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Edited Transcript of DXS.AX earnings conference call or presentation 5-Feb-20 10:30pm GMT

Half Year 2020 Dexus Earnings Presentation

Sydney Feb 17, 2020 (Thomson StreetEvents) -- Edited Transcript of Dexus earnings conference call or presentation Wednesday, February 5, 2020 at 10:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alison C. Harrop

Dexus - CFO

* Darren Joseph Steinberg

Dexus - CEO & Executive Director of DEXUS Funds Management Limited

* Deborah C. Coakley

Dexus - Executive General Manager of Funds Management

* Kevin L. George

Dexus - Executive General Manager of Office

* Ross G. Du Vernet

Dexus - CIO

* Stewart Hutcheon

Dexus - Executive General Manager of Retail and Industrial

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Conference Call Participants

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* Darren Leung

Macquarie Research - Analyst

* Grant McCasker

UBS Investment Bank, Research Division - Head of Australian Real Estate Research Team, Executive Director & Equities Analyst of Real Estate

* Sholto Maconochie

Jefferies LLC, Research Division - Equity Analyst

* Simon Chan

Morgan Stanley, Research Division - VP & Equity Analyst

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Presentation

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [1]

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Good morning, everyone. And thanks for joining us for our 2020 half year result presentation.

I'd just give a quick apologies for the slight delay this morning, but unfortunately, we had a couple of phone lines drop out just before the start, so apologies again for that.

Today, you will hear from Alison on the financials, Kevin covering our Office portfolio, Stewart talking to our Industrial portfolio, Ross talking through the progress on our Development pipeline and Deb covering our Funds Management business.

We continue to make significant progress towards our vision of being globally recognized as Australia's leading real estate company. Our Australian property portfolio is now valued at approximately $34 billion, split between Dexus and our Funds Management portfolio. Our Office portfolios perform. We have a growing contribution from our Funds Management business. And we have city-defining projects, which are mixed-use in nature and will draw on our multi-sector capabilities. This strategy continues to be driven by the key global megatrends of urbanization and the growth in pension capital fund flows.

We've been active across all areas of our business for the first 6 months of the year, achieving a solid financial result, which has seen us upgrade our full year guidance to circa 5.5% for distribution per security growth. In our Property portfolio, we've maintained high occupancy and achieved record Melbourne rents at 80 Collins Street. Our Funds Management platform continues its momentum with Dexus Wholesale Property Fund raising new equity with investor interest to enter the fund now at record levels. We've completed our office development at 240 St Georges Terrace in Perth, and we've realized $27.8 million of trading profits. We have achieved all of this while maintaining our focus on managing our capital, including securing new debt on attractive terms while retaining gearing well below our target range.

The recent bushfire events have reminded us of the impact that the environment can have on our communities, and our thoughts are with all of those who have been affected. Dexus has been focused on enhancing property resilience for some time now to mitigate environment- and climate-related impacts. While we have been fortunate not to have had any direct impact from the bushfires on our buildings, we have launched a number of initiatives to support our people, customers and communities. In a major step forward on our journey to net 0 emissions, our off-site renewable energy supply agreement has commenced across our New South Wales portfolio. And finally, we are proud to be recognized for our strong track record in sustainability, having achieved some excellent results across leading global ESG benchmarks.

I'll now hand you over to Alison to cover the financial results.

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Alison C. Harrop, Dexus - CFO [2]

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Thanks, Darren, and good morning, everyone.

Turning to the composition of the results. Our property portfolio delivered AFFO of $322.3 million, and Kevin and Stewart will talk to like-for-like income across their portfolios shortly. Our Funds Management business generated FFO of $33.4 million, up significantly. And we delivered trading profits of $27.8 million after tax, driven by the sale of 201 Elizabeth Street in Sydney. Valuation increases of $724 million were up 4.7% on prior book values and ahead of those booked in half year '19. Our portfolio weighted average cap rates are now at 4.98% for Office and 5.78% for Industrial. Over the next 12 months, we expect further value gains on the back of continued strong investor demand, combined with recent transactional evidence and a lower-for-longer interest rate environment.

