Slide 1: ASX cover letter: Annual results presentation
DEXUS Funds Management Limited 21 August 2008 ABN 24 060 920 783 AFSL: 238163 For personal use only Level 9, 343 George Street Sydney NSW 2000 PO Box R1822 Royal Exchange NSW 1225 The Manager Australian Stock Exchange Limited Telephone 02 9017 1100 20 Bridge Street Direct 03 8611 2930 Sydney NSW 200
Slide 2: DEXUS Property Group Annual Results 2008
DEXUS Property Group Annual Results 2008 For personal use only Victor Hoog Antink Chief Executive Officer DEXUS Funds Management Limited ABN 24 060 920 783 Australian Financial Services Licence Holder
Slide 3: State of the market – DEXUS focus
State of the market – DEXUS focus For personal use only Market Credit crunch is creating volatile financial markets Property sector fundamentals are sound Flight to quality DEXUS focus Active property management Active capital management Full Year Results presentation 2008 2
Slide 4: Strong results underpinning distribution growth
Strong results underpinning distribution growth For personal use only Financial highlights – Stable operating earnings $498m – Strong DPU growth 11.9c, up 5.3% – Gearing reduced 33.2% Operational highlights – Like for like property income growth 4.5% – Strong leasing activity 818,000 sqm – Stabl
Slide 5: 2008 Achievements
2008 Achievements For personal use only Retail portfolio disposal – Focusing strategy on office and industrial Acquisition of CalWest’s 20% JV interest – Creating flexibility to reposition the US portfolio Internalisation of management platform – Full alignment with investor interests Austra
Slide 6: Agenda
Agenda For personal use only Overview Financial performance – Craig Mitchell Office portfolio – Louise Martin Industrial portfolio – Andrew Whiteside International portfolio – Paul Say Third party funds management Summary and outlook DEXUS House, 343 George Street, Sydney Full Year Res
Slide 7: Our business today
Our business today For personal use only Total portfolio value $15.3 bn – Owned property portfolio $8.9 bn – Third party funds management $6.4 bn Quality and scale: Owned1 Group – No 1 in office $4.6 bn $7.1 bn – No 3 in industrial $1.6 bn $2.3 bn – Retail $0.3 bn $3.7 bn – International $2.2 bn
Slide 8: Expanded leadership team
Expanded leadership team For personal use only DEXUS Executive Committee. Left to right: Paul Say – Corporate Development/US, Andrew Whiteside - Industrial, Jane Lloyd - Retail, Tanya Cox – COO, Victor Hoog Antink - CEO, Pat Daniels – HR, John Easy - Legal, Mark Turner – Unlisted/Europe, Louise Mart
Slide 9: Financial performance
For personal use only Financial performance Craig Mitchell Chief Financial Officer
Slide 10: Consistent performance
Consistent performance For personal use only Total assets Net tangible asset value per security Gearing ratio Distributions per security Full Year Results presentation 2008 9
Slide 11: Stable operating earnings
Stable operating earnings For personal use only Jun 08 Jun 07 $’m $’m Office 242.6 254.5 Industrial (Aust & Int) 237.6 222.8 Retail 27.6 55.2 Development gains 5.9 0.0 Management income 1,2 16.2 13.9 Responsible Entity fees 2 (31.9) (33.1) Operating Earnings 498.0 513.3 Net finance cost and other 3
Slide 12: Risk adjusted returns
Risk adjusted returns For personal use only Owned Assets Operating Earnings $8.9bn1 $498.3m 1. Excludes intangible assets of $255m for management rights Full Year Results presentation 2008 11
Slide 13: Capitalisation rates soften
Capitalisation rates soften For personal use only 75% of the portfolio book independently valued Average capitalisation rates have softened by 40 bps in the last six months Entire portfolio revaluation increase of $184m or 2% over 12 months Cap rate Cap rate Inv. property 1H08 2H08 FY08 Jun 07
Slide 14: Strong capital framework
Strong capital framework For personal use only Robust internal capital management processes Facility mix June 08 Diversified funding sources – Bank and capital markets – Domestic & international Transparent debt structure – No off balance sheet debt (no look through adjustments) – Majority of
