Dexus · ASX:DXS
Dexus — DEXUS Property Group — H1 FY2009 Earnings Presentation
78 slides from Dexus's earnings presentation, February 2009
Slide 1: DEXUS Property Group Half Year Results 31 December 2008
DEXUS Property Group Half Year Results 31 December 2008 DEXUS Funds Management Limited ABN 24 060 920 783 Australian Financial Services Licence Holder
Slide 2: Half Year Results 2008
Half Year Results 2008 Victor Hoog Antink Chief Executive Officer
Slide 3: State of the market – DEXUS focus
State of the market – DEXUS focus Market Challenging and volatile environment – Impacting capital markets – Impacting all business operations DEXUS focus Actively managing our property portfolio to extract value and deliver sustainable income Pro-actively managing our balance sheet and maintai
Slide 4: Well positioned: solid portfolio, focused team
Well positioned: solid portfolio, focused team Strategic focus – leading owner, manager, developer DEXUS Group operating model1 – superior quality office and industrial portfolio – key locations in selected markets Strong tenant relationships – quality covenants – high retention rates – long ten
Slide 5: Prudent & proactive capital management
Prudent & proactive capital management Proactive capital management - $1.5bn secured Debt – refinanced all 2009 debt maturities to Feb 2010 - $950m – additional $250 million facility obtained – Standard & Poors rating BBB+ reaffirmed in Nov 2008 Equity – $300 million placement – DRP participation
Slide 6: Results at a glance
Results at a glance Financial Dec 08 Dec 07 – operating earnings $251.4m $254.4m – FFO per security 5.4c 5.9c – DPS 3.8c 5.9c – revaluations (devaluations) ($773m) $337m – gearing 37.3% 31.3% Operational – like-for-like property income 1.5% 4.4% – portfolio occupancy 93.1% 95.1% – lease duration
Slide 7: Agenda
Agenda Financial performance Craig Mitchell Office portfolio Louise Martin Industrial portfolio Andrew Whiteside International portfolio Paul Say Third party funds management Victor Hoog Antink Summary and outlook Victor Hoog Antink Half Year Results presentation 2008 7
Slide 8: Financial performance
Financial performance Craig Mitchell Chief Financial Officer
Slide 9: Non-cash items dominate NPAT
Non-cash items dominate NPAT Dec 08 Dec 07 $’m $’m NPAT to stapled security holders (954.3) 432.7 Add back: Non cash: unrealised MTM loss on derivatives 427.9 72.3 Non cash: devaluations/(revaluations) of investment property/PPE 773.0 (337.1) Non cash: deferred tax benefit (83.8) (8.9) Net finance c
Slide 10: Rental income drives operating earnings
Rental income drives operating earnings Owned Assets Operating Earnings $9.0bn1 $251.4m Highly diversified property portfolio Rental income represents 98% of operating earnings Property assets represent 94% of total assets 1. Excludes intangible assets of $234m for management rights and cash H
Slide 11: Performance of funds from operations
Performance of funds from operations Dec 08 Dec 07 $’m $’m Office 119.1 123.0 Industrial - Australia 53.4 52.3 Industrial – International 77.6 65.6 Retail 7.7 19.9 Development gains - 5.9 Management EBIT1 5.3 4.9 Responsible Entity fees1 (11.7) (17.2) Operating earnings 251.4 254.4 Net finance cost
Slide 12: Property values have continued to decline
Property values have continued to decline Limited actual sales evidence for devaluations Valuation drivers for Dec 08 Australia – primarily due to cap rate softening North America & Europe – primarily due to operating fundamentals and cap rate softening Uncertainty surrounding future values –
Slide 13: Capitalisation rates continue to soften
Capitalisation rates continue to soften Average capitalisation rates have softened by 72 bps in the last six months Entire portfolio revaluation decrease of $773 million or (8.1%) over last six months Cap rate Cap rate Change Property 1H09 De-valuation Jun 08 % Dec 08 % bps $’m 1 $’m % Australia
