Dexus has completed the sale of three office properties for $715 million, surpassing its $2 billion divestment target ahead of schedule. The transactions reinforce its disciplined capital management and will reduce gearing by around 2 percentage points.
- Three office properties sold for $715 million
- Divestment target of circa $2 billion met ahead of FY27
- Properties located in Sydney and Brisbane CBDs
- Sale proceeds reduce pro forma gearing by circa 2 points
- Settlement expected October 2026, subject to FIRB approval
Dexus Surpasses Divestment Target Early
Dexus (ASX:DXS) has accelerated its capital recycling strategy by exchanging contracts for the sale of three office properties totalling $715 million, pushing its divestment program past the $2 billion mark well ahead of its FY27 deadline. This milestone underscores the group's disciplined approach to unlocking value and managing liquidity amid a challenging office market.
Details of the Property Sales
The properties involved are 30-34 Hickson Road and 36 Hickson Road in Sydney's CBD, alongside 123 Albert Street in Brisbane. The combined sale price aligns closely with independent valuations as of 30 June 2026, representing roughly a 4% discount to book values at the end of 2025. Settlement is slated for October 2026, pending Foreign Investment Review Board (FIRB) approval and other conditions.
Notably, about 67% of the sale price will be received upon settlement, with the remaining 33% deferred over 30 months and carrying a 6.25% annual coupon. This structure reflects a measured approach to balancing immediate liquidity with longer-term cash flow considerations.
Asset Quality and Occupancy Metrics
30-34 Hickson Road is an A-grade office building with 41% occupancy and a weighted average lease expiry (WALE) of 0.7 years, indicating significant upcoming lease rollover risk. In contrast, 36 Hickson Road, a heritage-listed office, boasts 89% occupancy and a WALE of 1.1 years. The Brisbane asset at 123 Albert Street stands out with 96% occupancy and a WALE of 5.5 years, offering a more stable income profile.
Impact on Capital Structure
Proceeds from these sales will trim Dexus’s pro forma look-through gearing by approximately two percentage points, easing financial leverage and potentially enhancing balance sheet flexibility. This divestment follows a period of active capital management, including buybacks and distribution adjustments, as the group navigates evolving market conditions and portfolio repositioning.
CEO Ross Du Vernet emphasised that these transactions demonstrate Dexus’s ability to secure liquidity at prices that represent a significant premium to the implied security price, reinforcing investor confidence in the portfolio’s underlying value.
Bottom Line?
Dexus’s ahead-of-schedule divestments highlight effective capital discipline but raise questions about future asset rotation and income sustainability.
Questions in the middle?
- How will Dexus redeploy capital freed from these divestments amid current market dynamics?
- What impact might the 33% deferred payment structure have on near-term cash flow and risk?
- Will the relatively low occupancy and short WALE at some sold assets affect Dexus’s income stability post-sale?