Singapore Fund Manager Teams with Dexus for $288M Sydney Office Investment

Singapore’s Mercatus Co-operative will head Down Under to make its first acquisition outside the city-state, joining forces with Dexus, Australia’s biggest office landlord, to buy a 33.3 percent stake in a well-known Sydney commercial tower for A$375 million ($288.1 million).

Mercatus, a real estate firm backed by Singapore’s NTUC trade union federation, will hold a 90 percent stake in the joint venture, called Mercatus Dexus Australia Partnership, while Dexus will own the remaining 10 percent. The JV will acquire a one-third interest, subject to regulatory approval, in 1 Bligh Street, a 29-storey building in Sydney’s core financial precinct.

The seller of the 33.3 percent stake is Cbus Property, a subsidiary of Australia’s pension fund for the construction industry.

“This acquisition is part of our strategy to diversify our portfolio and to generate sustainable long-term returns,” Mercatus CEO Tan Ser Joo said in a Monday release. “We are honoured to be able to partner Dexus, one of Australia’s leading real estate groups, in our first direct real estate investment overseas.”

Local Landmark

Dexus is the investment manager for the joint venture and post-acquisition will continue to manage 1 Bligh Street, a local landmark recognisable by its double-skin glass facade and elliptical shape.

The 2011-vintage building is 99.5 percent occupied, with a weighted average lease expiry of 5.4 years as of 31 December 2020. Key tenants include law firm Clayton Utz, business news giant Bloomberg and the Australian government.

The property has a lettable area of 43,000 square metres (462,848 square feet), meaning the JV partners are acquiring the 33.3 percent stake for roughly A$26,163 ($20,041) per square metre.

The joint venture and acquisition will increase Dexus’s effective ownership interest in the building to 36.66 percent, according to Dexus, which co-developed the project with Cbus Property. The remaining interest is held by Dexus Wholesale Property Fund, an open-ended unlisted fund.

“This transaction demonstrates the ongoing strength of demand from international institutions for high-quality Australian office asset exposure under Dexus platform management,” said Dexus CEO Darren Steinberg.

Cross-Border Action

The stake in 1 Bligh Street marks the first foray into Australia for Mercatus, but the country is no stranger to office market investment by Asian majors.

Last month, Singaporean sovereign wealth fund GIC agreed to acquire a quarter stake in the One The Esplanade office tower in Perth from asset management firm Brookfield for A$220 million. Canada-based Brookfield, which sold a 50 percent stake in the property to Invesco for A$500 million in early 2020, retained 25 percent ownership.

Last November, CIC bought a half stake in Sydney’s Grosvenor Place for A$925 million from Dexus and a Dexus-sponsored office partnership fund, boosting the Chinese sovereign wealth fund’s interest in the office tower to 75 percent.