DEXUS Property Group has issued an earnings guidance rise of 5.2 per cent for the 2014 financial year, based on expected improvement in capital values, and has relaunched a share buy-back.
The group has also had independent revaluations of 21 of its 84 properties resulting in a $58 million, or 4.4 per cent, overall increase on prior book value for the quarter to June 30.
The rise was largely driven by two Sydney properties, 30 The Bond and Australia Square, which accounted for $46.2 million, with both values rising on firming capitalisation rates and stronger average leasing terms.
DEXUS chief executive Darren Steinberg said the revaluation of 30 The Bond resulted in a 15 per cent increase to $179 million, while the 50 per cent share of Australia Square was now worth $305 million.
"Barring unforeseen changes to operating conditions, our guidance for earnings or funds from operations for the year ended June 30, 2014, is 8.15¢ per security, a 5.2 per cent increase from the 2012 year," he said.
Late last month, DEXUS also upgraded its second-half distribution for the 2013 financial year to 3.11¢, taking the full-year distribution to 6¢, a 3.4 per cent increase. The upgrade was a result of an increase to the 2013 payout ratio from 75 per cent to 77 per cent after the managers reported a fall in expected capital expenditure. The earnings per security was reaffirmed at 7.75¢.
"We expect tenant demand to remain tempered in the coming year as a result of current economic conditions which has led to business uncertainty, with pressure on both market rents and incentives," Mr Steinberg said. "Despite the current conditions, our portfolio is well positioned for solid growth underpinned by strong like-for-like office income growth and an expected increase in trading profits."
Head of property research at Goldman Sachs Simon Wheatley said while the overall increase in value from the portfolio revaluation appears healthy, outside of the contribution from 30 The Bond and Australia Square, the increase in value was mild.
The rise in valuations is made as the Australian real estate investment trusts emerged as the single largest purchaser group in 2012-13 for commercial assets, research from advisory group Deep End Services found.
The firm's principal, Kevin Stanley, said A-REITs accounted for 28 per cent of the $14.4 billion worth of sales in the past year. It is tipped the next 12 months will also be dominated by REITs amid suggestions DEXUS and Investa Office Fund would be interested buyers in any assets from the Commonwealth Property Office Fund, if they were offered.