DEXUS (DXS) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us today and to those joining us virtually as well. I'm Rowena Causley, the Head of Listed Investor Relations at Dexus. We would like to begin today by acknowledging the Traditional Custodians of the lands on which we operate and pay our respects to their elders, past and present. I will now hand over to Darren for his introductory remarks.

Thanks, Rowena, and good afternoon, everybody. Over the past decade, Dexus has evolved considerably. And following the AMP Capital transaction, we considered it appropriate to host today's event to outline our strategy and detail our aspirations and path forward from here. Today, you'll hear from Jonathan Hedger. Jonathan maybe you just stand up and wave for the people that are here on our Group Strategy; Ramana James on our Sustainability Strategy; Deb Coakley and Michael Cummings on our Funds Business; and Ross Du Vernet on Transactions & Development. We'll then take any questions you might have. Here in the room today and joining us for Q&A, our CFO, Keir Barnes, I think you all know Keir. Co-Head of Infrastructure, Michael Bessell; and our Chief Operating Officer, Mel Bourke. Also in the room is Andy Collins, our EGM of Office; and Peter Morley, our Project Director of Atlassian Central. Pete's not here yet. And Brenton McEwan, our Head of Transactions and Development. Brenton, are you here? Hopefully, he's working hard. And those guys will be hosting the tour of the site following today's session. We're also pleased that Ric Wang, Head of Real Estate, Design and Development for Atlassian will also be joining us on the tour too. He was asking plenty of questions about their work from home policy. Our purpose is to unlock potential to create tomorrow, and we'll do this through our live values, rally to achieve together and build trust through action. The talent of our people is one of our top assets and the passion and commitment that these values communicate underpin and differentiate our culture at Dexus. We have a clear vision to be globally recognized as Australasian's leading real asset manager. We have created a real asset group of scale with capability across all major Australasian real estate and infrastructure sectors. Our $61 billion fully integrated platform includes a $17 billion high-quality investment portfolio and a substantial $44 billion funds management business. We now have circa 50,000 investors across the platform. These are the key attributes that we value in our investment proposition. We are putting effort into having the right systems and processes that set up an efficient and scalable platform and creating an agile culture that is focused on solutions for our customers, driving performance for our investors. Fundamental to being an investment manager is we value investment performance. Our long-term relationships with a broad range of capital partners gives us a diversified access to capital to act on opportunities and further expand our funds business. Balance sheet strength is both prudent to navigating cycles while providing capacity to access investments of scale. And underpinning our approach is our commitment to sustainability, which is considered as part of all investment decisions. As I said before, we're on a path to becoming Australasian's leading real asset manager. And over the past decade, we've taken deliberate actions to drive growth. We started by establishing capability in the key real estate markets with a focus on building office leadership. We expanded that capability as we moved into health care and embedded our development track record. We continue to accelerate our funds management business through the acquisition of APN in 2021, diversifying our listed product and retail investor base. The AMP Capital transaction that we completed earlier this year has given us scale in funds and a meaningful infrastructure business. In total, these transactions have more than doubled our third-party funds under management. And this all sets us up as a market-leading real asset manager and unlocks further opportunity for the group as well as our third-party investors. So to conclude this part of our presentation, our vision is to be Australasian's leading real asset manager. What you hear from the team today is our investment management model will unlock the large real asset opportunity by matching capital and investments. This will drive capital-efficient returns for Dexus investors. The funds management business has broad and deep access to diversified sources of capital, and the platform is capable of sourcing a wide range of investment opportunities for Dexus and our capital partners. Thank you. I'll now hand you over to Jonathan.

