Dexus · ASX:DXS
Dexus — DEXUS Property Group — Investor Presentation (December 2009)
63 slides from Dexus's investor presentation, Dec 1, 2009
Slide 1: Sydney Office Tour 2009 presentation cover letter
1 December 2009 DEXUS Funds Management Limited ABN 24 060 920 783 AFSL: 238163 For personal use only Level 9, 343 George Street Sydney NSW 2000 PO Box R1822 The Manager Royal Exchange NSW 1225 Australian Securities Exchange Limited 20 Bridge Street Telephone 61 2 9017 1100 Sydney NSW 2000 Direct 61
Slide 2: DEXUS Funds Management Limited
DEXUS Funds Management Limited ABN 24 060 920 783 Australian Financial Services Licence Holder
Slide 3: Welcome
For personal use only Welcome Victor Hoog Antink Chief Executive Officer 1 December 2009
Slide 4: About DEXUS
For personal use only About DEXUS
Slide 5: Delivering on strategy
Delivering on strategy For personal use only Australia’s leading owner, manager, developer of superior quality office and industrial properties No. 1 in office and No.3 in industrial in Australia Quality portfolio delivering strong results Progressed selected non-core asset sales Repositioni
Slide 6: Agenda
Agenda For personal use only Overview of DEXUS Office sector Louise Martin The market Peter Studley Portfolio performance – September quarter Louise Martin The leasing market John Swadling Development Tony Gulliver Questions Tour of Western Corridor, North Sydney, Chatswood Chris Fishe
Slide 7: DEXUS Office Sector
For personal use only DEXUS Office Sector Louise Martin
Slide 8: Integrated office model
Integrated office model For personal use only Asset Research and Finance Management Valuation Property Marketing Management Enhanced performance Sustainability and value Leasing Development/ Repositioning
Slide 9: DEXUS office sector – our business
DEXUS office sector – our business For personal use only Investing in prime office properties, business parks and car parks DXS, DWPF, STC, AXA Asset Diversification 46 assets1 Carpark & Canberra NZ Office / Land 4% $6.0bn value2 Business Park 4% 4% Brisbane 2% 3% 810 tenants B-Grade 9% Pr
Slide 10: Structure
Structure For personal use only Exec. Assistant-1 Exec. Assistant - 1 Louise Martin Head of Office John Swadling Jim Jones Tony Gulliver Head of Office Head of Property Head of Peter Studley Investments Management Development Head of Research Analysts - 2 General Managers - 7 Leasing Managers - 2 Pr
Slide 11: The Market
For personal use only The Market Peter Studley
Slide 12: Investment climate now less uncertain
Investment climate now less uncertain For personal use only Economic growth forecasts Many global leading China indicators have turned Australia Canada Economists getting more NZ 2010 optimistic about 2010 2009 US Credit conditions tight but HK slowly improving Singapore UK Weak prognosis fo
Slide 13: Confidence back
Confidence back For personal use only Back to pre-GFC levels …. Index Net bal. 140 40 Sharp lift in confidence Business confidence Consumer sentiment 30 Part stimulus effect… 120 …but also well-founded 20 10 based on house prices, 100 0 stock market, and modest -10 unemployment levels 80 -20 -
Slide 14: Australian CBD office demand
Australian CBD office demand For personal use only National net demand & employment growth ('000, sqm net absorption & number of jobs 2010 - 2013: 700 Demand Jobs lost or gained 600 GDP growth up 500 Business investment up 400 (from low base) 300 200 Employment up 100 0 Global growth up -100
Slide 15: Supply pressure mild in major markets
Supply pressure mild in major markets For personal use only National completions Supply pressure points as at Sept 2009 Under Vacancy rate (% of stock) construction 9% (% stock) Peak supply pressure only Sydney CBD 4.5% 8.5% about half of Nth Sydney 3.4% 11.4% last time 6% Macquarie Park 2.2% 13.8%
Slide 16: Sydney office market – outlook
Sydney office market – outlook For personal use only Supply, demand & vacancy ('000m2) Net Supply (LHS) Demand (LHS) Vacancy (RHS) (% of stock) Demand increasing, 350 25% slowly at first Low supply 2010-2013 (1 250 20% Bligh St, 420 George St, 163 Castlereagh St) 150 15% Vacancy peaking around
Slide 17: Why & when incentives will tighten
