Slide 1: 2023 Annual Results Presentation and property synopsis
Dexus (ASX: DXS) ASX release 16 August 2023 2023 Annual Results Presentation and property synopsis Dexus releases its 2023 Annual Results Presentation. An investor conference call will be webcast at 9.30am today on www.dexus.com/investor-centre The 2023 property synopsis excel workbook is also avail
Slide 2: 2023 Annual Results
2023 Annual Results 16 August 2023 Dexus Funds Management Limited | ABN 24 060 920 783 | AFSL 238163 as responsible entity for Dexus
Slide 3: Acknowledgement of country
Acknowledgement of country Dexus acknowledges the Traditional Custodians of the lands on which our business and assets operate, and recognises their ongoing contribution to land, waters and community. We pay our respects to First Nations Elders past and present. Artist: Amy Allerton, Indigico Creati
Slide 4: Agenda
Agenda Overview Darren Steinberg, CEO Financial results Keir Barnes, CFO Funds management Deborah Coakley, EGM Funds Management Investments Office portfolio Andy Collins, EGM Office Industrial portfolio Stewart Hutcheon, EGM Industrial, Healthcare & Alternatives Transactions and Developments Ross Du
Slide 5: Our strategy
Our strategy 4 Dexus 2023 Annual Results Presentation 16 August 2023
Slide 6: A real asset manager with deep sector expertise
A real asset manager with deep sector expertise Supported by strong governance, a robust balance sheet and leading ESG credentials Real estate Infrastructure Office Industrial Retail Healthcare Infrastructure c. $24bn FUM c. $12bn FUM c. $10bn FUM c. $2bn FUM c. $11bn FUM Top 5 across each real esta
Slide 7: FY23 highlights
FY23 highlights Resilient income streams Investment manager of choice $555.0m AFFO 95.9% Office occupancy , well 1 Added circa $18bn FUM Diversified funds offering above market average of 87.2%2 $(752.7)m Statutory net loss after tax through the and increased 99.4% Industrial occupancy 1 27.9% geari
Slide 8: Sustainability leadership and strategy
Sustainability leadership and strategy Continued ESG leadership and strategy refreshed for the future ESG initiatives, benchmarks and ratings Global leader 4.9 Star Top 5% S&P Global ESG Score NABERS Energy rating Real estate Dexus group office portfolio S&P Global Sustainability Yearbook 2023 Globa
Slide 9: Financial results
ELA hehe FIFI IIIS OCA (LTA hfe Athi hihehifibifit hehe fe, crapurtilinn ME CT, eM LOC CLELL + (ekrhelrllrh aka teta laff ODO ML LLLLLL wwiwide a aia ila, — nani she -
Slide 10: Key earnings drivers and valuations
Key earnings drivers and valuations Earnings composition increasingly diversified Key earnings drivers Investment portfolio valuations Earnings driver FY23 composition1 30 June 2023 Valuation Capitalisation rate value2 12-months movement3 12-months movement 83% of FFO (89% FY22) (11.9)% 5.0% 62% Off
Slide 11: FY23 financial results
FY23 financial results Delivered on upper end of guidance in a challenging operating environment FY23 FY22 Change › Office property FFO decreased primarily due to the impact of divestments and non-recurring income from development impacted properties in FY22, partly offset by rent increases $m $m %
Slide 12: Strong financial position
Strong financial position Managing gearing and hedging to maintain balance sheet strength and fund future commitments › Active debt management securing $2.6 billion of new and refinanced facilities with an average Diversified sources of debt tenor of 4.5 years, including a $500 million exchangeable
Slide 13: Gearing capacity to fund commitments
Gearing capacity to fund commitments Gearing expected to remain within 30-40% target range › $2.3bn committed spend, comprising $2.2 billion committed development spend over the next five years and $0.1 billion committed co-investments › Headroom expected to grow to $3.3bn including proceeds of cont
Slide 14: Funds management
Funds management
Slide 15: Dexus funds platform
Dexus funds platform A real asset platform of scale, diversity and organic growth opportunities Third party FUM grew by 68% in FY23, with infrastructure accounting for 61% of FUM growth $43.6 billion FUM1 Sectors Product type Funds management platform growth $bn Office 28% Real estate Infrastructure
Slide 16: Dexus funds platform
