Dexus (ASX: DXS) ASX release 15 October 2019 Citi Australian and New Zealand Investment Conference presentation Dexus provides the attached presentation which will be used as a basis of discussion at the Citi Australian and New Zealand Investment Conference, to be held at the Sheraton Grand in Sydney on Wednesday, 16 October 2019. For further information please contact: Investor Relations Media Relations Rowena Causley David Yates +61 2 9017 1390 +61 2 9017 1424 +61 416 122 383 +61 418 861 047 rowena.causley@dexus.com david.yates@dexus.com About Dexus Dexus is one of Australia’s leading real estate groups, proudly managing a high quality Australian property portfolio valued at $31.8 billion. We believe that the strength and quality of our relationships is central to our success, and are deeply committed to working with our customers to provide spaces that engage and inspire. We invest only in Australia, and directly own $15.6 billion of office and industrial properties. We manage a further $16.2 billion of office, retail, industrial and healthcare properties for third party clients. The group’s circa $9.3 billion development and concept pipeline provides the opportunity to grow both portfolios and enhance future returns. With 1.7 million square metres of office workspace across 53 properties, we are Australia’s preferred office partner. Dexus is a Top 50 entity by market capitalisation listed on the Australian Securities Exchange (trading code: DXS) and is supported by 26,000 investors from 19 countries. With 35 years of expertise in property investment, development and asset management, we have a proven track record in capital and risk management, providing service excellence to tenants and delivering superior risk- adjusted returns for investors. www.dexus.com Download the Dexus IR app Download the Dexus IR app to your preferred mobile device to gain instant access to the latest stock price, ASX Announcements, presentations, reports, webcasts and more. Dexus Funds Management Ltd ABN 24 060 920 783, AFSL 238163, as Responsible Entity for Dexus (ASX: DXS)
Citi Australian & New Zealand Investment Conference Presentation October 2019 Dex exus us Fund unds M Mana nagem ement ent L Limited ed AB ABN 24 24 06 060 9 0 920 20 783 AF AFSL 238163 as r res espons nsible ent e entity for D Dex exus us
Key takeaways Dexus benefits from Australian CBD exposure Austral alian an office f e fundam damen ental als ar are at e attrac active - Relative pricing and rent growth for Australian office compares favourably to global cities - Measured supply at a time of record low vacancy levels (Sydney and Melbourne) - CBDs continue to benefit from strong employment growth Dex exus wel ell po positioned ed for s sustai ained ed per performan ance - High quality portfolio with development pipeline weighted to key Australian CBDs - Diversified lease expiry profile provides upside exposure - Strong underlying fixed rental increments of 3.5-4.0% - Customer focus with emphasis on making things ‘simple and easy’ 2 Citi Australian & NZ investment conference presentation
Megatrends Dexus’s strategy is orientated around two key long-term growth thematics 1 2 We are in a climate of rapid Urban banisat ation Growth i h in p n pens nsion c n capital f fund und flows change and the context in which we operate our Densification of land use in and around key Increased demand for real assets from business, both today and in economic and transport hubs growing and ageing populations the future, is informed by the 30.2 disruption and opportunity 41.4 created by global megatrends. otal assets +55. +55.6% “Australia’s Other er m megat egatren ends ds that at c could d illion) 2 26.6 ies major cities all itie +13.7 tot illions) 1 trillio impac pact Dex exus’s ’s s strat ategy egy an and d ranked in the l cit on funds t ital c (millio top 25 most 20%+ nsion fund (USD t out utlook i inc nclud ude: 16.5 liveable cities capit allocated to real globally” ion ( estate, The r ris ise of t the m mille illennia ial l lian c latio infrastructure and Pens worke wo ker Australia EIU Liveability popula private equity, up Rankings from 4% in 1997 Tec echnologi gical al c chan ange ge 2007 2017 2017 2060F Envir ironmental s l sustain inabilit ility “re-creation of assets in high demand CBD “attraction of like minded, long dated, third party locations to unlock change of use upside” capital partners to invest alongside Dexus” 1. Source: ABS 2. Source: Willis Towers Watson, Global pension assets study 2018. 3 Citi Australian & NZ investment conference presentation
