DGAP-Ad-hoc: Dexus Finance Pty Limited / Key word(s): Quarter Results/Real
Estate
Dexus Finance Pty Limited: September 2019 quarter portfolio update
23-Oct-2019 / 02:07 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*
*23 October 2019*
*September 2019 quarter portfolio update*
Dexus today announced its property portfolio operational update for the
quarter ended 30 September 2019.
Darren Steinberg, Dexus Chief Executive Officer said: "This office market
cycle is certainly not over, with our office portfolio effectively full and
the Sydney and Melbourne office market vacancy rates at very low levels. In
this environment we remain confident of being able to continue to drive
rental growth in our quality office properties in these markets,
particularly in those leases coming up for expiry over the next few years."
*Highlights*
? Leased 27,267 square metres[1] of office space and 4,660 square metres
of office development space across 77 transactions with office portfolio
occupancy remaining high at 98.1%
? Leased 22,691 square metres1 of industrial space across 30 transactions,
with industrial portfolio occupancy increasing slightly to 97.4%
? Launched our next stage of office as a service through the acquisition
of the Australian operations of Six Ideas, a strategic workplace and
change management consultancy, enabling our customers to align workplace
with organisational goals and strategy
? Sold the North Shore Health Hub, Stage 1 currently under development at
12 Frederick Street, St Leonards on a fund-through basis to Healthcare
Wholesale Property Fund
? Dexus was named the Global Industry Leader for the Real Estate Sector by
the Dow Jones Sustainability Index (DJSI) and achieved Global Sector
Leader status for listed office in the Global Real Estate Sustainability
Benchmark (GRESB)
*Dexus office portfolio*
*Key metrics* *30 September 2019* *30 June 2019*
Occupancy by income 98.1% 98.0%
Occupancy by area 97.8% 97.8%
WALE by income 4.5 years 4.4 years
Average incentives[2] 14.0% 13.4%
Executive General Manager, Office, Kevin George said: "Our portfolio
occupancy remains very high. In a period of limited contiguous space options
and limited new supply, we have the opportunity to reset rental levels
across 147,900 square metres of vacant or expiring space across our Sydney
portfolio, which is currently 8% under-rented, up to the end of FY22. This
represents approximately 17% of our total office income.
"We continue to generate good enquiry volumes in line with our experience of
the last 18 months and are very encouraged by the growth in SMEs and the
technology sector, including cloud computing, social media and cyber
security. The services industry generally is still benefiting from
significant infrastructure investment in our key markets and this has helped
underpin our high occupancy level.
"During the quarter we launched our next stage of office as a service
through the acquisition of the Australian operations of Six Ideas, a
strategic workplace and change management consultancy, enabling our
customers to align their workplace with organisational goals and strategy.
We also opened Dexus Place in Perth, which enables us to offer our Perth
based and visiting customers the benefits of a state-of-the-art workspace
with the flexibility of access from one hour to one month."
Over the quarter to 30 September 2019, a total of 31,927 square metres1 of
office space was leased across 77 transactions in the core portfolio and the
development projects that are underway or recently completed. Notable
activity during the quarter included:
? Securing 10 tenants across 2,983 square metres at Australia Square,
Sydney
? Renewing 2,106 square metres with a tenant at 309 Kent Street, Sydney
? Securing two new tenants over 1,492 square metres at 100 Mount Street,
North Sydney, taking committed space to 99.8% and WALE to 7.5 years only
four months post completion.
Post 30 September 2019, Dexus and DWPF agreed terms with Herbert Smith
Freehills for a long-term lease across 10,300 square metres at the 80
Collins Street precinct South Tower, increasing leased space at the South
Tower from 63% to 89%.
*Dexus industrial portfolio*
*Key metrics* *30 September 2019* *30 June 2019*
Occupancy by income 97.4% 97.0%
Occupancy by area 98.9% 98.8%
WALE by income 4.7 years 4.7 years
Average incentives 3.8% 11.7%
Over the quarter to 30 September 2019, 22,691 square metres1 of industrial
space was leased across 30 transactions, with notable activity including:
? Securing 8,704 square metres at Axxess Corporate Park across 19
transactions, including Kaufland expanding across 2,099 square metres
? Renewing UPS across 5,465 square metres at Quarry, 5 Basalt Road,
Greystanes
? Securing two new tenants and two renewals across 4,440 square metres at
Lakes Business Park South, Botany
Occupancy (by income) increased slightly to 97.4%, while WALE (by income)
was maintained at 4.7 years. Average incentives on leasing undertaken during
the quarter reduced compared to FY19, with a higher proportion of deals
during the quarter being represented by effective deals. Incentives on face
deals were down slightly compared to FY19.
*Development*
During the quarter, Dexus completed its office development at 240 St Georges
Terrace in Perth (now 95% committed[3] with 7.1 year WALE) in addition to
the following projects:
? City retail projects, providing enhanced amenity at 44 Market Street and
321 Kent Street in Sydney
? A 9,100 square metre distribution and office facility for Dunlop
Flooring at 380 Doherty's Road, Truganina
? Healthcare Wholesale Property Fund's (HWPF's) Calvary Adelaide Hospital,
a 12 storey, 343 bed hospital offering clinical services, consulting
suites and a 24-hour emergency department
Dexus's group development and concept pipeline now stands at a cost of circa
$8.7 billion post completions during the quarter, including 240 St Georges
Terrace and Calvary Adelaide Hospital.
