CPPIB, DEXUS propose A$2.7bn A-REIT buyout

Australian real estate investment firm, Dexus, has teamed up with the $182 billion Canadian pension to buy out the listed shares it does not already own in the A-REIT Commonwealth Property Office Fund.

DEXUS Property Group, the Australian real estate investment firm, has joined forces with the Canadian Pension Plan Investment Board (CPPIB) to propose a A$2.7 billion (€1.9 billion; $2.55 billion) buyout of the Australian REIT Commonwealth Property Office Fund.

DEXUS and CPPIB have offered Commonwealth shareholders a mix of cash and continued ownership of DEXUS securities, “designed to provide [Commonwealth] unitholders with both certainty of value and an opportunity to remain invested,” according to an ASX statement. The combined offer values Commonwealth at A$1.15 per share, which was almost exactly the REIT’s closing price yesterday.

DEXUS already owned a 14.9 percent stake in Commonwealth, meaning the offer adds up to about A$2.7 billion, according to a DEXUS spokesman. Given the cash-stake split, the DEXUS-CPPIB consortium would be paying about A$1.8 billion for a prime office portfolio worth about A$3.7 billion, as well as assuming A$1 billion of the fund’s debt. Commonwealth’s portfolio comprises 26 office buildings, including Grosvenor Place, 201 Kent Street and 10 Shelley Street in Sydney, 385 Bourke Street in Melbourne and 10 Eagle Street in Brisbane.

If the bid is successful, Commonwealth will be delisted and operate as a 50-50 joint venture between CPPIB and DEXUS, with DEXUS serving as the manager. According to the statement, the acquisition would increase DEXUS’ assets under management from A$7.8 billion to A$11.5 billion, and would also grow its third-party funds management platform from A$6.1 billion to A$8 billion.

CPPIB and DEXUS began talks about this buyout in July, when DEXUS announced its intention to acquire a 14.9 percent interest in Commonwealth.

Graeme Eadie, senior vice president and head of real estate investments at CPPIB, said in the statement: “The proposal is an excellent opportunity to expand our Australian core office portfolio and is in line with our strategy to invest in high-quality assets that are well positioned in their markets. As a long-term investor, we look forward to working alongside DEXUS in the advancement of this proposal.”

The C$188.9 (€134 billion; $182 billion) Canadian pension plan has been making big strides in the Asia-Pacific this year, but has not made a sizable investment in Australia since July 2012, when it injected A$1 billion into the development of two office towers in Sydney’s central business district alongside developer-cum-fund manager Lend Lease. To date, CPPIB’s global real estate portfolio stands at C$20.9 billion.