Slide 15: Pro-active debt management
Pro-active debt management For personal use only Refinanced all 2008 maturities Maturity profile June 08 – $500m, average term 5.5 yrs – $300m, average term 3.8 yrs $580m debt maturities in FY09 – $250m commitments already secured Committed undrawn facilities of approx $500m Well within key
Slide 16: Key financial risk management measures
Key financial risk management measures For personal use only Jun 08 Jun 07 Gearing1 33.2% 35.6% Interest cover 3.0x 2.9x Headroom (approx) $500m $400m Duration of debt 3.0 yrs 2.8 yrs Interest hedge duration 6.2 yrs 6.0 yrs Weighted average cost of debt2 5.4% 5.7% Debt hedged 86% 93% Foreign balance
Slide 17: Distribution policy
Distribution policy For personal use only Distribution policy to pay: – 100% of trust operating earnings – 100% of funds management earnings – Up to 100% of development profits The Zenith, Pacific Highway, Chatswood NSW Full Year Results presentation 2008 16
Slide 18: Strong financial position
Strong financial position For personal use only Consistent financial returns Stable operating earnings Effective capital management Well positioned for the future Governor Phillip Tower, 1 Farrer Place, Sydney NSW Full Year Results presentation 2008 17
Slide 19: Office Portfolio
For personal use only Office Portfolio Louise Martin Head of Office
Slide 20: Highlights – solid performance
Highlights – solid performance For personal use only Solid portfolio performance High quality portfolio Strong like for like NPI growth Occupancy high Under-rented portfolio Substantial progress of development pipeline 30 The Bond, Sydney NSW 30 The Bond, Sydney NSW Full Year Results pre
Slide 21: Quality portfolio – strategic location, quality assets
Quality portfolio – strategic location, quality assets For personal use only High quality assets – 95% of office buildings are Prime or A-grade1 Geographic spread – 71% of portfolio located in Sydney Allocation by asset class Geographical allocation by market $4.6bn $4.6bn 1. Includes office par
Slide 22: Office Market – well positioned
Office Market – well positioned For personal use only Solid growth from market rents in all major office markets Sydney CBD net absorption ('000m2) Historically high occupancy rates (% of stock) Total completions (LHS) Vacancy (RHS) 200 25% Easing leasing market 20% Past 10 Further rises in
Slide 23: Strong portfolio fundamentals
Strong portfolio fundamentals For personal use only Solid like on like growth of 4.4% High occupancy levels at 98% Access to market growth 13% portfolio under-rented 42% exposed to market over next 2 years Capital values steady Net Property Like Occupancy Occupancy % Over/Under Mkt revie
Slide 24: Office leasing – strong performance, active management
Office leasing – strong performance, active management For personal use only Strong leasing with 93,000 sqm1 leased Office lease expiry by income Average rental increase was 6.9% Major leasing deals: – 123 Albert Street, Rio Tinto 26,000 sqm, 10 yrs – Southgate, IBM, 15,500 sqm, 9 yrs – 14 Moo
Slide 25: Significant office development underway
Significant office development underway For personal use only 123 Albert Street – 38,600 sqm of office – 68% pre-committed to Rio Tinto with option to expand – demolition commenced, completion due Dec HY 2010 – estimated development cost $350m 1 Bligh Street – 42,000 sqm office component only –
Slide 26: 2009 office focus
2009 office focus For personal use only Active management through integrated model - property, asset and development management Service excellence in property management – Extend internalisation in Australia – Implementation over the next 12 mths Continued implementation of sustainability prog
Slide 27: Australian Industrial Portfolio
For personal use only Australian Industrial Portfolio Andrew Whiteside Head of Industrial
Slide 28: Highlights – active management delivering results
