Dexus faces sell-off demands for Melbourne, Launceston airport stakes amid investor stoush

Australia’s sovereign wealth fund is among the heavyweight investors lining up against Dexus wanting it to sell out of two important airports as part of a case that’s headed for court.

Dexus could be forced to sell its entire stake in Melbourne and Launceston airports. Picture: Nicole Garmston

Property group Dexus could be forced to sell its entire stake in Melbourne and Launceston airports due to a stoush with its heavyweight co-investors prompted by its attempts to sell off a near 10 per cent interest in the company that owns them.

The listed company runs funds which own about 27 per cent of the Australia Pacific Airports Corporation – the owner of both facilities – and its interest is worth about $4bn.

The scene is now set for a legal battle which would pitch the company against co-owners IFM Investors, the Future Fund, SAS Trustee, represented by NSW TCorp, and the Utilities of Australia vehicle managed by HRL Morrison and Co.

Melbourne airport ranks as the country’s second busiest and Dexus picked bought an interest in APAC two years ago as part of the purchase of Collimate Capital, the local real estate and infrastructure business it bought from AMP.

That deal meant that funds newly controlled by Dexus effectively became the largest shareholder in the APAC vehicle, which owns both the airport in the Victorian capital under a 50-year leasehold, and Tasmania’s Launceston airport.

Dexus manages a number of funds with exposure to the airport company. It had sought to offer a stake of about 9.7 per cent of APAC to new investors but that process has halted.

The move riled other shareholders who argued that Dexus revealed confidential information in attempting to sell the stake. The stoush has yet to hit the courts, but if a decision goes against Dexus then it could be forced to sell its whole stake to the other deep-pocketed shareholders in the APAC.

An aerial view of Melbourne Airport’s terminals.

Dexus is vigorously defending its position, arguing that it had acted in the interest of its clients.

The potential to lose another big asset in a vehicle it picked up in the acquisition of the former AMP business has rattled investors who sent Dexus shares down by 1.09 per cent to $7.23 in Friday afternoon trading.

The company has already been forced to sell off a half interest in Sydney’s Macquarie Shopping Centre for $830m to its co-owners, Cbus and UniSuper, who had argued a “prohibited transaction” had occurred when Dexus bought the Collimate Capital business.

Dexus has sought to shift away from being an owner of office towers and to forge into real assets, partly by growing its funds platform but it has found the going tough.

The company said it was appointed last year by some of the holders of interests in its funds to undertake a sale process for their stakes.

It said it had received a notice from APAC’s board alleging Dexus has used a confidentiality deed poll and disclosed confidential information in the sale process.

This was alleged to be in breach of the requirements under a shareholders’ deed and the co-owners called for Dexus to sell its stake to them in a compulsory process. Dexus said it “intends to dispute the validity of the notice, has always acted in good faith and will vigorously defend its position and its clients’ interests”.

The Dexus stake represents about 10 per cent of its third-party funds under management and accounts for about $15m of its management fees.

An APAC spokesman said that the board had confirmed a breach of the deed by one of APAC’s shareholders. “The breach was considered material and incapable of being remedied,” he said.

“The board is overseeing this matter with a strong focus on good governance and complying with its obligations to act in the best interests of the company.”

One analyst said that if the Dexus funds were forced to sell then it would cause reputational damage as it would leave the underlying clients without an exposure to the strongly-performing assets and unable to buy back into them.

He said that large institutional clients would be reluctant to give Dexus fresh mandates, though he noted that Dexus had indicated that it would fight the action.

Some advisers said that the large co-owners may be looking to leverage a technical breach of the agreements governing information usage, in order to boost their stakes in the airports company.

Others pointed to the continuing problems in the Dexus funds division which had been portrayed as a growth area when the Collimate Capital acquisition was made.

APAC is undertaking projects including Melbourne Airport’s third runway and Launceston Airport’s terminal upgrade. The airport had 2.95 million passengers through the terminals for the month of March.

International passenger volumes exceeded pre-pandemic levels by 4.8 per cent attributable to strong growth in international capacity.

Domestic passenger volumes dipped due to Cyclone Alfred, which cut into Queensland traffic.

Originally published as Dexus faces sell-off demands for Melbourne, Launceston airport stakes amid investor stoush