Ann: FY23 Results presentation, page-2

Taking a deep dive into the data I am more convinced Industrial property is the best place to invest in property. Critical shortage of warehousing in Australia.. Market rent reviews are up to 30% higher than existing rents. It will take a while for existing leases to catch up as market rent reviews are generally at exercise of an option term (say every 5 years) but in the meantime 50% of annual rent reviews are to CPI with the balance at fixed rates (around 3%).

Annual valuations are taking a small hit as cap rates increase in sympathy with higher interest rates but with current SP 20% below NTA there's plenty of wriggle room although 27% gearing means any percentage reduction in market value is magnified by about about 40% when measured against the equity component. So a 10% reduction in valuation will cut equity share by 14%. Higher interest rates on borrowing will be a headwind but wait for annual rent increases to combat this. DXI has around 50% of debt hedged at a fixed rates although they only last around 2-3 years. If higher interest rates persist then debt interest will be a headwind and cap rates will come under further upward pressure

Certainly industrial IMO is better than office and retail where regular valuations are more likely to take larger MTM hits. However having said that the SP of these REIT are at a very steep discount to NTA so can represent a good risk investment with plenty of margin for error. Like URW where the SP has cratered since buying the offshore assets of Westfield. SP I think has fallen about 75% but debt is the killer here. I think gearing is 50% which is far to high with any market valuations are amplified by 100% so plenty of wriggle room required here.

DXI is not a growth stock and should be considered a more boring safe good yielding investment and is a good fit for that defensive component of any investment portfolio. Dull and boring. Also by buying into this REIT rather than buying into a single property you are buying into a portfolio of properties thus spreading your risk. Another bonus is there's no purchase stamp duty which is around 5%.

Will need to keep managers (DXS) who are keen to expand management fees and this means expanding investment portfolio of the likes of DXI. Reckless investing hits unitholders but not managers. Increasing assets means either more debt or more equity. DXI debt is still too high IMO and there's a development pipeline requiring capital. The airport development in Perth is a biggy. DXI have been selling properties which is my preferred method of getting capital for developments. Maximum pressure by unitholders is required to keep them in check