Looking at the key financial metrics in further detail. Office property FFO increased, enhanced by Development completions and the acquisitions of 80 Collins Street in Melbourne and the remaining 25% increase -- interest in MLC Centre in Sydney. Industrial property FFO reduced due to the divestment of the first tranche of the Dexus Australian Logistics Trust portfolio with the second tranche due to settle in April. Management operations income increased significantly due to the establishment of DALT as well as acquisitions and revaluations. Finance costs rose as we ceased capitalizing interest at completed developments. Corporate costs also rose as we continued to invest in major project initiatives that will set us up for long-term success. While underlying FFO per security increased 1.9%, lower trading profits were recognized this half as all of the trading profits for FY '19 were recognized in the first half of that year. As a result, AFFO per security reduced to $0.269, and distributions were consistent at $0.27. However, both measures are expected to grow on a full year basis. Finally, valuation gains across our total property portfolio were the primary driver of the $0.62 increase in NTA per security to $11.10.

Moving on to capital management. During the half, we successfully completed the issue of $200 million of MTNs with a 10-year tenor. And post 31 December, we issued a further $500 million of MTNs with a 12-year tenor at an attractive all-in rate and increasing our debt duration to 7.4 years. We also activated nonmarket securities buyback as part of our active approach to capital management and in response to security price volatility, providing us with the opportunity to enhance investor returns.

At 25.5%, gearing is below our target range of 30% to 40% and provides us with the capacity to fund committed development projects and also future opportunities where we see an efficient use of our capital. We have minimal short-term refinancing needs, and our cost of funds of 3.5% continues to benefit from low interest rates.

Thank you, and I will now pass you on to Kevin to cover the office portfolio performance.

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Kevin L. George, Dexus - Executive General Manager of Office [3]

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Thanks, Alison, and good morning.

So far this year, occupier demand has remained steady for both our core portfolio and Developments with effective rents holding or growing in most assets and many of our customers still investing in growing their businesses. In the December quarter, we experienced increased inquiry levels across a broad range of industries compared to the prior corresponding period. We expect the continued solid employment growth in Sydney and Melbourne, combined with positive conditions in the business services sector, will support further occupier demand over the next 12 months. In our forecast supply pipeline for the Sydney CBD, the key quarter development has also pushed out by 1 year, meaning that we now expect a year of net withdrawals in FY '22.

Office demand moderated over the past 12 months, following 3 years of very strong growth. The office markets, however, continue to benefit from inner urban jobs growth, driving net absorption across CBD and metropolitan markets. There is active ongoing demand with a number of large tenant groups in the market, and inquiries are up year-on-year in the sub-3,000 square meter category. And we have seen ongoing activity from government, IT, finance and business services sectors, driven by the increased focus of business on governance and compliance. The education and health sectors also remain active, and we expect this to continue, along with the urbanization trend and population growth.

This slide is quite compelling and shows that, nationally, growth in the office-using sectors, specifically the knowledge industries, have been driving the economy throughout 2019 and, in turn, supporting job creation. Accounting for circa 35% of the total economy, all of these industries recorded positive growth in the year to September 2019. The measure is a good forward-looking indicator for demand for office space in the near future. In the same vein, corporate profitability across these industries has also seen sustained growth over the past 2 years, which will likely lead to additional net demand as companies look to expand their footprint.

So how did the Office portfolio perform during the half? Occupancy remained high at 97.4%, and we continue to capture the upside in the Sydney CBD market, achieving 18% re-leasing spreads this period. Our weighted average lease expiry increased slightly, while average portfolio incentives ticked up as a greater proportion of leasing was undertaken in Brisbane and Perth this period. Like-for-like income growth was 8.9%, enhanced by positive re-leasing spreads at Sydney properties like Australia Square and MLC Centre as well as leasing success at other properties. We expect the full year number to stabilize as a result of downtime associated with the space coming back online at Grosvenor Place after the departure of Norton Rose in December.

In Melbourne, where prime office vacancy has tightened to an all-time low of 1.8%, we were able to capitalize on leasing at 80 Collins Street, achieving record rents and setting new benchmarks for the Melbourne CBD. The portfolio achieved a 1-year total return of 12.4% and continues to outperform the PCA MSCI office benchmark to 30 September 2019 over 3 and 5 years.

We continue to maintain a diverse expiry profile. Up to the end of FY '22, we have the opportunity to reset rental levels for a further 140,000 square meters of vacant or expiring space across our Sydney portfolio, representing about 19% of our total office income. As our city portfolio remains 5% under-rented, this offers an excellent opportunity to drive value over the coming period. Looking forward, we try to limit our expiries in the near term to 13% of portfolio income in any 1 year. Rio Tinto's pending departure from 123 Albert Street in Brisbane impacts FY '22, and we are working to reduce our overall risk that year.

