Dexus

Approach

We create value for all our stakeholders through utilising our asset management, development and transaction capabilities.

How we create value

Our value creation roadmap outlines the process through which we create value for our stakeholders.

The megatrends impacting our business shape our strategy and we use our business model to transform our key resources into long-term value for Dexus Security holders, our funds management partners and other key stakeholders.

Key resources
Key business activities
Value created
EARNINGSDRIVERSFINANCIALSUSTAINEDVALUEPEOPLE AND CAPABILITIESVALUEDRIVERSTHRIVING PEOPLECUSTOMERS AND COMMUNITIESENVIRONMENTVALUEDRIVERSENRICHED ENVIRONMENTPROPERTIESVALUEDRIVERSLEADING CITIESVALUEDRIVERSFUTURE ENABLEDCUSTOMERSAND STRONGCOMMUNITIESStrategyMegatrendsExternal environmentMaterial issues and risksMANAGINGDEVELOPINGTRANSACTINGOURBUSINESSMODEL
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Megatrends

We are in a period of rapid change and the context in which we operate our business, both today and in the future, is informed by the disruption and opportunity created by global megatrends.

We outline various megatrends that could impact Dexus’s strategy and outlook, and the nature and potential of these can change over time.

Urbanisation
Urbanisation in major cities both in Australia and around the world is increasing. This creates challenges for social equity, the environment, transport systems and city planning.
Growth in pension capital fund flows
Funds under management within pension funds are expected to increase significantly as populations in developed nations continue to age. Consequently, real estate is expected to receive a higher share of capital allocation.
The rise of the millennial worker
Increased participation by millennials in the workforce is changing how people work.
Technological change
Technology and connectivity is driving mobility and collaboration in workplaces. Artificial Intelligence, automation and robotics is replacing repetitive tasks, together with a new focus on the value of big data and analytics.
Environmental sustainability
A growing global population continues to place demands on the world’s finite resources, while the financial impacts of environmental risks such as climate change are becoming increasingly apparent.
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Strategy

Dexus’s strategy is to deliver superior risk-adjusted returns for investors from high quality real estate in Australia’s major cities.

Delivering superior risk-adjusted returns means outperforming the relevant three and five-year benchmarks in each market in which Dexus owns or manages properties while providing Dexus Security holders with sustainable and growing distributions.

VisionStrategyStrategicobjectives
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Key business activities

We create value for all our stakeholders through utilising our asset management, development and transaction capabilities.

Key business activities
Value created
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Managing

The majority of our earnings are derived from the rental income we receive from the properties we own in our $15.6 billion Australian property portfolio. In addition, we manage $16.2 billion of Australian property investments on behalf of our third party capital partners. We utilise our asset and property management expertise to maximise cash flow across the group portfolio. This active approach seeks to add value through development or leasing to diversify the customer mix and capitalise on the stage that we are at in the property cycle. Our in-house project delivery group assists in effectively managing downtime and delivering capital works projects in a timely manner.

Dexus has a circa $9.3 billion group development and concept pipeline. We utilise our expertise to access and manage development opportunities, enhancing future returns and improving portfolio quality and diversification. Development also delivers on our third party capital partners’ strategies and provides organic growth in assets under management, and therefore revenue potential to Dexus.

We utilise our multi-disciplinary expertise to identify, evaluate, and execute acquisition and divestment opportunities across a range of sectors and asset types. We invest alongside our third party capital partners to access product with the objectives of improving portfolio quality and performance and achieving scale in our core markets. We have demonstrated our ability to invest capital at the right time in the property cycle, acting quickly and evolving our approach to secure opportunities while adhering to our strict investment criteria.

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Key resources

We rely on our key resources or relationships to create value now and into the future.

Financial
How our key resources are linked to value creation

Our financial resources are the pool of funds available to us for deployment, which includes debt and equity capital, as well as profits retained from our property management, development and trading activities. This also includes the financial capital from our third party capital partners which we deploy on their behalf.

Our prudent management of financial capital underpins the delivery of superior risk-adjusted returns to Dexus Security holders with a through the cycle target for Adjusted Funds From Operations (AFFO) per security growth of 3-5% and Return on Contributed Equity (ROCE) of 7-10%. Our policy is to pay distributions to Security holders in line with free cashflow for which AFFO is a proxy.

The value that is created
Sustained value

Superior long-term returns for our investors and third party capital partners.

