Dexus Industria REIT’s Profit Rebound Highlights Risks in Development Pipeline and Market Conditions

Strong Financial Recovery and Operational Momentum

Dexus Industria REIT (ASX: DXI) has delivered a striking financial recovery in the half-year ended 31 December 2024, reporting a net profit after tax of $53.7 million. This marks a significant turnaround from the $10.2 million loss recorded in the prior corresponding period, driven largely by positive property valuation gains and improved operational performance.

Funds From Operations (FFO), a key metric reflecting the REIT's underlying earnings power, increased by 5.7% to $28.8 million, or 9.1 cents per security. The distribution per security was maintained at 8.2 cents, representing a payout ratio of 90.3%, signaling a stable income stream for investors despite ongoing market uncertainties.

Portfolio Strength Underpinned by High Occupancy and Rental Growth

The REIT's portfolio, valued at approximately $1.4 billion, continues to demonstrate resilience with an occupancy rate of 99.5% by income and a weighted average lease expiry of 5.6 years. Industrial assets remain the core focus, benefiting from limited supply and sustained demand across major Australian cities.

Like-for-like rental growth stood at 4.7% on a face basis, supported by positive re-leasing spreads averaging +12.2% and CPI-linked rent reviews. The industrial portfolio's weighted average capitalisation rate was 5.90%, reflecting a modest 2.4% uplift in property valuations despite a slight expansion in capitalisation rates.

Development Pipeline and Leasing Highlights

Dexus Industria REIT's development pipeline remains robust, with $269 million in projects spanning 287,900 square metres, primarily in Sydney and Perth. The pipeline targets yields on cost of 6.25% and above, with $179 million of spend remaining, including $47 million committed.

Notable leasing activity at ASCEND at Jandakot included full leasing of 46,448 square metres across two properties and pre-commitments for 26,900 square metres with blue-chip tenants. Post-period, additional development deals were secured at ASCEND and Moorebank, further strengthening the pipeline's income potential.

Prudent Capital Management and ESG Commitments

The REIT's balance sheet remains conservative, with look-through gearing at 27.7%, below its target range of 30-40%. Hedging coverage increased to 81%, mitigating interest rate risks amid a rising rate environment. Weighted average debt maturity stands at 3.5 years, with no maturities until late 2026, providing financial flexibility.

On the sustainability front, Dexus Industria REIT continues to advance its ESG agenda, sourcing 100% renewable electricity for operationally controlled assets and maintaining carbon neutrality across scope 1, 2, and some scope 3 emissions. Energy efficiency improvements are reflected in a 5.0 star NABERS energy rating and ongoing solar installations across the portfolio.

Outlook and Guidance

Looking ahead, DXI reiterates its FY25 guidance with FFO per security expected to grow 2.3% to 17.8 cents and distributions per security maintained at 16.4 cents, implying a distribution yield of 6.0% based on the closing security price as of February 2025. The REIT remains focused on delivering organic income growth, active portfolio management, and disciplined capital deployment to sustain long-term investor returns.