement with a major Asian group to take a stake in the $1.8bn Atlassian development next to Sydney’s Central Station, but industry players have suggested that these talks have also stalled.

Dexus must fund a substantial development pipeline, including its Brisbane waterfront project, tipped to be worth $2.5bn.

Additional reporting: Ben Wilmot