Slide 14: Net asset value composition
Net asset value composition Property devaluations of $702.2 million or 20 cents of NTA Impairment of PP&E of $70.8 million or 2 cents of NTA Mark to market losses on derivatives of $427.9 million or 12 cents of NTA NTA not impacted by currency movements due to hedging strategies 1. Predomina
Slide 15: Active capital management
Active capital management Refinanced all 2008 & 2009 debt maturities Gearing ratios – $950 million from ongoing and new banking relationships Additional commitments of $250 million Placement raising over $300 million – natural DRP participation 30% Distribution policy changed – payout ratio
Slide 16: Pro-active debt management
Pro-active debt management Committed undrawn facilities exceeded $700m Maturity profile Dec 08 ($m) Debt duration steady at 3.0 years Gearing (adjusted for cash) 37.3%2 No debt refinancing until Feb 2010 Committed development and acquisitions fully funded until 2011 Well within key coven
Slide 17: Sound capital framework
Sound capital framework Diversified investments and funding sources Facility mix Dec 08 – strong relationship with banking group Protection against movements in currency on debt and covenant headroom – balance sheet hedging – foreign currency denominated facilities Transparent debt structure –
Slide 18: Office Portfolio
Office Portfolio Louise Martin Head of Office
Slide 19: Highlights – solid performance in difficult times
Highlights – solid performance in difficult times High quality portfolio assets and good tenant diversification Solid portfolio performance Intensive management of portfolio with focus on cashflow Substantial progress of development pipeline and de-risking of developments 1 Farrer Place, Syd
Slide 20: Quality portfolio – strategic location, quality assets
Quality portfolio – strategic location, quality assets High quality assets – 94% of office buildings are Premium or A-grade1 Geographic spread over 6 key locations – 69% of portfolio located in Sydney Allocation by asset class Geographical allocation by market 1. Includes Office Parks. Does not
Slide 21: Office market – well positioned in key markets
Office market – well positioned in key markets Leasing demand expected to remain Supply and vacancy – Sydney CBD weak in 2009/10 ('000m 2) (% of stock) Total completions (LHS) Vacancy (RHS) Vacancy is forecast to rise in all major 200 Past 10 year 25% office markets average completions 20% Syd
Slide 22: Tenant diversification delivering sustained income
Tenant diversification delivering sustained income Well diversified by tenant sector Economic diversity of tenants – top 20 tenants generate over 50% of income – secure income from Government tenants – income evenly spread across industry groups % of Sector Top ten office tenants (by income) NPI 1
Slide 23: Strong portfolio fundamentals
Strong portfolio fundamentals Solid like on like growth NPI (%) Office lease expiry by income High occupancy rates Limited market exposure High retention rates Good lease duration Expiries for FY09 well managed Capitalisation rates softening Source: DEXUS forecast as at Nov 08 Net Prop
Slide 24: Office leasing – strong performance, active management
Office leasing – strong performance, active management 70% of FY09 expiries leased or renewed Rent review profile 25,000sqm leased - 64 transactions Average rental increase was 10.2%1 Major deals with Adobe, Dairy Australia and Australia Post Rent review profile de-risked 90% (FY09) and
Slide 25: Office development underway and de-risked
Office development underway and de-risked Developments are on track 123 Albert Street – 38,000sqm – 68% pre-committed to Rio Tinto – completion Dec 2010 – $250 million remaining to spend 60 Miller Street – 5,000sqm – 100% pre-leased – practical completion Feb 09 1 Bligh Street – 42,000sqm –
Slide 26: 2009 office focus
