The Dexus Property Group (ASX: DXS) share price rose marginally higher today after the company announced the sale of its Grosvenor Place in Sydney. Dexus shares closed the day up 0.31% at $9.85 per share.
What did Dexus announce today?
Dexus advised that it has conditionally exchanged contracts to sell a 50% stake in Grosvenor Place, Sydney. Its 50% claim in the building comprises a split ownership by Dexus and Dexus Office Partnership, which Dexus also holds a 50% interest in.
Grosvenor Place is a 44-level office tower that contains a ground floor retail, built in 1988. The property has a leasehold with 78 years remaining. At the end of the financial year, occupancy rates were recorded at 89% with a weighted average lease expiry of 3.4 years. Dexus acquired an initial interest in Grosvenor Place in 2013, generating an annual return of 12%.
The sale of the office building will realise total net proceeds of $925 million for the entire 50% interest. However, due to current vacancy and the short-term leasing risk in the building, Dexus received $694 million. This represents a 5% discount on the property’s book value as at 30 June.
Dexus highlighted that the transaction was finalised following an on-market campaign, in which over $803 million in sales were conducted. The purchaser of the building is an existing co-owner. Settlement will conclude early next year, pending approval from the foreign investment review board.
The company advised that the net proceeds of the sale will be used to repay its debt.
What did management say?
Dexus chief investment officer Mr Ross Du Vernet commented on the sale:
This transaction continues our asset recycling strategy, realising value for both Dexus and our Dexus Office Partner.
The sale further strengthens our balance sheet and enables us to organically fund higher return growth initiatives in our funds and development businesses. It also provides improved capacity to undertake capital management initiatives should there be a continued disconnect between public and private markets.
About the Dexus share price
The Dexus share price has fallen from grace since COVID-19 hit the Australia property sector. Shares in the group plummeted from the $13.51 reached in February to as low as $8.03 in the aftermath.
Dexus has a current market capitalisation of $10.7 billion and a price-to-earnings (P/E) ratio of 11.1.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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