Dexus funds platform Well regarded by an increasingly diversified investor base › Investors outside of top 5 account for 72% of FUM Why investors choose Dexus (up from 46% in FY18) › Offshore investors account for 26% of FUM (up from 23% in FY18), and expected to grow further Investor base increasin
Slide 17: Funds management
Funds management FY23 key achievements Raised $1.6 billion1 Onboarded 23 new Further enhanced across 14 vehicles institutional investors distribution capability › Dexus Healthcare Property Fund: and private wealth › Opened Singapore office $440m › Expanded distribution channels › Dexus Real Estate P
Slide 18: Key investment verticals take advantage of megatrends
Key investment verticals take advantage of megatrends Workplace Health Transport Social Energy “Connecting people and “Bringing communities “Enabling productivity” “Improving quality of life” “Powering our cities” our economy” together” Office Airports Hospitals Living Renewables Retail Rail Aged ca
Slide 19: Investments
Balance sheet FUM Co-investments 6% Office 71% Industrial 23% Investments
Slide 20: Office portfolio
Office portfolio
Slide 21: Office portfolio performance
Office portfolio performance High quality portfolio with 95.9% occupancy and stable lease terms › Occupancy remains high at 95.9% despite the challenging operating $24.3 billion $12.3 billion environment, above the market average of 87.2%4 Dexus group Dexus balance sheet office portfolio office port
Slide 22: Staggered expiry profile and diversified tenant base
Staggered expiry profile and diversified tenant base Supporting resilient income streams Dexus office portfolio lease expiry profile (by income)1 Diversified tenant base with Sydney Melbourne Brisbane Perth limited concentration risk 15% Top customer – 13% target threshold Commonwealth Government of
Slide 23: Sydney CBD occupancy
Sydney CBD occupancy 30 The Bond Premium occupancy higher in the core 36 The Bond Australia Square One Farrer Walsh Bay › The market occupancy rate of Premium space in the core Occupancy 89% Core of the Sydney CBD is 90%, which is the highest of the four Premium stock 270,000 sqm Occupancy 90% preci
Slide 24: Industrial portfolio
Industrial portfolio
Slide 25: Industrial portfolio performance
Industrial portfolio performance Strong fundamentals continue to underpin future rent growth › Portfolio occupancy increased to 99.4% reflecting the continued leasing $12.1 billion $4.1 billion success and recent sale of Axxess Corporate Park Dexus group industrial portfolio Dexus balance sheet indu
Slide 26: Industrial take-up moderating, low vacancy to provide support
16 August 2023 Industrial take-up moderating, low vacancy to provide support Demand driven by investment in last mile fulfilment, population growth and inventory build up National industrial take-up returns to pre-COVID levels Dexus leasing observations Million sqm › Net face rents in major markets
Slide 27: Transactions and Developments
Transactions and Developments
Slide 28: Active capital allocation approach
Active capital allocation approach Continued focus on capital recycling into value creating opportunities $5.4 billion Balance sheet capital recycling Total group real asset transactions $1.8 billion $1.1 billion FY23 balance sheet spend on development pipeline and co-investments balance sheet dives
Slide 29: Developments – creating next generation assets
Developments – creating next generation assets Further enhances portfolio quality and provides organic FUM growth › Development aligns with strategic objectives of resilient portfolio income Project cost Yield Est. cost to % Key committed projects Sector on Completion streams and investment manager
Slide 30: Trading profits
Trading profits Strong year in FY23, with lower contribution expected in FY24 › FY23 was a strong year for trading profits (post tax), with $50.2 million1 realised across two trading projects Trading profit track record › Trading profits expected to be lower in FY24 (circa $10 million post tax), as
Slide 31: Summary
Summary 30
Slide 32: The Dexus investment proposition
The Dexus investment proposition High-quality portfolio with embedded potential from funds management and development Fully integrated real asset platform of scale and deep capability Investment Funds management Development $17.4bn $43.6bn $17.4bn1 capital invested directly third party real estate a
Slide 33: Summary