2009 office focus Active management through integrated model - property, asset and development management – leasing of vacancies – tenant retention through service excellence from our internal property management teams Continued implementation of sustainability programs at property management
Slide 27: Australian Industrial Portfolio
Australian Industrial Portfolio Andrew Whiteside Head of Industrial
Slide 28: Highlights – active management delivering results
Highlights – active management delivering results Sound portfolio fundamentals – strategic mix of assets/strong tenant profile Active management approach – locking in tenure/maximising sustainable cash flows Delivering strong results – 3.4% like for like income growth – preserving portfolio va
Slide 29: Diversified portfolio – quality assets, strategic location
Diversified portfolio – quality assets, strategic location Flexible product – strategically located Continued market appeal – 97% occupancy Geographic weighting Property type Half Year Results presentation 2008 29
Slide 30: Industrial activity and property returns
Industrial activity and property returns 80% of industrial property returns comes from income historically % % pa growth Source: Access Economics, IPD/PCA and DEXUS Research Half Year Results presentation 2008 30
Slide 31: Quality portfolio – strong tenant profile
Quality portfolio – strong tenant profile Economic diversity of tenants Top 10 customers (by income) (%) Well diversified by industry sector 70% of income secured on 5+ year terms Top 20 tenants make up 45% of rent Half Year Results presentation 2008 31
Slide 32: Portfolio fundamentals - sound performance
Portfolio fundamentals - sound performance Solid like-for-like growth Rent review profile Strong rent review structure 3.7% YTD High occupancy maintained Limited exposure to market in the next 12 months Capitalisation rate softened 60bps Net Property Like-for- Occupancy Occupancy % Over/Un
Slide 33: Industrial leasing – intensive activity
Industrial leasing – intensive activity Strong leasing with 115,000sqm leased Lease expiry profile June 08 to Dec 08 – 80% of FY09 expiries negotiated (%) Continued success with existing tenants – retention at 79% Average rental growth of 0.1% – 3.5% for new leases Major leasing deals includ
Slide 34: Developments – flexibility in key markets
Developments – flexibility in key markets Strategic sites in two key locations – Laverton North, Melbourne – Greystanes, Western Sydney Staged approach with steady enquiry - proven appeal to users - project track record No committed developments underway Greystanes acquisition in stages Comm
Slide 35: 2009 industrial focus
2009 industrial focus Active focus on the fundamentals - experienced team focused on delivering on strategy and operational excellence - protecting value through active management - extracting value from operations Well positioned for the future - quality, flexible portfolio with capacity - bran
Slide 36: International Industrial Portfolio
International Industrial Portfolio Paul Say Head of Corporate Development
Slide 37: Active management in a challenging market
Active management in a challenging market Challenging market conditions impacting Total property portfolio by value1 results – like on like earnings down – valuations written down Sound portfolio fundamentals – quality assets – flexible asset mix – diverse tenant profile Active management appr
Slide 38: Sector now feeling impact of global economic slowdown
Sector now feeling impact of global economic slowdown Diminishing global trade and domestic Sharp decline in US confidence in Q4 demand – sharp turndown in US market sentiment – Europe continues to be challenging – sub-prime debt markets hit hardest Valuations down sharply reflecting sentiment –
Slide 39: Quality, diversified & adaptable portfolio
Quality, diversified & adaptable portfolio Quality institutional grade properties Economic diversity of tenants Highly diversified portfolio Strategically located Economic diversification in tenant base Strong tenant relationships % of Top 10 North American tenants (by income) Sector NPI 1