Thanks, Darren, and good afternoon, everyone. Over the next 15 minutes or so, I will look to cover off on 3 things: one, delve a little bit deeper into the strategy; two, the opportunity in front of us; and finally, how we'll look to unlock that through our business model. Starting from the foundations. We've all seen this before in some way, shape or form. Dexus' strategy is to provide superior risk-adjusted returns for investors through investing in high-quality real estate and infrastructure assets. We'll do that through 2 objectives: delivering resilient income streams through investing in a high-quality diversified portfolio of assets and being identified as a third-party investment manager of choice. This is enabled by a fully integrated platform and our commitment to sustainability and prudent capital management. In pursuing this plan, the business has experienced meaningful change and growth. And this growth has only been possible due to the breadth and skill base of the Dexus team. We're more than just an office REIT. Simplistically, we are seeking to leverage the breadth of our capabilities to source opportunities alongside capital partners that will unlock increased capital efficiency for Dexus security holders. Our progress in this regard can be seen by total funds under management increasing by 7x over the last decade, third-party assets under management increasing by 5x and the sector and risk exposures provided to our third-party partners expanding meaningfully. For example, circa 50% of our third-party business at this point in time is invested in industrial, health care and infrastructure, a very different situation to only 5 years ago. This means that the business has more opportunity to provide investors with opportunities than ever before. And setting the strategy, we think very deeply about aligning with tailwinds, wherever we can. And there's 4 key trends that we think will drive sustainable growth for the business over the medium to long term. Firstly, population growth and urbanization. The Australian population is forecast to grow at over 50% over the next 50 years -- sorry, 40 years. This growth is expected to be concentrated in major Australian cities and will drive investment demand for real estate and infrastructure, be that demand for workspace, health, social facilities, transport, energy and living. Dexus is well positioned to benefit from this growth across our exposure to these different thematics. Further bolstering this trend, population is not only growing, it's also aging. Pension capital and private capital demand is expanding to service the 6th growing population and the sustainability revolution is only gaining its initial momentum. Our platform and capability set is diverse and provides multiple ways to benefit from these trends. Demonstrating the depth and multiple levers we have available, we have leading positions, as Darren mentioned, across each of the core real estate asset classes. By AUM, we have a top 5 position in each of office, industrial, retail and health care and a meaningful infrastructure sector. We also have substantial embedded growth within the real estate business through our development pipeline. Additionally, the only sector of real assets platform incorporates transactions, product creation, capital raising, asset management and development capability, all of which strongly positions us to secure investment opportunities for both the balance sheet and our third-party platform. It also positions us to capitalize on a very substantial growth opportunity. The current collective size of the sectors that we plan is estimated at circa $2 trillion, a big number and one that will only expand as the population growth continues. Simplistically, the scale of this opportunity for Dexus can be demonstrated by thinking about a 1% expansion of market share in each segment. 1% in each segment would add $20 billion to our funds business. And within that, we view the industrial, health care and infrastructure sectors as particular areas of opportunity. And as we've done with health care and infrastructure, we may, from time to time, look to add new verticals. In assessing those sectors, we look for the following factors: large markets, resilient and sustainable demand drivers, and the ability for Dexus to be a meaningful player with scale. We want to be a leader in what we do, not a participant. And finally, opportunities to leverage our existing skill base to unlock adjacencies. And unlocking this opportunity, matching third-party capital with appropriate investments is critical. And our ability to do this has been transformed in recent years. On the capital side, we have coverage now across institutional, retail, high net worth and listed investors and a broad set of products for those investors to allocate capital into. From an investment perspective, we're able to source investments not only from broadly across the real estate and infrastructure sectors, but also the risk profiles within those sectors with core development and even opportunistic. Deb, Michael and Ross will provide more color around this later in the presentation. We view the balance sheet, the Dexus balance sheet as an important competitive differentiator in unlocking this. Broadly, allocation decisions can be thought of in 2 buckets: core investment exposures and growth initiatives. Core investment exposures is the vast majority of the balance sheet and will be on a go-forward basis, takes the form of high-quality real estate and infrastructure investments. These investments are expected to provide resilient income streams over the long term. They include direct