COMMERCIAL property landlord Dexus is dabbling in the residential space, providing a $70 million joint construction finance for an apartment project in Melbourne as part of three seed assets with an end value of $245 million for its new opportunity fund as it continues to expand its funds management business.
The new Dexus Real Estate Partnership 1 (DREP1) is the first in a series of closed-ended opportunity funds aimed at wholesale investors.
The investments include an office development in Melbourne’s Richmond, an industrial development in western Sydney and a circa $70 million senior construction finance facility in a 50/50 co-investment with Solido Capital for a residential project in south-east Melbourne’s Elsternwick.
“The acquisition of these investments demonstrates Dexus’s appetite to originate and secure return-enhancing opportunities for DREP1, including investing throughout the capital structure,” Dexus CEO, Darren Steinberg said.
“Our funds continue to benefit from leveraging our full service platform, originating new opportunities to deliver enhanced returns.”
The Richmond property is a circa 1,500 sqm development site with plans for Dexus to manage the development of a circa 10,000 sqm A-Grade office building that is expected to be completed in 2024.
“Dexus has strong conviction in the fringe office market of Richmond, which forms part of Melbourne’s creative, tech and innovation precinct,” it said. The suburb, along with little brother Cremorne, has become a focal point for Melbourne office and development property activity this year as the CBD remained mostly empty.
The acquisition is conditional on the vendor securing a planning permit, with the planning application submitted. It is anticipated that the asset will be sold by the fund.
In Sydney, Dexus has picked up a 3.8-hectare strategic infill parcel at 149 Orchard Road in Chester Hill that will be used for a circa 20,000 sqm small unit industrial estate, in 50/50 co-investment with Dexus;
Dexus said the development is positioned to benefit from increased demand for last mile, e-commerce focused warehousing and is targeting completion in 2023. The acquisition is subject to a put and call option which is expected to be exercised in mid-2022.
Meanwhile, the senior finance facility is being provided for the construction of a permit-approved mixed use development project in Elsternwick. The project has 99 apartments, four retail suites and three office suites, with construction having commenced. Solido Capital originated the opportunity and is the facility agent.
“This initial joint investment between the fund and Solido Capital provides the opportunity to co-invest with an experienced non-bank provider of credit for residential property development projects and includes potential access to further credit deal flow,” Dexus said.
Dexus spent the September quarter continuing the diversification and expansion of its now 20 vehicle-strong $25.7 billion funds business. It recently acquired all of the APN stapled securities, following the group’s $320 million takeover of APN in May, which was in October rebranded to Dexus.