Looking to the year ahead, conditions are likely to be similar to last year with the potential for upside. Future supply levels are reasonable with vacancy rates likely to remain in the single digits when supply is expected to peak in Sydney and Melbourne over the next few years. We expect rents to grow at moderate levels in these markets, and we remain confident of capturing the upside in our portfolio in the near term from the exceptional market rent growth of the past few years. Brisbane is making a comeback with double the 10-year average take-up of space in 2019 and prime vacancy on its way down. And Perth continues its recovery, albeit at a slower rate.

Thank you. Stewart will now take you through the Industrial portfolio performance.

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Stewart Hutcheon, Dexus - Executive General Manager of Retail and Industrial [4]

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Thanks, Kevin, and good morning, everyone.

The Industrial sector has some great tailwinds with continued asset value appreciation and strong support from institutional investors. We see further opportunities within the sector as businesses seek to drive efficiencies in their supply chains and online retail demand continues to rise. Overall leasing demand for Industrial space remains very strong.

Looking at the Industrial portfolio metrics where we list 128,000 square meters of space across 60 deals, including 46,000 square meters of development leasing. Occupancy remained high at 96%, and we delivered like-for-like income growth of 3.5%. We continue to expect this growth to be 3% to 4%, excluding one-offs, for the full year.

The weighted average lease expiry reduced slightly, and average incentives increased as a result of leasing at office parks suites in Southeast Melbourne. We delivered a 1-year total return for the period of 12.7%, and pleasingly, the portfolio is now outperforming the MSCI industrial benchmark over both a 3- and 5-year time period to 30th September 2019.

I'll now hand you to Ross to cover Development.

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Ross G. Du Vernet, Dexus - CIO [5]

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Thanks, Stewart.

In our Development business, we've been making some big investments in bolstering our capability further as we do see this as a source of competitive advantage in acquisitions and a key tool for us to squeeze out more value from the assets we own or manage. And as you'll see in the results, we're making some good progress. This slide shows our development at 180 Flinders Street in Melbourne, which is now 93% leased and scheduled for completion later this year.

The group Development pipeline is now more than $11 billion with potential end value in the order of $15 billion. Half of the pipeline sits within the Dexus balance sheet portfolio with $800 million committed, $4.1 billion uncommitted and a further $800 million of concept opportunities where we are working through rezoning and planning approvals. The pipeline grew despite completed projects coming online like 240 St Georges Terrace, where we achieved an unlevered project IRR of 13.2%, and further detail on this project is included in the appendices.

As Alison mentioned, the balance sheet is in terrific shape, and we have considerable capacity to fund the future development pipeline as well as flexibility to bring in additional capital partners. Currently, less than 5% of the balance sheet is committed to developments.

The increase in the Development pipeline this half is primarily a result of the upsizing of the potential at the Waterfront Precinct, where we reached an agreement with the Queensland government to acquire adjacent land, which enables us to pursue a 2-tower scheme, which is compliant with current council controls. Dexus arguably has the best CBD development sites on the Eastern Seaboard, and this will have a meaningful impact on the quality of the portfolio over the coming decade. The Waterfront Precinct is without comparison, being a 2-hectare precinct on the river's edge in the heart of Brisbane CBD. Our expectation is that Pitt and Bridge Street Precinct will be the next iteration of the iconic 1 Farrer Place here in Sydney. Our unsolicited proposal with the New South Wales government at Central Station has the potential to be the draw card for global tech firms in the state government's new tech and innovation precinct. And 60 Collins Street is on a unique corner at the Paris end of Collins Street with the opportunity to be the best office tower in Melbourne.

These projects will provide opportunities for our customers to grow; opportunities for us to grow our funds business; opportunities for us to showcase our ESG credentials in a meaningful way; and clearly, opportunities to create significant value for our investors.

Our Development footprint spans beyond the iconic CBD projects, and it's pleasing to see our continued success in growing the Industrial development business. Developing high-quality logistics property is a key way we are looking to grow our funds business and to drive higher level of return on invested capital from what is a very contested and increasingly low-return sector. We've started construction on all 3 of the East Coast projects we secured in mid-2018, and we're building the final stage of our Laverton Industrial Estate in Truganina, which, upon completion, will bring the total stock developed in project to over 400,000 square meters.

