Recasts with comments from CEO interview, details and updates shares

By Byron Kaye and Roshan Thomas

Feb 18 (Reuters) - Dexus DXS.AX, Australia's largest office landlord, on Tuesday pitched the country as a safe harbour for investors amid geopolitical uncertainty, as it aims to sell A$2 billion of assets in three years in a faltering commercial property market.

The Sydney-listed company said it had completed a quarter of its divestment plan, as it reported a 13.9% drop in adjusted funds from operations — its preferred performance metric — for the six-month period ended December 31.

Three years of high interest rates and the impact of incentives - strategies office landlords use to lure or retain tenants - contributed to the earnings decline. However, the company said that anticipated rate cuts and stabilising office demand should slow the earnings downturn.

"The market is, from an investment point of view, kind of bottoming," said Dexus CEO Ross Du Vernet in an interview.

"Investors have had a lot of reason to sit on the sidelines the past few years (but) some certainty of the rate cycle turning, as seen in a rate cut, will be important," he added.

Du Vernet said he expects Australia to benefit from inbound and domestic mergers and acquisitions demand, as trade and regulatory upheaval spearheaded by U.S. President Donald Trump fuelled uncertainty in markets around the world.

"Within that global investment universe of uncertainty, Australia is actually pretty well-positioned (due to) diversification in our economy, strong population growth, our geographical remoteness in some respects, rule of law and stability in government," he said.

Shares of Dexus DXS.AX were down 0.8% by mid-session trade, against a slightly weaker overall market .AXJO.

Despite the decline in adjusted funds from operations (AFFO), Dexus swung back to a profit of A$10.3 million for the half year, bouncing back from a A$597.2 million loss in the previous corresponding period, citing lower fair valuation losses.

Dexus declared an interim distribution of 19 Australian cents per security and reaffirmed its AFFO outlook for the full financial year ending in June, expecting between 44.5 and 45.5 Australian cents per share, down from 48 cents last year.

($1 = 1.5741 Australian dollars)

(Reporting by Roshan Thomas in Bengaluru; Editing by Sherry Jacob-Phillips)

((Roshan.Thomas@thomsonreuters.com;))