PAG Buying Melbourne Office Complex From Dexus for $164M

Australian property giant Dexus has agreed to sell a central Melbourne office complex for A$254.5 million ($163.8 million), with market sources confirming fund manager PAG as the buyer.

The Hong Kong- and Tokyo-based private equity shop is picking up Flinders Gate, a recently redeveloped asset comprising two commercial buildings and a multi-deck carpark adjoining the Adelphi Hotel in the Victoria capital’s East End, with the complex providing 20,400 square metres (219,584 square feet) of lettable office and retail space.

The transaction is expected to close in October, ASX-listed Dexus said Wednesday in an earnings presentation. The group is on track to achieve its A$2 billion divestment target by fiscal 2027 after undertaking A$1.1 billion in disposals since 30 June 2024.

“We continued to transition the Dexus portfolio, selectively divesting assets to enhance portfolio quality and balance sheet strength, while providing capacity to fund our committed developments,” said chairman Warwick Negus and CEO Ross Du Vernet.

Historic Redevelopment

Dexus acquired the 1920-era property in March 1999 and completed the redevelopment in August 2020, adding new Grade A upper floors to 180 Flinders Street while retaining the historic facade of the lower floors and refurbishing the office space in the adjoining building at 189 Flinders Lane.

PAG is paying A$12,475 ($8,026) per square metre of lettable area for the 94 percent-leased property, whose office tenants include construction heavyweight John Holland and investment manager Netweath. Weighted lease term by income is five years.

The agreed price for Flinders Gate is in line with the asset’s book value and an independent valuation and represents a 6.37 percent market cap rate, according to Dexus. News of the deal was first reported by The Australian.

Asia Pacific-focused PAG is testing Melbourne’s sluggish office market for a second time after buying 367 Collins Street, a 1975-vintage tower, from Mirvac last June for A$340 million.

The private equity shop also owns 44 Market Street in central Sydney, having acquired the Grade A tower two years ago for A$393.1 million.

Cashed Up

Despite funds targeting APAC markets accounting for just 20 of the 111 real estate investment vehicles closed in the first quarter of 2025, PAG’s Secured Capital Real Estate Partners VIII ranked second globally with $4 billion in commitments, according to Realfin.

The opportunistic vehicle trailed only Blackstone Real Estate Debt Strategies V among real estate fundraising conclusions during Q1, the London-based data provider said.

Reuters reported earlier this month that PAG had joined KKR and Nomura Real Estate in an investor group preparing to bid for Japanese brewer Sapporo’s $2.7 billion real estate business, with other suitors said to include a partnership of Bain and Tokyu Fudosan and a Lone Star-Kenedix tie-up.