Dexus

Performance

We create value for all our stakeholders through our value creation roadmap.

FY19 achievements

We have establised a value creation roadmap which has enabled us to deliver a strong result across our key resources for all of our stakeholders.

Achieved
Underway
Investors
  • Delivered 5.0% growth in distribution per security, declaring 50.2 cents per security for FY19 (FY18: 47.8 cents per security)

Office and Industrial
  • Achieved 98% and 97% occupancy in our office and industrial portfolios respectively as at FY19 exceeding the 95% target

  • Delivered 3.4% like-for-like income growth in office and 8% in industrial in line with the revised targets of 2.5-3.5% and circa 8% respectively

  • Reduced total capital expenditure to $164.3 million (FY18: $167.8 million) in line with taget range of $155-165 million

  • Reduced office portfolio FY20 lease expiry to 6.9% at 30 June 2019, down from 11.7% at 30 June 2018 managing forward lease expiry risk

  • Leased 98,898 square metres in the Sydney CBD office market achieving +24% releasing spreads

Development
  • Completed 100 Mount Street development in May 2019 with 96% of space committed at 30 June 2019 and achieving an unlevered IRR of 39.6%

  • Leasing risk was reduced across all key office development projects with:

    • 100 Mount Street, North Sydney reaching practical completion with 96% of space committed, up from 63% at FY18

    • 240 St Georges Terrace, Perth with 93% of space committed, up from 51% at FY18

    • 180 Flinders Street, Melbourne with 81% of space committed, up from 39% at FY18

  • New opportunities acquired or activated include:

    • A fund-through development of a premium grade office tower, hotel and retail precinct at 80 Collins Street, Melbourne which was announced in May 2019

    • Securing a prime office development site at 52 & 60 Collins Street, Melbourne

    • Commencing a city retail redevelopment at MLC Centre, Sydney

    • Activating two industrial development projects at Truganina in Victoria

Third Party Funds Management
  • Unlisted funds continued to achieve strong performance against their investment objectives

  • Dexus Wholesale Property Fund (DWPF) continued to outperform its benchmark over all time periods

  • Established a new circa $2 billion (on completion) unlisted trust that invests in Australian logistics properties

  • Attracted 12 new investors across four managed funds

Trading
  • Delivered $34.7 million of trading profits net of tax, achieving the FY19 target

Capital Management
  • Debt duration remained high at 6.7 years at 30 June 2019

  • Further diversified funding sources through the issue of $425 million of Exchangeable Notes to fund the acquisition of a further 25% interest in the MLC Centre, Sydney

  • Contributed to sustainable urbanisation through the activation of six sites within the existing portfolio including 360 Collins Street, Melbourne, 105 Phillip Street, Parramatta, Raphael Place at One Farrer Place, Sydney, 321 Kent Street, Sydney, 44 Market Street, Sydney and 100 Mount Street, North Sydney

  • Progressed the planning and development of four city-shaping precincts including Waterfront Precinct in Brisbane, St Leonards Health Precinct in Sydney, Henry Deane Place, Central in Sydney and 140 George Street in Parramatta

  • Achieved an employee Net Promoter Score of +40, demonstrating a strong workplace culture that is well regarded by Dexus’s People

  • Made progress against the gender diversity target of 40% female, 40% male, 20% any, achieving 37% female representation across senior and executive management roles (FY18: 34%)

  • Delivered a comprehensive leadership training program, equipping leaders with the skills required to manage high-performing teams

Future enabled customers
  • Increased the availability of the Divvy parking solution and expanded the reach of Dexus building portals to over 53,000 users (FY18: >35,000)

  • Extended the Wellplace offering to include 28 wellness partnerships (exceeding our target of 25 wellness providers), providing our customers the opportunity to offer their employees valued health and wellbeing services

  • Implemented 24 smart technologies at 100 Mount Street, North Sydney (exceeding our target of 15 smart technologies), with 14 operational at 30 June 2019 and the remainder to be operational in FY20

Strong communities
  • Established a partnership with the Cancer Council to provide our building communities simple and easy access to resources, support services, research and volunteer opportunities that support customers’ health and wellbeing

