Dexus Plans Commercial ‘Super Sites’ in Sydney, Melbourne

Dexus has reported a bumper $3.1 billion in property acquisitions over the year, padding out its office portfolio as it expands its pipeline of development in Sydney and Melbourne.

While headline profit figures for Dexus tracked 25.9 per cent lower—continuing the narrative of muted profits this reporting season—the group’s funds from operations grew 4.3 per cent to $681.5 million.

Dexus reported a 5.5 per cent increase in adjusted funds from operations of 50.3 cents, while distributions per security are up 5 per cent to 50.2 cents.

Dexus’ robust year of acquisitions was underpinned by the year’s largest property deal—the $1.482 billion purchase of 80 Collins Street.

The group now commands 17 per cent of the Melbourne CBD office market.

Meanwhile, Dexus is consolidating its hold on Sydney’s CBD, spending $354 million on strata offices in the precinct around its 56 Pitt Street tower.

The move will give Dexus effective control of development activity in the area and provide a “compelling opportunity to create a potential super site”, the group said in its results.

“Thee properties located adjacent to 56 Pitt Street have been exchanged, providing a compelling opportunity [to] deliver a significant office development located in the financial core of the Sydney CBD for a future supply cycle.”

Dexus confirmed it has taken a 50 per cent interest in 3 Spring Street, 58 Pitt Street and 60 Pitt Street for $177 million. The properties were acquired with an unnamed investment partner on delayed settlement terms out to 2022.

Other acquisitions for the group include the $800 million purchase of the remaining half stake in the MLC Centre from GPT in March.

Dexus also grew its presence in logistics, spending $188 million on three industrial sites in Melbourne, Sydney and Brisbane and joined the shift away from retail in offloading the Sturt Mall in Wagga Wagga for $73 million.

The group is also progressing its core development pipeline of office projects, with 60 and 52 Collins Street set to move ahead and 180 Flinders Street currently 81 per cent committed and due to complete this time next year.

In Brisbane, Dexus is planning the $1.4 billion transformation of the Eagle Street riverside precinct.

Lower net revaluation gains—down $428.7 million on 2018—weighed on the group’s net profit after tax of $1.28 billion.

Dexus chief executive Darren Steinberg said that the group entered the year ready to respond to market challenges.

“Our focus on maintaining a leading position in the Australian property market has been achieved through the performance of our property portfolio, selective acquisitions with future value-add, growth in our funds management business and the delivery of trading profits.”