Highlights – active management delivering results For personal use only Strong portfolio fundamentals – high quality institutional grade assets – highly diversified portfolio – strategically located Active management approach Delivering strong results Driving value: – delivering on developme
Slide 29: Industrial market – positive outlook
Industrial market – positive outlook For personal use only Take-up in FY09 is expected to ease due Industrial take-up – long term trend to business uncertainty Competition constrained and reduction in speculative construction Long term trend for major users to seek business efficiencies throug
Slide 30: Portfolio fundamentals - strong performance
Portfolio fundamentals - strong performance For personal use only 2.3% like for like growth Strong rent review structure High occupancy at almost 99% Strong retention rates at 78% Net revaluation increase, despite cap rates softening by 24 bps over 12 months Net Property Like for Occupancy
Slide 31: Industrial leasing – strong activity
Industrial leasing – strong activity For personal use only Strong leasing with 289,000 sqm1 leased Industrial lease expiry by income 78% renewed Average rental increase of 4.2% Major leasing deals include: – AWH, Lara 117,000 sqm – 15 years – SCT, Acacia Ridge 15,000 sqm – 5 years – Best Bar
Slide 32: Developments – momentum in key markets
Developments – momentum in key markets For personal use only Strategic sites in 2 key locations – Laverton North, Melbourne – Greystanes, Western Sydney Contributing to portfolio diversification and earnings Staged approach with steady enquiry - proven appeal to users - project track record Pr
Slide 33: Greystanes, NSW – strategic site
Greystanes, NSW – strategic site For personal use only Acquired major development site in Western Sydney 48 hectares, delivered in stages (2008 - 2010) De-risked: Planning, land-form, infrastructure, services Significant ESD features Flexible product mix Realisation via: – Pre-committed
Slide 34: 2009 industrial focus
2009 industrial focus For personal use only Active focus on the fundamentals - experienced team in estate & development management - delivering growth through active management - extracting value from operations Well positioned for future growth - quality, capacity and scaleable portfolio - deve
Slide 35: International Industrial Portfolio
For personal use only International Industrial Portfolio Paul Say Head of Corporate Development
Slide 36: Highlights – performing to expectations
Highlights – performing to expectations For personal use only Sound portfolio fundamentals Total property portfolio – Quality institutional grade assets by value1 – Diversified by location with a high concentration in key hub locations – Diversified by size and use Driving value through active manag
Slide 37: North American Market – resilient industrial sector
North American Market – resilient industrial sector For personal use only Current situation US Industrial demand/supply Demand solid last 12 months, particularly around key hub locations New supply levels have peaked Rental growth slowing in-line with the economy Outlook Decreasing demand du
Slide 38: North America – strong portfolio performance
North America – strong portfolio performance For personal use only Strong like for like NPI growth of 7.2% International portfolio by value 3 Arrears stable WALE increased to 3.9 yrs North American valuations down by 3.3% Net Property Like for Occupancy Occupancy by % Over/ Mkt review Retent
Slide 39: North America – adding value through leasing
North America – adding value through leasing For personal use only Area leased 385,000 sqm North America lease expiry by income Retention rates consistent at 74% Vacancies up by 3% mainly due to acquisitions Leasing focus on vacancies and pending 2009/10 expiries – Sterling renewed at $1.7m
Slide 40: North America – limited development activity
North America – limited development activity For personal use only Limited development activity underway Developments – Summit Oaks, completed July 08 – Atlantic Corporate Park, completed this month – San Antonio, stage 1 commenced Whirlpool investment program target close to completion Proper