  • Offered customers the opportunity to choose a charity to receive funds raised across the office community. Charities are supported across key pillars of children’s hospitals, health, animals, the homeless and the environment

Supply Chain
  • Developed a supply chain due diligence tool to enhance the identification and assessment of modern slavery risks in partnership with 14 members of the Property Council of Australia, (PCA)

  • Delivered 950,351 square metres of office space to a minimum 5 star NABERS Energy rating and 757,423 square metres of office space to a minimum 4 star NABERS Water rating - almost reaching our 1,000,000sqm of office 5 star NABERS Energy rating and 4 star NABERS Water rating by 2020 targets

  • Achieved 10.9% reduction in energy consumption and 12.4% reduction in Scope 1 and Scope 2 greenhouse gas emissions against FY15 like-for-like baseline, exceeding our 10% by 2020 target

  • Secured an Energy Supply Agreement to source renewable energy to support the base building services of 40 properties across our NSW portfolio

  • Recorded an average resource recovery rate of 61% across 31 de-fit projects in FY19, with 19 of these projects achieving a resource recovery rate of over 80%

Financial

Dexus’s quality portfolio, development pipeline and growing funds platform are underpinned by a strong balance sheet, facilitating a secure earnings stream with growth potential.

Our strategy contributes to the generation of long-term and sustainable returns. The balance sheet investment strategy remains focused on:

  • Activating and investing in the development pipeline

  • Supporting growth in the funds management business

  • Selective core asset acquisitions which provide potential to unlock additional value in the future, and

  • Divesting non-core assets to continue improving the quality of the portfolio

In addition, we maintain diverse sources of capital as well as conservative gearing to provide capacity to fund the committed development pipeline and optionality to fund the uncommitted development pipeline.

5.0%

Growth in distribution per security

5.5%

Growth in AFFO per security

10.1%

Return on contributed equity

Key financialsFY19FY18Change
Funds From Operations (FFO) ($m)681.5653.34.3%
Net profit after tax ($m)1,281.01,728.9(25.9)%
AFFO per security (cents)50.347.75.5%
Distribution per security (cents)50.247.85.0%
ROCE (%)10.1%7.6%2.5ppt
Net tangible asset backing per security ($)10.489.648.7%
Gearing (look-through) (%)24.0%24.1%(10)bp
Board focus
Financial performance is a key focus area for the Board and the Board Audit Committee. In FY19, the Board and Board Audit Committee were involved in:
  • Considering and approving Dexus's financial reports, audit reports, market guidance, distribution details, funding requirements and liquidity, as well as property portfolio valuation movements

  • Approving the group’s Financial KPIs and scorecard, in addition to annual and half year results materials

  • Approving the group’s capital management activities including a $425 million Exchangeable Note offering and an equity raising, comprising a $900 million institutional placement and a $63.9 million SPP, which was increased from its original $50 million cap

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Case study

Financial

Attracting new investors for sustained performance

Dexus broadened its relationships with third party capital partners, attracting and securing stable long-term capital sources to invest alongside it through the cycle.
Download Financial

Properties

Securing opportunities. Adding value.

As a real estate group, our properties are central to our value creation framework.

Dexus owns and manages high-quality, sustainable properties located in the key CBDs around Australia. Underpinned by our customer-centric approach, we utilise our asset and property management expertise to optimise building functionality and maintain high occupancy levels. Further value is unlocked by capitalising on development opportunities, in turn enhancing portfolio quality and increasingly meeting the growing demands of our customers.

$31.8bn

Value of property portfolio

98.0%

Dexus office portfolio occupancy

10,149

Construction jobs supported2

$1.6bn

Gross Value Added1 (GVA) to the Australian economy

$7.1bn

Group development pipeline

Circa$2.2bn

Future concept development opportunities

  1. Total Gross Value Added (GVA) includes estimated direct GVA and indirect GVA generated to the economy by developments completed in FY19 and currently underway. Source: Urbis; Dexus.

  2. Total construction jobs include direct and indirect employment supported by developments completed in FY19 and currently underway. Source: Urbis; Dexus.