investments and investments in funds and JVs alongside partners. Growth investments are investments that support the execution of longer-term strategic initiatives. Those could be. Underpinning development projects for Dexus intends to sell down a share to partner. Warehousing of assets on behalf of the funds or trading businesses or investments that add additional capability to the platform, access new sources of capital or allow us to enter new growth verticals. Various examples of this type of activity are provided on the slide. On a go-forward basis, our bias and allocating incremental capital will be to do that alongside partners. This enables Dexus to gain exposure to the underlying investment while generating an improved return through fees and ensuring a high degree of alignment with our investment partners. And we're already well progressed in deploying capital in this way with circa 40% of the balance sheet invested in funds and JVs. In making incremental capital allocation decisions, we also highlight the following guidelines. Every investment is allocated on its own merits against an appropriate benchmark. Over the medium term, Dexus will seek to have no more than 50% of its balance sheet invested in any single asset class. And development exposure is targeted at no more than 15% of the investment portfolio at any point in time. And as mentioned, we want to deploy capital alongside our partners. What does that mean practically? The balance sheet investment portfolio should be expected to gradually diversify as the platform unlocks new opportunities alongside partners and a portion of the existing investments will be recycled to provide funding. Ultimately, we're an active manager of capital, and we're continually seeking to increase the resilience and return generation of the investment portfolio. So looking to bring this all together. We're seeking -- as mentioned, we're seeking to leverage the overall capabilities of the platform to unlock investment opportunities alongside our partners to drive increasingly capital-efficient returns for Dexus security holders. And a measure that's been mentioned previously around capital efficiency is the ratio of third-party funds under management to the balance sheet. This ratio has increased over the past 10 years from about 0.8:1 to 2.5:1. An investment in Dexus now provides a baseline exposure to a high-quality portfolio of investments with exposure to an investment management business of scale and relevance. We believe this provides greater capital efficiency, growth potential and ultimately returns than a stand-alone capital-heavy investment model, and whilst providing lower volatility in cash flows than a pure-play funds manager. As part of the next phase of the journey, we're looking to expand this ratio towards 5:1. This is going to take some time and achieving this will involve securing investments in the capital to support growth in our existing products, leveraging the broader Dexus platform to create new products and introducing capital into our development pipeline alongside Dexus. Successful execution of this would result in substantial expansion of the funds business and material value creation and the management platform. But I'd also say, in undertaking this expansion, we will not grow fund for Pharma sec. From Dexus' perspective, it's important that this growth is profitable and focuses unlocking efficiencies from the Dexus platform. While for our investment partners, first and foremost, is delivering returns while delivering on our sustainability and governance commitments. So in summary, our investment management business model and broad capability set provides exposure to a significant long-term growth opportunities across a range of real asset classes. We'll maintain an investment portfolio of quality and scale. However, we will continue to deploy incremental capital alongside partners across a broader range of opportunities. And our third-party funds business will increasingly contribute towards the growth of the overall group as Dexus seeks to drive increase of capital efficiency. In closing, we've taken a number of deliberate actions over the past 10 years to evolve the business. We believe we're well positioned and are excited about the future. Thank you for listening, and I will now pass to Ramana James to talk through our Sustainability Strategy.

Thanks, Jonathan, and good afternoon, everybody. You already know my name. But I've actually joined Dexus in February of this year, so relatively new to the team as the Head of Sustainability. I have led sustainability teams in ASX-listed companies for probably 20, 23 years. And in doing that, I was really excited to be coming across the Dexus because of the size and scale of the platform, but also because of the sustainability opportunity this platform provides as well. Since I've joined, I've been working with the management team, but also the Board on our new sustainability strategy. And I've been really impressed by the level of engagement and the culture of belief in the role that sustainability and ESG can play in the commercial success of the organization. As Jonathan outlined, our commitment to sustainability outcomes underpins the Dexus strategy, and it's critical to support the delivery of additional value to you as investors. Our sustainability aspiration is unlock the potential of real assets to create a more sustainable tomorrow. And the addition of the AMP Capital assets to the platform, including infrastructure, creates a unique opportunity for scale and impact through sharing knowledge and capability across our different asset classes. A great