Slide 41: European Market – industrial sector slowing
European Market – industrial sector slowing For personal use only Current situation Economic growth – France & Germany Demand solid last 12 months, particularly around infrastructure hubs Supply levels high Index rents as a result of increasing construction costs Outlook Economic growth in F
Slide 42: Europe – portfolio fundamentals
Europe – portfolio fundamentals For personal use only Portfolio value down by 12.5% International property portfolio Vacancies increased to 11% by value3 WALE increased to 3.6 yrs Arrears are stable Avg Net Property Like for Occupancy Occupancy % Over / Mkt review Retention Lease Portfolio D
Slide 43: 2009 International focus
2009 International focus For personal use only European focus – Focus on active management of portfolio – Future repositioning North American focus – Continued delivery of solid performance – Reposition the portfolio over time – reduce to selected US markets – increase efficiency and synergies –
Slide 44: Third Party Funds Management
For personal use only Third Party Funds Management Victor Hoog Antink DEXUS Funds Management Limited ABN 24 060 920 783 Australian Financial Services Licence Holder
Slide 45: Third party management business - highlights
Third party management business - highlights For personal use only Third party funds increased by 39% to $6.4bn One of the largest third party platforms in Australia Well diversified by investor base and asset class $900 million development pipeline underway Source of Funds Fund breakdown Fu
Slide 46: Summary and Outlook
Summary and Outlook For personal use only Victor Hoog Antink Chief Executive Officer DEXUS Property Group ABN 24 060 920 783 Australian Financial Services Licence Holder
Slide 47: Well positioned for the future
Well positioned for the future For personal use only Clear vision and strategy High quality portfolio Stable and sustainable property earnings Quality developments adding value Strong balance sheet with low gearing Experienced management team Well-positioned to take advantage of market
Slide 48: 2009 focus
2009 focus For personal use only Active portfolio management Active capital management Seek long-term value add opportunities FY09 guidance Sydney CBD – GPT & Australia Square Full Year Results presentation 2008 47
Slide 49: Questions
For personal use only Questions
Slide 50: Important Information
Important Information For personal use only This presentation 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 Information in t
Slide 51: Annual Results 2008 – Appendix
DEXUS Property Group Annual Results 2008 – Appendix For personal use only DEXUS Funds Management Limited ABN 24 060 920 783 Australian Financial Services Licence Holder
Slide 52: Balance sheet
Balance sheet For personal use only Jun 08 Jun 07 DEXUS Property Group $’m $’m Cash & receivables 140 96 Property assets 8,734 9,152 Other (including derivative financial instruments & intangibles) 475 239 Total assets 9,349 9,487 Payables & provisions 323 290 Interest bearing liabilities 3,007 3,35
Slide 53: Movement in funds under management
Movement in funds under management For personal use only 10000 $765m $(1,001)m 9500 $166m $(379)m $9,027m 9000 $99m $8,862m $185m $m 8500 8000 7500 7000 Jun-07 Acquisitions Disposals Operating Capex Development FX/Cash & Other Valuation Jun-08 1 Capex increase 1. Includes accruals of $8m Full Year R
Slide 54: Net property income reconciliation to P&L
Net property income reconciliation to P&L For personal use only 30 Jun 08 $’m Property revenue 664.8 Less: Property expenses (159.6) Plus: Net Property Income from equity a/c investments 4.5 Less: Depreciation, bad debts and eliminations (1.9) Total NPI 507.8 Represented by: Office 242.6 Industrial
Slide 55: Interest reconciliation
Interest reconciliation For personal use only 30 Jun 08 $’m $’m Interest paid/payable 183.1 Other finance costs 3.3 Interest expense 186.4 Realised interest rate swaps (25.3) Unrealised interest rate swaps MTM 70.0 Net fair value loss (gain) of interest rate swaps 44.7 Total interest expense 231.1 L
