Dexus to pay AMP $337m for Collimite Capital real estate and infrastructure business

The purchase helps diversify the company away from the sluggish office market.

Dexus chief executive Darren Steinberg. Picture: Britta Campion

Listed landlord and developer Dexus has flagged a push into managing real assets as traditional commercial property classes come under pressure amid financial instability.

Big office towers and shopping centres are falling in value but Dexus has just struck a fresh deal to acquire the Collimate Capital real estate and infrastructure business from AMP.

Real assets encompass both property like office towers and shopping centres and infrastructure like airports, roads, student accommodation and hospitals.

The move bolsters Dexus’s funds unit by adding about $18bn worth of assets and helps it forge into infrastructure where it sees opportunities well beyond real estate.

Dexus chief executive Darren Steinberg said the acquisition would confirm the company as a “fully integrated real assets manager”.

“It positions the overall business for growth with expanded real estate product offerings and the capability of providing a new platform for growth in the highly attractive and adjacent infrastructure segment,” he said.

Mr Steinberg said that the global trend was for capital to be allocated to real assets and the opportunities were large.

“The total spending needed on infrastructure in Australia over the next 20 years is estimated at about $2 trillion, which provides Dexus with access to enormous long-term growth opportunities,” he said.

The move diversifies the company’s earnings from its traditional mainstay of offices. Mr Steinberg expects commercial property to go through a tough phase.

“It’s going to be a bit of a grind for a couple of years as we work through normalisation of interest rates,” he said.

Mr Steinberg said the company was committed to cutting leverage on balance sheet but was also seeing deals in its opportunistic fund.

The long-running funds platform deal pays AMP about $337m from Dexus, including the base purchase price, sponsor investments, and cash held on Collimate’s balance sheet.

A remaining $50m of the purchase price depends on the transfer of AMP’s interest in China Life AMP Asset Management company by the end of September 2024.

The recut deal means that Dexus can move ahead with its plans to shift deeper into managing real assets, while AMP gets a relatively clean exit.

AMP chief executive Alexis George.

The alternative structure was put in place after delays securing the regulatory approval from China. Dexus said the pair had finalised binding documentation for the alternative transaction structure under a two-stage completion process, with the first element completing on March 24.

The maximum payable by Dexus for the platform has been set at a base price of $225m and $50m of this is deferred until the Chinese approval comes through. If it does not, the deferred amount would be forfeited by AMP.

AMP’s overall receipts will be lifted as Dexus will pay $105m for sponsor investments and $57m for cash on Collimate’s balance sheet.

AMP said the deal was a significant milestone in its simplification strategy, following the sale over the past 18 months of its remaining interest in AMP Life, the exit of AMP Capital’s global equities and fixed income business, its infrastructure debt platform and the international infrastructure equity business.

“The sale allows AMP to have a clear focus on our go-forward businesses of retail banking and wealth management in Australia and New Zealand. We will continue to build on the hard work of the past 12 months to position AMP to win in those markets, deliver for customers and drive value for shareholders,” AMP chief executive Alexis George said.

AMP said it would now review its balance sheet and its cost base and hoped to return excess liquidity to shareholders and cut outstanding debt.

“While AMP has identified it has in the order of $500m surplus capital, in the current environment it is deemed appropriate to retain this funding,” the company said.

“When the capital and balance sheet review is completed, the return of excess liquidity will be reconsidered.”

AMP said it would work through its previously announced $1.1bn return of capital to shareholders via its near complete $350m on-market buyback, $400m via a final dividend and further on-market buybacks, and another $350m of buybacks or other capital returns once it gets approvals.