Market speculation surfaces on GPT-Dexus merger talks

Could GPT be interested in acquiring Dexus? Picture: iStock

Dexus has once again emerged as a topic of conversation in the real estate industry, but this time the talk is not about Blackstone’s interest but that of GPT.

The latest rumblings are that perhaps the pair have been in preliminary discussions about the merits of a merger in what would be a transformational industry deal and one of the largest seen for some time.

While investment bankers are yet to be connected to the scenario, Dexus has been close to Citi, while GPT has new management under the leadership of ex-Charter Hall executive Russell Proutt, so it’s unclear which bank would enter the frame.

DataRoom understands Dexus and GPT have previously held merger talks over the years, but the boards have always put a stop to it.

The understanding is while there have been some discussions, things have cooled off for now, with the market volatility linked to US President Donald Trump’s tariffs making any deal activity virtually impossible.

But, should there be a transaction this year, as some think could be the case, it would create a $15bn-plus listed real estate powerhouse, based on the market values of the two companies.

The share price of Dexus, with a $7.7bn market value, has fallen 25 per cent in five years. It was the country’s largest listed office landlord when the working from home trend emerged in the aftermath of the pandemic.

GPT — the country’s oldest property trust — is worth $8.7bn, and its shares are up 11 per cent over the same period.

Unisuper, which is one of GPT’s largest investors with 14 per cent, would have a major say on whether a deal moves forward, and the understanding is the relationship with Dexus has soured over a Macquarie Centre legal dispute.

The speculation comes after New York private equity firm Blackstone last year was said to have once again been running the ruler over Dexus as a buyout possibility.

DataRoom reported in December the deal plans stalled around October with the departure of Mark Harrison, who GPT announced seven months earlier would be joining the property trust from Blackstone, as its new chief operating officer.

He earlier worked for Proutt’s former employer, Charter Hall.

It is believed Dexus and GPT have been in talks because bringing the two groups together would make strategic sense.

Both have a similar strategy, with a diverse commercial property portfolio and operating in real estate funds management.

A deal would create a $60bn funds management business that would provide the financial firepower to compete with global rivals like Brookfield and Blackstone.

The synergies of bringing the businesses together would be substantial, and turbocharge growth.

Dexus has a $14.8bn portfolio of real estate and infrastructure assets and $53.4bn of funds under management, including $38.9bn managed for third parties.

The company owns some of the best-known office towers, including the MLC Centre in Sydney and 360 Collins Street in Melbourne, as well as airports and other key infrastructure assets.

In its portfolio are offices worth $20bn, $11bn worth of industrial properties, $9bn of retail, $1.7bn of healthcare, $11bn of infrastructure and $1bn of alternative investments.

Of its funds under management, 27 per cent is in infrastructure, 26 per cent in offices, 22 per cent in retail and 18 per cent in industrial, with the remainder in other classifications.

GPT has $34.1bn worth of assets under management, including $4.9bn in retail, $3.6bn in office and $3.8bn in logistics.

A deal would also provide the pair with the firepower to seize market opportunities, such as convincing funds managed by rivals like Lendlease to replace their managers with a new, larger and more efficient real estate powerhouse.