Slide 56: Income statement – net profit
Income statement – net profit For personal use only Jun 08 Jun 07 $’m $’m Operating earnings 498.0 513.3 Other income/expenses (17.0) (3.8) Finance costs1 (213.2) (129.7) Minority interests (7.0) (42.0) Tax expense 2 (7.9) (33.6) Revaluations 3 185.4 864.6 NPAT to stapled security holders 438.3 1,16
Slide 57: Profit to distribution reconciliation
Profit to distribution reconciliation For personal use only June 08 Grp Prop MTM Incentive St-line Def P/L on RENTS Translation of Distributable $m Cons'd Revals Derivs & amort rent Tax sale of capital FX for hedge Earnings FX adj inv prop distribution rates & other Revenue from ordinary activities
Slide 58: Funds Management contribution
Funds Management management Contribution contribution Arthur P For personal use only DEXUS Holdings Pty Ltd DEXUS Operations Trust – Parent Entity 12 months 12 months 30 Jun 08 30 Jun 08 $’m $’m Management Fee Revenue 89.8 Equity accounted profit (50%) 2.9 EBIT 1 21.8 Consolidated profit (100%) 2.3
Slide 59: Comparing operating cash flow and distribution
Comparing operating cash flow and distribution For personal use only Jun 08 $’m Net cash inflow for operating activities 374.4 Add (Distributable Cash) net gain on sale of investment properties 5.9 Total net cash inflow 380.3 Less maintenance and leasing capex 1 (90.8) Operating funds inflow 289.5 P
Slide 60: External revaluation summary
External revaluation summary For personal use only Property Sector % of Book Value Valuation Previous Change in Book Portfolio externally valued $m Book Value % Average Value1 ($m) Cap Rate % 2 Office Aust – New South Wales 30 1,049 961 9.2 6.1 Aust – Victoria 0 0 0 0 7.2 Aust - ACT 56 60 64 (6.0) 7
Slide 61: Revaluation summary
Revaluation summary For personal use only Office Industrial Retail North America Europe Total $m $m $m $m $m $m P&L Revaluations – investment properties1 External Valuations 94 19 - (62) (45) 6 Internal Valuations 173 2 3 - - 178 Sub Total 267 21 3 (62) (45) 184 P&L revaluations – equity accounted p
Slide 62: Debt profile
Debt profile For personal use only Facility limit Drawn Amount Maturity Dates Security1 Currency A$’m A$’m Syndicated bank debt 300 251 Mar 10 Unsecured Multicurrency2 218 215 Sept 10 Bilateral bank debt 360 302 Dec 10 Unsecured Multicurrency2 145 0 Sept 11 178 51 May 12 – Jul 12 250 193 Dec 12 375
Slide 63: Debt profile by jurisdiction
Debt profile by jurisdiction For personal use only Weighted average cost of Interest bearing Interest hedge duration debt1 liabilities2 Australia/New Zealand (A$) 6.04% A$776m 4.8yrs USA (US$) 5.10% US$1,732m 6.8yrs Europe (€) 4.63% €201m 5.9yrs Canada (C$) 4.93% C$70m 9.5yrs 3 Average/Total 5.39% A
Slide 64: Interest rate hedging profile
Interest rate hedging profile For personal use only Interest rate hedging FY08 FY09 FY10 FY11 FY12 FY13 Avg FY14+5 A$m average hedged1 918 616 601 611 488 494 278 A$ hedge rate (ex margin)2 4.94% 4.54% 4.30% 4.81% 4.64% 5.13% 5.98% A$ blended rate (inc margin)3 6.04% 6.86% 6.90% 7.49% 7.72% 7.61% 7.
Slide 65: Foreign income hedging profile
Foreign income hedging profile For personal use only Foreign income hedging FY08 FY09 FY10 FY11 FY12 Combined hedging profile 91% 96% 93% 92% 91% US$ hedging profile1 94% 99% 98% 99% 98% Foreign exchange contracts (US$m) 12.4 9.5 5.2 4.4 4.4 Average A$/US$ rate 0.6978 0.6844 0.6725 0.7096 0.7098 NZ$
Slide 66: Developments – completed
Developments – completed For personal use only Property Country Area Estimated final Estimated yield on cost sqm cost1,2 (%) ($m) Completed Industrial - Australia DEXUS Industrial Estate, Laverton Nth – Fosters Australia 45,270 32.5 7.2 DEXUS Industrial Estate, Laverton North – Best Bar Australia 12
Slide 67: Developments – underway
Developments – underway For personal use only Area Expenditure to date1,2 Estimated cost1,2 Estimated yield Est. completion Property Country on cost sqm (A$m) (A$m) date (%) INDUSTRIAL Redwood Gardens – Sperian Protection Australia Australia 3,400 1.9 3.9 7.5% Oct 2008 San Antonio – Stage 1 USA 59,1