Summary Leading real asset manager with a robust balance sheet › Dexus has demonstrated strategic execution: – Maintained a strong balance sheet through asset recycling – Property portfolio which continues to benefit from flight to quality – Continued to grow and expand the Funds platform › We are h
Slide 34: Appendices
Appendices
Slide 35: Dexus today
Dexus today $61.0 billion – total funds under management1 Dexus portfolio Funds management portfolio Opportunistic 1% Office 28% Real estate Real estate securities securities <1% & other 3% Infrastructure <1% Office 71% Healthcare 3% Opportunistic & trading <1% $17.4bn Healthcare 2% Infrastructure R
Slide 36: Reconciliation to statutory profit
Financial results Reconciliation to statutory profit Reference Item 30 June 2023 30 June 2022 $m $m Statutory AIFRS net profit / (loss) after tax (752.7) 1,615.9 Investment property and inventory (Gains)/losses from sales of investment property 0.6 2.0 Fair value (gain)/loss on investment properties
Slide 37: Management operations profit
Financial results Management operations profit Funds Property Development Management FY23 ($m) Management Management Management Operations Revenue 150.9 90.8 35.0 276.7 Operating expenses (57.3) (80.7) (26.1) (164.1) FY23 net profit 93.6 10.1 8.9 112.6 FY23 margin 62% 11% 25% 41% FY22 margin 63% 11%
Slide 38: Cash flow reconciliation
Financial results Cash flow reconciliation 30 June 2023 30 June 2022 $m $m Cash flow from operating activities 770.9 560.1 add back: payment for inventory acquisition and capex 10.9 14.8 less: cost of sale of inventory (61.0) (138.6) less: tax on trading profits not yet paid (21.5) (10.0) add back:
Slide 39: Interest reconciliation
Financial results Interest reconciliation 30 June 2023 30 June 2022 $m $m Total statutory finance costs 174.1 141.8 Less: Debt modification and amortisation of exchangeable notes (23.1) (5.7) Add: Finance costs attributable to investments accounted for using the equity method1 8.0 1.5 Less: AASB 16
Slide 40: Change in net tangible assets and revaluations
Financial results Change in net tangible assets and revaluations Investment portfolio Valuation Weighted change average $m cap rate $m $ps Opening net tangible assets1 (1 July 22) 13,206.6 12.28 Dexus office portfolio (1,177.8) 5.21% Revaluation of real estate (1,183.9) (1.10) Dexus industrial portf
Slide 41: Direct property portfolio book value movements
Financial results Direct property portfolio book value movements Office1 Industrial1 Healthcare Dexus total1 Trading $m $m and other1 $m assets2 $m (inventory) $m Opening direct property 13,294.7 3,955.8 136.5 17,387.0 54.4 3 Lease incentives 121.6 15.0 0.1 136.7 0.3 Maintenance capex 45.4 2.4 - 47.
Slide 42: Co-investments in pooled funds
Financial results Co-investments in pooled funds Dexus Dexus FY23 Passing Fund Ownership Number of Total assets Occupancy WALE WACR co-investment co-investment distribution look-through stake (%) properties ($m) (%) (years) (%) value ($m)1 income ($m) yield (%)2 gearing (%) Healthcare DHPF 16.4% $24
Slide 43: Capital management
Capital management FY23 position Debt maturity profile1 Key metrics 30 June 2023 30 June 2022 $m 2,500 Total debt2 $5,310m $4,882m 2,000 Headroom (approximately)3 $2.5bn $1.9bn 1,500 Pro forma gearing (look-through)4 27.9%5 26.9% 1,000 Covenant gearing (covenant6 <55%) 29.4% 25.5% 500 Interest cover
Slide 44: Capital management – interest rate hedging profile
Capital management Interest rate hedging profile Hedge profile Hedging profile 30 June 2023 30 June 2022 $m 5,000 3.0% Average amount of debt hedged1 86% 65% 4,500 Average amount of debt hedged excluding caps 69% 58% 4,000 2.5% 3,500 Weighted average interest rate on hedged debt2 1.9% 1.5% 3,000 2,5
Slide 45: Debt facilities
Capital management Debt facilities1 Facility limit Drawn Maturity Currency Facility limit Drawn A$m A$m A$m A$m Bilateral bank debt 600 150 FY25 A$ Sub total 450 13 FY26 A$ 7,700 5,116 750 - FY27 A$ Currency translation and fair value adjustments 288 280 1,350 425 FY28 A$ Deferred borrowing costs an
Slide 46: Real estate development pipeline
Funds management Real estate development pipeline $8.8 billion Funds management real estate development pipeline $3.0 billion $5.2 billion $0.6 billion Committed projects Uncommitted projects Concept projects Project cost on uncommitted projects in funds management business Uncommitted projects FY24
