Print | Share | Reprint

Dexus sell real estate to Blackstone

by Jonathan Braude | Published April 16, 2012 at 1:22 PM

Australian property manager Dexus Property Group on Monday, April 16, announced the sale of 65 U.S. industrial properties to Blackstone Group LP for $770 million and said the deal would allow it to restructure its debt.

Dexus is selling its U.S. central portfolio, although the disposal includes properties across the East Coast and central United States, with some as far west as Phoenix. The portfolio covers a total of 16.62 million square feet and is 89.6% occupied. Three of the properties are leased to home appliance maker Whirlpool Corp.

"This sale is consistent with Dexus' current strategy to exit noncore U.S. markets," said CEO Darren Steinberg in a statement, adding that the company's U.S. team had increased occupancy in the central portfolio by 12.8% in the six months after the company assumed leasing management in June 2011.

The divestment leaves Dexus with a residual four properties in the central portfolio, with a pro-forma book value of just $8 million, but also keeps intact its West Coast portfolio of 24 properties, with a book value of $533 million. Following the sale, to Blackstone Real Estate Partners VII, the remaining U.S. portfolio will represent about 8% of the group's assets, Dexus said in a statement.

Dexus said the receipts from the sale will initially be used to repay loans, allowing it to restructure its U.S. debt, at a cost of roughly 12% of the gross proceeds of the transaction. The process will involve prepaying certain debt obligations and unwinding various interest rate swaps. The net proceeds, about $660 million, will reduce the group's leverage by 6% to a pro forma 26%.

Post-restructuring, the company will use the surplus cash from the deal for a securities buyback of up to A$200 million ($207 million), of up to about 5% of the equity in issue.

Justifying the move, Steinberg said: "A buy back represents a sensible use of surplus capital while Dexus securities trade at a discount to their underlying value, and, on this basis, it is expected to enhance value and returns to investors."

Deutsche Securities Australia Ltd. will act as broker for the buyback.

Dexus of Sydney maintains a U.S. head office in Newport Beach, Calif. Its shares are listed on the Australian Stock Exchange and closed up Friday A$0.5, or 0.56%, at A$0.905.

Share:

Private Equity

Dexus sell real estate to Blackstone

Free preview

Meet the journalists

Jonathan Braude

Senior Writer: Global News

Movers & Shakers

Video

Coming back for more

Sectors