Transcription of Finance News Network Interview with DEXUS Property Group (ASX:DXS) Chief Operating Officer, Craig Mitchell
 
 
Carolyn Herbert: DEXUS Property Group (ASX:DXS) is one of Australia’s leading real estate groups, investing directly in high quality Australian office and industrial properties. With $19.1 billion of assets under management, the Group also actively manages office, industrial and retail properties located in key Australian markets on behalf of third party capital partners.
 
I’m Carolyn Herbert and joining me at the CEO Sessions in Sydney is DEXUS Chief Operating Officer, Craig Mitchell. Craig, welcome back.
 
Craig Mitchell: Thank you Carolyn.
 
Carolyn Herbert: Can you start by giving us an introduction to DEXUS Property Group?
 
Craig Mitchell: DEXUS Property Group is a real estate investment trust and manages $19.5 billion worth of real estate in Australia. Half of that real estate is on our balance sheet, and half of that real estate is managed in the third party funds. It’s a fully integrated company, where we do the property management, asset management and development in-house. And we are underpinned by a strong balance sheet with a low leverage of about 28 per cent.
 
Carolyn Herbert: Now to your full year results 2015. What were the highlights?
 
Craig Mitchell: It was a strong 2015. Funds from operation, which is our underlying earnings was $544.5 million, a strong year. We’re up nearly 9.5 per cent on earnings per share and dividend per share. Our return on equity was 11.5 per cent and we had strong trading profits of nearly $42.5 million, after tax.
 
Carolyn Herbert: Now to the DEXUS property portfolio. How is your office portfolio performing?
 
Craig Mitchell: Our office portfolio is performing exceptionally well and we’ve got $7.8 billion under management, on our balance sheet. Occupancy is 95 per cent and the majority of our portfolio is in Sydney’s CBD, where we have 60 per cent of our portfolio. In fact if you look at our portfolio, one in four buildings in the Sydney CBD, we either own or manage.
 
Carolyn Herbert: Can you tell us about some of your acquisitions?
 
Craig Mitchell: We’ve been very active in acquisitions. Just recently we settled a large office building in Brisbane, called Waterfront Place for $635 million. That was acquired 50 per cent with our Wholesale Fund DWPF in our balance sheet on very good metrics, about $9,600 a square metre.
 
Carolyn Herbert: What’s the size of your development portfolio?
 
Craig Mitchell: So we’re now moving into the phase where we’re activating our development pipeline. We have a development pipeline of about $3.5 billion. So just over $1 billion of that of our pipelines are on our balance sheet and $2.5 billion, is in our third party. An example of that would be 5 Martin Place in Sydney, where we’ve got a premium office building just coming to completion in November of this year.

Carolyn Herbert: Now to the Funds Management business. What were the highlights and where are clients looking to invest?
 
Craig Mitchell: Our Funds Management business is a growing part of our business. Today we have $9.6 billion in funds under management in that business, and the business was making nearly $18 million EBITDA in 2012. And we’re giving guidance for FY16 of making $45 million to $50 million EBITDA. Our investors are looking for core real estate in the three sectors of office, industrial and retail, and only in Australia. So we’re seeing good growth. An example, when we acquired the CPA portfolio over a year ago, we achieved a levered return of just under 20 per cent in the first year.
 
Carolyn Herbert: Finally Craig, what’s your outlook for FY2016?
 
Craig Mitchell: We’ve got a very strong outlook for 2016. If you go back for the last three years, we’ve averaged 8.6 per cent and dividend per share growth. In 2016, we’re giving guidance of earnings per share and dividend per share growth of 5.5 to 6.0 per cent. In addition, we expect to see strong net tangible asset growth in 2016 as well.
 
Carolyn Herbert: Craig, thanks for the update on DEXUS Property Group.
 
Craig Mitchell: Thank you.
 
 
Ends