*Capital management*
In early October, Dexus successfully completed the issue of $200 million of
domestic Medium Term Notes with a 10-year tenor at an attractive all-in rate
of 2.62%.
*Sustainability*
Dexus's focus on environmental, social and governance (ESG) factors
continues to contribute to long-term value, and during the quarter Dexus was
recognised by a number of leading global ESG benchmarks, including:
? Dexus was named the Global Industry Leader for the Real Estate sector by
DJSI in the 2019 SAM Corporate Sustainability Assessment
? The group achieved Global Leadership status in GRESB, with the following
rankings:
? Dexus Office Trust was ranked the Global Sector Leader[4] for listed
office entities and was ranked the number one global listed entity
across all sectors
? Dexus Wholesale Property Fund (DWPF) was ranked the Overall Global
Sector Leader[5] for diversified office/retail entities
? Achieved an A+ rating for both the Strategy & Governance and Direct
Property modules in the latest assessment by the Principles for
Responsible Investment (PRI)
*Funds management*
During the quarter, HWPF acquired the North Shore Health Hub, Stage 1
currently under development at 12 Frederick Street, St Leonards. The
state-of-the-art healthcare facility, being developed by Dexus, will support
existing infrastructure in a growing healthcare precinct on Sydney's lower
North Shore and is due for completion in late-2020, with 50% of the facility
already pre-committed.
As mentioned in the development section, the new Calvary Adelaide Hospital
development was completed during the quarter.
*Trading*
As mentioned above, Dexus sold the North Shore Health Hub on a fund-through
basis to HWPF and will continue to manage the development for total revenue
of circa $224 million[6].
The sale is expected to contribute circa $18-22 million[7] in trading
profits pre-tax, which will be realised across FY20 and FY21, with the
amount for each financial year dependent on the progress of the development
and leasing.
Dexus also exchanged contracts to sell a 25% interest in 201 Elizabeth
Street, Sydney and entered into a put and call option for the remaining 25%
in late 2020 for a total of $315 million. The sale is expected to contribute
circa $34 million to pre-tax trading profits in FY20 and is expected to
contribute a further circa $34 million in pre-tax trading profits in FY21 in
the event either option is exercised.
*FY20 outlook and guidance*
Darren Steinberg said: "We've seen a significant increase in interest from
offshore investors seeking to invest into quality direct office property in
our funds management business. This increased interest is partly a function
of the relative pricing and rent growth for Australian office comparing
favourably to global cities.
"When you combine this trend with the actual transactional evidence that has
flowed through in both Sydney and Melbourne over the past few months, along
with the spread to bonds which has increased further, we are confident that
we will see further cap rate compression.
"Our weighted average office portfolio cap rate was 5.15% at 30 June 2019.
We expect circa 25 basis points of cap rate compression to flow through for
quality office properties, and at least 25 basis points of cap rate
compression for quality industrial properties over the next 12 months.
"Importantly, our high-quality property portfolio with a diversified lease
expiry profile and fixed rental increments of 3.5-4.0%, projects in our
development and concept pipeline, and our strong balance sheet all place us
in a strong position to continue to deliver for investors in a period of
continued economic and geopolitical uncertainty."
Dexus reiterates its market guidance[8] for the 12 months ending 30 June
2020 to deliver distribution per security growth of circa 5%, with the
distribution payout ratio remaining in line with free cash flow.
*Notes*
[1] Including Heads of Agreement.
[2] Excluding development leasing.
[3] Excluding leases which expire in December 2019, 240 St Georges Terrace
is 88% committed.
[4] Global Sector Leader means the entity achieved the highest score for the
nature of ownership and sector combined.
[5] Overall Global Sector Leader means the entity achieved the highest score
for its sector, regardless of nature of ownership.
[6] Land was transferred at fair value. The balance of the proceeds reflects
the development spend under a development management agreement that will be
paid across a number of fund-through instalments during FY20 and FY21.
[7] Expected trading profit reflects a potential range of assumptions
regarding leasing and incentive outcomes as well as timing of achieving key
milestones.
[8] 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 income growth of
4.5-5.5%, Dexus industrial portfolio like-for-like income growth (excluding
one-offs) of 3-4%, management operations FFO of $55-60 million, cost of debt
of mid-3%; trading profits of $35-40 million net of tax; maintenance capex,
cash incentives, leasing costs and rent free incentives of $170-185 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 $31.8 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 $15.6 billion of office and industrial properties. We manage a further
$16.2 billion of office, retail, industrial and healthcare properties for
third party clients. The group's circa $8.7 billion development and concept
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 26,000 investors from 19 countries.
With 35 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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Archive at www.dgap.de
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: 894507
End of Announcement DGAP News Service
894507 23-Oct-2019 CET/CEST
(END) Dow Jones Newswires
October 22, 2019 20:07 ET (00:07 GMT)
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