CPP Investment Board

CPP Investment Board
DEXUS Property Group

DEXUS Property Group

October 10, 2013 19:53 ET

Proposal to Acquire Commonwealth Property Office Fund

TORONTO, ONTARIO--(Marketwired - Oct. 10, 2013) - Canada Pension Plan Investment Board issued a joint ASX release with DEXUS Property Group today. Below follows the release.

Proposal to acquire Commonwealth Property Office Fund

DEXUS Property Group ("DEXUS") today announced that, with Canada Pension Plan Investment Board ("CPPIB") (together the "Consortium"), it has made an indicative, non-binding proposal (the "Proposal"), to the responsible entity of Commonwealth Property Office Fund ("CPA"), Commonwealth Managed Investments Limited ("CMIL"), to acquire all of the issued units in CPA, other than those to which DEXUS is already entitled(1), by way of an informal trust scheme.

The Proposal, if implemented, will result in the Consortium acquiring a $3.7 billion(2) prime grade Australian office portfolio.

Under the Proposal, the consideration comprises a mixture of DEXUS Stapled Securities and cash. This is designed to provide CPA Unitholders with both certainty of value and an opportunity to remain invested in a high quality internally-managed Australian office platform with strong growth prospects. The proposed cash/scrip mix (expressed per CPA Unit) is:

  • $0.680 in cash consideration, and
  • 0.4516 DEXUS Stapled Securities

At a DEXUS trading price of $1.04, the Proposal provides CPA Unitholders a headline offer price of $1.150 per CPA unit(3). The Consortium believes the Proposal, if implemented, will provide demonstrable value for CPA Unitholders:

NTA Valueb
(at $1.05 per DXS Stapled Security
) Headline Offer Price
(at $1.04 per DXS Stapled Security
Proposal value $1.155 $1.150
Proposal represents a premium/(discount) to CPA's:
- 30 day VWAP on 23 July 2013a ($1.071) 7.8 % 7.3 %
- Closing price on 23 July 2013a ($1.085) 6.4 % 6.0 %
- Closing price on 10 October 2013 ($1.155) 0.0 % (0.4 %)
- Stated 30 June 2013 NTA price ($1.15) 0.4 % 0.0 %
(a) The day prior to CMIL's announcement that it had received a preliminary internalisation proposal from the Commonwealth Bank of Australia (CBA), which was released to the ASX on 24 July 2013.
(b) Represents the total value of the cash component of the offer price plus the value of the DXS scrip component at NTA per DXS Stapled Security.

In formulating the Proposal, the Consortium had regard to the transactions costs that both it and CPA would incur including costs arising under CPA's debt facilities. The price that the Consortium is offering under the Proposal takes account of those transaction costs and recognises they will be incurred in implementing the Proposal.

Under the Proposal, DEXUS intends that the DEXUS Stapled Securities issued to CPA Unitholders will participate in the next distribution for the number of days they are on issue during the distribution period.

Any CPA Units which are issued to CPA convertible noteholders following a conversion of their notes prior to any approval of the Proposal by CPA Unitholders will be acquired under the Proposal. Under the Proposal, CPA convertible noteholders who submit valid conversion notices after CPA Unitholder approval is obtained (if any) will be cashed out by the responsible entity of CPA in accordance with the terms of the convertible notes.

Proposal benefits and rationale

The Proposal is designed to provide CPA Unitholders with an attractive premium for their units and on-going participation in the benefits associated with an investment in DEXUS.

The Proposal, if implemented, is in line with DEXUS's strategy and provides the following benefits to new and existing DEXUS Security holders:

  • Creates the leading owner and manager of prime grade Australian office
    • Office Assets Under Management ("AUM") increases from $7.8 billion to $11.5 billion, with a 26% share of Sydney prime grade office
  • Brings together two complementary office portfolios
  • Further enhances strong third party funds management platform
    • Platform AUM increases from $6.1 billion to $8.0 billion
  • Creates a partnership with CPPIB, a global long-term investor with deep investment expertise in the real estate sector
  • Generates accretion to Funds From Operations (FFO)(4)
  • Positions DEXUS as one of the A-REIT sector's lowest cost operators
    • Due to scalability of the DEXUS platform, MER reduces to sub 45 basis points(5)
  • Maintains DEXUS's financial strength

CPPIB joint venture

After DEXUS announced entry into a forward contract which gave it the right to acquire a 14.9% interest in CPA, CPPIB, at the initiative of an intermediary, was introduced to DEXUS. The parties then commenced discussions on a confidential basis about the possibility of the parties working together to facilitate the consideration, negotiation and implementation of the Proposal.

