Dexus completes $300m raising

Dexus announced it has successfully raised more than $300 million for a first close of its second dedicated real estate opportunity fund, putting it on track to raise up to $1 billion in equity.

The Dexus Real Estate Partnership 2 (DREP2) fund is the second in a series of closed-ended funds targeting Australian real estate opportunities.

The fund seeks to provide institutional and wholesale investors with enhanced returns through exposure to investments in property repositioning, development, special situations, and real estate credit opportunities.

Multiple funding rounds for DREP2 are expected to close this year. Once completed, and with gearing, the fund expects to invest as much as $2 billion, commencing with the funds from first close.

"This successful fund raising illustrates the continued investment appetite for enhanced returns and investors support for the specialist Dexus team to identify and deliver successful transactions in this space," Dexus chief executive, funds management Deborah Coakley said.

DREP1 closed in December 2022, with the fund's investment capacity at around $1 billion, including gearing.

Up to four DREP1 deals are expected to be exited this calendar year, with fund returns expected to be consistent with the target net equity IRR of 15%. DREP2 is targeting the same IRR.

"As anticipated, DREP2 has attracted substantial investor interest from domestic and international investors who believe that the current market environment offers the right set of circumstances for opportunity style investing," DREP fund manager Jason Howes said.

Dexus said the capital raise attracted a mix of new and existing DREP1 investors, two-thirds of which were institutional while the remaining third were wholesale.

Howes said DREP1 adopted a disciplined and rigorous deal assessment process, with only 4% of potential opportunities moving to execution. DREP2 would follow a similar disciplined process.

"Our targets for deploying capital are up to 33% in credit opportunities, with the balance weighted toward equity repositioning and special situations strategies," he said.

"We expect at least 60% of the portfolio to be in Sydney and Melbourne and will cap gearing at 55% of gross assets."