DGAP-Ad-hoc: Dexus Finance Pty Limited / Key word(s): Quarter
Results/Quarter Results
Dexus Finance Pty Limited: March 2019 quarter portfolio update
30-Apr-2019 / 09:08 CET/CEST
Disclosure of an inside information acc. to Article 17 MAR of the Regulation
(EU) No 596/2014, transmitted by DGAP - a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
*Dexus (ASX: DXS)*
*ASX release*
*30 April 2019*
*March 2019 quarter portfolio update*
Dexus today announced its property portfolio operational update for the
quarter ended 31 March 2019.
Darren Steinberg, Dexus Chief Executive Officer said: "This quarter, we have
achieved milestones across leasing, development, funds management,
transactions and capital management.
"We also announced the sale out of a non-core market and increased
investment into a core market with the acquisition of the MLC Centre in
Sydney, consistent with our commitment to drive investment performance for
Dexus investors and our capital partners."
*Highlights*
? Leased 41,874 square metres[1] of office space and 19,225 square metres
of office development space across 93 transactions with office portfolio
occupancy increasing to 97.5%
? Leased 46,193 square metres1 of industrial space across 19 transactions,
with industrial portfolio occupancy increasing to 96.9%
? Announced the acquisition of the remaining 50% interest in the MLC
Centre, Sydney jointly with Dexus Wholesale Property Fund (DWPF), which
subsequently settled on 1 April 2019
? Conditionally exchanged contracts to sell Dexus's 100% interest in 11
Talavera Road, Macquarie Park for $231.2 million[2] and in April 2019,
exchanged contracts to sell Finlay Crisp Centre5, Canberra for $62
million2
? Post quarter end, Healthcare Wholesale Property Fund (HWPF) received a
major equity commitment of $100 million which is subject to FIRB approval
? Dexus was again recognised by Workplace Gender Equality Agency as an
Employer of Choice for Gender Equality
*Dexus office portfolio*
*Key metrics* *31 March 2019* *31 December 2018*
Occupancy by income 97.5% 97.3%
Occupancy by area 97.1% 97.0%
WALE by income 4.4 years 4.5 years
Average incentives[3] 13.5% 11.9%
Executive General Manager, Office, Kevin George said: "Leasing enquiry
remained robust over the quarter despite uncertainty as a result of external
factors, including the NSW State election and upcoming Federal election.
Enquiry over the past quarter has converted to significant leasing activity
in Sydney and Perth, including our key office developments at 100 Mount
Street in North Sydney and 240 St Georges Terrace in Perth.
"Our portfolio occupancy remains very high however we have the opportunity
to reset more than 115,000 square metres of vacant or expiring space across
our Sydney properties up to the end of FY21. This represents approximately
17% of our total office income."
Over the quarter to 31 March 2019, a total of 61,099 square metres1 of
office space was leased across 93 transactions in the core portfolio and in
the development projects that are underway. Notable activity during the
quarter included:
? Securing Heads of Agreement across 10,706 square metres at 240 St
Georges Terrace in Perth, taking committed space to 92.5%
? Securing St John of God Health Care across 4,882 square metres at 266
Wellington Street, Kings Square resulting in the entire Kings Square
complex being 100% leased. The complex became fully leased 19 months prior
to the expiry of the 5-year rental guarantee which has been in place since
the completion of the development in November 2015
? Leasing 4,795 square metres across 5 transactions at the MLC Centre, 19
Martin Place, Sydney
? Leasing 4,397 square metres at 100 Mount Street in North Sydney, taking
leased space to 92% ahead of the development project's completion which is
due in May 2019
While FY19 distribution guidance remains unchanged, Dexus notes that its
target for FY19 office like-for-like growth may be affected by a tenant
dispute in Queensland. While Dexus expects receipt of proceeds from this
tenant, it notes that timing is uncertain. This space has already been
leased to a new tenant that is now in occupation. Dexus's revised target for
FY19 office like-for-like income growth is now circa 3%.
