DGAP-Ad-hoc: Dexus Finance Pty Limited / Key word(s): AGM/EGM
Dexus Finance Pty Limited: 2019 Annual General Meeting
30-Oct-2019 / 06:51 CET/CEST
Disclosure of an inside information acc. to Article 17 MAR of the Regulation
(EU) No 596/2014, transmitted by DGAP - a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
*30 October 2019*
*2019 Annual General Meeting*
*Chair's address*
Good afternoon everyone and welcome to Dexus's 2019 Annual General Meeting.
I would also like to welcome those joining us on the live webcast.
I'm Richard Sheppard, the Chair of the Board of Directors of Dexus Funds
Management Limited, and
I'll table my appointment as Chair of today's meeting and open the meeting.
Welcome to Dexus Place, which is our flexible space offering that we provide
to our customers for meetings, training and events just like this. Earlier
this month we opened Dexus Place in Perth, which now enables us to offer
these facilities in five locations across the four core Australian property
markets we invest in - connecting the east coast to the west.
I will commence the meeting with my address which will provide you with a
high-level overview of what we achieved in the 2019 financial year and then
I'll hand over to our CEO, Darren Steinberg, who will cover some of our
recent achievements. We will then turn to the formal aspects relating to the
resolutions which were outlined in the Notice of Meeting and Explanatory
Memorandum sent out in late-September.
I'll start my presentation by looking at what Dexus is today.
We manage an Australian property portfolio valued at $31.8 billion, with
Dexus directly owning $15.6 billion of this, consisting mainly of office as
well as industrial properties. We manage a further $16.2 billion in the
office, industrial, retail and healthcare property sectors on behalf of our
third party capital partners.
We are the largest owner and manager of office buildings in the country with
$13.2 billion invested in our directly owned Dexus portfolio and our market
capitalisation is circa $13 billion.
I want to reflect on how we run this business for the long term and how real
estate is a long-term asset class. Our actions since FY12 have transformed
the business while delivering improvements to all key metrics. Importantly
this Management team, led by Darren, has demonstrated a successful track
record of executing on strategy and completing highly complex transactions
and developments.
Our customer focus is being reflected in our strong customer net promoter
score which has continued to increase even further this year. Our funds
management business has grown strongly and continues to attract interest
from offshore capital partners.
We have a highly engaged and diverse workforce and we continue to invest in
our properties to improve the efficiency of our portfolio and minimise our
environmental footprint while enhancing our resilience to climate risk.
We entered the financial year with a clear strategy, ready to respond to
market opportunities and challenges. This focus has delivered great returns
over the long-term and for the past 12 months has seen us achieve a strong
financial result. We've also been involved in a number of transactions that
have positioned the group for the next 5 to 10 years, which I will touch on
shortly.
Our full year distribution of 50.2 cents per security was in line with our
guidance, up 5.0% on FY18 and resulting in a compound annual growth rate of
6.6% since FY12.
Growth in Adjusted Funds from Operations (or AFFO) per security and Return
on Contributed Equity are key measures that drive long-term value creation
for security holders. For the year, we delivered AFFO
per security growth of 5.5% and a Return on Contributed Equity of 10.1%.
We had a significant year of transaction activity, reinforcing our active
approach to portfolio management and addressing the Board's focus on
increasing the group's exposure in the Melbourne CBD. Overall, we transacted
$3.9 billion of properties, which included $3.1 billion of acquisitions and
$800 million of
non-core asset sales.
We increased our office exposure in our core markets while enhancing our
embedded pipeline of office development projects in the CBDs of Melbourne
and Sydney.
This included:
? Firstly, acquiring the remaining 50% interest of the MLC Centre, Sydney
alongside Dexus Wholesale Property Fund (DWPF), giving us control of one
of Sydney's landmark assets that will directly benefit from significant
capital investment in the Martin Place precinct. This property currently
has a retail redevelopment project underway.
? And second we secured properties located at the tightly held Paris end
of Collins Street in Melbourne. This included 60 and 52 Collins Street,
which we will consolidate into a premium office development, and the 80
Collins Street precinct, again acquired with DWPF and which represents a
rare opportunity to invest in a whole block precinct.
Our transactions over the year have enhanced portfolio quality and
diversification.
They also provide us with the opportunity to develop landmark office towers
that will generate significant value for the group over the long term.
Like Sydney, Melbourne continues to benefit from record infrastructure
investment and is underpinned by strong population growth.
We have some key office development opportunities which will see Dexus play
a key role in the evolution of Australia's major cities.
At 60 and 52 Collins Street, we have lodged a development application and at
180 Flinders Street, opposite Federation Square, we are now more than 80%
leased.
In Sydney, we were very pleased to be able to finalise the amalgamation of a
key future development site around our existing asset at 56 Pitt Street
which, under proposed changes to the Sydney planning laws will allow for a
tower of up to 310 metres. This is an exciting opportunity for the group and
has taken more than four years to consolidate.