Slide 47: Office and industrial key metrics
Property portfolio Office and industrial key metrics Key metrics Office Industrial Amount of space leased1 196,998sqm2 272,059qm3 No. of leasing transactions 3062 713 Occupancy by income 95.9% 99.4% Occupancy by area 95.3% 99.7% 64 Momentum Way, Ravenhall VIC Average incentives 30.0%4 10.7%5 No. of
Slide 48: Office portfolio diversification
Property portfolio Office portfolio diversification Office by asset type Office by location Sydney Prime CBD/fringe Premium grade 53% grade WA 11% 49% 95%1 NSW 56% QLD 12% $12.3bn $12.3bn Other <1% VIC 21% B-grade 5% A-grade 42% Sydney suburban 7% 1. Prime grade buildings represent 95% of the office
Slide 49: Office portfolio lease expiry profiles by region
Property portfolio Office portfolio lease expiry profiles by region1 Sydney CBD By income By area Melbourne CBD 20% 18.6% By income By area 20% 17.6% 14.0% 13.3% 14.8% 15.5% 15% 12.5% 15% 11.5% 9.3% 9.8% 9.3% 10.2% 10.8% 10.2% 10.4% 10% 8.4% 10% 7.7% 5.4% 6.2% 6.1% 6.3% 4.0% 4.5% 5% 5% 2.4% 0% 0% Av
Slide 50: Office top customers represent 17.5% of total property portfolio income
Property portfolio Office top 10 customers represent 17.5% of total property portfolio income Office top 10 customers Diversity of office customers (by income) 0% 5% 10% 15% 20% Credit % of total property Office customers1 rating2 portfolio income3 Financial and insurance services 18% Legal services
Slide 51: Industrial portfolio diversification
Property portfolio Industrial portfolio diversification Industrial by asset type Industrial by location NSW 47% Industrial SA <1% Land 4% estate 75% Data centre 4% WA 13% Distribution $4.1bn $4.1bn centre 12% QLD 10% Business park 5% VIC 29% 64 Momentum Way, Ravenhall, QLD 50 Dexus 2023 Annual Resul
Slide 52: Industrial portfolio lease expiry profile by income
Property portfolio Industrial portfolio lease expiry profile by income 20% 16.1% 15.1% 14.5% 15% 10% 9.2% 7.7% 5% 0.6% 0% Available FY24 FY25 FY26 FY27 FY28 Key vacancies FY24 Key expiries FY25 Key expiries FY26 Key expiries FY27 Key expiries FY28 Key expiries Lakes Business Park (0.4%) Kings Park I
Slide 53: Industrial portfolio lease expiry profiles by region
Property portfolio Industrial portfolio lease expiry profiles by region1 Sydney Income Area Brisbane Income Area 25% 22.8% 23.4% 20% 16.3% 20% 14.4% 15.4% 15% 12.5% 11.6% 13.7% 11.9% 15% 11.2% 12.0% 11.9% 11.1% 10.7% 9.9% 10.3% 9.9% 10.0% 10% 10% 5.1% 5.6% 5% 5% 1.3% 0.8% 0.6% 0.8% 0% 0% Available F
Slide 54: Industrial top customers represent 4.1% of total property portfolio income
Property portfolio Industrial top 10 customers represent 4.1% of total property portfolio income Industrial top 10 customers Diversity of industrial customers (by income) % of total - 5% 10% 15% 20% 25% 30% 35% Industrial customers1 property portfolio income2 Transport, Postal and Warehousing 34% Re
Slide 55: Office portfolio sustainability metrics
Environmental metrics Office portfolio sustainability metrics Dexus office portfolio net greenhouse emissions intensity Dexus Office NABERS Energy ratings Dexus Office NABERS Water ratings 120 5.5 stars Operational Emission sources 5.5 stars 185,311sqm 41,796sqm 5 stars 29% 100 Emissions intensity (
Slide 56: Dexus completed developments
Development Dexus completed developments Pipeline Building area1 Project cost2 Yield on cost Leased Final Third party sqm $m % % completion partner interest % Industrial 12 Frederick Street, St Leonards NSW 17,500 67 n/a 73% Nov-22 0% Stage 2 1-21 McPhee Drive, Berrinba QLD 13,800 42 4.15% 100% Feb-
Slide 57: Dexus committed developments and fund-throughs
Development Dexus committed developments and fund-throughs Pipeline Building area1 Project cost Est. cost to Yield on cost3 Leased Completion due Third party partner sqm est.2 completion2 % % interest $m $m % Office 123 Albert Street, Brisbane QLD 39,100 597 148 c. 5% 78% Early 2024 - Atlassian Cent
Slide 58: Dexus uncommitted developments
Development Dexus uncommitted developments Pipeline5 Building Project cost Est. yield on est. Third party partner area1,5 est.2 project cost3 interest sqm $m % % Office Stage 2 Waterfront Brisbane QLD 57,500 c. 450 5-6% 50% 60 Collins Street, Melbourne VIC 43,200 c. 1,000 5-6% - 4 Central Place Sydn
Slide 59: Transactions