*Dexus industrial portfolio*
*Key metrics* *31 March 2019* *31 December 2018*
Occupancy by income 96.9% 96.8%
Occupancy by area 98.0% 97.8%
WALE by income 5.0 years 5.0 years
Average incentives 8.2% 7.7%
Over the quarter to 31 March 2019, 46,193 square metres1 of industrial space
was leased across 19 transactions, with notable activity including:
? Renewing lease agreements with three tenants across 17,160 square metres
at 1 Foundation Place, Greystanes
? Securing heads of agreement across 15,587 square metres at Quarry, 1
Basalt Road, Greystanes extending the WALE to 6.3 years
Occupancy and WALE (by income) have been maintained at 96.9% and 5.0 years
respectively, while forward leasing has mitigated future expiry risk with
minimal downtime resulting in FY20 expiries reducing from 14.2% at 30 June
2018 to 7.7% at 31 March 2019.
*Transactions*
In March 2019, Dexus and DWPF entered into an agreement to jointly acquire
the remaining 50% interest in the MLC Centre, 19 Martin Place, Sydney for a
total price of $800 million[4], with the acquisition settling on 1 April
2019. The acquisition provides opportunities to:
? Benefit from strong Sydney CBD office market fundamentals within the
upcoming lease expiry profile,
? Achieve positive rental reversion through the 12,800 square metre ground
floor retail development, adding further amenity for Dexus's customers and
enables Dexus to activate the development of the retail area in its
entirety
? Gain full management and operational control of the asset
Dexus funded its share of the MLC Centre acquisition through the issue of
A$425 million of Guaranteed Exchangeable Notes, further diversifying the
Group's funding sources through accessing an attractively priced new source
of capital.
Dexus and Dexus Australian Logistics Trust settled on the acquisition of the
9-hectare brownfield site at 425 Freeman Road, Richlands, QLD previously
announced to the Australian Securities Exchange (ASX) in August 2018.
In addition, Dexus exchanged contracts to sell 11 Talavera Road, Macquarie
Park for $231.2 million2 and in April exchanged contracts to sell Finlay
Crisp Centre[5], Canberra for $62 million. The sale of these properties is
consistent with our strategy of divesting properties from non-core markets
and reinvesting proceeds in development and acquisition opportunities in
core markets.
*Development*
Dexus progressed its $5.0 billion group development pipeline of which $2.6
billion sits within the Dexus portfolio and $2.4 billion within the Funds
Management business. Notable activity during the quarter included:
? Securing a conditional agreement for a 45-year lease with the NSW
Government at the MLC Centre, paving the way for a private theatre
operator to run the Theatre Royal and enabling Dexus to activate the
entire development of the retail area. The inclusion of the theatre
expands the scope of the development and changes the total development
spend to circa $170 million as well as the target yield on cost to circa
6%. Part of the agreement with the NSW Government includes an arrangement
taking into account Dexus's inability to activate the development
potential on the site.
? The unveiling of the new Sydney flagship Tiffany & Co store at 175 Pitt
Street, spanning three levels across 2,270 square metres of office and
retail space, located within Sydney's luxury shopping precinct
? The completion of the final stage of development at Dexus's Quarrywest
estate in Greystanes. Combined with the adjoining Quarry at Greystanes
site, the estate has been developed over the past 9 years into a premium
industrial precinct offering high quality industrial facilities across
almost 350,000 square metres.
*Corporate Responsibility and Sustainability*
Dexus was named by WGEA as an Employer of Choice for Gender Equality
recognising Dexus's active commitment and progress towards achieving gender
equality in its workplace through embedding organisation-wide flexible work
practices, tailored parental leave policies to support women and men, and
robust analysis and correction of gender pay gaps.
Dexus was also awarded a Gold Class Sustainability Award in the RobecoSAM
2019 Sustainability Yearbook, recognising leadership in environmental
performance and reflecting Dexus's commitment to addressing climate change
impacts including the goal to achieve net zero emissions by 2030.
*Funds management*
DWPF undertook an equity raising to fund its acquisition of an additional
25% interest in the MLC Centre acquisition. The offer raised approximately
$340 million of equity, attracting six new investors and further
diversifying DWPF's unitholder base.