Board focus
From a property portfolio perspective, the Board approves any acquisitions, divestments or developments. In FY19, the Board approved:
  • Acquiring 52 and 60 Collins Street, Melbourne (a future development site)

  • Acquiring the remaining interest in the MLC Centre, Sydney (Dexus 25%)

  • Acquiring 80 Collins Street, Melbourne (Dexus 75%)

  • Acquiring key Sydney properties, on a deferred settlement basis, to create a potential super site incorporating 56 Pitt Street, Sydney

  • Establishing DALT which involved the sale of end value circa $2 billion of industrial properties into the trust

  • Divesting 11 Talavera Road, Macquarie Park and Finlay Crisp Centre, Canberra

  • Activating development projects at:

  • North Shore Health Hub, Stage 1 of 12 Frederick Street, St Leonards an identified trading property earmarked to become an asset of the HWPF

  • 140 George Street, Parramatta owned within the Dexus Office Partnership, subject to tenant pre-commitment

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Committed development pipeline

180 Flinders StreetMelbourne

A vibrant new office tower which complements the refurbishment of the existing heritage offices and building façade fully restored to its former glory.

Project cost: $146 million

Ownership: 100% Dexus

Expected completion: Mid-2020

180 Flinders StreetMelbourne
12 Creek Street – The AnnexBrisbane

A new development featuring boutique office space with a rooftop terrace, cascading gardens that combine in a vertical village to provide access to fresh air, and a casual dining precinct set in a vibrant forecourt.

Project cost: $62 million

Ownership: 50% Dexus, 50% DWPF

Expected completion: Late 2019

12 Creek Street – The AnnexBrisbane
240 St Georges TerracePerth

A Premium office building redevelopment located in the heart of the Perth CBD with new end-of-trip amenity, refurbished office floors and the introduction of a Dexus Place, along with a renewed street entry, improved retail offering and a new childcare centre.

Project cost: $193 million

Ownership: 100% Dexus

Expected completion: Late 2019

240 St Georges TerracePerth
MLC Centre, 19 Martin PlaceSydney

The MLC Centre precinct will be transformed into a vibrant community offering retail, dining, cultural and commercial spaces in the heart of the Sydney CBD.

Project cost: $170 million

Ownership: 50% Dexus, 50% DWPF

Expected completion: Late 2021

MLC Centre, 19 Martin PlaceSydney
North Shore Health Hub
12 Frederick Street
St Leonards

The North Shore Health Hub is a premium healthcare facility for auxiliary medical services supporting existing infrastructure in a growing healthcare precinct.

Ownership: 100% Dexus

Expected completion: Late 2020

North Shore Health Hub
12 Frederick Street
St Leonards
Lot 15, 11-167 Palm Springs RoadRavenhall, Victoria
  • A purpose built facility across 35,300 square metres including manufacturing, warehousing and a corporate head office for Scalzo foods

  • First pre-commitment development lease secured for the estate which was acquired in June 2018

  • Speculative facility also being built

Project cost: $83 million

Ownership: 25.5% Dexus, 50% DWPF, 24.5% Dexus Australian Logistics Partner

Expected completion: Late 2020

Lot 15, 11-167 Palm Springs RoadRavenhall, Victoria
Clearwater Place and Dohertys RoadTruganina, Victoria
  • A purpose-built temperature controlled warehouse facility across 7,300 square metres for Coles Supermarkets Australia to service its Victorian market

  • A 9,100 square metre multi-purpose facility designed to accommodate Dunlop Flooring’s national distribution centre, head office and showroom

Project cost: $44 million

Ownership: 100% Dexus

Expected completion: Mid-2020

Clearwater Place and Dohertys RoadTruganina, Victoria
80 Collins StreetMelbourne

This property is a key precinct project contributing to Leading Cities but not a part of the group’s development pipeline as it was acquired on a fund-through basis which will deliver a completed project with the leasing of vacant space being undertaken by Dexus. The large-scale site is located at the ‘Paris end’ of Collins Street and comprises an existing 47 level A-grade office tower (North tower), and three components currently under development including a new 35 level premium office tower (South tower), a new retail podium and a new 255 room boutique hotel.

Total acquisition price: $1.476 billion1

Ownership: 75% Dexus, 25% DWPF

Expected completion: Mid–late 2020

  1. Includes the existing North tower. The new components of the 80 Collins precinct are currently being developed. Dexus and DWPF have joint ownership and their contribution to the development is limited to the acquisition price.

