DEXUS Property Group

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Dexus has announced that it has conditionally exchanged contracts to sell 45 Clarence Street, Sydney to Peakstone.
The sale will realise net proceeds of $530 million, which is consistent with the property’s book value at 31 December 2019.
It was bought in 1998 at $165 million.
45 Clarence Street is a 28-level, A-grade office tower across 32,000 square metres, located in the western corridor of Sydney’s financial district and was built in 1990.
On 31 December 2019, the property was 100% occupied and had a weighted average lease expiry of 3.3 years.
The sale was concluded following the receipt of an off-market unsolicited offer from Peakstone, a Singapore headquartered manager of Asian capital, and is subject to the purchaser receiving FIRB approval.
 “This transaction reinforces the resilience of prime quality office asset values in the Sydney CBD and enables us to recycle capital into higher returning opportunities that we expect will become more prevalent over the coming period,” said CEO Darren Steinberg.
The transaction follows the completion or exchange of more than $800 million of property divestments across the group during FY20.
The net sale proceeds will initially be used to repay debt.
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Dexus announces conditional contract to sell 45 Clarence Street to Peakstone

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DEXUS Property Group and DEXUS Wholesale Property Fund has secured international law firm Allens to its premises at yet-to-be built 480 Queen Street building in the Brisbane CBD.
The agreement will see Allens take over about 4,000 square metres on levles 24-26 in sky-rise section of the building. The lease will put the occupancy rate in the building to 50%, which is well ahead of the targeted completion date of February 2016. 
Allens will join BHP Billiton, Herbert Smith Freehills and The Executive Centre in the building.
The 480 Queen Street office development is described as a "strategic investment" jointly owned by DEXUS and DWPF located in Brisbane’s ‘Golden Triangle’ office precinct and is being developed by Grocon on a fund-through basis.
It is targeting a 6-Star Green Star and 5-star NABERS energy rating. 
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Allens lease three floors of yet to be completed Brisbane building

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The Australian Shareholders’ Association has weighed in on the battle for the $2.5 billion Investa Office Fund, ahead of a vote on Friday on a merger proposal by Dexus Property Group, reported The Australian.
The association has criticised the issue of misleading documents by the owner of IOF’s manager in the lead-up to the meeting.
The Takeovers Panel on Friday ruled the documents sent out by the manager opposing the merger, which is favoured by IOF’s independent directors, were unclear, misleading and incomplete and ordered them to be reissued, as well as the removal of an alternative proxy form, said the report.
“It is disturbing that retail unitholders have been sent inadequate information, including a misleading proxy form, and just two days before proxies close will receive more information for them to consider," Diana D’Ambra, chairman of ASA, was quoted as saying by the newspaper.
“We urge IOF retail unitholders to ensure they express their views by voting.”
Fresh disclosures by Investa managing director and chief executive, Jonathan Callaghan, noted a declaration of unacceptable circumstances and orders made by the panel.
The consequences of a loss of IOF’s management, including losing close to $20 million of fees annually, if the Dexus proposal goes ahead, have now been disclosed.
The Dexus proposal still faces a hurdle.
The panel has not prevented Morgan Stanley Real Estate from voting its 8.9 per cent stake in IOF, most likely against the merger.
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<div>On Monday morning, DEXUS Funds Management responded to the Takeovers Panel declaration of unacceptable circumstances in relation to the affairs of Investa Office Fund.</div>
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The Panel's declaration is in response to an application to the Panel made by DEXUS RE on March 21, 2016.
"The Panel‟s declaration of unacceptable circumstances in relation to the matters described vindicates the action taken by DEXUS.
"We note the Panel decided not to interfere with the voting rights attached to IOF units with regard to the Morgan Stanley Real Estate Investing entities.
"DEXUS RE encourages all IOF Unitholders to express their opinion on the DEXUS Proposal at the forthcoming meeting of IOF Unitholders at 10.00am, Friday 15 April, 2016." 
Meanwhile, the chances of a consortium including Mirvac, Blackstone and China Investment Corporation (CIC) making a bid for Investa Office Fund appears to be all but dead in the water, according to the Australian Financial Review.
That would leaves Dexus Property Group best placed to win the $3.5 billion portfolio at a shareholder vote on Friday. 
But the AFR reported, citing sources, that DEXUS is in talks with some of the consortium to sell some assets. 
In a similar move, when it bought Commonwealth Property Fund back in 2014, Dexus did a deal in which it sold rival bidder GPT GROUP a $1.2 billion "consolation prize" of several assets to effectively take GPT out of the race. The properties were acquired at valuation. 
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Dexus responds to Takeovers Panel declaration

