This article is from the Australian Property Journal archive
MAJOR office landlord Dexus is confident of growing distributions further over the next financial year as its takes advantage of Sydney and Melbourne’s strong markets.
It posted distribution per security of growth of 4.5% for the 2017 full year to 45.47cps, and is looking to replicate that for FY2018 with a guidance of 4.0% to 4.5% growth.
NPAT was up 0.3% to $1.2642 billion, on the back of funds from operations growing by 1.1% to $617.7 million, to 63.8cps and, and net revaluation gains of $704.7 million for a 6.5% uplift across the portfolio.
The valuation gains saw NTA grow by 92cps to $8.45, which chief financial officer Alison Harrop said reflected tightening capitalisation rates supported by market sales evidence, in addition to leasing success and rental growth achieved at office properties, and completed industrial developments.
Chief executive officer, Darren Steinberg, said the group’s “continued strong performance in FY17 has positioned us for growth in distributions in FY18 and we are well placed to capitalise on the positive market conditions in Sydney and Melbourne.
“We expect to see further support for real estate values into FY18 as a result of the strength of property fundamentals in Sydney and Melbourne combined with persistent investment demand from global and local players attracted to the stable returns from quality well leased properties.
“We continue to focus our investment strategy on Australia’s major cities, reinforcing our belief that cities will benefit from the global trend of urbanisation
Steinberg said the softer the markets of Brisbane and Perth have turned the corner, but the recovery in Perth would take time and depend on the performance of the local economy.
Kevin George, executive general manager, office and industrial said Dexus’ office and industrial portfolios delivered 2.6% and 3.6% like-for-like income growth respectively.
“Strong returns were driven by leasing, most notably at our properties in the buoyant Sydney and Melbourne markets. Leasing performance across the office portfolio resulted in occupancy of 97.2%, and in Sydney we experienced strong effective rental growth from tightening supply and increased demand,” he said. “We have an opportunity to capitalise on the strength of the market through negotiating favourable terms on our Sydney lease expiries, which represent 64% of expiries over the next three years.”
Its office portfolio WALE by income increased slightly to 4.8 years, and WACR firmed from 6.16% to 5.78%. Average incentives were down from 17.7% to 14.5%.
The pending Woodside expiry at its 240 St Georges Terrace asset in Perth in FY19 represents 3.2% of total property portfolio income, and with Perth’s subdued market conditions led to 17.5% devaluation.
The sale of its 105 Phillip Street, Parramatta asset is expected to contribute around 60% of trading profits in FY18.
George said the industrial portfolio saw in a record year of leasing, with 117 deals undertaken across 432,105 sqm, improving occupancy from 90.4% to 96.5%. While WALE was up to 5.1 years and WACR came in by 0.5bps to 6.88%, incentives rose from 9.5% to 14.5%.
Dexus completed 125,600 sqm of industrial development leasing over the full year and activated seven industrial facilities across New South Wales and Victoria.
The group currently has a $4.3 billion development pipeline, $2.1 billion of which sits in the Dexus portfolio.
Distribution for the six months to the end of June is 23.76cps. The pro forma gearing of 26.7 is below the group’s target range of 30% to 40%.Cost of debt reduced to 4.1%, and debt duration extended to 5.6 years.
Australian Property Journal