We've had some good wins in the trading book, which has seen us increase the trading profits from the identified priority projects to $245 million to $315 million, driven by the North Shore Health Hub, Lakes Business Park and the addition of Truganina to the pipeline. We'll continue to make good progress at Lakes, which is under construction, with 75% of that space now committed.

Thank you, and I'll now hand you over to Deb to cover off on the Funds business.

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Deborah C. Coakley, Dexus - Executive General Manager of Funds Management [6]

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Thanks, Ross, and good morning.

As Darren mentioned, opportunities within our Funds Management business continue to attract interest from global investors. We are pleased to have strengthened existing relationships during this period. Our Funds business has grown to $17 billion across the office, industrial, retail and health care sectors, providing Dexus with an important source of growing annuity-style income, improving our return on invested capital and enhancing our scale in core markets. We continue to attract like-minded capital partners to invest alongside through the cycle. These partners are not only seeking out-performance. They're seeking to leverage our capabilities in driving ESG and quality ESG outcomes when it comes to sustainability, our approach to customers and communities and our best practice governance.

Our Funds platform has 79 investors across 7 vehicles. And key highlights for the 6-month period include DWPF raising circa $180 million of new equity, which is earmarked for future developments, and interest in this fund is now at elevated levels. We've seen a significant increase in engagement from existing and potential new capital partners who we are tactically working with to satisfy their needs. The second tranche rights of the Dexus Australia Logistics Trust were exercised, which see GIC acquire an additional 24% interest for $366 million. And this is in line with Dexus' previously articulated divestment strategy. We attracted another new investor to our health care fund, completed the Calvary Adelaide Hospital development and acquired the North Shore Health Hub, which combined to enhance the fund's cash flow profile. And pleasingly, our activities across the Funds Management business over the past 12 months has driven an increase in management operations FFO of more than 21%.

Thank you, and I'll pass you back to Darren for the wrap-up.

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [7]

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Thanks, Deb.

Looking at the key takeaways from the result. Our high-quality portfolio with scale in key CBD locations is attracting new customers, and strong investment demand for direct real estate is positively impacting asset values. Our significant pipeline of development opportunities will provide embedded organic growth for Dexus and our third-party capital partners. We have a strong balance sheet with diversified sources of capital, and we have a track record of delivering distribution growth for investors.

So to conclude, we are delivering on our strategy, supporting our vision of being globally recognized as Australia's leading real estate company. These results have been underpinned by a high-quality Property portfolio with its diversified expiry profile and fixed annual rental increases of 3.5% to 4%. When combined with our significant Development pipeline and strong balance sheet, we are well positioned to continue to deliver value for investors over the long term.

While issues such as the Australian bushfires and the coronavirus have increased uncertainty about the short-term economic outlook, there are reasons to be positive about the white-collar industries, which underpin office demand. Conditions in the technology, finance and business services industries are much more positive than in many other sectors, and interest rates are expected to remain lower for longer, supporting investment demand for real estate. As a result of progress this period, we have upgraded market guidance for distribution per security growth from circa 5% to circa 5.5% for the 12 months ended 30th of June 2020.

Thank you. We'll now open the lines for any questions you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Your first question comes from Sholto Maconochie from Jefferies.

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Sholto Maconochie, Jefferies LLC, Research Division - Equity Analyst [2]

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Just a couple of quick ones for me. Just on the guidance, looking at the comparison in your quarterly update, looks like it was driven -- the trading profits increased $5 million at the top end; managed operations, circa $5 million and lower incentives at the top end. Is that the main driver of -- even like-for-like was maintained and [net costs of] the upgrade?

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [3]

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Alison, why don't you pick that one up?

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Alison C. Harrop, Dexus - CFO [4]

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Sure. Sholto, yes, you're sort of partly right. I guess the way that we're looking at it, all parts of the business are really performing well. We have increased certainty on our Property income. You're right, we have better outcome on our management business. And I guess, yes, there's probably a few more potential opportunities in the trading pipeline. That's probably how I'd characterize it.

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Sholto Maconochie, Jefferies LLC, Research Division - Equity Analyst [5]

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And you -- on the trading pipeline, it's obviously been upgraded over the next 4 years with the inclusion of those other Development projects, too, correct?

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Alison C. Harrop, Dexus - CFO [6]

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That's right. Yes.