Slide 40: Portfolio metrics
Portfolio metrics Strong leasing activity has seen North American lease expiry profile by income 210,000sqm leased in 59 deals Earnings profile – like on like earnings down: – occupancy slightly down by 1% to 90.8% – additional tenant incentives – fixed rent reviews of 2-3% on 70% of portfolio
Slide 41: International outlook: continued volatility
International outlook: continued volatility Our portfolio fundamentals remain sound – quality portfolio delivering results – strong tenant relations Preparing to actively reposition international portfolios when market conditions improve Active management is a key priority – maintaining occupa
Slide 42: Third Party Funds Management
Third Party Funds Management Victor Hoog Antink
Slide 43: Third party management business - highlights
Third party management business - highlights One of the largest third party platforms in Australia at $6.1 billion Well diversified by investor base and asset class Annuity income stream – no reliance on performance fees $240 million developments underway Source of Funds Fund breakdown $6.1
Slide 44: Summary and Outlook
Summary and Outlook Victor Hoog Antink Chief Executive Officer
Slide 45: Well positioned to respond to market cycles
Well positioned to respond to market cycles Focused strategy High quality portfolio Delivering core property earnings Prudently managed balance sheet Experienced management team The Zenith, 821 Pacific Highway, Chatswood, NSW Half Year Results presentation 2008 45
Slide 46: 2009 focus
2009 focus Maximising cash-flows – active portfolio management – enhancing our property portfolio – active capital management – strengthening our balance sheet FY09 guidance – earnings of 10.8 cents per security – distribution of 7.6 cents per security Half Year Results presentation 2008 46
Slide 47: Questions
Questions
Slide 48: Important information
Important information 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 this presentation including
Slide 49: Half Year Results 2008 — Appendices
DEXUS Property Group Half Year Results 2008 — Appendices
Slide 50: Balance sheet
Balance sheet DEXUS Property Group Dec 08 Jun 08 $’m $’m Cash & receivables 145 136 Property assets 8,948 8,738 Other (including derivative financial instruments & intangibles) 482 475 Total assets 9,575 9,349 Payables & provisions 277 323 Interest bearing liabilities 3,455 3,007 Other (including de
Slide 51: Net property income reconciliation to P&L
Net property income reconciliation to P&L 31 Dec 08 $’m Property revenue 342.8 Less: Property expenses (82.6) Plus: Net property income from equity a/c investments — Less: Amortisation, depreciation and eliminations (2.4) Total NPI 257.8 Represented by: Office 119.1 Industrial Australia 53.4 Industr
Slide 52: Interest reconciliation
Interest reconciliation 31 Dec 08 $’m $’m Interest paid/payable 100.3 Other finance costs 1.5 Interest expense 101.8 Realised interest rate swaps (5.0) Unrealised interest rate swaps MTM 407.2 Net fair value loss (gain) of interest rate swaps 402.2 Total interest expense 504.0 Less interest capitali
Slide 53: Profit to funds from operations reconciliation
Profit to funds from operations reconciliation Group Property MTM Incentive Straight Deferred P/L on sale RENTS Other Distributable Consolidated revals/ derivs & amort line rent tax of invest capital earnings Impairment FX adjust prop distribution Revenue from ordinary activities Property revenue 34
Slide 54: Funds management contribution
Funds Fundsmanagement Managementcontribution Contribution Arthur P 31 Dec 08 $’m Internal Responsible Entity fee revenue (at cost) 11.71 Third party management fees and other revenue 31.82 Compensation related expenses (30.8)3 Other corporate expenses (7.4)4 Management EBIT 5.3 Net interest expense
