Dexus is one of Australia’s leading real estate groups, proudly managing a high quality Australian property portfolio valued at more than $22 billion.
As property innovators, we are deeply committed to working with our customers to provide spaces that engage and inspire, as well as delivering quality, sustainable returns for our investors. Delivering to the needs of our customers and the strength and quality of our relationships will always be central to our success.
We invest only in Australia, and directly own $11 billion of office and industrial properties. We manage a further $11.7 billion of office, retail and industrial properties for third party clients. The Group’s $4.5 billion development pipeline provides the opportunity to grow both portfolios and enhance future returns.
Our revenues are built from property
The majority of our earnings, or FFO, is derived from rental income we receive from the properties we own directly, which comprises an $11 billion Australian property portfolio. This portfolio is predominantly weighted to the Sydney office market, Australia’s key economic centre where vacancy is expected to tighten over the next few years.
In addition, an established third party funds management business provides Dexus with annuity-style income derived from $11.7 billion of assets under management for high quality third party clients.
We actively seek to optimise returns
We are active asset managers, which means we are constantly evaluating opportunities to optimise the performance of the properties we manage.
This approach has, for example, assisted us in maintaining high office portfolio occupancy rates over time, with average occupancy of 95.8% achieved since FY12 in our directly owned office properties.
To deliver some predictability to our returns, our lease terms generally contain fixed annual increases of between 3% and 4%.
We create long-term opportunities
Our investment strategy is focused on the long term.
Across our entire portfolio, we manage a development pipeline valued at $4.5 billion. It’s a pipeline that is purposefully created to deliver future potential revenue streams, while adding further depth and flexibility to the spaces we can offer our customers.
Value is added through:
- On-balance sheet development pipeline: enhances portfolio quality and returns with target year-one yields and project internal rate of return (IRR) at much more favourable metrics than what can be achieved through direct acquisition
- On-balance sheet trading pipeline: promotes value creation via developing, acquiring and repositioning assets for divestment. Dexus has established a track record in trading, selling nine properties and delivering $158.7 million of trading profits for investors, achieving an average unlevered project IRR of 23.4% from FY12 to HY17. The trading pipeline has been enhanced with priority projects that are expected to deliver approximately $90-100 million from FY17 to FY19
- Third party development pipeline: provides organic growth in assets under management, and therefore revenue potential. Currently comprises $2.5 billion of projects.
We deliver above benchmark returns
Strong track record of delivering at the asset level and ultimately to investors:
- On-balance sheet office portfolio, Dexus Wholesale Property Fund and Dexus Office Partnership continue to outperform benchmark
- Delivered a compound annual growth rate in distribution per security of 7.9% from FY12 to FY16 with a target of 3-5% growth in FFO through the cycle
- Target a return on equity of 9-10% p.a. through the cycle
We maintain a strong balance sheet
We aim to maintain a strong balance sheet, through conservative financial and operational risk management
Financial Risk Management:
- Strong investment grade credit rating of ‘A-‘ from S&P and ‘A3’ from Moody’s
- Gearing of 26.5% stands below 30-40% target range
- Diversified mix of debt facilities with weighted average duration >5 years and hedging policy >60%
- Distribution policy aligned with free cash
Operational Risk Management:
- Dexus adheres to strict investment criteria for acquisitions, divestments and development
- Up to 15% of funds under management limit on capital deployed into development/trading opportunities
- Lean Management Expense Ratio (MER) of 36bps
Information as at 31 December 2016 and past performance is not an indication of future performance.
- This information is issued by Dexus Funds Management Limited (DXFM) in its capacity as responsible entity of Dexus (ASX:DXS). It is not an offer of securities for subscription or sale and is not financial product advice.
- The information including, without limitation, any forward looking statements or opinions (the Information) may be subject to change without notice. To the extent permitted by law, DXFM, Dexus and their officers, employees and advisers do not make any representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of the Information and disclaim all responsibility and liability for it (including, without limitation, liability for negligence). Actual results may differ materially from those predicted or implied by any forward looking statements for a range of reasons outside the control of the relevant parties.
- The information should not be considered to be comprehensive or to comprise all the information which a Dexus security holder or potential investor may require in order to determine whether to deal in Dexus stapled securities. This information does not take into account the financial situation, investment objectives and particular needs of any particular person.
- The repayment and performance of an investment in Dexus is not guaranteed by DXFM, any of its related bodies corporate or any other person or organisation.
- This investment is subject to investment risk, including possible delays in repayment and loss of income and principal invested.