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Sholto Maconochie, Jefferies LLC, Research Division - Equity Analyst [7]

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And then just on the occupancy decline, 60 basis points, was that Norton Rose mainly from -- and some other -- are there any other projects that stand out for the occupancy decline on the PCP on the -- since June for Office?

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Kevin L. George, Dexus - Executive General Manager of Office [8]

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That's the main one, Sholto.

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Sholto Maconochie, Jefferies LLC, Research Division - Equity Analyst [9]

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All right. And then will you -- correct me if I'm wrong, are you saying the net withdrawals you think will be in Sydney will be net withdrawals in supply in '22? Is that what you said on the call?

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Kevin L. George, Dexus - Executive General Manager of Office [10]

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Yes. In '22, with key quarter pushing out, there's a couple of buildings coming out for risk conversion. And yes, so we -- that year will be a net decline in Office stock.

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Sholto Maconochie, Jefferies LLC, Research Division - Equity Analyst [11]

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Okay. And then just on the rent, I think it was 8% in FY '19, now 5%. Is that partly due to the market? What's the driver there, is it a bit of market coming up and you re-leasing the other stuff in the first half? Is that the driver of that change?

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Kevin L. George, Dexus - Executive General Manager of Office [12]

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That's right, yes.

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Sholto Maconochie, Jefferies LLC, Research Division - Equity Analyst [13]

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All right. And finally, obviously, the [values] were preannounced, but what's your expectation of cap rate movement in Office and Industrial over the next 12 months?

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [14]

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Look, I think it will come back to the quality of the properties, but 12.5 to 25 basis points is what we're thinking. It may be a bit more in Industrial, depending on this level of demand that seems to be extremely strong out there.

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Operator [15]

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Your next question comes from Grant McCasker from UBS.

Next question comes from Darren Leung from Macquarie Group.

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Darren Leung, Macquarie Research - Analyst [16]

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Just a quick one on your guidance. So obviously, you've refined your FFO guidance higher to 4% growth. Can you please give me an indication as to why your dividend is only increasing by 0.5%, particularly in light of maintenance CapEx [generally is] coming down as well?

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Alison C. Harrop, Dexus - CFO [17]

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Yes. Look, I think you have to -- the result is obviously a range of things that are moving. I guess maybe if I spell out here how we get to the 5.5% for the full year or proposed 5.5%, so the Property portfolio is going to deliver us 3%. We get 1% from our Development and transactions. The management business and finance costs and so on will give us 5%. There is a bit of a drag from our CapEx, you'll notice, so that's going to be a bit higher. So that's down 3.5%. So that's how we get to the 5.5%.

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [18]

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Be mindful as well, there's a lot going on in -- we've always spoken about the black swan events. So it's pleasing we're able to come out with this upgrade in light of everything that's going on around us.

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Darren Leung, Macquarie Research - Analyst [19]

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Okay. Understand. And perhaps on the capital management side. Can you please give us a bit of color around the buyback? So obviously, you guys raised equity in May last year, and then there was a buyback launched towards the back end of last year. And I'm just trying to get my head around in terms of what this means to the capital management strategy for the group more broadly.

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [20]

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I think when you have a look at the listed market, it's far from a perfect beast from time to time. So where we see periods of weakness in our share price, where we can see the opportunity to buy back our stock extremely cheaply, we'll take advantage of it. We have a very strong balance sheet. Obviously, we continually evaluate at year-end -- looking at to where the best use of our capital is, whether it be developments, new acquisitions. But if we can buy back our own stock at extremely cheap levels that's the easy one for us because we don't have to do due diligence on it.

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Darren Leung, Macquarie Research - Analyst [21]

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And what's your definition of cheap for your stock?

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [22]

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Do you want me to give you the exact price levels? Or...

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Darren Leung, Macquarie Research - Analyst [23]

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Yes. Yes. If there's a range, that works, a more precise number works.

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [24]

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Alison can work that out.

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Darren Leung, Macquarie Research - Analyst [25]

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So just a final one on the Office lease expiry profile. So you mentioned trying to reduce below, I think it was 13% or 15% exposure per year. In FY '22, can you provide a bit more color around your strategy at 123 Albert Street, please?

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [26]

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Kevin, do you want to talk to that?

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Kevin L. George, Dexus - Executive General Manager of Office [27]

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Yes. So pleasingly, we've had a lot of inbound interest already from customers expressing interest in having a look at 123 Albert Street. So we are in the process of looking at the extent to which we upgrade that property and decouple Rio out of it. The building was primarily built for them. So we're looking at the extent to which we enhance that property, and it will be very customer-led, our decision-making. And then -- but yes, we're I think, pleasingly, this far out, we have some very good interest in the asset already. So we are in that sort of planning phase at the moment.

