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2 ASX REIT reports out today: Vicinity Centres & Dexus

Today was the busiest day yet of ASX reporting season as the likes of CSL Limited (ASX: CSL), WiseTech Global Ltd (ASX: WTC) and a2 Milk Company Ltd (ASX: A2M) delivered their annual results, alongside many others.

In the large-cap space, two ASX real estate investment trusts (REITs) released their full-year results: Vicinity Centres (ASX: VCX) and Dexus Property Group (ASX: DXS).

We know that COVID-19 and the associated lockdowns have impacted ASX REITs, but to what extent? Let’s dig into the results.

Vicinity Centres

The Vicinity Centres share price finished more than 4% lower today as investors absorbed the results. Here are the headline figures from Vicinity’s FY20 report:

  • Total income down 22% to $738.4 million
  • Funds from operations (FFO) down 25% to $520.3 million
  • Portfolio occupancy of 98.6%, down from 99.5% at the end of FY19
  • Statutory net loss after tax of $1.8 billion, compared to a profit of $346.1 million in FY19

Vicinity’s bottom line was impacted by a property valuation loss of $1.7 billion and an impairment of goodwill of $427 million. As the company flagged in an update last month, the valuation of the overall portfolio declined 11.3% or $1.79 billion for the six month period to 30 June 2020.

Vicinity recently launched a $1.2 billion equity to support its financial position and also warned it would not be paying a final FY20 distribution. The company disclosed that to 30 June 2020, it was eligible for gross payments of $10.8 million under the initial phase of the JobKeeper program.

Rent relief

Commenting on rent relief, chief executive Grant Kelley said Vicinity continues to work through rent relief negotiations with affected tenants to reach mutually-beneficial outcomes. Of the short-term lease variations agreed to date, 86% of the rent relief relief has been in the form of waivers and 14% deferrals.

Outlook

Looking forward, Mr Kelley said: “the COVID-19 pandemic has accelerated consumer trends, including increased take-up of online retail spending. In addition, we have seen CBD office workers largely working from home, with an increase in the number of consumers shopping locally benefiting our suburban centres.”

Mr Kelley believes Vicinity is well-positioned to capitalise on these changes over time due to its strong data analytics capability, market-leading destinations and the embedded mixed-use opportunities it is able to realise across the portfolio.

As expected, the company declined to provide FY21 guidance but assured investors it will provide further updates as appropriate.

Dexus Property

While Vicinity is primarily focused on retail, Dexus has a strong tilt towards the office sector. At the end of FY20, Dexus’ portfolio value grew by 3.9% to $16.5 billion, comprising a $14.2 billion office portfolio and $2.2 billion industrial portfolio.

Here are the headline figures from Dexus’ FY20 result:

  • Total property FFO up 6.4% to $795.6 million
  • Property revenue up 5.8% to $936.9 million
  • Funds management revenue up 14.8% to $73.6 million
  • Net profit after tax of $983 million, down 23.3%

The fall in profit was primarily due to revaluation gains which were $160.7 million lower than in FY19.

The company noted that until the last quarter, its financial results were tracking ahead of expectations.

Dexus said it continues to work with its customers on rent relief requests. So far, it has reached an in-principle agreement on 37% of rent relief requests received. In the fourth quarter of FY20, rent collections were 94% in the office sector, 92% in industrial and 39% for city retail.

Distribution & outlook

Dexus declared a final distribution of 23.3 cents per share, bringing full-year distributions to 50.3 cents per share – in line with FY19. The Dexus share price edged higher today to close at $8.48, meaning shares are currently offering a dividend yield of around 6.3%.

Commenting on what comes next, chief executive Darren Steinberg said: “Our immediate priorities are summarised across five key areas: assisting Australian businesses in returning safely to their workplaces, optimising our property portfolio composition, accelerating opportunities to expand our funds management platform, continuing to work with our customers on the future of workspace, and progressing the city-shaping development pipeline.”

Dexus is not providing distribution guidance for FY21 but intends to deliver a distribution in line with free cash flow.

Thursday is set to be another big day of news with reports expected from Wesfarmers Ltd (ASX: WES), Qantas Airways Limited (ASX: QAN), Domain Holdings Australia Ltd (ASX: DHG) and Mirvac Group (ASX: MGR).

To keep up to date with all the latest reports, be sure to bookmark Rask Media’s ASX reporting season page.

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Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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