This article first appeared on GuruFocus .
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Total AFFO:$484 million, with a distribution of $0.37 per security, reflecting a payout ratio of 82%.
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Office FFO:Reduced primarily due to divestments and lower average income-producing occupancy.
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Industrial FFO:Increased driven by development completions, higher average physical occupancy, and strong releasing spreads, partly offset by divestments.
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Co-investments in Pooled Funds:Increased driven by Dexus' investments in DSIT1 and DWSF as well as higher distributions received from some FUMs.
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FFO from Management Operations:Decreased due to lower FUM as a result of divestments, lower management fees, and slightly lower performance fees.
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Group Corporate Costs:Reduced by 6% due to active cost management; group corporate and management operation costs reduced by more than $30 million since FY24.
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Finance Costs:Increased due to a higher weighted average cost of debt, partly offset by the impact of divestments.
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Trading Profits:Higher with the sale of Brookhollow, Chester Hill, and completion of construction at Prestons.
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Portfolio Valuation:Increased by 1% for the 12 months to June 30; office portfolio increased by 0.6%, and industrial portfolio increased by 2.3%.
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Look-Through Gearing:33.4%, expected to reduce by around 1.5 percentage points following recently announced divestments.
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Office Occupancy:Improved from 92.3% a year ago to 95.7%.
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Office Leasing Volumes:172,000 square meters, 60% higher than the prior year.
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Office Incentives:26.4%, held down by effective deals in Melbourne; excluding those, incentives were 29.9%.
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Office Like-for-Like Income:Grew 30 basis points.
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Office One-Year Total Return:5.4%.
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Industrial Occupancy:By income reduced slightly to 94.6%; by area 96.5%.
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Industrial Releasing Spreads:Strong at 24%.
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Industrial Average Incentives:Increased to 21%.
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Industrial One-Year Total Return:7%.
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Industrial Reversion:Portfolio remains 8.1% under-rented, with 20% accessing reversion by FY28.
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Industrial Development:Leased 128,000 square meters across 23 development deals; 68% of the committed book is now pre-leased.
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Funds Management:Manages $36 billion in third-party capital; raised $2 billion in equity across the platform.
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DWPF Redemption Queue:Stood at $1.7 billion at the start of the year, completely resolved post year-end.
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DWSF Performance:Ranked first among all wholesale funds in the MSCI Index over the one-, two-, and three-year periods.
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DWPF Performance:Achieved a one-year return of 9.3%.
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FY27 Guidance:Expected AFFO of $0.375 to $0.395 per security and distributions in line with last year at $0.37 per security.
Release Date: August 20, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Dexus ( DEXSF ) delivered solid FY26 results, meeting commitments with total AFFO of $484 million and a distribution of $0.37 per security, reflecting a payout ratio of 82%.
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Office portfolio occupancy improved significantly to 95.7%, the strongest since June 2023, with leasing volumes up 60% year-over-year.
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Industrial portfolio achieved a strong one-year total return of 7%, with releasing spreads of 24% and 68% of the committed development book pre-leased.
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Funds management raised $2 billion in equity, doubled from last year, and fully resolved the DWPF redemption queue post year-end.
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Balance sheet remains solid with look-through gearing at 33.4%, expected to reduce by 1.5 percentage points after divestments, supporting recommencement of buyback activity.
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Portfolio valuations stabilized, with overall portfolio value increasing by 1%, driven by market rent growth, and industrial assets up 2.3%.
Negative Points
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FY27 earnings are expected to be lower, with AFFO guidance of $0.375-$0.395 per security, due to minimal performance fees, trading profits, and higher financing costs.
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Waterfront Brisbane project faces further delays, with completion now expected in late 2029, increasing costs and impacting cost to complete.
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APAC litigation remains a significant overhang, with legal costs of approximately $60 million expensed and potential future claims not provisioned.
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Infrastructure funds and mandates from AMP are under review, with expectations of materially lower earnings contribution from these funds.
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Office like-for-like income growth was only 30 basis points, impacted by downtime at key vacancies, and effective leasing spreads remain negative at -8.7%.
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Industrial occupancy by income decreased to 94.6%, with incentives increasing to 21% due to supply-driven competition in select sub-markets.
Q & A Highlights
Q: Regarding the ongoing APAC matter, can you quantify the potential scale of legal action against Dexus if shareholders were to take action, and does the current provision in NTA cover just the appeal costs or also potential losses? A: Ross Du Vernet (Group CEO): The provision in NTA today essentially relates to legal costs for both our clients and other parties to the judgment to date, plus some costs for us to get through the appeal. It does not provision for any future claims. No claims have been made, and if they are made, it will likely take some time. Keir Barnes (CFO) added that the costs that can be reliably estimated total approximately $60 million and have been expensed in the P&L and reflected in NTA.
