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Listed property group Dexus (ASX: DXS) is partnering with Marquette Properties to revamp a 40-year-old office building in Brisbane’s CBD into a $500 million student accommodation project.
The B-grade office building, known as Mineral House, is located at 41 George Street – opposite the new Queen’s Wharf development and within 200 metres of the Queensland University of Technology campus.
The development which will accommodate 1,200 students is also aimed at capitalising on Griffith University’s proposed new city campus following the acquisition of the Treasury Building lease from The Star Entertainment Group (ASX: SGR) for $67.5 million announced last month.
Mineral House, a 27-storey office tower, was purpose-built for the state government in 1984 and has been bought by Dexus with vacant possession.
The building was acquired by Marquette Properties earlier this year for a reported $120 million, at significant discount to the $159 million paid by Singapore-based AEP Investment Management in 2016.
Under the terms of its partnership with Dexus, the Brisbane-based Marquette will hold a 5 per cent interest in the project, which is being acquired through Dexus’s opportunistic fund series, the Dexus Real Estate Partnership (DREP).
Dexus has confirmed to Business News Australia that the fund has settled the purchase for $123 million this week and that preliminary construction works are expected to start “imminently”.
Dexus and Marquette Properties will be joint development managers, adding to Marquette’s significant footprint in the Brisbane CBD which includes the Blue Tower and Gold Tower in the city’s “golden triangle” within the Eagle Street precinct.
Plans for the tower will see the existing structure and facade “reutilised” with the addition of resident amenities such as gym, yoga, gaming and cinema rooms over three levels.
“This transaction demonstrates our ability to leverage the broad set of capabilities across our platform to create value for clients and investors,” says Dexus CEO Ross Du Vernet.
“This includes special situations investing, office development and refurbishment, and the infrastructure team’s deep understanding of the Australian student accommodation sector.”
Dexus, which manages a $54.5 billion infrastructure and real estate portfolio, is one of Australia’s largest owners of student accommodation.
Among the company’s biggest projects in Brisbane is the $2.5 billion redevelopment of the Eagle Street Pier precinct currently under way.
The Dexus Real Estate Partnership (DREP) targets opportunistic unlisted Australian real estate opportunities, with Dexus noting that student accommodation remains undersupplied in Australia.
The company says that while the current purpose-built student accommodation sector pipeline totals 7,770 new beds by 2026, this is not enough to meet future demand.
“DREP is committed to delivering superior returns for its investors,” says DREP fund manager Jason Howes.
“By leveraging the capabilities of the Dexus platform, we have created a compelling commercial proposition that has attracted investment from both Series 1 and 2.”
The latest Brisbane project has fully deployed DREP Series 1 with 15 investments executed, with DREP Series 2 currently open for investment and expected to be “substantially larger” than the initial series.
Dexus expects the 41 George Street project to be completed in 2026.
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