Dexus Remains Resilient Despite Profit Drop

What a difference a year can make to the balance sheet.

Property giant Dexus has reported a half-year net profit after tax of $23.1 million, down 97.1 per cent from the same period 12 months ago.

It cites the reduction has been “primarily driven by net property devaluations compared with valuation uplifts in the previous corresponding period”.

A total of $242.2 million—or about 1.4 per cent—has been wiped from its prior book values for the period to December 31, 2022, with its impact “partially offset” by positive rent growth.

Asset recycling also has enabled it to maintain a strong balance sheet with substantial headroom of $3 billion in cash and undrawn debt facilities.

And, significantly, its funds from operations were up 9.3 per cent to $340.1 million.

The ASX-listed property developer and manager has updated its guidance—“barring unforeseen circumstances”—to deliver distributions of 51 to 51.5 cents per security for the 12 months ending June 30, 2023.

“Despite subdued market conditions, it has been an active six months,” Dexus chief executive Darren Steinberg said.

“We have announced $773 million of balance sheet divestments since the full-year 2022 result, recycling capital into higher returning opportunities and maintaining a strong balance sheet.”

Dexus manages $26.3 billion of funds across 19 funds within its diversified funds management business. 

On the development front, the group’s rationalised pipeline now stands at $15.8 billion—$8.8 billion sitting within the Dexus portfolio and $7 billion within third party funds.

During the past six months it has progressed “city-shaping” projects, including Atlassian Central and Central Place in Sydney and the Waterfront Brisbane redevelopment.

▲ The 39-storey Atlassian Central is expected to open in 2027.

It has $2.5 billion to spend on its committed development projects during the next five years.

“While we have rationalised our pipeline by removing concept projects that we are no longer pursuing in the current market, the remaining pipeline is profitable and the decision to activate uncommitted projects will be assessed on project commerce and capital availability,” Dexus chief investment officer Ross Du Vernet said.

Dexus leased 106,751 square metres of office space across 154 transactions and 7789 square metres of office development leasing across six transactions; as well as 153,989 square metres of industrial space across 34 transactions and 60,179 square metres of space across five industrial development leasing transactions in the six months to December 31, 2022.

Steinberg added the coming addition of AMP’s real estate and infrastructure platform would further bolster the company’s strategic objectives of generating resilient income streams. 

“Dexus has demonstrated resilience in a challenging environment, with our portfolio maintaining strong occupancy and continuing to benefit from the flight to quality,” he said.

“Recycling assets and proactively managing capital has also enabled us to maintain a strong balance sheet.”

But he also warned: “The macroeconomic environment remains challenging with rising interest rates, ongoing supply chain disruptions, a global energy crisis and geopolitical risks contributing to continued economic uncertainty.”