18 December 2017

$660 million valuation uplift across Dexus’s portfolio

Dexus today announced that 96 of their 103 assets, comprising 44 office properties and 52 industrial properties have been externally valued as at 31 December 2017.

The external independent valuations have resulted in a total estimated $660 million or circa 5.3% increase on prior book values for the six months to 31 December 2017. As a result of these valuations, Dexus’s net tangible assets per security is expected to increase 65 cents.

Darren Steinberg, CEO of Dexus said: “The strength of the fundamentals in the Sydney and Melbourne office markets combined with solid transactional evidence across both the office and industrial asset classes has seen a strong uplift in values across our portfolio over the past six months. Pleasingly our property values in Brisbane have also benefited from leasing success and values in Perth have stabilised.”

The weighted average cap rate across the total portfolio tightened 29 basis points over the past six months to 5.66%. The weighted average capitalisation rate of the office portfolio tightened 28 basis points from 5.78% at 30 June 2017 to 5.50% at 31 December 2017 and the industrial portfolio weighted average capitalisation rate tightened 23 basis points from 6.88% to 6.65%.

The majority of the valuation uplift was due to the increase in market rents and further capitalisation rate compression experienced in both Sydney and Melbourne. In Sydney, 45 Clarence Street increased $55 million and 383-385 Kent Street increased $76 million as a result of capitalisation rates firming 50 basis points. 100 Mount Street, North Sydney, which is currently under construction, increased in value by approximately $36 million following leasing success which resulted in a 75 basis point tightening in the property’s capitalisation rate to 5.25%.

In the industrial portfolio, strong leasing at recently completed developments located at Greystanes and Laverton and capitalisation rate firming in the Prime South Sydney market led to valuation increases.

Details relating to specific individual property valuations will be released in Dexus’s HY18 result to be announced on Wednesday 14 February 2018.

Darren Steinberg said: “Australia is a key destination for commercial real estate investment, with recent transactions pricing in line with global metrics. This has been driven not only by the strong fundamentals in the Sydney and Melbourne office markets but also by the long dated nature of debt now able to be obtained by well capitalised institutional real estate owners.”