Dexus says cities will come back as property giant expands in funds

Property giant Dexus says workers will come back to their desks and is committed to major developments even as lockdowns make leasing tough.

Dexus chief executive Darren Steinberg is backing a return to CBDs by office workers once lockdowns end. Picture: Britta Campion/The Australian

Dexus chief executive Daren Steinberg has issued a clarion call to governments to move beyond lockdowns and get cities back running, as the office landlord and funds manager delivered a steady result.

The company has successfully diversified to grow its funds empire to $25bn this year but is still a big believer in offices, and wants policy settings to shift to spark CBDs.

“The idea of zero Covid is laughable compared to what is taking place across the globe,” Mr Steinberg said. “Once people have had the opportunity to be vaccinated I would hope and expect that these continued lockdowns and border closures are eliminated. If they‘re not, Australia will begin to suffer, economically.”

Mr Steinberg said the rest of the world was operating in a kind of post-Covid environment. “It is an absolute imperative that we get as many people vaccinated, as is possible and then we open up for business and travel,” he said.

He is optimistic that people will return to cities even if they work more flexibly. “The CBD is very resilient and was bouncing back very quickly,” he said. ”I would suspect once everyone‘s had the opportunity to be vaccinated, towards the end of this year, the city will bounce back.”

Dexus reported a 17 per cent jump in annual profit to $1.14bn as the group backs a return to CBDs by office workers and its shares dipped by 1.53 per cent to $10.53.

The company has also expanded in other areas, including logistics property and healthcare, partly as lockdowns still bite.

 “The continuing cycle of lockdowns will have an impact on business and consumer confidence, and we are prepared for this environment. The momentum experienced in our CBDs has been interrupted due to the recent lockdowns, but we expect activity to return to previous levels as the restrictions are eased,” he said.

The company had adjusted funds from operations and a distribution of 51.8c a security for fiscal 2021, up 3 per cent on the pandemic-hit previous year.

Dexus won approval for the merger of the $5.6bn AMP Capital Diversified Property Fund with the Dexus Wholesale Property Fund and struck a deal to acquire APN Property Group.

Rent collections for the Dexus portfolio were strong at 98 per cent last year and held in July as lockdowns began.

Dexus also progressed planning for city-shaping projects in the group’s $14.6bn development pipeline and it completed $881m of projects, mainly in industrial property.

The company has bought a swag of top quality office assets including a 49 per cent interest in Capital Square Tower 1 in Perth and a deal to fund, develop and invest in Atlassian’s headquarters in Sydney. It also forged deeper into healthcare property via investing in an Australian Unity fund.

“In the face of an uncertain operating environment, we are well positioned to continue to deliver on our strategy, with our growing funds management business, quality property portfolio and strong balance sheet,” Mr Steinberg said.

Based on current expectations relating to Covid-19 impacts and barring unforeseen circumstances, Dexus forecast a distribution per security growth of not less than 2 per cent for this financial year.

Jefferies analysts said that the funds from operation was 1.3 per cent below consensus and the result was helped by strong trading profits and lower tax.

Office income slipped 1.6 per cent due to sales and lower occupancy, while the impacts of the pandemic were reduced. Jefferies said the company’s guidance ahead of market expectations.