The listed property company Dexus has purchased 50% of the iconic Sydney office building, MLC Centre, from QIC Global Real Estate for AUD722.5m (€490m).

The stake will be split equally between Dexus and the AUD7.5bn unlisted open-ended Dexus Wholesale Property Fund (DWPF).

DWPF, which has 68 Australian and foreign institutional investors, is one of the best-performing and largest vehicles of its kind in Australia.

Michael Sheffield, DWPF’s fund manager, told IPE Real Estate: “This acquisition diversifies DWPF’s Sydney exposure through an investment in the central core of Martin Place precinct that is undergoing revitalisation and is set to benefit from enhanced infrastructure links.”

With the acquisition, Dexus has cemented its position as Australia’s largest office owner. It has also today acquired an office building at 100 Harris Street on the Sydney city fringe in Pyrmont for AUD327.5m.

Darren Steinberg, Dexus CEO, said the acquisitions “reinforce our belief that Sydney will continue to benefit from the global trend of urbanisation and enhanced infrastructure links over coming years”.

Asked about buying at what could be the top of the market, Steinberg told IPE Real Estate: “Pricing of assets in the Sydney market is still attractive on a global basis. We see strong market fundamentals in Sydney – low vacancy and solid rental growth – providing opportunity for further growth in values.”

Dexus says there is development potential for 12,000sqm of under-utilised floor space at the 67,100sqm MLC Centre. There is development approval for 2,000 sqm of retail space, in addition to the existing 10,300 sqm of retail space.

The new owners also see the asset as offering opportunity to “explore changing uses and adding new uses as part of future development schemes”. Dexus already owns adjoining buildings in Martin Place.

Dexus went into a trading halt today to raise AUD500m in new capital, which will be used – alongside AUD288.6m of debt – to fund the office acquisitions.

When approached on its decision to sell MLC Centre, Steven Leigh, managing director of QIC GRE, said: “Our decision to sell MLC Centre has been driven by portfolio reweighting.”

He added: “The current strong demand for A-grade commercial assets in Sydney’s CBD drove strong interest in the asset throughout the sales campaign.”

QIC put its stake in MLC Centre  on the market in March this year. It jointly owned the asset with listed property company GPT Group accumulating its 50% stake in two transactions in 1996 and 1997.

Rob Sewell, head of office investments in Australia at JLL, said: “Over the past 10 years only four assets over $500m have sold in the Sydney CBD.”

The 62-storey MLC Centre, which houses legal firms and the Sydney office of the US Consul-General, is undergoing a major facelift costing more than AUD150m.