Dexus profits up 83% as suburban office tenants relocate to the CBD
Dexus has delivered on its promise of an improvement in its operating performance reporting an 83.3% rise in interim net profits to December 31 of $267 million.
The vastly improved result follows the commercial property developer, owner and manager reporting a 67% slump in full year profit in August last year.
The six month result was in line with guidance given to the market at the end of 2012.
Dexus executive general manager for office and industrial Kevin George described the office market as “tempered” but says there are “positive signs” in core markets and “solid interest” in "high quality buildings".
In the tough business conditions, George says a number of firms are seeking to modernise and “gain workplace efficiencies which has flowed through to increasing enquiries in our portfolio”.
George added that suburban tenants are looking to relocate to CBD offices due to competitive conditions and a reduced rental price differential.
The $5.5 billion Dexus office portfolio delivered a return of 10.3% over the six month period.
Over the reporting period Dexus disposed of its US industrial property portfolio worth US$561 million at a 13% premium to its book value and made a number of Australian office acquisition to rebalance the group’s portfolio to its target of 80% weighted to Australian offices and 20% to Australian industrial property.
“The US portfolio sale considerably improves the quality of the group’s earnings profile as the proceeds are re-allocated to the Australian market,” said Dexus chief executive Darren Steinberg.
Dexus spent $504 million of the money generated from the US sale to acquire stakes in three Sydney CBD office buildings including a 25% stake in Grosvenor Place at 225 George Street, which will settle at the end of February.
Dexus has a total commercial property portfolio valued of $7.1 billion with offices making up the bulk of this, worth $5.5 billion.
It completed 239,000 square metres of new leasings over the six month period with the occupancy rate across the portfolio increasing from 93.4% to 94.7%
Steinberg said the company still expected to post full-year earnings of 7.75 cents per security and an annual distribution of 5.8 cents.
"We are well positioned for growth with a strong and conservative balance sheet, and confident that we can continue to deliver superior risk-adjusted returns for our investors from our quality Australian real estate portfolio," he said.
A thousand square metres of office space will become available at level 17 in the flagship green building, One Bligh Street in the Sydney CBD during the 2013 financial year.
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