The Proposal follows DEXUS's entry into a letter of co-operation with CPPIB (the "Co-operation Letter"), which sets out the terms upon which the Consortium parties have agreed to co-operate to determine whether they will implement the Proposal.

If the Proposal is implemented, CPA will become an unlisted fund, managed by DEXUS and owned equally by DEXUS and CPPIB.

Darren Steinberg, Chief Executive Officer of DEXUS, said: "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.

"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.

"The Proposal is compelling and designed to deliver significant benefits to both CPA Unitholders and DEXUS Security holders. The Proposal aligns with our strategy of delivering superior risk adjusted returns for investors from high quality Australian real estate, primarily comprising CBD office buildings."

Graeme Eadie, Senior Vice-President and Head of Real Estate Investments, CPPIB, said: "The Proposal is 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. As a long-term investor, we look forward to working alongside DEXUS in the advancement of this Proposal."

The Consortium looks forward to progressing this Proposal with CMIL on an agreed and co-operative basis.


The Proposal is conditional upon the successful completion of satisfactory due diligence and DEXUS and CPPIB Board approvals. Based on public information they have reviewed to date, DEXUS and CPPIB currently believe that the due diligence process can be completed within four to six weeks of receiving access to all relevant materials.

The Proposal is also conditional on the execution of a scheme implementation agreement by DEXUS, CPPIB and CMIL (or their nominees) under which the parties will agree to give effect to the Proposal. Any scheme implementation agreement will itself be subject to conditions, including material counterparty consents, approval of CPA Unitholders and approval by FIRB and the ACCC.

Ancillary Proposal

DEXUS has also submitted to the CBA an indicative and non-binding proposal outlining a potential facilitation of the Proposal and transition of the management of CPA ("Ancillary Proposal").

Under the Ancillary Proposal, DEXUS has proposed that it would make a cash payment to the CBA and its relevant subsidiaries for among other things facilitating the Proposal and the transition of CPA management to DEXUS. The Ancillary Proposal will be subject to conditions including that the Proposal is implemented.

It is intended that an entity in the DEXUS Property Group will become the responsible entity of CPA on completion of the Proposal, assuming it is implemented.

Substantial Holder Notice and on-market securities buy-back

A substantial holder notice evidencing that DEXUS and CPPIB have become associated in relation to the Proposal is attached to this announcement, together with a copy of the Co-operation Letter.

As a result of this development, DEXUS advises that it has decided to suspend the on-market securities buy-back announced to the market on 2 July 2013 ("buy-back"). DEXUS has acquired approximately 75 million securities since the buy-back was announced.


  • DXS Substantial Holder Notice (including Co-operation Letter)


DEXUS Property Group (DEXUS) is one of Australia's leading real estate groups, investing directly in high quality Australian office and industrial properties. With a total of $13 billion of assets under management, DEXUS also actively manages office, industrial and retail properties located in key Australian markets on behalf of third party capital partners. DEXUS manages an office portfolio of over 900,000 square metres across Sydney, Melbourne, Brisbane and Perth and is one of the largest institutional owners of office buildings in the Sydney CBD, Australia's largest office market. DEXUS is a Top 50 entity by market capitalisation listed on the Australian Securities Exchange under the stock market trading code 'DXS' and is supported by more than 18,000 investors from 15 countries. With over 25 years of experience in commercial property investment, development and asset management, DEXUS has a proven track record in capital and risk management, providing service excellence to tenants and delivering superior risk-adjusted returns to investors. www.dexus.com

Download the DEXUS IR app to your preferred mobile device to gain instant access to the latest stock price, ASX Announcements, presentations, reports, webcasts and more.

DEXUS Funds Management Ltd ABN 24 060 920 783, AFSL 238163, as Responsible Entity for DEXUS Property Group (ASX:DXS).

About Canada Pension Plan Investment Board

Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 18 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, CPPIB is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At June 30, 2013, the CPP Fund totalled C$188.9 billion of which C$20.9 billion represents real estate investments. For more information about CPPIB, please visit www.cppib.com

CPPIB has agreed to the statements made by and references to CPPIB in this release. However, CPPIB has not authorised any of the statements made by DEXUS or the references to or concerning DEXUS Property Group in this release.

(1) Under DEXUS's forward contract with Deutsche Bank AG, announced to the ASX on 25 July 2013.

(2) CPA book value as at 30 June 2013.

(3) DEXUS Stapled Security Price is based on the closing price of DEXUS Stapled Securities as at 10 October 2013.

(4) Refer to the presentation released to the ASX in relation to this Proposal.

(5) Management Expense Ratio on an annualised basis. Refer to the presentation released to the ASX in relation to this Proposal.

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