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DEXUS Property Group today announced the resignation of its chief operating officer, Craig Mitchell, who is leaving to become the chief executive officer of Grocon Pty Ltd.
Last month Craig Mitchell was suggested as a contender for the Charter Hall Group chief investment officer gig. 
Sources said Mitchell was keen to make his name away from his boss, the well-regarded Darren Steinberg. 
Carolyn Viney, one of the highest ranking women in the property industry, announced her decision to step down this June.
Mitchell was considered for GPT Group's chief executive officer role but missed out to Bob Johnston.
Mitchell is chief operating officer at DEXUS and an executive director of DEXUS Funds Management having more than 25 years of financial management and accounting experience, with more than two decades specialising in the property industry.
Prior to DEXUS, Mitchell held positions with Stockland Group and Westfield.
Darren Steinberg, DEXUS CEO thanked Craig for his significant contribution to the Group over more than eight years.
"He leaves DEXUS in a strong position and we wish him all the best in his new leadership role.” Craig joined the Group as Chief Financial Officer (CFO) in September 2007 and as a member of the Executive General Management team has overseen various functions including the management of the third party funds management platform and retail business.
"Craig was appointed to the Board as an Executive Director in February 2013.
Richard Sheppard, Chair of DEXUS said: “On behalf of the Board and the team at DEXUS we extend our thanks and gratitude to Craig and appreciate his dedication and overall contribution to the Group.” Craig‟s existing responsibilities in the short term will be assumed by members of the Executive General Management team.
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Craig Mitchell quits DEXUS for Grocon

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DEXUS Property Group (DEXUS) has posted a strong 2016 financial result.
Dexus are Australia's largest office landlord with 1.8 million sqm of office space under management.
They have grown their third party funds from $5.6 billion in FY12 to $11.2 billion.
“Four years ago we reset our strategy to focus our business on Australian office property and third party funds management," said DEXUS CEO Darren Steinberg.
"Over the past four years, we have improved our efficiency reducing our Management Expense Ratio from 67 basis points to 35 basis points.
"At the same time, we have continued to maintain a strong balance sheet, and with recent divestments this further strengthens our position.
“We have fostered a culture of innovation and continuous improvement, invested in our people to build their capabilities and enhanced our customers’ experience, delivering new products and services.
“We have expanded our development pipeline and identified trading opportunities, positioning the portfolio for future growth.
Darren said DEXUS are expecting to deliver a solid result in FY17 despite recent divestments.
"We expect underlying FFO per security to grow by 3.0-3.5 percent and distribution per security by 2.5-3.5 percent.”
DEXUS FY17 Highlights
Funds from Operations1 (FFO) of $610.8 million, up 12 percent on FY15
Adjusted Funds from Operations2 (AFFO) of $413.9 million, up 12 percent on FY15
Statutory net profit of $1,259.8 million, up 104 percent on FY15, driven primarily by revaluations
FFO per security of 63.1 cents and distribution per security of 43.51 cents, both up 6 percent on FY15
Return on Equity3 of 19.3 percent and an average of 12.2 percent over the past four years
Group Management Expense Ratio4 of 35bps, down 6bps from 41bps at FY15
Net tangible assets (NTA) per security of $7.53 at 30 June 2016, up 13 percent or 85 cents from 30 June 2015
Gearing5 of 30.7 percent8 
 