Slide 68: Developments – pipeline
Developments – pipeline For personal use only Country Building Expenditure Estimated Estimated yield on Est. completion Area to date 1,2 cost1,2 cost 3 date Property (A$m) (%) sqm (A$m) INDUSTRIAL DEXUS Industrial Estate, Laverton Nth 3 Australia 369,000 63.7 390 7.5 2015+ Axxess Corporate Park, Mt
Slide 69: Acquisitions
Acquisitions For personal use only Acquisition cost 1 Yield on Interest Acquisition Property Date % $m A$m Cost Notes ACQUISITIONS - AUSTRALIA Greystanes, NSW Dec 07 100 73.2 n/a $84m to be paid in further stages ACQUISITIONS – NORTH AMERICA Chicago, IL, USA Dec 07 100 US$29.5 34.5 6.5% San Antonio,
Slide 70: Whirlpool - investment program update
Whirlpool - investment program update For personal use only The program’s overall blended yield estimated to be 6.6% Location Estimated acquisition date Area Estimated acquisition cost (m) ‘000 sqm Completed to date Orlando, FL, USA Jun 07 47 US$25.1 Toronto, ONT, Canada Dec 07 70 C$71.4 Perris, CA,
Slide 71: Disposals
Disposals For personal use only Interest Settlement amount Property Date Notes % A$m Retail portfolio sale (5 properties) Oct 07 50 950.4 Sale to DWPF DEXUS Industrial Estate, Laverton Nth – Dec 07 50 58.0 Sale to AXA Coles Distribution Centre TOTAL Disposals 1,008.4 Full Year Results presentation 2
Slide 72: Australian major tenants by income
Australian major tenants by income For personal use only Office % of Total NPI Industrial % of Total NPI 1. State of NSW 9.3 1. Coles Myer Limited 6.6 2. Woodside Energy Ltd 6.5 2. Elders Ltd 5.6 3. Commonwealth of Australia 4.7 3. Visy 3.8 4. S&K Parking 4.0 4. IBM Global Services 3.1 5. IBM Austra
Slide 73: Major tenants by location and income
Major tenants by location and income For personal use only Australia % of total NPI North America % of total NPI 1. State of NSW 6.4 1. Whirlpool Corporation 8.0 2. Woodside Energy 4.5 2. AT&T Corporation 2.6 3. Commonwealth of Australia 3.8 3. US Government (TSA) 1.9 4. Fedex Ground Package System
Slide 74: Retail
Retail For personal use only Completed the sale of five retail assets to DWPF Portfolio income of $27.6m Whitford City Shopping Centre, WA, the remaining retail property Anticipated to be sold in financial year 2008/2009 Centre Whitford City Centre MAT ($psm) 7,379 Specialty MAT ($psm) 9,282
Slide 75: Australia / New Zealand office – lease expiry
Australia / New Zealand office – lease expiry For personal use only 18.0% 15.5% 15.5% 16.0% 13.4% 14.0% 11.3% 12.0% 10.1% 9.7% 9.3% 8.9% 10.0% 8.6% 8.5% 8.5% 8.3% 8.2% 7.9% 7.8% 7.5% 7.3% 7.3% 7.0% 8.0% 6.6% 6.0% 4.6% 3.6% 4.0% 2.3% 2.1% 2.0% 0.0% Vacant < 1 Year < 2 Years < 3 Years < 4 Years < 5 Ye
Slide 76: Australian industrial – lease expiry
Australian industrial – lease expiry For personal use only 25.0% 20.9% 20.0% 17.6% 17.4% 14.8% 14.3% 13.9% 15.0% 12.4% 12.4% 9.9% 9.5% 8.6% 10.0% 8.2% 6.1% 6.1% 5.1% 3.8% 3.5% 5.0% 3.2% 3.1% 2.6% 2.5% 1.5% 1.4% 1.1% 0.0% Vacant < 1 Year < 2 Years < 3 Years < 4 Years < 5 Years < 6 Years < 7 Years < 8
Slide 77: North American industrial – lease expiry
North American industrial – lease expiry For personal use only 14.9% 14.9% 16.0% 14.2% 13.9% 13.5% 13.2% 12.8% 14.0% 12.4% 12.0% 10.5% 9.2% 9.2% 10.0% 8.2% 8.1% 8.0% 6.8% 6.0% 4.7% 4.5% 4.4% 4.1% 4.0% 3.8% 3.6% 3.6% 4.0% 2.1% 1.5% 1.3% 2.0% 0.4% 0.0% Vacant MTM <1 Year <2 Years <3 Years <4 Years <5
Slide 78: European industrial – lease expiry
European industrial – lease expiry For personal use only 27.6% 27.4% 30.0% 26.2% Germany 25.0% 19.5% 20.0% 15.7% 12.1% 11.9% 15.0% 10.4% 10.4% 9.3% 8.9% 10.0% 6.9% 4.4% 4.1% 3.0% 5.0% 2.2% 0.0% 0.0% 0.0% 0.0% 0.0% Vacant <1 <2 <3 <4 <5 <6 <7 <8 <9 < 10 > 10 Year Years Years Years Years Years Years Y
Slide 79: Important Information
For personal use only Important Information 78 Full Year Results presentation 2008
Slide 80: Important Information
Important Information For personal use only This presentation 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 Information in t