How we measure value
  • Growth in distribution per security

  • Growth in Adjusted Funds From Operations (AFFO) per security

  • Return on Contributed Equity (ROCE)

Read more on our Financial performance
How our key resources are linked to value creation

As a real estate company, our properties are central to how we create value. We actively manage our property portfolio to enhance its potential, while unlocking further value by developing our properties to further enhance quality in their current use, or for higher and better uses.

Our portfolio is concentrated in Australia’s major cities, which we help shape as leading destinations to live, work and play.

The value that is created
Leading cities

A high-quality portfolio that contributes to economic prosperity and supports sustainable urban development across Australia’s key cities.

How we measure value
  • Scale: value of portfolio

  • Customer demand and space use: portfolio occupancy rates

  • Economic contribution: Construction jobs supported and Gross Value Added (GVA) to the economy from development projects

  • Future value: value of development and concept pipeline

Read more on our Properties performance
How our key resources are linked to value creation

Our people’s knowledge and expertise are critical inputs to how we create value.

We are a passionate and agile team who want to make a difference. We focus on sustaining a high-performing workforce supported by an inclusive and diverse culture.

Our intellectual capital enables us to instil strong corporate governance, sound risk management and maintain a focus on safety at all levels of our business.

The value that is created
Thriving people

An engaged and capable workforce that delivers on our strategy.

How we measure value
  • Employee engagement: employee Net Promoter Score

  • Gender diversity: female representation in senior management roles

  • Succession strength: proportion of internal candidates placed in available roles

Read more on our People & capabilities performance
How our key resources are linked to value creation

Our capacity to create value depends on strong relationships with our customers, local communities and suppliers.

We work in partnership with our customers to provide engaging and productive spaces that anticipate their evolving needs.

We support the communities in which we operate in recognition of their contribution to the activity and vibrancy of our spaces.

We partner with our suppliers to deliver our development projects and manage our properties more efficiently, while maintaining a proactive focus on safety.

The value that is created
Future enabled customers and strong communities

Satisfied and successful customers supported by high-performing workspaces and a comprehensive customer product and service offering.

Well connected, prosperous and strong communities within and around our properties.

A network of capable and effective supplier relationships that ensures environmental, social and governance standards are maintained throughout our supply chain.

How we measure value
  • Customer advocacy: customer Net Promoter Score

  • Community contribution: total value contributed

  • Supply chain economic contribution: value of spend with suppliers

Read more on our Customer & communities performance
How our key resources are linked to value creation

The efficient use of natural resources and sound management of environmental risks supports our creation of value through delivering cost efficiencies and operational resilience.

We understand, monitor and manage our environmental impact, setting short-term and long-term measurable environmental performance targets.

We prepare for the physical impacts of climate change, while harnessing opportunities that support the transition to a low carbon economy.

The value that is created
Enriched environment

An efficient and resilient portfolio that minimises our environmental footprint and mitigates climate risk.

How we measure value
  • Resource efficiency: Energy and water reductions and waste management

  • Climate resilience: Greenhouse gas emissions reductions

  • Performance ratings: NABERS Energy and Water ratings

Read more on our Environment performance
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Material issues and risks

Our material issues are informed by our knowledge of our business environment and play a key role in business planning.

Dexus has used the materiality definitions from the Integrated Reporting Framework and the GRI Standards, which consider material issues to be those that are of high importance to our stakeholders and that affect the organisation’s ability to create value over the short, medium and long term.

Our material issues influence our ability to create value by impacting one or more of the key resources that Dexus relies on.

Key risks

There are various risks that could impact Dexus’s strategy and outlook. We understand that effective risk management requires an understanding of risks during all phases of the investment life cycle.

We actively review and manage the risks facing our business over the short, medium and long-term, overseen by the Board Risk Committee. Periodically, we formally re-assess our key risks through an extensive process, facilitated by an independent specialist. In the intervening years, an annual management review of the key risks is conducted in line with reporting disclosure requirements.

This year, we undertook risk assurance mapping which reviewed the assurance program and the key risks. We also reviewed risk ratings and control processes.

Board focus
The Board Risk Committee is responsible for reviewing the Risk Management framework and risk appetite for the group. In FY19 the Board Risk Committee was involved in:
  • Considering and reviewing the top key risks, their controls and mitigants

  • Reviewing cyber risk and ongoing resilience

  • Overseeing Dexus's preparedness to respond to a crisis

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