Transactions Dexus1 Dexus acquisitions Purchase price2 Interest Settlement Dexus divestments Sale price2 Interest Settlement $m $m 3 Spring, 58 Pitt and 60 Pitt Streets, Sydney NSW3 $46.2 50% Aug 18-Aug 22 383-395 Kent Street, Sydney NSW $385.0 100% 29-Jul-22 113-153 Aldington Road, Kemps Creek NSW
Slide 60: Office demand indicators
Office demand indicators Professional services industry showing resilience amid moderating business conditions Professional services firms hiring intentions Business conditions remain positive ‘000 Vacancies Job Ads Professional job vacancies ‘000 jobs Index Business confidence Business conditions 3
Slide 61: High quality properties likely to outperform
High quality properties likely to outperform We expect premium assets to outperform lower grades in the current investment climate › Capitalisation rates for premium office properties have been more stable than secondary over time › The spread between premium and secondary properties is starting to
Slide 62: Office market outlook – flight to quality and core
Office market outlook – flight to quality and core We are observing a flight to both high quality property and core locations › Flight-to-quality is a major theme for office markets as occupiers seek high quality centrally located offices with amenities that appeal to staff › Net absorption of premi
Slide 63: Office market outlook
Office market outlook Office leasing inquiry driven by smaller occupiers Leasing inquiry steady through FY23, driven by smaller users Vacancy rates in CBD office markets 0-999sqm 1,000-2,999sqm 3,000sqm+ 000’sqm Syd CBD Melb CBD Bris CBD Perth CBD 1000 25% 900 800 20% 700 600 15% 500 400 10% 300 200
Slide 64: Industrial sector
Industrial sector Demand moderating though long-term tailwinds remain; low vacancy leading to significant rent growth Structural level of demand vs. actual gross leasing Lack of available space has led to a rapid growth in rents Million Projected leasing (pro-rata based on H1 2023) $/sqm Last 12 sqm
Slide 65: Healthcare sector
Healthcare sector Healthcare has outperformed other sectors over the past decade Growing institutional demand drives healthcare transactions higher Indexed returns1 by sector over 15 years (March 2008=100) $ billions Hospitals Medical office R&D Projected on pro rata basis All Property Retail Office
Slide 66: Market outlook – Sydney CBD supply
65 -50 100 150 0 50 -100 121 Castlereagh St (David Jones) '000 square metres 32-36 York St FY24 FY24-FY26 Central Place Source: JLL Research, Dexus Research. 33 Alfred St 333 Kent St Dexus 2023 Annual Results Presentation - net supply: only 3.6% of stock Martin Place Metro - North Tower FY25 - 51% o
Slide 67: Market outlook – Melbourne CBD supply
66 40 80 0 -20 -40 60 20 NAB House - 500 Bourke St (ISPT) '000 square metres FY24-FY26 140 Lonsdale St (Charter Hall) Source: JLL Research, Dexus Research. 130 Little Collins St (Golden Age) FY24 - net supply is 5.4% of stock, 299 Bourke St / 280 Little Collins (Newmark) Dexus 2023 Annual Results Pr
Slide 68: Dexus’s position in CBD office
Office markets Dexus’s position in CBD office CBD office market Sydney Melbourne Brisbane Perth Total NLA 5,218,892 5,269,994 2,333,552 1,876,333 Prime vacancy average 14.9% 16.6% 12.4% 15.6% Dexus CBD exposure Total NLA 516,310 398,157 261,263 183,645 Number of properties 14 7 5 4 Occupancy (by are
Slide 69: Other information
Other information Exchange and securities used in statutory accounts 30 June 2023 31 Dec 2022 30 Jun 2022 Closing rates for Statement of Financial Position USD 0.6630 0.6775 0.6889 Average rates for Statement of Comprehensive Income USD 0.6734 0.6752 0.7030 Post consolidation equivalent amounts 12 m
Slide 70: Glossary
SLIDE TO BE REVIEWED Glossary Distribution payout policy: Policy is to distribute in line with free cash flow for which AFFO is a proxy FFO is in line with Property Council of Australia definition and comprises net profit/loss after tax attributable to stapled security holders calculated in accordan
Slide 71: Disclaimer
Disclaimer This presentation is issued by Dexus Funds Management Limited (DXFM) in its capacity as responsible entity of Dexus (ASX code: DXS). It is not an offer of securities for subscription or sale and is not financial product advice. Information in this presentation including, without limitatio
Slide 72: dexus
dexus