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Dexus Property Group post strong 2016 financial result

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DEXUS Wholesale Property Fund has exchanged conditional contracts to acquire Carillon City, a CBD retail mall, located in the core retail precinct of the Perth CBD.
The property has been acquired for $140 million, with settlement expected to occur in November 2016.
Carillon City is located with frontages to both the Hay Street and Murray Street malls combined with linkages to Forrest Chase, St Georges Terrace and Perth Railway Station.
The centre comprises 10,700 square metres of retail space across four floors, with 108 tenancies including Topshop Topman, Priceline and The Reject Shop.
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DEXUS acquires Carillon City retail mall in Perth

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Commercial property transaction volumes rose in the September quarter, however they were well below the same period last year, according to Dexus Property Group's latest quarterly report.
Foreign investors were active, comprising 47 percent of activity.
Total transaction volumes for the September quarter increased to $7.2 billion, partially due to the industrial portfolio sale from Goodman to Blackstone, however volumes were down on the prior year due to a lack of prime assets for sale.
<a href="/images/2016/10/28/Figure%209.jpg" target="_blank">Click to enlarge</a>
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Major sales included the David Jones Market Street Store for $360 million, with CBus Super and Scentre Group each acquiring a 50% share.
An ARA managed fund purchased the Southgate Complex in Melbourne ($439 million at 6.5% yield and reported IRR of 7.5%).
Charter Hall Prime Retail Fund purchased the sub-regional centre, Campbelltown Mall for $197 million on a yield of 6%.
With limited core CBD assets available for sale, there were a number of office assets purchased in metropolitan or fringe locations e.g. Toorak Road, Hawthorn, New South Head Road, Edgecliff and Coward Street, Mascot.
<a href="/images/2016/10/28/Figure%2010.jpg" target="_blank">Click to enlarge</a>
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Foreign investment activity increased this quarter, comprising the majority of larger acquisitions in the office and industrial sectors.
Domestically, Privates and A-REITS were the most active, with A-REIT activity largely concentrated in the retail sector including SCA acquiring a number of centres.
Investment yields continued to tighten over the past six months with prime assets in the Sydney and Melbourne CBDs trading below 5.5%, while Brisbane and Perth assets trading slightly higher.
Values continue to firm in most sectors and markets.
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Commercial volumes down year on year

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A concentration of growth in the NSW and Victorian economies and in service industries will continue to support occupier demand and outperformance in the Sydney and Melbourne property markets in FY17, according to Dexus Property Group's latest quarterly report.
Key assumptions affecting the near-term outlook include:
NSW and Victoria will solidly outperform other states based on population growth and infrastructure spending. Queensland is forecast to improve, while WA will continue to lag.
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Official cash rate to remain unchanged over the next 6 months with a bias to move lower in 2017.
Residential construction activity is expected to slow and could be a key risk to growth (FY18- FY19) if it slows more sharply than forecast.
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<img src="/images/2016/10/28/Figure%202.jpg" alt="">
Employment growth is positive, but the rate of growth is slowing with a continued shift from full time to part time jobs.
Service sector activity (such as education, health, IT, tourism and business) will remain a growth driver for the economy. Growth will be higher for small to medium businesses than large businesses.
The property markets of Sydney and Melbourne are forecast to show positive occupier demand over the next 12 months with mixed demand elsewhere.
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Bond yields are expected to stablise at/near current levels and rise at a slower rate than in the US over the medium term, staying low by historical standards.
Property yields are expected to remain at low levels for a considerable time unless there is an external shock or disruption to capital flows.
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Population growth to help NSW and Victoria property outperform: Dexus

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DEXUS Property has advised occupancy (by area) at Grosvenor Place, Sydney increased to 96 percent from 94.5 percent at 30 June 2016.
 