Slide 55: External revaluation summary
External revaluation summary Property sector % of book value Valuation External Previous Change in Portfolio average externally valued ($’m) revaluation book value book value % cap rate2% ($’m) Office Australia — NSW 43.2 1,284 (98) 1,382 (7.1) 6.6 Australia — VIC 25.3 160 25 135 18.2 7.7 Australia
Slide 56: Revaluation summary
Revaluation summary Office Industrial Retail North America Europe Total $m $m $m $m $m $m P&L Revaluations — investment properties External valuations (60) (14) — — (66) (140) Internal valuations (114) (64) — (384) — (562) Sub total (174) (78) — (384) (66) (702) P&L revaluations — PP&E External valu
Slide 57: Key financial risk management measures
Key financial risk management measures Dec 08 Jun 08 Gearing1 37.3% 33.2% Interest cover 2.7x 3.0x Headroom (approx) $700m $500m Duration of debt 3.0 yrs 3.0 yrs Interest hedge duration 6.0yrs 6.2 yrs Weighted average cost of debt2 5.3% 5.4% Debt hedged 91% 86% Foreign balance sheet hedged3 100% 93%
Slide 58: Debt profile
Debt profile Facility limit Drawn amount Maturity dates Security1 Currency A$’m A$’m Syndicated bank debt 300 227 Mar 10 Unsecured Multi-ccy, A$ limit1 303 303 Sept 10 Unsecured Multi-ccy, US$ limit2 Bilateral bank debt 360 308 Dec 10 Unsecured Multi-ccy, A$ limit1 145 70 Sept 11 Unsecured Multi-ccy
Slide 59: Debt profile by jurisdiction
Debt profile by jurisdiction Weighted average Interest bearing Cross currency Interest hedge cost of debt1 liabilities swaps3 duration % millions millions years Australia/New Zealand 5.65 A$1,896 A$(1,012) 5.0 USA 4.72 US$969 US$610 6.4 Europe 4.65 €83 €100 5.4 Canada 4.93 — C$70 9.0 Average/total2
Slide 60: Mark to markets
Mark to markets A$ interest rate swap US$ interest rate swap mark to market movement mark to market movement 0 5.00% 80 8.00% 60 -50 7.00% 40 4.00% 20 -100 6.00% US$m A$m % 0 % 5.00% -150 -20 3.00% -40 -200 4.00% -60 -80 Net movement (A$101m) 3.00% -250 Net movement (US$182m) 2.00% Jun-08 Dec-08 Jun
Slide 61: Interest rate hedging profile
Interest rate hedging profile Interest rate hedging HY09 FY09 FY10 FY11 FY12 FY13 Avg FY14+5 A$m average hedged1 822 696 776 791 643 499 313 A$ hedge rate (ex margin)2 4.50% 4.70% 4.59% 4.93% 4.86% 5.13% 6.08% A$ blended rate (inc margin)3 5.65% 5.47% 5.34% 6.41% 6.70% 6.88% 7.03% US$m average hedge
Slide 62: Foreign income hedging profile
Foreign income hedging profile Foreign income hedging HY09 FY09 FY10 FY11 FY12 FY13 Combined hedging profile 93% 90% 85% 87% 90% 90% US$ hedging profile1 97% 96% 92% 93% 97% 98% Foreign exchange contracts (US$m) 4.7 9.5 7.25 5.6 4.4 2.65 Average A$/US$ rate 0.6727 0.6844 0.6848 0.7084 0.7098 0.6657
Slide 63: Cross currency swap maturity profile
Cross currency swap maturity profile Cross currency swaps FY09 FY10 FY11 FY12 US$ maturities (US$m)1 78 120 172 240 US$ average rate2 0.8990 0.7040 0.7721 0.8121 € maturities (€m) 0 100 0 0 € average rate2 n/a 0.5046 n/a n/a CAD maturities (C$m) 0 70 0 0 US$ average rate2 n/a 0.8677 n/a n/a 1. Exclu
Slide 64: Portfolio composition (revenue and lease expiry)
Portfolio composition (revenue and lease expiry) Expiry year % of global rent FY09 FY10 FY11 FY12 FY13+ Australian office 47% 1% 4% 4% 4% 34% Australian industrial 18% 1% 2% 3% 4% 9% Retail 3% 1% 0% 1% 0% 1% North America industrial 27% 2% 5% 4% 4% 12% Europe industrial 5% 0% 1% 0% 1% 2% Total 100%
Slide 65: Developments – completed
Developments – completed Property Country Area Estimated Estimated sqm final cost1 yield on cost ($m) (%) Industrial Sperian, Redwood Gardens, Dingley Australia 3,400 3.9 7.5 San Antonio USA 42,371 20.0 8.8 Office 60 Miller Street, North Sydney Australia 4,532 25.2 8.3 Total completed 49.1 1. Conver
Slide 66: Developments – underway