80 Collins StreetMelbourne
Calvary Adelaide HospitalAdelaide

Upon completion, the new Calvary Adelaide Hospital will provide a high-quality contemporary facility with 343 beds. The new facility replaces the existing Calvary Wakefield and Calvary Rehabilitation Hospitals.

An asset of HWPF, the project is located on the corner of Angas and Pulteney Streets on the edge of the Adelaide CBD.

Current valuation (as if complete): $338 million

Ownership: 100% HWPF

Expected completion: Late 2019

Calvary Adelaide HospitalAdelaide
SWIPE
Our development projects contribute to creating Leading Cities by adding to the fabric and economic prosperity of cities, and satisfying the evolving needs of our growing customer base.”

Case studies

Properties

100 Mount Street delivers a new landmark for North Sydney

After years of limited supply, 100 Mount Street has kicked off the next wave of quality office accommodation coming online in North Sydney, supporting the revitalisation of the North Sydney CBD.
Properties

Quarry, Greystanes delivers a premium industrial estate to Western Sydney

Quarry, Greystanes (Quarry) is the most significant industrial estate developed in the expanding Greater Western Sydney area in recent years.
Download Properties

People and capabilies

Our people and capabilities are central to how Dexus delivers on its strategy.

Our people are inspired and motivated to create spaces where people thrive, supported by a culture that delivers sustained value for our investors and other stakeholders.

Our people are passionate, agile and engaged in the purpose and direction of Dexus. Our approach to inclusion and diversity allows us to harness different perspectives for better decision-making as well as providing access to the widest pool of available talent.

We continue to focus on internal carreer planning, development and new opportunities for our people. We support the health and wellbeing of our people through a suite of wellbeing benefits and a program of activities throughout the year including Wellbeing Month which was held in May 2019.

+40

Employee Net Promoter Score

37%

Females in senior and executive management roles

27%

Available roles filled by internal applicants

Board focus
  • The Board People and Remuneration Committee oversees all aspects of human resource management as well as Director and Executive remuneration at Dexus. For further details on the key focus areas during FY19, refer to the Remuneration Report or the Corporate Governance Statement available at www.dexus.com

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Case study

People and capabilities

Creating a workplace where people thrive - Wellbeing Month

As part of a commitment to creating spaces where people thrive, Dexus designed a suite of benefits and programs focused on enhancing employee wellbeing.
Download People and capabilities

Customers and communities

Our ability to create value relies on strong and enduring relationships with our customers, suppliers and the communities where we operate.

We understand the importance of high-performing workspaces for employee productivity and business success, and our comprehensive customer product and service offering supports our customers’ success today and into the future.

At Dexus, we leverage technological change for the long-term benefit of our workspaces, avoiding the gimmicks and securing the game changers that enhance the customer experience. With the evolution of data collection and analytics, we are able to act upon deeper insights into how our customers are consuming spaces and services.

Every year, we engage hundreds of suppliers to assist us in undertaking our business activities of transacting, managing and developing. Building a network of supplier relationships helps us create value through our development activities and managing our properties more efficiently.

Our capacity to create value is influenced by the strength of our relationships with local communities. That’s why we focus on supporting well‑connected, prosperous and engaged communities in and around our properties.

+46

Customer Net Promoter Score

>$1.2m

Value of community contribution

>$550m

Operational procurement spend

Board focus
Our customer and communities are stakeholders that are a continued focus for the Board. In FY19 the Board was involved in:
  • Reviewing and discussing the annual customer survey results and associated actions

  • Discussing Management’s approach to customer compliments and complaints

  • Discussing Dexus’s customer centric aspirations and alignment with group strategy

  • Discussing Dexus’s charitable initiatives

  • Discussing and reviewing the group’s approach in relation to Modern Slavery Act 2018 legislation

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The Dexus Experience

Convenience

Delivering a convenient work experience through five-star concierge, priority access to childcare, transport solutions, simple and easy leases, and access to Dexus Place, a tailored extension of our customers’ work environment that includes meeting, training and conference facilities as well as bespoke event space supported by state-of-the-art technology.

