As you may not have heard from me before, please allow me to introduce myself. I’m the Executive General Manager of Funds Management at Dexus, responsible for the management of the funds that were previously known as APN Property Group that, during the year, transitioned to the Dexus platform.
As the year draws to a close, I’d like to take this opportunity to provide an update on our progress and offer a few observations regarding the outlook for the year ahead.
There is growing demand from investors for real estate assets, and a continued interest in the Australian market. We therefore began the year with the strategic goal of expanding Dexus’s funds management platform.
We have made good progress towards that goal. In April, we secured approval to merge AMP Capital’s $5.6 billion diversified property fund with Dexus Wholesale Property Fund, followed in August by the acquisition of APN Property Group.
The result is that APN Real Estate Securities’ industry-leading products are now available to a larger audience through our platform, backed by a business development team able to offer a comprehensive suite of income-focused products.
While integrating the technical and administrative sides of the business, a key focus has been the preservation of the culture and independence of APN’s real estate securities business.
APN’s brand resonates with retail investors, as does the team’s track record. Their management of your investment continues, as does the high-quality service you have received. With the integration complete, the Dexus platform can now be leveraged to expand its reach while retaining its unique character and positioning.
It was a very different environment this time last year. Concerns over the future of the office as a reliable source of income were mounting and question marks hung over shopping malls.
Over the past 12 months, those questions have been answered. AREITs have proved their longevity.
The APN AREIT Fund and Asian REIT Fund are both good examples of what skilful management can achieve in a challenging environment. In an era of record low rates, their respective current running yields of 5.03%1 and 5.71%1 are attractive options for income investors.
Over the past six months I have worked closely with Pete Morrissey, Head of Real Estate Securities, and his team. Their knowledge and depth of research is impressive, and evident in their most recent presentation. It makes some pertinent observations I’d like to share.
First, the AREIT sector is regaining its stature. With merger and acquisition activity increasing and offshore interest in the sector growing, October was a record month for transactions.
Second, the most depressed AREIT sectors are now recovering. For the first time since the pandemic, several large shopping malls have sold at or above book value whilst operational performance is ahead of expectations.
In the office sector, occupancy is stabilising and capital values remain robust supported by strong investor demand. As for industrial, the structural shifts continue to drive occupancy and rental growth. In turn, these factors are driving valuations. The cashflow resilience among specialised REITs like childcare and healthcare, meanwhile, is also now more appreciated. Valuation growth is evident here, too.
These factors bode well for the year ahead. With low gearing, inflation protection, high quality yields and attractive valuations, AREITs should continue to deliver long term value. Of course, some sectors offer better value than others, which is where APN Real Estate Securities can help.
Their expertise and experience combined with the reach and depth of Dexus’s fully integrated platform is a powerful combination. I’m excited to see what we can achieve in the year ahead and look forward to further updating you on our progress.
Thank you for your continued support and enjoy the festive season.