example of this is how we're able to achieve net 0 with the AMP capital integration with about 30-odd assets coming into the platform, we're able to achieve net 0 on Scope 1 and 2 within 3 or 4 months of that acquisition being concluded. We've also got great examples of taking experience and knowledge from the work we've done with Taronga Ventures around cybersecurity and real estate assets and sharing that knowledge with some of our infrastructure assets facilitated by Michael and the team. So our aspiration recognizes that Dexus plays an important role in delivering environmental and social outcomes. And with this expanded platform, if you think about it, a customer could have multiple touch points with Dexus investments and assets. So whether that be from the energy they use through investments in wind farms, through to the water they drink through desalination plants, to their place of work or to where they shop. So we see sustainability as not only risk management for our business, but also a growth opportunity. Our third-party capital partners seek a proven track record in sustainability performance as a non-negotiable. Otherwise, they're not going to invest with us. In the current operating environment, we have seen a flight to quality assets and sustainability performance is increasingly a critical component of quality. Customers' demand for sustainability design are increasing, and these assets are attracting premium rents. A close to 5-star Neighbors rating, across our office portfolio and the continued focus on improving this time -- over time will support the achievement of resilient income streams through the cycle. Our new sustainability strategy identifies 3 priority areas, which align to our group strategy to drive commercial value. So we believe we can create a competitive advantage with the new strategy and particularly the focus on customer prosperity, where we're creating a point of differentiation in the market. This focus enables us to leverage Dexus' expertise and high-quality portfolio to deliver sustainability performance for customers who are increasingly setting their own sustainability goals and objectives. We have done this through our Dexus GreenPower Buyers Club, which provides our retail and office customers the chance to access renewable energy at rates or in ways they may not be able to do themselves. And we've got many of our industrial customers signing up to solar power as part of a support and an offer for them, close to 1/3 of our platform now in Industrial. Both of these initiatives drive great commercial outcomes for our customers, but ultimately for Dexus and for our investors. With our real asset platform, we also have unique opportunities for climate action. So from emissions reduction and net 0 to addressing the impacts of climate change on our assets to investing in energy transformation, as Jonathan outlined. We know that climate impacts will increase on assets and the work we have done to assess scenarios across the portfolio, but also more than 21 site-based site level risk assessments on climate risk are helping ensure we create greater resilience in our assets and ultimately ongoing leasing and asset values. And our third area, enhancing communities, we acknowledge the positive impact our assets have on local communities. Good design and place-making will support engagement with and the success ultimately of those assets. Underpinning these priority areas are a series of foundations, things like nature and biodiversity or First Nations indigenous engagement. They are critical. We get those in order and that we focus on ensuring we manage and support our social license to operate through those, but they also give us the license to focus on those 3 priority areas that we've identified. Our new sustainability strategy is delivered at the asset level through initiatives that our teams own and are held accountable for. Building on the progress we have made, we see significant future opportunities across all 3 areas that we've just outlined. We will continue to work alongside our customers to help them achieve their own sustainability goals, while looking at the leasing process and space design to achieve more sustainable fit-outs. In Climate, we'll continue to expand beyond Scope 1 and 2 to address Scope 3 emissions, but also look to unblock potential through both investment opportunities in the energy transition and also the installation of our own renewable energy solutions. And while we're starting from a lower base with our community programs, we're building out a national framework to deliver consistency across our placemaking with a stronger focus on the commercial activations within our assets to drive value. To conclude, there is growth and opportunity in sustainability. Our sustainability strategy is strongly aligned to the group strategy, and it will focus on delivering commercial value for our customers, communities and investors. Initiatives are embedded across our business operations with clear accountabilities. And while we have brought together highly complementary sustainability skill sets from the AMP Capital integration, it is still driven and owned and executed by teams across Texas. So not a siloed sustainability team looking to drive the programs of work. And this ranges from our asset managers to development planners to investment decision makers. We're building on a strong track record as a global sustainability leader and that's been recognized through indices and benchmarks for many years, but we're setting up to respond to the sustainability revolution that Jonathan outlined. Thank you. I'll now hand over to Deb.

