Dexus Industria REIT posts $0.3m NPAT

Dexus Industria REIT (DXI) has posted $0.3 million of net profit after tax (NPAT) for the year ended 30 June despite $56.3 million of net fair value losses on investment properties reflecting a 3.5% decline on prior book values.

DXI also benefitted from built momentum in second half with 24% industrial re-leasing spreads, resulting in 16.5% re-leasing spreads on a full-year basis.

“Statutory net profit after tax was $0.3 million, predominantly due to $56.3 million of net fair value losses on investment properties compared with the $100.3 million net fair value gain recorded in the prior year,” the trust said in the announcement made to the ASX.

“We have delivered on our guidance statement while actively positioning for future growth. Dexus re-leased a record 19% of the total portfolio at re-leasing spreads of 16.5%, while divesting $250 million of assets to recycle capital into higher-returning opportunities, including the development pipeline,” Alex Abell, DXI Fund Manager, commented.

“Our active management has positioned us to generate superior risk-adjusted returns for investors seeking listed industrial real estate exposure in Australia.

“The strategic divestments have strengthened DXI’s balance sheet and resulted in pro forma look-through gearing of 27.3%, below the target 30-40% band.”

All DXI’s assets were independently valued in the 12 months to 30 June 2023 and the external independent valuations resulted in a like-for-like devaluation of $22.9 million, representing a 1.5% decrease on prior book values.

At the same time, market rental growth and escalated CPI reviews partly offset 47 basis points of like-for-like capitalisation rate expansion.

DXI’s property portfolio comprises interests in 94 properties valued at $1.6 billion with a weighted average capitalisation rate of 5.38% and the portfolio weighted average lease expiry is 6.3 years and total occupancy remained strong at 97.5%.

“Like-for-like income growth was impacted by approximately 2% due to inter-period vacancy, resulting in growth of 3.2%. Re-leasing spreads strengthened to 24% in the second half, and were 16.5% for the full year,” it said.

At the same time, Jandakot Airport industrial precinct delivered average rent reviews of 5.4%, supported by 61% of income linked to CPI escalations. Jandakot Airport industrial precinct leasing volumes totaled 45,300 square metres, with re-leasing spreads of 21.6%.

As far as the Brisbane Technology Park was concerned, its assets recorded like-for-like growth of 5.8%, supported by positive leasing outcomes across 8,700 square metres with continued interest from technology and life sciences tenants.

Commenting on the outlook, the trust said that strong tailwinds from development completions, annualisation of double-digit re-leasing spreads and 50% of portfolio income linked to CPI rental escalations would position DXI well for FY24, despite higher floating interest rates which will impact growth.

“Barring unforeseen circumstances, FY24 guidance for FFO is 17.1 cents and for distributions is 16.4 cents per security, reflecting a distribution yield of 5.9%.”

DXI has $237 million of remaining spend on its committed and uncommitted development pipelines, of which $87 million is committed. The total pipeline of $318 million equates to interests in 398,200 square metres in major hubs in Sydney and Perth, providing an opportunity to capture strong market rental growth and further enhance portfolio quality.