Dexus reports more than 200% rise in net profit on gains from investment properties

Dexus Property Group reported a more than 200 percent rise in its statutory net profit after tax for the six-months ending December 2015, helped mainly by gains from revaluation of investment properties. 

The company, which invests in office and industrial properties, reported a 25.3% increase in its Funds From Operations to $323.9 million, or 33.4 cents per security, reflecting a 17.1% increase. It guided for 5.5-6.0% growth in FFO per security for the financial year ending June 30, 2016.

Chief executive Darren Steinberg said he expected interest rates to remain low for a longer period which would help businesses and consequently, leasing.

“Office market fundamentals, particularly in Sydney, are expected to continue to improve as Australian corporates invest for growth. Investment demand should also retain its strength as investors seek the defensive nature of property,” he said.

The company’s statutory net profit after tax was $797.5 million, a rise of 209.3% on the previous corresponding period, primarily due to $533.7 million of net revaluation gains on investment properties. 

“Revaluation gains across our property portfolio drove the majority of the increase in statutory net profit and NTA per security, as recent comparable market transactions drove cap rate compression at properties with strong tenant covenants,” Steinberg said.

Net tangible assets (NTA) per security was $7.25, up 57 cents from 30 June 2015.

Dexus has also entered into a binding agreement with the management of Investa Office Fund (IOF) under which it will seek to buy all of the units in IOF, subject to the approval of IOF Unitholders. Dexus said it views the acquisition as accretive to underlying FFO per security.

The deal already has won approval from competition watchdog ACCC.

The group achieved 245 leasing deals across 242,596 square metres and said it had completed developments at 5 Martin Place, Sydney and Kings Square, Perth, with 480 Queen Street, Brisbane nearing completion. 

Dexus said it was in talks with the NSW government for the sale of 39 Martin Place, Sydneyfor the new metro rail project.

It said as part of its strategy to divest from non-core properties, Dexus sold off 36 George Street, Burwoodfor $95 million for a 32% IRR on investment.

It also plans to develop a 41,163 square metre office tower at 90 and 100 Mount Street, North Sydney.