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Darren Leung, Macquarie Research - Analyst [28]

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Perhaps a small one. Would you take it off as a -- take it off-line as development, obviously keep it at the running core properties?

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Kevin L. George, Dexus - Executive General Manager of Office [29]

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We haven't made that decision. At the end of the day, if the commerce makes sense and the customer demand warrants a more substantial application of capital, then we'll look at that. Of course, we would. But if something more modest is required then, and that's what the customers are wanting, we'll look at that as well. So we haven't made that decision.

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Operator [30]

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Your next question comes from Grant McCasker from UBS.

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Grant McCasker, UBS Investment Bank, Research Division - Head of Australian Real Estate Research Team, Executive Director & Equities Analyst of Real Estate [31]

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Apologies for that before. Three questions. Are you able to call out what the margin was on the recent debt issuance that you've done?

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Alison C. Harrop, Dexus - CFO [32]

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Yes. Sure. So on the -- so we did -- we've done 2. So the most recent one, the $500 million that we did, the margin on that was 1 70. And the 10-year that we did back at the end of last year, the margin was 1 62.

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Grant McCasker, UBS Investment Bank, Research Division - Head of Australian Real Estate Research Team, Executive Director & Equities Analyst of Real Estate [33]

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Okay. And then on the development pipeline, I realize there's a lot of moving parts. Are you able to give some sort of guidance on those 3 major projects you talked about, when you may look to commence those?

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [34]

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Do you want to talk to that?

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Ross G. Du Vernet, Dexus - CIO [35]

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Those 3 major ones, you're thinking 60 Collins Street, Waterfront and 56 Pitt? Or are you thinking Central as well?

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Grant McCasker, UBS Investment Bank, Research Division - Head of Australian Real Estate Research Team, Executive Director & Equities Analyst of Real Estate [36]

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Throw in 4 -- throw in Central as well.

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Ross G. Du Vernet, Dexus - CIO [37]

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Well, we think 60 Collins Street will complete probably early '26. Waterfront will complete, at least the first tower, so there's a 2-tower scheme there, probably mid-'26. 56 Pitt or the Pitt Street Precinct will be sometime in 2027. And Central, there's probably a favorable move around Central, could be as early as '26, but our working assumption at the moment is probably more like 2028.

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Grant McCasker, UBS Investment Bank, Research Division - Head of Australian Real Estate Research Team, Executive Director & Equities Analyst of Real Estate [38]

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That's completion?

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Ross G. Du Vernet, Dexus - CIO [39]

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Completion date, sorry. Yes.

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Grant McCasker, UBS Investment Bank, Research Division - Head of Australian Real Estate Research Team, Executive Director & Equities Analyst of Real Estate [40]

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Yes. And then if -- you talked about investment in capability to execute on that. So there's sort of other development opportunities in the market at the moment. Do you have the capability just to also execute on that?

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Ross G. Du Vernet, Dexus - CIO [41]

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Yes. I think Dexus isn't new to Development. We've been doing this a long time. I think what we're -- you shouldn't read anything more into my comments than we're acknowledging that there's a great opportunity for our business to build on that. And the quality of the pipeline deserves us to invest further in those capabilities. So we have a great team at the moment. We continue to attract great talent into the business.

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Operator [42]

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(Operator Instructions)

Your next question comes from Simon Chan from Morgan Stanley.

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Simon Chan, Morgan Stanley, Research Division - VP & Equity Analyst [43]

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Just one quick question. [KG], in your press release, you called out Sydney leasing spreads pretty lofty, about 18%. Have you got the same number for -- either across your whole portfolio or for Brisbane and Perth in particular?

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Kevin L. George, Dexus - Executive General Manager of Office [44]

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Yes. Overall, the spread was about 4.5% for the total book. And the Perth and Brisbane, they were negative, those spreads, as markets over rented.

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Operator [45]

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There are no further questions at this time. I will now hand back to Mr. Steinberg for closing remarks.

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Darren Joseph Steinberg, Dexus - CEO & Executive Director of DEXUS Funds Management Limited [46]

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Thanks, everyone, for listening this morning. And we look forward to catching up with many of you over the coming days and weeks. Thank you.