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DEXUS acquires $435 million Perth offices

Real estate is on the rise. DEXUS Property Group (ASX: DXS) and its wholesale property fund announced today a $435 million joint venture purchase of three Perth CBD office buildings.

The A-grade properties will be developed by Leighton Properties (ASX: LEI), and are expected to pull a 9.9% blended unlevered 10-year internal rate of return. Internal rates of return are used as a discount method, and can generally be compared to a project’s growth rate.

This most recent acquisition follows last week’s announcement (see “Real estate on the rise“) that DEXUS will dole out $544 million for a soon-to-be-developed office in Brisbane CBD.

“The announcement of two strategic office investments worth approximately $1 billion in close succession demonstrates our team’s ability to source quality real estate in an environment where there are limited opportunities,” said CEO Darren Steinberg in a statement today. “DEXUS has demonstrated its ability over the past nine months to invest in quality office property across the spectrum through acquiring core and value-add opportunities and on a development fund-through basis.”

Located just outside the core CBD area, Steinberg estimates that its 25-35% lower rental entry point will make the offices extremely marketable to future tenants. 45% of the space has already been accounted for, and Leighton Properties has included a five-year income guarantee in DEXUS’ acquisition agreement.

Pending final details, the purchase should be completed by the end of the month. Construction will begin in July, and the offices are expected to be operational by mid-2015.

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