Dexus defies pandemic concerns to record $362m portfolio lift

The company’s office towers held their value and warehouses have surged

19/08/2020. Darren Steinberg, CEO of Dexus, photographed at their offices in Sydney. Britta Campion / The Australian

Office and industrial property giant Dexus has shrugged off concerns about coronavirus to record a $362m lift in the value of its property holdings.

The company joins a series of landlords to have lifted values on the back of low interest rates and global demand for Australian property, even as leasing markets remain tough.

Dexus had 117 of its 128 assets, comprising 41 office properties, 75 industrial sites and one healthcare property valued, resulting in a 2.3 per cent lift on book values over the past six months.

Dexus chief executive Darren Steinberg said the latest independent valuations reinforced the quality of the property portfolio.

“We have had a consistent focus on improving the portfolio quality via leasing, acquisitions, divestments and developments and that, combined with continued investment demand, contributed to the consistent growth in underlying asset values,” he said.

The company’s valuation lift has been helped by recent office and industrial sales, where the market is running hot.

“Among global investors Australia continues to be a highly attractive investment destination and we expect continued strength in investment demand for quality assets in the year ahead,” Mr Steinberg said.

“The value of the office portfolio increased marginally on the back of a number of recent leasing deals, improving conditions in the leasing market and cap rate compression on some longer WALE assets,” he said.

The industrial portfolio surged by 9.8 per cent, with capitalisation rates and discount rates firming, occupancy rates remaining high and several development projects being completed.

The weighted average capitalisation rate of the office portfolio tightened about four basis points from 4.95 per cent at the end of December to 4.91 per cent. The industrial portfolio weighted average capitalisation rate tightened circa 44 basis points from 5.36 per cent at the end of December, to 4.92 per cent at June 30.

Macquarie analysts said that the revaluations helped the Dexus balance sheet and would cut the company’s gearing by 40 basis points to about 24 per cent on a pro-forma basis.