Why & when incentives will tighten For personal use only Sydney CBD, vacancy rate & incentive Incentive RHS Vacancy LHS 25% 50% 20% 40% 15% 30% Incentives higher 10% 20% than warranted by 5% 10% vacancy 0% 0% 1987 1990 1993 1996 1999 2002 2005 2008 2011(f) Source: Jones Lang LaSalle, DEXUS Q309 fore
Slide 18: Peaks in vacancy are followed by strong growth
Peaks in vacancy are followed by strong growth For personal use only Gross effective & face rents vs vacancy rate (Sydney CBD) ($) Vacancy rate RHS Face rent Effective rent Next 5 years 1,000 25% Face 3-5% pa 800 20% Effective 5-10%pa 15% 600 10% 400 5% 200 0% 1987 1990 1993 1996 1999 2002 2005
Slide 19: Transaction activity
Transaction activity For personal use only National sales >$5m $ billions Office Retail Industrial Volumes less than half pre- 20 GFC levels Privates & foreign 15 Mainly smaller transactions <$50m 10 Signs of some larger 5 transactions occurring Cost of capital a major 0 constraint 1991 19
Slide 20: Office values
Office values - For personal use only Prime office yield spreads over bonds % Sydney Melbourne Values have fallen by 4% between 21% (Melbourne) and 37% (Brisbane) 2% Situation expected to improve in 2010 due to: 0% - Positive yield spreads -2% - Improving credit markets -4% - Higher growth expec
Slide 21: Office cycle close to bottom
Office cycle close to bottom For personal use only Location Perth Melbourne Brisbane Sydney CBD Canberra Nth Sydney nt s tme e In v Fixed reviews – long Stage Contraction Recovery Growth Post-growth Features Tenant demand- of period Rents - 2011- 2014 Vacancy - Incentives - Cap rates - Source: DEXUS
Slide 22: Portfolio Performance - September Quarter
For personal use only Portfolio Performance - September Quarter Louise Martin
Slide 23: Stable performance
Stable performance For personal use only Jun 30 2009 Sept 30 2009 Occupancy 97.6% 96.5% WALE (income) 5.4 5.4 WALE (area) 4.8 4.8 Expiries (FY10 by income) 10% 5% Leasing Activity1 103 transactions 34 transactions (excluding dev) 36,500 area 18,061 sqm 6.6 % rental growth 11.5% rental growth on pass
Slide 24: Occupancy above average
Occupancy above average For personal use only DXS Occupancy - Australian Office Sep 09 Occupancy rates above PCA average in all Australian markets1 93.5% Canberra 16 of 26 assets with occupancy greater than 98% (13 fully 99.3% occupied) 94.6% Occupancy to Sept 09 fell 1.1% to 96.5%2, primarily
Slide 25: Weighted average lease expiry – smooth profile
Weighted average lease expiry – smooth profile For personal use only WALE as at 30 September 2009 is 5.4 years by income and 4.8 years by area. This is unchanged from 30 June 2009 Expiry profile is quite smooth with no large spikes over the next 7 years Lease Expiry Profile 30 September 2009 % o
Slide 26: Secure office income
Secure office income For personal use only FY10 Expiries reduced from 10% to 5% Positive rental growth in leasing and structured leases to Sept 09 – 91% of leases locked away – Average increase on fixed or CPI leases is 4.0% – Average increase on new leases and renewals is 11.5% Offsetting thi
Slide 27: Valuations
Valuations For personal use only Portfolio last valued at 30 June 2009 Including developments, DXS office valued at $4.0bn, down from $4.6bn as at 30 June 2008 Weighted average cap rate as at June 2009 is 7.7% 0.25% Movement in cap rate equals 3.5% of value Cap rates appear to be stabilisi
Slide 28: Sustainability
Sustainability For personal use only Progress for the year to June 2009 – Energy consumption down 8% – Greenhouse Gas emissions down 7% – Water usage down 11% NABERS rating completed – average 3 Star portfolio: current market best practice DXS C OM M ERC IA L - T OT A L ENERGY DXS C O M M ERC IA
Slide 29: The Leasing Market
For personal use only The Leasing Market John Swadling
Slide 30: Active leasing approach
Active leasing approach For personal use only Appointed agents on all vacancies Fortnightly minuted meetings to review all enquiry, issue proposals and negotiate leases All CBD demand tracked, collated and analysed External agencies reviewed monthly
Slide 31: Demand increasing
Demand increasing For personal use only The number of enquiries for Sydney CBD office properties is up 15% since June 09, from 122 to 160 enquiries DXS Office - Demand Tracker 160,000 1,200 Total demand (sqm) for enquiries 140,000 149,944 1,000 increased from 96,000 to 150,000 120,000 132,667 Av
