Despite ongoing snap lockdowns and empty desks in central business districts, the country’s biggest office landlord, ASX-listed Dexus, has booked a 17 per cent increase in profits on the previous year.
Dexus chief executive Darren Steinberg said that while the pandemic had created a challenging operating environment, it had reinforced the importance of having a “diversified business model”.
Steinberg is confident the group can deliver a 2 per cent lift in distributions over the coming year after delivering a 3 per cent increase in adjusted funds from operations and distributions of 51.8¢ per security for the recent financial year.
The result was buoyed by the group’s funds management business, which over the period grew to $25 billion, $5.6 billion of which was due to the Dexus Wholesale Property Fund’s merger with AMP Capital Diversified Property Fund in April.
The group also struck a partnership with Singaporean investor Mercatus to take over a one-third stake in Sydney’s 1 Bligh Street in a $375-million deal.
The group remains one of the biggest and most active investors in healthcare properties since 2015, spending $780 million on completed assets for its wholesale Healthcare Property Fund.
Dexus added the Australian Bragg Centre, also known as SAHMRI 2, to its portfolio after acquiring the state-of-the-art medical precinct from its developer Commercial and General in a $446.2-million deal in October 2020.
Dexus has been active on the corporate front, paying $180 million for a 7 per cent stake in the Australian Unity Healthcare Property Fund—the target of a $2.8-billion takeover bid by NorthWest Healthcare Properties.
Steinberg said the group had selectively recycled assets to support its growth, involving $6.4 billion in healthcare, industrial and office transactions.
The transactions included 18 industrial acquisitions—undertaken largely alongside third party capital—and five healthcare acquisitions.
“Recycling assets during the past year has enabled us to maintain the strength of our balance sheet while allocating capital towards new investment opportunities that offer strong grown prospects,” Steinberg said.
“The continuing cycle of lockdowns will have an impact on business and consumer coincidence [but] we have confidence in the future of CBDs and cities and our ability to deliver sustained value over the long term.”
The group office portfolio saw occupancy reduce to 95 per cent with like-for-like income growth at 2.3 per cent, down from 4.7 per cent in the previous financial year.
“Face rents remain largely unchanged in the core CBD markets, however, effective rents have come under pressure as incentives have increased,” Dexus general manager for office Kevin George said.
“It's clear that workplace flexibility is here to stay [however] activity in the portfolio has provided us with confidence that office markets will continue to improve in the year ahead.”
The company bought a number of new office assets including a 49 per cent interest in Capital Square Tower 1 in Perth and a $1.4-billion deal to fund, develop and invest in Atlassian’s headquarters in Sydney.
Activity in the group’s industrial portfolio remained strong, leasing 450,000sq m of industrial space across 116 transactions.
The group completed almost $900 million in developments, including $450 million of industrial projects, taking its industrial portfolio to over 2.6 million square metres.
Development projects including 180 Flinders Street and 80 Collins Street in Melbourne, as well as 47 Momentum Way in Ravenhall, 9 Custom Place in Truganina and the North Shore Health Hub in St Leonards, were some of the recent completions.
The group restocked its $14.6-billion development pipeline, receiving approval for a dual tower, $2.1-billion office project in central Brisbane, and progressing through to stage three of its $2.5-billion unsolicited proposal at Central Place Sydney.