Also, in Sydney, we continue to make good progress with our unsolicited
proposal for a development at Central Station, and we expect a conclusion to
the process early next year.
In Brisbane, following feedback from key stakeholders, we have amended our
scheme at the Waterfront Precinct and expect to enter into conditional
agreements with the State Government before the year end.
We will ensure that these developments are funded in a measured and
conservative manner - with most of these projects expected to be undertaken
alongside our third party capital partners.
From a capital management perspective, we continued to improve the diversity
of our funding sources and maintained the strength of our balance sheet in
an active year of acquisitions.
We achieved this through issuing $425 million of Exchangeable Notes to fund
the MLC Centre acquisition - and completing an equity raising that included
a $900 million institutional placement and a Security Purchase Plan to
partly fund 80 Collins Street. The Board upscaled the Security Purchase Plan
from the original $50 million cap to $64 million and accepted all valid
applications in order to meet the strong demand from eligible Security
holders.
Both of these issuances are up for ratification today by Security holders as
part of Resolution 4.
These activities, as well as the divestment of properties during the year,
have resulted in our gearing level remaining well below our target range of
30-40%.
This provides us with the funding needed for committed projects in our
development pipeline and also for future opportunities where we see an
efficient use of our capital, including buying back Dexus securities on
market should the opportunity present itself.
New investors have enabled us to strengthen the position of our Funds
Management business - demonstrated through the launch of a new fund and the
activation of industrial development projects.
We welcomed GIC as a foundation investor in the newly created Dexus
Australian Logistics Trust, a $2 billion portfolio made up of assets from
our Dexus industrial portfolio.
We also introduced M&G Real Estate to the Dexus Industrial Partnership and
extended the Partnership's investment period to accommodate a new growth
mandate.
In the healthcare property space, Employees Provident Fund Malaysia became
an investor of the Healthcare Wholesale Property Fund, enabling the Fund to
acquire the North Shore Health Hub last month.
Last month also marked the completion of the Calvary Adelaide Hospital
development, with the Fund's portfolio now valued at over $450 million.
Moving onto some recent achievements from an Environmental, Social and
Governance or ESG perspective, which is an integral part of our business
operations. Our focus on ESG is not only important for our investors but is
also important for our customers who want to occupy sustainable buildings.
ESG continues to contribute to long-term value, and this year we were
recognised by the Dow Jones Sustainability Indices as the Global industry
leader across all real estate companies. Global Real Estate Sustainability
Benchmark (GRESB) also recognised us as having Australia's most sustainable
listed office portfolio, and we've achieved strong results in this year's
assessment from the Principles of Responsible Investment.
We progressed our long-term goal to achieve net zero carbon emissions by
2030 across our portfolio by securing one of Australia's first supply-linked
Energy Supply Agreements which will see half of the base building power of
our NSW properties being sourced from wind and solar projects from 1 January
2020.
As a Board we recognise that good corporate governance is the foundation for
the long-term success of the group, and our best practice corporate
governance continues to attract third party capital partners. We have always
placed a high importance on governance, including ethical behaviour,
treating our customers and investors well and complying with our legal
obligations. To maintain this focus, this year we conducted a detailed
review of our corporate governance framework and established a dedicated
Governance team.
Recognising the increasing relevance of ESG factors we also established a
new Board ESG Committee.
The safety of our employees, contractors and people visiting our properties
is of paramount importance to us as a Board and we continue to include
safety metrics in the Group Scorecard to ensure that it remains front of
mind.
And finally, we defined our organisational purpose, which reinforces our
reason for being in business. To support the right culture, we articulate
our core values of openness and trust, empowerment and integrity, and
recognise the Board's oversight role in ensuring that management instils
these values.
*CEO's address*
Good afternoon everyone.
Looking closely at our $15.6 billion property portfolio and our latest
results for the September quarter released last Wednesday show that the
office market cycle is certainly not over.
Our office portfolio is effectively full, and the Sydney and Melbourne
office market vacancy rates are at very low levels. In this environment we
remain confident of being able to continue to drive rental growth in our
quality office properties, particularly in those leases coming up for expiry
over the next few years.
Leasing and development completions in our office portfolio have seen
occupancy remain high at 98.1%, while industrial portfolio occupancy
increased to 97.4%.
Across both our office and industrial portfolios, the weighted average lease
expiry has increased or been maintained with the completion of developments
like 100 Mount Street and 240 St Georges Terrace, and we've seen average
incentives remain low.
Investment demand for quality office and industrial properties combined with
a lower for longer interest rate environment continues to flow through to
our capital values - and we expect this to continue.
Total portfolio valuations were up nearly 6% on prior book values, but lower
than the revaluation uplifts achieved in the prior year. In office, rental
growth drove more than 60% of the portfolio's valuation uplift.
And our weighted average cap rates are now at 5.15% for office and 5.92% for
industrial.
