This article is from the Australian Property Journal archive
AFTER an expansive FY22 that included the acquisition of AMP Capital’s real estate and domestic infrastructure equity business against a turbulent economic backdrop, Dexus (ASX: DXS) saw a 41.9% boost to its net profit after tax.
Dexus reported its net profit after tax at $1,615.9 million, up 41.9% on FY21, which was largely attributed to fair value gains on investments and a positive net fair value movement of interest rate derivatives.
Underlying FFO was up 10.1% on FY21 at$734.2 million, with AFFO and distributions at 53.2 cents per security for the FY22 period, an increase on FY21 of 2.7%.
“This result is particularly pleasing given our initial market guidance for distribution growth of not less than 2% which was upgraded in the second half to growth of not less than 2.5%. Our distributions continue to be paid out in line with free cash flow for which AFFO is a proxy, in accordance with our distribution policy,” said Keir Barnes, CFO at Dexus.
In its portfolio, external independent valuations saw a circa 5.6% increase on prior book value or a total of $926.0 million increase.
Revaluation gains drove the 86 cent or 7.5% increase in NTA backing per security to $12.28 at 30 June 2022.
“We’ve achieved a lot this year in what has been a complex environment. We have selectively recycled assets and made investments to support long term growth which involved over $10 billion of industrial, office, retail and healthcare transactions across the group,” said Darren Steinberg, CEO at Dexus.
Across its office portfolio DXS achieved 95.6% occupancy and 98.1% across its industrial portfolio, as at 30 June 2022.
Rent collections across both portfolios were at 98.5% for FY22, while as at July 2022 collections were down slightly to 96.1%.
“Dexus’ earnings for fiscal 2022 are in line with our expectations. The results highlight the resilience of Dexus’ good-quality portfolio of assets across office and industrial during a difficult period for office assets,” commented Saranga Ranasinghe, vice president at Moody’s Investors Service.
“Although office occupancy levels remained strong and well above industry levels, this has come at the cost of weaker net effective rents than in previous years. We expect office leasing incentives in Sydney to start moderating from the current high levels. However, incentives, as well as market conditions, will remain challenging in the Melbourne market given the high uncommitted new supply of office space.”
The office portfolio saw an increase in WALE from 4.6 years in FY21 to 4.7 years in FY22, with incentives up from 24.9% to 29.4% and WACR down from 4.91% to 4.75%.
Dexus leased 152,855sqm of office space across 292 transactions over the period, in addition to 96,749sqm of space across office developments.
The industrial portfolio also saw an increase in WALE from 4.4 years to 4.7 years, with incentives down from 17.8% in FY21 to 13.5% in FY22 and WACR down from 4.92% to 4.29% over the same period.
Dexus leased 373,301sqm of industrial space across 75 transaction throughout FY22, with an further 330,097 of space across 21 developments.
“We now have over $500 million of committed projects across the group industrial pipeline after completing 322,100 square metres in FY22. On completion of the group development pipeline, the group’s industrial portfolio would grow to $13.0 billion across 4.2 million square metres,” said Ross Du Vernet, CIO at Dexus.
The group development pipeline now stands at a cost of $17.7 billion, of which $10.3 billion sits within the Dexus portfolio and $7.4 billion within third party funds.
Dexus also acquired AMP Capital’s real estate and domestic infrastructure equity business with up to $21.1 billion of funds under management.
“The year culminated in the announcement that we had entered into an agreement with AMP to acquire its real estate and domestic infrastructure equity business. With the addition of the infrastructure platform, this transaction positions Dexus as a leading real asset manager, underpinned by our best practice governance and risk management framework,” added Steinberg.
AMP Capital Wholesale Office Fund (AWOF) unitholders voted in favour of the change of trustee of the fund, resulting in the maximum potential price being reduced.
“We remain focused on completing the transaction which, regardless of this outcome, will transform our product offering to investors, with new capabilities and significant scale across retail and infrastructure real assets and up to $21.1 billion of additional funds under management,” said Steinberg.
Dexus secured $1.6 billion in investment into its funds management platform and reported ROCE of 9.7%.
Gearing was at 26.9%, which is below the target range of 30% to 40%. With 65% of debt hedged across FY22 and an average debt maturity of 5.9 years.
DXS reported $1.9 billion in cash and undrawn debt facilities.
“We anticipate a challenging period over the next two years with rising interest rates, ongoing supply chain disruptions, a global energy crisis and geopolitical risks contributing to continued economic uncertainty. Higher interest rates are expected to impact our results in FY23,” said Steinberg.
Dexus provided a FY23 distributions guidance of 50.0 – 51.5 cents per security, sitting below the distribution delivered for FY22.
“In the year ahead, we will integrate AMP Capital’s real estate and domestic infrastructure equity platform. Looking beyond FY23, we are set to emerge as one of the leading real asset managers in the Asia-Pacific region positioned to capitalise on underlying structural trends, and we are confident of continuing deliver long-term value,” concluded Steinberg.