HWPF has made significant progress in its capital raising efforts. Post
quarter end, HWPF secured a major equity commitment of $100 million which is
subject to FIRB approval. The commitment will enable HWPF to acquire[6] the
North Shore Health Hub - Stage 1 of the development at 12 Frederick Street,
St Leonards currently held in Dexus's Trading portfolio.
On 5 October 2018 Dexus announced to the ASX that it had entered into
conditional agreement to acquire an interest in Heathley Limited and the
Heathley Healthcare REIT, a new stapled vehicle proposed to list on the ASX.
The agreement was subject to a successful Initial Public Offering, and
following discussions with Heathley management, Dexus confirms that it will
no longer be progressing with this investment.
*FY19 guidance*
Darren Steinberg said: "Having achieved a solid third quarter result for
FY19, we are well positioned to continue to deliver distribution growth for
our investors, with our portfolio benefiting from high portfolio occupancy
and continued demand for quality workspace."
Dexus reaffirms its market guidance[7] for the 12 months ending 30 June 2019
for distribution per security growth of circa 5%, with the distribution
payout ratio remaining in line with free cash flow.
[1] Including Heads of Agreement.
[2] Net sale proceeds are before transaction costs.
[3] Excluding development leasing.
[4] Reflects acquisition price for remaining 50% interest and excludes
acquisition costs.
[5] The property is owned by the Dexus Office Partnership ("Partnership"),
in which Dexus holds a 50% interest. Settlement is expected in July 2020.
[6] Subject to HWPF Board and Advisory Committee approvals.
[7] Barring unforeseen circumstances, guidance is supported by the following
assumptions: Impacts of announced divestments and acquisitions; FFO per
security growth of circa 3%, underlying FFO per security growth of circa 3%
underpinned by Dexus office portfolio like-for-like growth of circa 3%,
Dexus industrial portfolio like-for-like income growth of circa 8%,
management operations FFO broadly in line with FY18; cost of debt of circa
4%; trading profits of circa $35 million net of tax; maintenance capex, cash
incentives, leasing costs and rent free incentives of $155-165 million; and
excluding any further transactions.
For further information please contact:
*Investor Relations*
Rowena Causley
+61 2 9017 1390
+61 416 122 383
rowena.causley@dexus.com
*Media Relations*
Louise Murray
+61 2 9017 1446
+61 403 260 754
louise.murray@dexus.com
Information and Explanation of the Issuer to this News:
*About Dexus*
Dexus is one of Australia's leading real estate groups, proudly managing a
high quality Australian property portfolio valued at $28.9 billion. We
believe that the strength and quality of our relationships is central to our
success, and are deeply committed to working with our customers to provide
spaces that engage and inspire. We invest only in Australia, and directly
own $13.9 billion of office and industrial properties. We manage a further
$15.0 billion of office, retail, industrial and healthcare properties for
third party clients. The group's $5.0 billion development pipeline provides
the opportunity to grow both portfolios and enhance future returns. With 1.7
million square metres of office workspace across 53 properties, we are
Australia's preferred office partner. Dexus is a Top 50 entity by market
capitalisation listed on the Australian Securities Exchange (trading code:
DXS) and is supported by 27,000 investors from 19 countries. With more than
30 years of expertise in property investment, development and asset
management, we have a proven track record in capital and risk management,
providing service excellence to tenants and delivering superior
risk-adjusted returns for investors. www.dexus.com
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30-Apr-2019 CET/CEST The DGAP Distribution Services include Regulatory
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Language: English
Company: Dexus Finance Pty Limited
264 George Street
2193 Sydney
Australia
Phone: +61 2 9017 1100
Fax: +61 2 9017 1101
E-mail: ir@dexus.com
Internet: www.dexus.com
ISIN: XS1961891220
WKN: A2RZHG
Listed: Regulated Unofficial Market in Frankfurt
EQS News ID: 805119
End of Announcement DGAP News Service
805119 30-Apr-2019 CET/CEST
(END) Dow Jones Newswires
April 30, 2019 03:08 ET (07:08 GMT)