Over the next 12 months we see the potential for circa 25 basis points of
cap rate firming for quality office property and at least 25 basis points
firming for industrial, supported by the spread to bonds and investor
sentiment.
From a development perspective we reached key milestones across the group's
development and concept pipeline, including completion of the premium office
development at 100 Mount Street in North Sydney owned by Dexus and DWPF.
100 Mount is a new generation building which adopts the latest in smart
building technology and sets a new benchmark for office on Sydney's north
shore.
We achieved an unlevered project IRR of 39.6% and a yield on cost of 7.8%.
We exceeded our acquisition assumptions on both rents and downtime, with the
project now nearly 100% leased.
Turning to our funds management business, we now manage $16.2 billion of
funds across seven vehicles on behalf of 79 third party clients and
partners.
In addition to the new Industrial, logistics and healthcare partners
mentioned by Richard, DWPF also attracted nine new investors over the year
and continues to outperform benchmark over all time periods.
The $3.2 billion funds management development pipeline also ensures we
continue to deliver on our third party capital partners' investment
objectives and provides a source of organic growth.
We had another good year in the trading business, which is where we invest
and develop for profit.
We reached agreement to sell 201 Elizabeth Street in Sydney across two
tranches, delivering
circa $34 million of pre-tax profits to be realised in FY20 and a further
circa $34 million in FY21 in the event of the exercise of a put and call
option for the second tranche.
Last month we also completed the sale of the North Shore Health Hub to our
Healthcare property fund on a fund-through basis which will deliver trading
profits across FY20 and FY21.
To conclude, it's been a great year. We are on track and achieving results.
We entered the year with a clear strategy and I'm proud of how the team has
performed over the past 12 months.
Importantly, we are well positioned for continued success despite increased
economic uncertainty. We have high portfolio occupancy with fixed rental
increases, limited supply in our core markets and the Australian office
yield spread to bonds remains attractive from a global perspective.
We also have our trading profits significantly de-risked over the next two
years.
Taking all of this into account, we are confident of delivering on our
market guidance[1] for the 12 months ending 30 June 2020 of distribution per
security growth of circa 5%.
The full release including the presentation is available at
www.dexus.com/investor-centre [1]
*For further information please contact:*
Investor Relations Media Relations
Rowena Causley Louise Murray
+61 2 9017 1390 +61 2 9017 1446
+61 416 122 383 +61 403 260 754
rowena.causley@dexus.com louise.murray@dexus.com
[1] Barring unforeseen circumstances, guidance is supported by the following
assumptions: Impacts of announced divestments and acquisitions; FFO per
security growth of circa 3%, underlying FFO per security growth of circa 3%,
underpinned by Dexus office portfolio like-for-like income growth of
4.5-5.5%, Dexus industrial portfolio like-for-like income growth (excluding
one-offs) of 3-4%, management operations FFO of $55-60 million, cost of debt
of mid-3%; trading profits of $35-40 million net of tax; maintenance capex,
cash incentives, leasing costs and rent free incentives of $170-185 million;
and excluding any further transactions.
Information and Explanation of the Issuer to this News:
*About Dexus*
Dexus is one of Australia's leading real estate groups, proudly managing a
high quality Australian property portfolio valued at $31.8 billion. We
believe that the strength and quality of our relationships is central to our
success, and are deeply committed to working with our customers to provide
spaces that engage and inspire. We invest only in Australia, and directly
own $15.6 billion of office and industrial properties. We manage a further
$16.2 billion of office, retail, industrial and healthcare properties for
third party clients. The group's circa $8.7 billion development and concept
pipeline provides the opportunity to grow both portfolios and enhance future
returns. With 1.7 million square metres of office workspace across 53
properties, we are Australia's preferred office partner. Dexus is a Top 50
entity by market capitalisation listed on the Australian Securities Exchange
(trading code: DXS) and is supported by 26,000 investors from 19 countries.
With 35 years of expertise in property investment, development and asset
management, we have a proven track record in capital and risk management,
providing service excellence to tenants and delivering superior
risk-adjusted returns for investors. www.dexus.com
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30-Oct-2019 CET/CEST The DGAP Distribution Services include Regulatory
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Archive at www.dgap.de
Language: English
Company: Dexus Finance Pty Limited
264 George Street
2193 Sydney
Australia
Phone: +61 2 9017 1100
Fax: +61 2 9017 1101
E-mail: ir@dexus.com
Internet: www.dexus.com
ISIN: XS1961891220
WKN: A2RZHG
Listed: Regulated Unofficial Market in Frankfurt
EQS News ID: 900179
End of Announcement DGAP News Service
900179 30-Oct-2019 CET/CEST
1: https://link.cockpit.eqs.com/cgi-bin/fncls.ssp?fn=redirect&url=6ad6ed24adee8992cc127b59402392fc&application_id=900179&site_id=vwd&application_name=news
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October 30, 2019 01:51 ET (05:51 GMT)
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