Dexus overview $31.8 billion under management 1 Dexus distribution per security (cents) 2 PROP OPERTY P POR ORTFOL OLIO - Proxy for Australian office property • Overweight position to Sydney market $15.6 b billio illion 1 6.6% 6. 6% CAGR CA since F FY12 12 FUNDS M FU MANAGEM EMEN ENT - Outperforming and growing Funds Management business $16.2 b billion illion 1 cps 50.2 - $9.3 billion 1 group development and 50 47.8 DEV EVEL ELOPM PMEN ENT 45.47 concept pipeline 43.51 45 41.04 - FY20 and FY21 trading profits significantly 40 TR TRAD ADING 37.56 de-risked 3 36.00 35 32.10 CAP APITAL TAL - Strong balance sheet with gearing of 24.0% 30 MANAGEM EMEN ENT - Market cap of circa $13 billion 25 - 95% of Property FFO already locked in FY20 G 20 GUI UIDAN ANCE 20 - Trading profits significantly de-risked 3 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Con onfid ident of of a achie ievin ing c cir irca - Cost of debt of mid-3% with appropriate th 4 5% FY2 FY20 d distr tributi tion g growth levels of hedging 1. Funds under management and development and concept pipeline as at 30 June 2019. 4. Barring unforeseen circumstances, guidance is supported by the following assumptions: Impacts of announced 2. Adjusted for the one-for-six security consolidation completed in FY15. Compound annual growth rate (CAGR) is calculated over seven years. divestments and acquisitions; FFO per security growth of circa 3%, underlying FFO per security growth of circa 3%, underpinned by Dexus office portfolio like-for-like income growth of 4.5-5.5%, Dexus industrial portfolio like-for-like 3. Post 30 June 2019. Dexus exchanged contracts to sell a 25% interest in 201 Elizabeth Street, Sydney for $157.5 million and entered into a put and income growth (excluding one-offs) of 3-4%, management operations FFO of $55-60 million, cost of debt of mid- call option to sell the remaining 25% interest in late 2020 for a further $157.5 million. Trading profits in FY21 are subject to the exercise of either 3%; trading profits of $35-40 million net of tax; maintenance capex, cash incentives, leasing costs and rent free option. incentives of $170-185 million; and excluding any further transactions. 4 Citi Australian & NZ investment conference presentation
High quality portfolio weighted to Australian CBDs With positive outlook for cap rate compression Office portfolio asset diversification Sydney Office cap rate spread to 10-year Aus govt bonds September 1994 – September 2019 3 , % Premium Grade 31% 5.15% 5. 5% offi office por ortfol folio o 5% CR 1 at WACR t 30 J 0 June une Developmen 4% 2019 19 t & other 7% +105 b +10 5 bps Up f p from m 4% 3% at F t FY18 10yr av avg. g. +238 bps bps age 4 10-year 10 ar av average A Grade 57% 2% 25y 5yr a avg. B Grade 5% 1% 25 25-year ar av average age Recent office transactional evidence 2 Pro ropert rty Pri rice ce ( ($m) Yie ield ld 0% 2 Chifley Square, Sydney 920.0 4.5% Spr pread t ad to -1% bo bonds ds Westfield office towers, Sydney 1,520.0 4.4% Sept ptembe ber 2019 spo pot 366 bps -2% Liberty Place precinct, Sydney 400.0 4.1% 10yr av average age 4 261 bps Barangaroo T2 and T3, Sydney 1,079.0 4.8% -3% 25y 5yr av average age 128 bps 242 Exhibition Street, Melbourne 830.0 4.8% -4% Sep-94 Sep-99 Sep-04 Sep-09 Sep-14 Sep-19 12 month capitalisation rate outlook: Potential 12.5-25 basis point firming for quality office property and at least 25 basis points firming for industrial, supported by spread to bonds and investor sentiment 1. Stabilised portfolio weighted average capitalisation rate. 3. Cap rate is equal to the average prime yield for the purposes of this analysis. 4. Post GFC 10-year average taken from March 2009 quarter through to September 2019. 2. Source: JP Morgan Equities Research. Source: JLL, RBA 5 Citi Australian & NZ investment conference presentation
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