Thanks, Ramana, and good afternoon, everyone. Just to break it up a little bit. We thought we would kick off with a video and a warning, you may recognize some of the talent. [Presentation]

I would ask for a pause, but we'll leave it at that. But I think the accents won there. And you can see we're a diverse platform on many levels. Dexus has been an active fund manager creating value for our capital partners for decades. The strength of our platform lies in the Dexus Difference. A combination of platform features that delivers very clear value proposition, positioning Dexus as an Australasian asset fund manager of choice. When we ask investors to describe us, they tell us that our long-standing track record of delivering strong risk-adjusted returns is delivered by a highly experienced management team. We have a strong reputation for corporate governance that is independently assessed and that our ESG performance is highly regarded, as Ramana has already commented on. We've demonstrated commitment to maintaining meaningful alignment with our capital partners and creating risk reward profiles, as Jonathan has outlined. And we have access to premium opportunities through the Dexus investment and development portfolio. These characteristics support the resilience of our business in the current environment and stand us in good stead for growth. At the heart of our Funds Management business is the performance of each fund. It is a key enabler of our success, and it is the #1 focus for our fund managers. The financial outcomes are driven by our ability to enhance the performance of our assets, seize development opportunities and ensure that market-leading fund managers focus on performance and stewardship. As both Ramana and Jonathan have already highlighted, a commitment to sustainability underpins the Dexus strategy. And for investors in the funds platform, it's a key priority area for them when considering their investment partner. We use GRESB as an important global benchmarking tool to monitor our investments and our performance against our ESG principles. Importantly, we have achieved a perfect score of 30 in the management component for all our rated funds in the GRESB 2023 ratings. Turning to our retail funds. They are well regarded by the research houses, endorsing management team and the quality of the investments as demonstrated by individual ratings for the funds. And pleasingly, we were recently included in the real asset category for the 2023 Zenith Investment Fund Partner Awards. The number of institutional investors on our platform continues to grow from 77 in 2020 to over 130 today, despite the cyclical nature of investors periodically rebalancing their portfolios. These relationships are important to the success of the platform, and I see it as a vote of confidence in our capabilities and product mix. The 2/3 of our top 30 investors are invested across multiple products. I just want to take this opportunity to revisit a transaction that occurred during COVID, that delivered substantial value for the funds platform and for Dexus and highlights our ability to execute complex transactions and deliver value for investors. After 6 months of engagement with the AMP Capital Diversified Property Fund, we were able to demonstrate the benefits of the Dexus platform and the value and performance that could be delivered for their unitholders. In April 2021, AMP Capital Diversified Property Fund merged with the Dexus Wholesale Property Fund. And this deal successfully delivered close to $5 billion in new funds to the funds platform. It importantly facilitated redemptions for those investors who require liquidity. It diversified the investor base for DWPF. And it reduced the overall fee structure and operating costs for the merged fund investors. This decision by unitholders signaled confidence in Dexus and our ability to professionally manage what was a very complex fund transaction and now a complex fund, delivering economies of scale from a management, procurement and leasing perspective for those investors. But this transaction would not have been possible if we did not have the deep relationships that we do with investors across the platform. More than 2 years later, this transaction has proved to be an overwhelming success, driving value for unitholders and growing DWPF into Australia's preeminent diversified property fund with more than $14 billion under management. This slide seeks to illustrate how we've achieved our growth, which is through a mix of new products and M&A activity, which Jonathan touched on. Dexus has a track record of success in developing new products aligned to future market trends, creating growth for the platform. In addition to the DWPF/ADPF merger that we just discussed, I want to highlight our early conviction-led investment in health care, which supported the establishment of the Dexus Healthcare Property Fund, DHPF, which has grown into a $1.8 billion fund today. This was a deliberate and purposeful approach to product development and DHPF is now -- has a high potential for scalability and a relevance to a broad investor base. More recently, we have expanded the product range across the risk-return spectrum through the opportunity product series. The second fund recently announced reflects strong investor demand for this product type. And it's interesting to note that the health care expertise we delivered -- we developed for DHPF has already been used to help on the investment strategy and in actual investments for the DREP series. This table shows our current product offering with third-party capital investments, demonstrating the relevance across all the key capital pools. The diversity of our product suite offers varying exposure across the risk return spectrum. Over $40 billion on the platform, we have bought broad and deep access to capital in Australia and offshore with demonstrated