Upbeat Dexus Promises Distribution, Defies Bearish Outlook

By Glenn Dyer | More Articles by Glenn Dyer

Another company that seems to be escaping the hold COVID had on investor perceptions about its immediate outlook is Dexus, the country’s biggest office landlord.

The group’s quarterly report yesterday revealed, Dexus, has seemingly shrugged off the impact of the pandemic with a series of new leases and a further push into funds management (which is aimed at offsetting over time the concentration on CBD office buildings) by selling off unwanted existing assets.

Dexus said in the report that in the three months to the end of September it had leased 53,600 square metres of office space in 63 transactions in Dexus’ core portfolio and at development projects underway or completed.

Portfolio occupancy remained high at 95.4%.

Dexus also said that it is now expecting its 2020-21 distribution to be steady with the 2019-20 figure.

“Dexus expects an FY21 full-year distribution per security amount that is consistent with FY20. The FY20 full-year distribution per security amount was 50.3 cents. Guidance has been issued as a result of the strength of rent collections and further clarity regarding the extensions related to the Code of Conduct1, but is subject to there being no reinstatement of any major lockdowns or unforeseen circumstances.”

Dexus CEO, Darren Steinberg said in the update: “It is encouraging to see the activity across all parts of our business despite the subdued economic conditions. This activity is testament to the quality of the buildings in our portfolio and our extensive relationships with our existing and prospective customers and third-party capital partners.”

That was enough for investors to chase Dexus securities which hit a three-month high of $9.42 before easing a touch to end the day up 3% at $9.37.

Conceding that conditions remain tough, Dexus’ head of office, Kevin George, said there are some signs of life and activity continuing in core CBD markets.

“We are seeing tenant enquiry in Brisbane and Sydney improving, driven primarily by companies in the tech, financial and professional services sectors as well as government seeking to upgrade their office space requirements,” Mr. George said in a quarterly update.

While office leasing agents maintain that rents are flat and large incentives are being offered to entice new tenants, Mr. George said rents were holding across Sydney and Melbourne.

“The demand outlook has improved from a few months ago with most lead indicators up when compared to the fourth quarter of 2020, ending June 30. Employment in white-collar industries was down by only 0.2 percent in the year to August 2020, helped by growth in the public and finance sectors.”

Dexus is also looking to sell up to $1.5 billion in assets to boost its funds management business. During the quarter, Dexus made an initial approach on behalf of the Dexus Wholesale Property Fund to the AMP Diversified Property Fund to consider a merger of the two unlisted vehicles.

Dexus securities rose 2% to $9.28.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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