Creating customer communities through activations in our office foyers, convenient local shops, and online building community platforms providing workplace news and information, events and retail offerings.

Offering services and amenities that promote the health and wellbeing of customers through quality end-of-trip facilities, yoga, Pilates and fitness classes.

Working with our customers to achieve energy, water and waste efficiencies for their tenancies along with sustainable fit-out designs.

Case study

Customers and communities

Inspiring the next generation through a community initiative

An industry partnership initiative that actively promoted Science, Technology, Engineering and Mathematics (STEM) to girls through experiencing a live build at Dexus’s 100 Mount Street, North Sydney (100 Mount) has encouraged girls to consider a career in property.
Download Customers and communities

Environment

Our capacity to create value is built on an efficient portfolio that minimises our environmental footprint and enhances our resilience to environmental risks.

Efficient use of natural resources creates value for Dexus and supports our customers to achieve their own corporate sustainability goals. We integrate energy, water and waste efficiency into the design and operation of our properties and regularly benchmark property performance using independent building certifications such as NABERS and Green Star.

Our commitment to achieve net zero emissions by 2030 supports the transition to a low-carbon economy, creates benefits for the bottom line, and aligns with the ambitions of our third party capital partners. We are also focused on understanding the impacts of climate change on our properties and invest in initiatives to enhance portfolio resilience.

10.9%

Reduction in like-for-like energy consumption since FY15

12.4%

Reduction in like-for-like greenhouse gas emissions since FY15

950,351sqm

of office space rated 5 star NABERS Energy or above

Board focus
Sustainability and the environment are a key focus area for the Board and the Board Risk Committee. In FY19, the Board and Board Risk Committee were involved in:
  • Reviewing the group’s progress in relation to 2020 targets

  • Discussing the renewable Energy Supply Agreement

  • Discussing and reviewing Dexus’s position in relation to on-site and offsite renewables

  • Discussing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)

  • Reviewing the group’s activities to enhance climate resilience

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Our approach to climate-related issues

Governance

The Dexus Board oversees all strategic risks including climate change, with the Board Risk Committee overseeing the group’s enterprise risk management practices, as well as environmental management and work health and safety. The Sustainability team, led by the Executive General Manager, Investor Relations, Communications and Sustainability, and the Senior Manager, Group Sustainability and Energy oversee the group’s management response and reporting, presenting on a quarterly basis to the Board Risk Committee on progress against targets and to the Board as key topics emerge.

Our corporate strategy considers climate-related risks and opportunities across short, medium and long-term timeframes. We have applied the Intergovernmental Panel on Climate Change RCP 8.5 scenario to assess exposure to physical risks and the IEA 2°C scenario to understand exposure to transition risks.

Key climate-related risks and opportunities are integrated into annual investment planning processes to enhance portfolio resilience across a range of possible climate futures.

Assessment of climate-related risks is integrated within our standard framework for managing risks, and climate change is acknowledged as a strategic corporate risk. When considering a potential acquisition, we review the sustainability risks as part of due diligence, taking into account environmental performance, climate change- related physical risk exposure and building upgrade and improvement plans. Any required upgrades are undertaken in line with the group’s NABERS Energy and net zero emissions targets. For properties under management, we review property exposure to climate risks, and other vulnerabilities, and work to enhance adaptation planning at more vulnerable locations.

We have set an ambitious pathway for emissions reduction through the goal of net zero emissions by 2030 across the group’s managed portfolio. This goal has been certified by the Science Based Targets initiative as meeting objectives of the UN Paris Agreement. We monitor and report on absolute, like-for-like greenhouse gas emissions and emissions intensity for all properties under our operational control.

As part of our ongoing TCFD journey, we are bringing together teams across Dexus to combine data for new insights on the financial impacts of climate change on asset valuation, operating costs, revenue and capital purchases that will be used to inform portfolio strategy and asset resilience planning.

>$136m

Saved through enhancing portfolio energy efficiency since FY08

Case study

Environment

Solar benefits Dexus and its customers

100 Harris Street in Pyrmont has had an interesting history dating back to the late 1890s when it served as one of Sydney’s original woolsheds.
Download Environment