Slide 32: Sublease is decreasing
Sublease is decreasing For personal use only CBRE Sydney CBD sublease barometer (Sep 09) shows total sublease space at 86,690 sqm (1.5-2% of stock) Marketed sublease space in DXS portfolio as at September 09 was approx 10,400 sqm or 1.9% of NLA. Has fallen in recent months from 13,300 sqm
Slide 33: Lease activity gaining momentum
Lease activity gaining momentum For personal use only 18,0611 sqm leased over 34 deals in the September quarter, major leases include: – 383 Kent St, Sydney – 3,154 m2 to InterSystems for 10 years – Governor Macquarie Tower, Sydney – 2,468.9 m2 to Piper Alderman for 8 years – The Zenith, Chatswood
Slide 34: Proactive leasing focus
Proactive leasing focus For personal use only Agreeing price for tenant make goods Incorporating into Lessor’s upgrades of T5 lights, carpets, ceiling tiles etc. Undertaking speculative fit outs where needed Reviewing agency performance Actively engaged with all FY10 and FY11 expires
Slide 35: Action on current vacancy
Action on current vacancy For personal use only Asset Area (sqm) Status 44 Market Street, Sydney 4,153 Refurbishment underway – Levels 7, 8, 10 available for fitout Q1, 2010 The Zenith, Chatswood 3,371 Terms agreed on 2,000sqm. Balance – Levels 1 & 8 available and under negotiation. 130 George Stree
Slide 36: Action on FY10 expiries
Action on FY10 expiries For personal use only Asset Area Status (sqm) Southgate, IBM Tower, 4,398 Levels 1, 2 & 3 now available and being Southbank refurbished for Q1, 2010. 40-50 Talavera Road, 2,503 Floors to be fully refurbished and in dialogue Macquarie Park with potential tenant. 383 Kent Stree
Slide 37: Development leasing – enquiries
Development leasing – enquiries For personal use only 123 Albert Street, Brisbane – 6 Star Green Star, 5 Star NABERS 68% leased (RIO Tinto) Available Levels 4 – 12 (13,500 sqm) – 32% 1,500 sqm floor plates Agents well underway with all marketing collateral Leasing proposals issued and nego
Slide 38: Development
For personal use only Development Tony Gulliver
Slide 39: Bligh St
For personal use only 1 Bligh St
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For personal use only
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Slide 47: Section through the building
Section through the building For personal use only
Slide 48: Typical high rise
For personal use only Typical high rise
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Slide 51: Double skin facade details
Double skin facade details For personal use only
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Slide 53: Key feasibility criteria - summary
Key feasibility criteria - summary For personal use only Entire low-rise pre-committed: 55% of total net lettable area Average low rise rent achieved: approx $1000 / m2 net face High rise area 18,800 m2: to be leased by mid 2011 Estimated yield on total cost: 7.1 % DXS 33.3% of total cost:
Slide 54: Albert Street, Brisbane
For personal use only 123 Albert Street, Brisbane
Slide 55: Design fundamentals
Design fundamentals For personal use only Office NLA 38,600m2 Twin offset cores with 1500m2 open floor plates 380 carparks 7 retail offers Premium Grade – Property Council of Australia rating matrix 6 Star Green Star – world’s best practice (certification received Dec 09) 5 Star NABERS
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brisbane treasury casino hilton wintergarden eagle street pier botanic gardens brisbane river (sai)
Slide 58: Profile
For personal use only PROFILE
Slide 59: DEXUS Property Group
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Slide 61: Key feasibility criteria - summary
Key feasibility criteria - summary For personal use only 25,500m2 pre-committed: 68% of total net lettable area Average anchor tenant rent achieved: approx $537/m2 net Area available 13,100 m2: to be leased by mid 2011 Estimated yield on total cost: 6.9 % Total cost: $349 million
Slide 62: Focus FY10
For personal use only Focus FY10 Louise Martin
Slide 63: Questions
For personal use only Questions
DEXUS Property Group — Investor Presentation (December 2009) on 6ix