DEXUS is one of Australia’s leading real estate groups, utilising its asset management, development and trading capabilities to derive earnings (or Funds from Operations (FFO)) and create value from its high quality property portfolio and established third party funds management business.
The majority of FFO is derived from rental income from a high quality and diversified $11.0 billion Australian property portfolio predominantly weighted to the Sydney office market where vacancy is forecast to tighten over the next few years.
Active management has assisted in maintaining high office portfolio occupancy rates over time, with average occupancy of 95.8% achieved since FY12.
- Office portfolio WALE of 4.7 years
- Lease terms contain fixed annual increases of circa 3.0-4.0%
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 capital partners.
Deep pipeline of value enhancement opportunities on-balance sheet and within funds:
- 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, through 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 which comprises $2.5 billion of projects, will drive improvement in quality of third party portfolio and organic growth in assets under management
Strong track record of delivering above benchmark returns 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
- 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 ROE of 9-10% p.a. through the cycle
Strong balance sheet with 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 band
- 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/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 Property Group (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 Property Group 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 Property Group security holder or potential investor may require in order to determine whether to deal in DEXUS Property Group 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 Property Group 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.