Dexus Half Year Growth from Tight Office Markets

6 February 2019

Dexus is on track to deliver strong gains from its office and industrial portfolio through both income growth, development activity and trading profits driven by peak demand from occupiers and investment capital sources. Dexus achieved an adjusted Funds From Operations of $282M up an 14.5% from the 6 months to December 2017 as a result of higher trading profits. Underlying FFO was up 3.6%. The total portfolio valuation was up $456M to following a 15bps compression in the office portfolio cap rate (5.22%) and a 26bps compression in the industrial portfolio cap rate (6.14%). Tenant demand continues to add to the Dexus results with occupancy increased to 97.3% (up from 96%) and average incentives down to 11.9% (from 13.9%) and a leasing spread of 18%. The results suggest that Dexus forecast of a 4-5% lift in office income is on track for the full year. In the industrial market, like for like income is up 5.4% however occupancy has dropped from 98.3% to 96.8%, but with average incentives dropping to 7.7% (down from 12.6%). Over the past 8 years, Dexus has been recycling its assets and bringing in new capital partners to boost its funds management revenue streams.Since 2012, Dexus has divested $4.8bn of stock and $8bn of external capital partners it has outlayed $4.9bn to invest in new stock with a focus on core and value add opportunities. Dexus total FUM has grown now to $15.6bn. The $5.2bn development pipeline in the business remains strong with significant progress in project in North Sydney, St George’s Terrace and Parramatta. DXS Trading Chart vs ASX200 AREIT Blue – Dexus, Purple ASX200 AREIT Source: #Dexus