CPPIB, Dexus team to buy owner of US$3.5B in Australian office properties

TORONTO – The Canada Pension Plan Investment Board is teaming with one of Australia’s leading real estate groups to acquire a US$3.5-billion portfolio of office properties.

Under the proposed deal, the CPPIB and Dexus Property Group would acquire all of the outstanding units of Commonwealth Property Office Fund (CPA), other that those to which Dexus is already entitled.

The proposed deal includes a mixture of Dexus stapled securities and cash designed to provide current CPA unitholders with “both certainty of value and an opportunity to remain invested in a high quality internally-managed Australian office platform,” Dexus and the CPPIB said in a release Thursday.

The CPPIB added in an email response to a query that, due to various rules and restrictions, it was not putting a dollar figure on the value on the bid at this point on the advice of legal counsel. However, the Australian media has calculated it at about US$3.55 billion.

If the deal goes through, CPA will become an unlisted fund managed by Dexus and owned equally by Dexus and CPPIB.

“We are pleased to be able to partner with a leading long-term investor with whom we have an established relationship to form the consortium,” Dexus CEO Darren Steinberg said in a release.

“The consortium believes the proposal represents an exciting opportunity for CPA Unitholders and has the capacity to deliver an attractive outcome for all stakeholders in a timely manner.

Graeme Eadie, head of real estate investments at CPPIB, described the proposal as “an excellent opportunity to expand our Australian core office portfolio and is in line with our strategy to invest in high-quality assets that are well positioned in their markets.”

With some US$12.3 billion of assets under management, Dexus also actively manages office, industrial and retail properties in key Australian markets on behalf of third-party capital partners.

The Canada Pension Plan Investment Board is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 18 million Canadian contributors and beneficiaries.

As of June 30, the CPP Fund totalled C$188.9 billion of which C$20.9 billion represented real estate investments.