Q: Is the intention to restart the buyback immediately after blackout, and how sustainable is it given look-through gearing of 33.4% and nearly $1 billion of capital commitments over the next two years? A: Ross Du Vernet (Group CEO): The buyback is a key part of the plan, but we are balancing short-term gains with not starving the business of capital for long-term growth. At current prices, I am a buyer of the stock, and you should expect us to be active in coming weeks. The buyback is not a material needle mover in FY27 guidance, but it will increase NTA and NAV per security and provide positive leverage to growth as the business turns around. We are targeting to release at least $2 billion of capital over the next couple of years, which supports the capacity.
Q: What are the key moving parts in the FY27 guidance, given the significant year-on-year decline in earnings? A: Keir Barnes (CFO): We anticipate an immaterial contribution from trading profits and performance fees, which alone account for 14% of the lower earnings. Other headwinds include higher funding costs, the practical completion of Atlassian, slight dilution from disposals, and allowances for materially lower contribution from FUM under review. Offsetting these, we anticipate solid growth in the core portfolio driven by leasing momentum, strong office growth, and continued industrial performance. Ross Du Vernet added that the underlying business is actually pretty much flat, excluding the high funding costs and full-year impact of Atlassian.
Q: Can you provide the like-for-like income growth for the office portfolio excluding divestments, and what are the current leasing spreads? A: Andy Collins (EGM - Office): Excluding divestments like 30 Hickson Road, like-for-like growth would be about 2.5% as opposed to the reported 30 basis points. On leasing spreads, we are now under-rented on an effective basis in Sydney CBD and Brisbane CBD for the first time in a long time. The effective spreads on deals done in FY26 were negative 8.7%, down from negative 10.2% in FY25.
Q: How should we think about the timing and success criteria for the infrastructure strategic review, and what would success look like for Dexus securityholders? A: Ross Du Vernet (Group CEO): The timing is not for Dexus to dictate as we work with clients, trustees, and investors. The litigation outcome will impact some decisions. Success means having strategies that can deliver attractive returns, products that clients support, and economics that provide a positive contribution given the complexity and loss of control when investing alongside clients. We are working through it in a methodical and considered way.
Q: Regarding the Waterfront Brisbane delays, does the fixed-price contract protect Dexus from further cost overruns, and what other risks are you exposed to? A: Andy Collins (EGM - Office): The fixed-price contract remains intact and protects Dexus and DWPF from construction cost escalation. It also includes a regime for liquidated damages for delays. The previously announced delays have been absorbed within the contract's capacity. The delay to late 2029 resets an appropriate contingency for weather from this point on. We will have much higher conviction on forecasting practical completion once we pass Level 5 later this financial year.
Q: Can you provide guidance on sources of funding and overall funding costs over the next year or two, particularly regarding the exchangeable notes maturing in November 2027? A: Keir Barnes (CFO): Pro forma gearing after post-balance date divestments sits at around 30%, stepping up to about 32% with the $0.5 billion of committed development expenditure in FY27. The $2 billion capital release target will further benefit gearing. On funding costs, we have high hedge coverage at an average rate of about 3%, which will normalize to higher rates as it rolls off. The exchangeable note is expected to remain in place until maturity.
Q: How are you thinking about allocating capital across opportunities like the buyback, reinvestment in developments, and the core portfolio? A: Ross Du Vernet (Group CEO): Capital allocation is about returns on assets we already own, driving divestment decisions where go-forward returns don't meet hurdles. There is no shortage of opportunities, but the bar is very high given the buyback. Marginal capital deployed over the last year has been on things with high returns that add diversification and capital efficiency. Those will be characteristics of any new investments.
Q: What are the expectations for maintenance CapEx and leasing CapEx in FY27, and has it peaked? A: Keir Barnes (CFO): We expect it to be a little lower than FY26, driven by a smaller office portfolio and better CapEx management, slightly offset by higher incentives in industrial. Andy Collins added that cash incentives and AFFO CapEx should continue to gradually reduce, with the composition of leasing being a key factor. Half of FY28 expiries are in Sydney prime, where we can drive incentives down.
Q: Is Atlassian Central a candidate for capital release, and what cap rate is it being held at? A: Ross Du Vernet (Group CEO): Yes, as we get to completion, it would be one of the assets to bring in third-party capital, partly due to portfolio concentration risk. It's a levered structure at about 65% LVR, so it's not a huge check to raise. The cap rate is 5.375% with a 15-year fixed 4% lease and clean cash flows. The capital raise will depend on where bonds are trading at year-end.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