It also secured 2,981 square metres of leasing at 385 Bourke Street, Melbourne increasing occupancy to 97.9 percent from 94.5 percent.
 
The advisory was part of DEXUS Property Group updating the leasing status across its property portfolio.
 
It advised it had leased 54,734 square metres of office space across 78 transactions, with occupancy maintained at 96 percent.
 
It also leased a significant amount of industrial space in a three month period securing 158,811 square metres1 of industrial space across 47 transactions, with occupancy improving to 92.3 percent.
 
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Key metrics
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30 September 2016
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30 June 2016
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Occupancy by income
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96.0%
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96.3%
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Occupancy by area
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95.9%
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96.3%
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WALE by income
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4.9 years
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4.7 years
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Average incentive
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15.4%
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17.7%
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Kevin George DEXUS Executive General Manager, Office &amp; Industrial said the strength of demand in the Sydney office market continued to flow through to the DEXUS portfolio during the quarter.
"We have seen our overall average incentives fall across the portfolio, driven by some properties which are in high demand and as a result have achieved solid growth in rents and reduced incentives at these properties.”
Notable activity for the quarter included:
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<li>Securing leasing commitments across 10,784 square metres of space at 30 The Bond, Sydney, after the surrender of office space previously occupied by Lend Lease – including securing a new lease with Roche across 4,418 square metres. Only 5,347 square metres remains to be leased at 30 The Bond</li>
<li>Securing three new leases with various tenants across 4,000 square metres at Waterfront Place, Brisbane</li>
<li>Renewing a lease with the South Australian State Government across 9,253 square metres at 11 Waymouth Street, Adelaide</li>
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Despite the surrender of lease by Lend Lease, occupancy (by income) only decreased slightly to 96.0 percent from 96.3 percent at 30 June 2016 across the total office portfolio, while the weighted average lease expiry (WALE) increased by 0.2 years to 4.9 years.
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Grosvenor Place, Sydney sitting at 96 percent full

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Retail sales growth has eased further at the expense of traditional major anchor tenants, according to Dexus Property Group’s latest quarterly report.
Consumers continue to limit spending on traditional retail goods in favour of retail services and dining/entertainment experiences.
Retail turnover growth eased to 2.6% for the year to August 2016.
NSW and Victoria continue to lead other states, but Queensland has been improving, having now recorded four consecutive months of increased growth.
WA is weak with mildly negative growth over the year.
<a href="/images/2016/10/28/Figure%2020.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/28/Figure%2020.jpg" alt="">
At a category level, ‘clothing, footwear and accessories’ and ‘cafés, restaurants and takeaway’ are currently the best performers. ‘Household goods’ growth has eased and ‘department store’ sales are contracting.
<a href="/images/2016/10/28/Figure%2021.jpg" target="_blank">Click to enlarge</a>
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There is significant development activity particularly in regional centres, as owners seek to expand their entertainment/leisure precincts to cater to new consumer preferences. The evolution of shopping centres is continuing to shift the balance from traditional anchor tenants, e.g. department stores to mini-majors/specialties.
<a href="/images/2016/10/28/Table%206.jpg" target="_blank">Click to enlarge</a>
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Dexus noted the key themes included:
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<li>Consumer confidence has remained steady in the last few months</li>
<li>Several retailers have announced expansion plans including Costco, Harris Scarfe (13 stores with a focus on NSW) and David Jones’ high-end food offer (commencing with Market Street, Sydney)</li>
<li>The UK department store Debenhams has announced their first Australian store will be at St Collins Lane, Melbourne in September 2017</li>
<li>Consolidation of major retailers is increasing with JB Hi-Fi acquiring The Good Guys, Home Consortium purchasing Masters and Steinhoff’s planned takeover of Fantastic Holdings</li>
<li>As part of its restructure, Woolworths has announced a review of existing and planned stores, with 30 stores targeted for closure</li>
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