This article is from the Australian Property Journal archive
THE Dexus Industria REIT (DXI) swung to a first half profit as portfolio valuation gains returned after more than two years of difficult conditions for the commercial real estate sector, and the trust remains on track to deliver on its full-year guidance of funds from operations (FFO) per security growth of 5.7%.
Statutory net profit after tax came in at $53.7 million, compared to a loss of $10.2 million in the prior corresponding period (pcp), which primarily reflected property valuation gains compared to valuation losses in the pcp.
FFO increased 5.7% to $28.8 million, or 9.1c per security. Portfolio like-for-like growth of 4.7% was offset by reduced property income from divestments. Net finance costs were lower due to a reduction in the average debt balance following divestments, reducing the impact of higher interest rates.
“Our portfolio continues to deliver a resilient income stream with embedded growth, and solid leasing outcomes underpinning future growth,” said Gordon Korkie, DXI fund manager said.
Valuation growth has resumed for the first time since FY22. All assets were independently valued in the six-month period and resulted in a valuation uplift of $34.0 million, representing a 2.4% increase on prior book values. Contracted rental growth and strong leasing outcomes offset the impact of nine basis points of capitalisation rate expansion.
Net tangible assets per security increased 8c, or 2.5%, to $3.32.
Korkie said industrial assets continue to attract significant interest from a diverse range of investors, evidenced by transaction volumes above pre-COVID levels.
“We remain focused on leveraging our strong balance sheet to invest in attractive investment opportunities to enhance portfolio quality and deliver strong returns.”
He said the result demonstrates the “benefits of our active management and disciplined approach to capital allocation”.
“We continue to deploy capital into our development pipeline. The projects completed during the half and committed projects are earnings accretive and improve overall portfolio quality through an investment in modern, highly functional warehouses. Momentum has been generated with four new developments activated after achieving two pre-commitments at Ascend at Jandakot during the half, which are expected to deliver yields on cost above our target threshold of 6.25%.
DXI’s industrial portfolio secured leasing deals across 87,661 sqm in the period, including development deals of 58,831 square metres. Notable development leasing at Ascent at Jandakot included 46,448 sqm across 8 Centurion Place and 5 Spartan Street, with both properties now 100% leased, and leasing pre-commitments signed with two blue-chip tenants across 26,900 sqm, taking the committed development pipeline at Ascend at Jandakot to 57% pre-leased.
“Industrial market conditions remain favourable. While demand has moderated from the extraordinary levels reached in recent years, strong population growth and higher online penetration rates are expected to continue to support demand,” Korkie said.
“In addition, supply levels are moderate which continues to support strong operating conditions, as evidenced by the double-digit re-leasing spreads achieved across our industrial re-leasing during the half and high occupancy levels.”
DXI’s portfolio has embedded rental growth supported by minimal near-term lease expiries.
“DXI will focus on retaining balance sheet flexibility, with gearing currently below the target range, prudent interest rate hedging and liquidity providing additional earnings resilience,” it said.
