Dexus Industrial (DXI):  the industrial REIT reported their full-year results for 2023 results which had few surprises, unlike CLW, which reported yesterday. The HNW Income Portfolio holds a 3.6% weight to DXI.

Key Points:

  • Profits up: Funds from operations up +2% to $54 million, and FFO per share 17.1c mid-point of the guidance.
  • Operationally solid: full occupancy at 98%, 6.3-year weighted average lease term saw 5% rental income growth.  What was more important was the average +24% re-leasing spreads DXI received when it signed new leases. Unlike office or retail LPTs, where the renewals will be brutal, DXI is actually looking towards tenant lease expiries.
  • Balance sheet a highlight: Despite small decreases in valuation, gearing declined to 25% (below target range 30-40%) and hedged for 4 years at an average cost 3.5%, and no maturities before 2025. Unlike other LPTs, DXI were quicker to recognise changing conditions and began selling assets in 2022 to reduce debt and improve the average quality of their portfolio, selling $250 million of assets over the past year.
  • Valuation: NTA $3.44 per share, a slight decrease due to asset sales and 1.5% decrease in valuation. 5.4% cap rate looks conservative for DXI’s industrial assets (though very sharp historically), with similar industrial assets in Sydney and Melbourne trading around 4-4.4%.
  • Outlook:  Industrial real estate market remains tight, with a record low vacancy rate of 0.8% nationally. FY24 Guidance of FFO per share of 17.1 cents per share solid with other trusts guiding to significant falls, reflecting DXI’s lower gearing and capital being used to develop assets mainly at Perth airport and in Sydney’s West, with a $120 million pipeline.


Portfolio Strategy:  DXI is a well-managed industrial REIT owning a diversified portfolio of industrial real estate valued at $1.6b with a development pipeline that will deliver earnings and distribution growth in the future. DXI trades at a 19% discount to NTA and on a 6% yield paid quarterly.

DXI was flat at $2.79.