Dexus Reports $136 Million Profit, AFFO of 45 Cents Amid Portfolio Resilience
Dexus has reported FY25 results that meet guidance, showcasing resilience in its office and industrial portfolios alongside strong funds management performance. The company signals optimism for the next phase of the real estate cycle despite ongoing market uncertainties.
- AFFO of 45.0 cents per security and distributions of 37.0 cents per security in line with guidance
- Statutory net profit of $136.1 million reversing prior year loss due to stabilizing capitalisation rates
- High occupancy maintained – 92.3% in office and 96.2% in industrial portfolios
- Funds management raised over $480 million in equity commitments and outperformed benchmarks
- Robust development pipeline with key projects progressing and sustainability initiatives advancing
Steady Performance in a Shifting Market
Dexus (ASX – DXS) has delivered its FY25 financial results, meeting its guidance with an AFFO of 45.0 cents per security and distributions of 37.0 cents per security. This performance comes amid a backdrop of ongoing economic uncertainty, yet the company’s focus on long-term value creation and portfolio quality has helped it navigate the challenges.
CEO Ross Du Vernet highlighted the resilience of Dexus’s high-quality office and industrial assets, noting occupancy rates well above national averages, 92.3% for office and 96.2% for industrial. These figures underscore the company’s strategic positioning in prime locations, which continues to drive leasing momentum and reduce incentives.
Turning the Valuation Tide
After a difficult FY24 marked by significant valuation losses, Dexus reported a statutory net profit of $136.1 million for FY25, a sharp turnaround primarily attributed to stabilizing capitalisation rates. The portfolio saw a positive shift in valuations during the second half of the year, signaling an inflection point in the real estate cycle. While the overall portfolio valuation declined slightly by 1.1% over the year, the improvement in the latter half suggests a more optimistic outlook.
The company’s disciplined capital management is evident in its gearing ratio of 31.7%, comfortably within its target range, supported by $3 billion in cash and undrawn facilities. Interest rate hedging at a weighted average of 2.1% provides further protection against market volatility.
Funds Management and Development Growth
Dexus’s funds management business remains a key growth driver, managing $35.6 billion in assets. The platform raised over $480 million in equity commitments for Dexus Real Estate Partnership 2, despite a subdued capital raising environment. Flagship funds outperformed their benchmarks, reinforcing investor confidence.
On the development front, Dexus’s $13.3 billion pipeline includes marquee projects like Atlassian Central and Waterfront Brisbane. These developments are progressing well, with fixed-price contracts and strong leasing pre-commitments mitigating risk. Industrial developments also saw record leasing volumes, further enhancing portfolio quality.
Sustainability and Community Focus
Sustainability remains integral to Dexus’s strategy, with continued progress toward net zero emissions and sourcing 100% renewable energy for its managed portfolio. The company improved its NABERS Indoor Environment ratings and installed battery storage solutions at key industrial sites. Partnerships with mental health organizations and community initiatives reflect Dexus’s commitment to social impact alongside financial performance.
Navigating Legal Challenges and Looking Ahead
Dexus is currently defending a legal claim from Australia Pacific Airports Corporation related to a sale process, with a court hearing scheduled for November 2025. While this introduces some uncertainty, the company remains focused on delivering value for its security holders and clients.
Looking forward, Dexus expects FY26 AFFO to be between 44.5 and 45.5 cents per security, with distributions maintained at 37.0 cents. The company’s leadership sees the real estate market entering a phase driven by fundamentals, positioning Dexus to capitalize on improving conditions.
Bottom Line?
Dexus’s FY25 results mark a cautious but clear turning point, setting the stage for growth as market fundamentals improve and strategic initiatives take hold.
Questions in the middle?
- How will the ongoing legal dispute with Australia Pacific Airports Corporation impact Dexus’s funds management operations?
- Can Dexus sustain its strong occupancy and leasing momentum amid evolving office market dynamics?
- What are the risks and opportunities associated with the company’s substantial development pipeline in a recovering market?
