Mirvac, Dexus swing to losses on empty offices
One of Australia’s biggest office landlords, Dexus, has been hit by a decline in property values across its large-scale office portfolio, swinging from a profit of $1.6 billion last year to a statutory loss of $752.7 million.
Widely seen as a bellwether for the sector, the crunch in the office portfolio – driven by workers sticking to flexible work practices – has forced Dexus to lean harder on its exposure to airports, healthcare and retail properties.
ASX-listed Dexus has an Australasian real estate and infrastructure portfolio valued at $61 billion. It directly and indirectly owns $17.4 billion of office, industrial, healthcare, retail and infrastructure assets and investments. It manages a further $43.6 billion of investments in the funds management business.
Taking out the one-off revaluations, the group’s funds from operations – the more accurate measure for real estate investment trusts – fell 3 per cent to $555 million on the 2022 year, which was in line with market expectations.
The company said on Wednesday that it was optimistic that its office portfolio had sailed through the working-from-home turbulence. The group’s portfolio is close to 95.6 per cent full.
In the latest deal, Dexus has re-signed its long-term tenant King & Wood Mallesons at Governor Phillip Tower, One Farrer Place, Sydney for a further 10 years.
A render of the 40-level Atlassian tower near Central Station in Sydney.Credit:
One of its major properties yet to come out of the ground is the $1 billion Atlassian tower in Sydney’s Central tech hub, which Dexus chief executive Darren Steinberg said was on track and all floors spoken for.
“Atlassian are committed and in fact we asked them for some space back in the yet-to-be-built tower, and they declined,” Steinberg said.
“We’re certainly seeing a return to office across the country in Australia. We’re seeing companies want to be located at the core of the CBDs and that’s evidenced by our 98 per cent occupancy in the Sydney CBD core.”
Dexus declared a final distribution of 23.6¢ payable on August 30. Its shares slipped more than 3 per cent to end the session at $7.76.
Real estate giant Mirvac swung to a $165 million full-year loss after writing down the value of its retail and office property investments and battling the effects of wet weather, rising interest rates and higher inflation on its development arm.
The statutory loss came after the Sydney-based company posted a $906 million profit the year before. Excluding the writedowns, its operating profit after tax fell 3 per cent to $580 million, or 14.7¢ per stapled security, in line with its own forecasts.
“We delivered on our key strategic priorities despite a challenging economic backdrop,” Mirvac chief executive Campbell Hanan said. He forecast operating earnings for the current year of between 14 and 14.3¢ per stapled security, and a stable dividend.
The $9 billion ASX-listed company, which is the country’s largest mixed-use medium to high-density housing developer, said its operations were hit by sustained wet weather on the east coast, supply chain constraints and labour shortages, along with increased construction costs.
Profits from residential developments slumped 34 per cent to $156 million in the year to June 30. With a $29 billion pipeline of projects in planning or under way, the developer still settled 2298 residential lots during the year, slightly ahead of its revised settlement target of about 2200 lots.
But the barrage of interest rate rises, lower first-home buyer activity and fewer product launches had taken their toll, Hanan said. “However, we continued to experience good demand from owner-occupiers focused on high-quality, well-located product with good amenity and delivery certainty, backed by a credible brand,” he said.
Mirvac also owns and manages $26 billion worth of assets in its investment portfolio across office, retail, industrial and build-to-rent properties.
It declared a final distribution of 5.3¢ payable on August 31, taking its payout to investors for the year up 3 per cent to 10.5¢ per stapled security. Its shares closed more than 5 per cent higher at $2.40.
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