Highlights

• AFFO delivered at 45.0 cents per security with distributions of 37.0 cents, meeting FY26 guidance targets.

• Office occupancy rose to 95.7% and industrial occupancy reached 94.6%, both outperforming market averages.

• The Boral Partnership provides access to a long-dated 2.5 million sqm development pipeline at capital-efficient terms.

• FY27 AFFO guidance of 37.5-39.5 cps reflects lower trading profits, higher finance costs, and Infrastructure Fund headwinds.

Dexus (ASX:DXS) is a leading Australasian real asset group managing a high-quality portfolio valued at $51.4 billion, comprising a $15.3 billion listed real estate portfolio and $36.1 billion in funds management. The Dexus Platform spans office, industrial, retail, healthcare, infrastructure, and alternatives — making it one of the most diversified real asset managers in Australasia. With over 33,900 investors from 28 countries and four decades of experience, Dexus is an A-/A3-rated (S&P/Moody's) property group.

Recent Development

On 20 August 2026, Dexus reported FY26 AFFO of $483.9 million (45.0 cps) and distributions of $397.4 million (37.0 cps), with a Payout Ratio of 82.1% — meeting guidance. Statutory net profit was $482.2 million, up significantly from $136.1 million in FY25 as Capitalisation rates stabilised and revaluations turned modestly positive.

Office occupancy rose to 95.7% driven by leasing at 80 Collins Street Melbourne and Australia Square Sydney. Industrial effective like-for-like income grew 8.3%, reversing prior year weakness. The funds management Business raised $2.0 billion in equity, including a record $500 million commitment into DWPF. A strategic review of infrastructure funds was commenced following the NSW Supreme Court judgment in the APAC matter, with $7.3 billion in third-party infrastructure funds under review. The Boral partnership, offering access to 2.5 million sqm of potential development area subject to rezoning and approvals, is a significant pipeline addition. FY27 AFFO guidance is 37.5-39.5 cps.

Sector Context

Australian CBDs are experiencing a K-shaped office recovery, with Premium and A-grade Assets achieving above-market occupancy while B-grade assets face structural vacancy challenges. Dexus's 95.7% office occupancy — well above market — reflects the quality concentration of its portfolio. The industrial sector remains under-rented (8.1% under-rented), providing embedded rental growth as leases expire and reset to market. The funds management business faces headwinds from elevated redemptions in certain core products, but DWPF's outperformance and the DREP2 growth to $870 million suggest institutional Demand for quality products remains robust.

Risks and Uncertainties

The infrastructure fund review — with $7.3 billion under review and approximately $35 million in annual management fees at stake — creates material Earnings uncertainty, particularly given the APAC appeal outcome in October 2026 could affect the scope and pace of resolution. Waterfront Brisbane's completion delay to late 2029 increases cost and timing risk on a $38 million+ investment. The Dexus Healthcare Property Fund (DHPF) has a $1.1 billion Redemption queue, requiring careful investor management. FY27 AFFO guidance of 37.5-39.5 cps implies a step down from FY26 45.0 cps due to lower trading profits and performance fees.

Catalysts to Watch

Resolution of the APAC litigation (appeal hearing listed October 2026) and the resulting infrastructure fund strategic review outcomes are the most significant near-term catalysts — for better or worse. Completion of Atlassian Central in late 2026 on schedule would be a positive milestone. Leasing progress at Waterfront Brisbane (71% leased) and industrial development completions at ASCEND and Horizon 3023 will support income growth. The progress of securities buyback activity — following divestment target achievement — will be a positive Capital management signal.

Final Thoughts

Dexus (ASX:DXS) delivered on its FY26 commitments in a challenging environment, but the infrastructure fund review and FY27 earnings step-down inject genuine uncertainty into the near-term Investment case. The quality of the core portfolio and progress on strategic actions — Boral pipeline, Atlassian Central delivery, buyback commencement — will determine whether the discount to peers is warranted.