Developments – underway Property Country Area Estimated Estimated Estimated Estimated sqm total cost to yield on completion cost1 completion total cost date (A$m) (A$m) (%) 1 Bligh Street, Sydney Australia 29,323 210 150 7.0 Jun HY 2011 123 Albert Street, Brisbane Australia 38,167 350 250 6.8 Dec HY
Slide 67: Acquisitions and disposals
Acquisitions and disposals Property Interest % Acquisition amount Notes A$m Acquisitions — Australia Greystanes, Western Sydney 100% 113 Staged acquisition with the remaining $57m to be paid Dec HY 09 as infrastructure is completed. Total acquisitions 113 Date Interest % Settlement amount Notes A$m
Slide 68: Whirlpool - investment program update
Whirlpool - investment program update The program’s overall blended yield estimated to be 6.6% Location Estimated Area Acquisition and acquisition date ‘000 estimated sqm cost ($m) Acquired to date Orlando, FL, USA Jun 07 47 US$25.1 Toronto, ONT, Canada Dec 07 70 C$71.4 Perris, CA, USA Jan 08 157
Slide 69: Developments – uncommitted pipeline
Developments – uncommitted pipeline Property Country Building Project Project Projected yield area estimate1,2 estimated to on project sqm (A$m) completion1,2 estimate cost (A$m) (%) Office — Australia 105 Phillip Street, Parramatta Australia 20,380 100 80 8 144 Wicks Road, North Ryde Australia 48,0
Slide 70: Australian major tenants by income
Australian major tenants by income % of Sector % of Sector Office NPI1 Industrial NPI2 1 Woodside Energy Ltd 6.3% 1 Coles Myer Limited 6.6% 2 State of NSW 5.1% 2 Elders Ltd 5.6% 3 Commonwealth of Australia 4.6% 3 Visy Steel Products 3.8% 4 State of Victoria 3.3% 4 IBM Global Services 3.1% 5 IBM Aust
Slide 71: Major tenants by location and income
Major tenants by location and income1 % of Europe % of North Europe NPI North America America NPI 1 Edeka Südwest 19.7% 1 Whirlpool Corporation 12.5% 2 Industriereifenkontor Lüdke 9.9% 2 AT&T Corporation 2.2% 3 Karstadt Vermietungsges. mbH 7.8% 3 US Government (TSA) 1.6% 4 Compass 7.7% 4 Savvis Comm
Slide 72: Retail — Whitford City Shopping Centre, WA
Retail — Whitford City Shopping Centre, WA Key statistics Book value $280m Ownership interest 50% Centre MAT ($psm) 7,516 Specialty MAT ($psm) 9,250 Total centre MAT growth ($psm) 6.2% Total centre MAT growth ($pa) 6.5% Total specialty MAT growth ($psm) 4.6% Total specialty MAT growth ($pa) 3.6% Spe
Slide 73: Australia/New Zealand office — lease expiry
Australia/New Zealand office — lease expiry As at 31 December 2008 25% 21.3% % of portfolio available for lease 20% 14.7% 13.5% 12.9% 15% 12.3% 11.6% 11.0% 10.9% 10.2% 9.4% 9.4% 8.9% 8.7% 8.2% 10% 7.9% 7.7% 6.8% 6.0% 5% 2.4% 2.3% 2.0% 1.8% 0% Vacant < 1 Year < 2 Years < 3 Years < 4 Years < 5 Years <
Slide 74: Australian industrial — lease expiry
Australian industrial — lease expiry As at 31 December 2008 18.8% 18.6% 20% 16.1% % of portfolio available for lease 16.0% 18% 15.1% 16% 14% 11.1% 10.5% 10.1% 12% 9.8% 9.3% 9.1% 10% 7.4% 6.5% 6.1% 8% 5.8% 5.7% 4.2% 4.2% 6% 4.0% 3.7% 3.4% 3.2% 4% 0.7% 0.6% 2% 0% Vacant <1 Year <2 Years <3 Years <4 Ye
Slide 75: North American industrial – lease expiry
North American industrial – lease expiry As at 31 December 2008 17.0% 15.8% 18% 14.9% % of portfolio available for lease 13.8% 16% 12.7% 12.0% 14% 10.5% 10.3% 10.0% 10.0% 10.0% 12% 9.2% 10% 8.2% 6.5% 8% 4.8% 4.7% 4.6% 6% 4.0% 3.8% 3.5% 3.6% 3.5% 3.3% 3.2% 4% 2% 0% Vacant <1 Year <2 Years <3 Years <4
Slide 76: European industrial – lease expiry
European industrial – lease expiry Germany As at 31 December 2008 45% 38.4% 37.6% % of portfolio available for lease 40% 35% 30% 25% 18.7% 17.9% 15.0% 20% 13.2% 12.0% 11.7% 15% 8.9% 7.2% 10% 5.1% 3.7% 3.6% 3.2% 1.8% 1.7% 5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0% Vacant < 1 Year < 2 Years < 3 Yea
Slide 77: Important Information
Important Information 77 Half Year Results presentation 2009
Slide 78: Important Information
Important Information 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 this presentation incl
DEXUS Property Group — H1 FY2009 Earnings Presentation on 6ix