ability to raise new capital through the cycle. The breadth of the opportunity for future growth is incredibly exciting. With the scale and capability of the Dexus platform, we remain confident in being highly competitive. The graph to the left shows the current breakdown of third-party capital by type. Over the past 5 years, we have diversified the capital base, ensuring we remain relevant to each investor type and reducing our reliance on any one. The graph on the right shows the forecast growth in global wealth capital pools. The market is substantial and growing. With Global Wealth forecast to reach $367 trillion in 2027, and 40% of that is due to be managed by wealth and asset managers like Dexus, utilizing the talent of our people, our best practice governance approach, our strong relationships with investors in each capital pool, we are well positioned to take advantage of this trend. Over time, the platform has consistently driven organic growth even through challenging operating environments. The organic growth complements Dexus' capital-raising capabilities with over 20 dedicated distribution and capital raising team members, growing the size and diversity of our investor base and consistently bringing new equity to the platform. We continue to invest in this capability and ensure we remain close to our investors. We have recently established an Asian presence, which you saw in the video by opening the Singapore office, reflecting the importance of that market to us. And at the same time, we are investing in systems and processes, data management and analytics to ensure we are easy to do business with. As Jonathan flagged earlier, we see several areas with strong macro tailwinds that support the long-term outlook for these sectors. The key themes of urbanization, population growth and energy transition support the long-term demands in sectors such as health care and transport. The table shows that the key themes -- shows the key themes and the relevant Dexus product. It also highlights our near-term opportunities and Dexus is well positioned to execute on these. Taking a deeper look at the real estate growth areas we see in the sectors. These are broadly characterized by strong underlying sector performance that is likely to benefit from those macro tailwinds and strong investor appetite for those asset classes. And for Dexus, while these represent a small percentage of our overall funds under management, with proven capability, existing relationships and high-quality assets that will help drive our success and growth in these sectors. We have a variety of products to meet the needs of investors, offering exposure to high-quality real estate assets ranging from shopping centers to hospitals and premium office towers. You will see the more recent fund DREP is targeting high net worth individual investors, while our listed vehicles, Dexus Industrial REIT and Dexus Convenience Retail REIT offer sector-specific exposure. Each one though can be characterized as investing in high-quality assets with potential to unlock value through the cycle. I'll now hand you over to our Co-Head of Infrastructure, Michael Cummings, who will take you through the Infrastructure business.

Good afternoon, everyone, and yes, my name is Michael Cummings. And yes, I'm one of the ones with the accent. So it's an Irish Scottish New Zealand accent. Hopefully, we'll be able to get through with all of the words intact, but we'll give it a go. So like I'm Co-Head of Infrastructure, along with my colleague, Michael Bessell in the second row. Now we both have extensive experience in this sector for more than 30 years each across Global Infrastructure Investments. So my role is more focused on the active investment management of our assets and our co-mingled funds, whereas Michael's role focuses on managing our origination pipeline and our separately managed account relationships. We are incredibly excited about the potential the Dexus platform offers us to further enhance the performance of our assets. So Infrastructure assets are real and tangible with characteristics that make them different and attractive in the wider investment landscape. They provide essential services to our communities, typically monopolistic in nature with high barriers to entry. Importantly, over the last 18 months, we have seen the sectors resilience as revenues are often linked to inflation, offering a level of value downside protection. Unlisted infrastructure investors as a result, have enjoyed an investment that offers lower volatility, reliable income and portfolio diversification with a low correlation to other asset classes. Turning now to our current product offering with around $11 billion in infrastructure assets under management, there's a range of products that meet the differing needs of retail, wholesale and institutional investors. These funds have investments in tightly held world-class assets from airports, schools, stadiums, rolling stock and electricity distribution. Importantly, they all encapsulate the key benefits of infrastructure to an investor's portfolio. I wanted to take this opportunity to give you a taste of the high-quality real assets we have in our platform. We have significant investments in 26 assets across every state and territory in Australia and in New Zealand, ranging from the 65,000 seat per stadium to the 3 million passengers per month Melbourne Airport. We are also the largest investor in on-campus student accommodation with over 7,000 beds in our portfolio, leading universities, including the ANU, the University of Melbourne and the University of Sydney. Across the ditch, we have a major stake in Powerco, the largest electricity and second largest natural gas distributor in New Zealand. These are just some of the assets that are managed by a team of 26 investment professionals with an average of 27 years industry experience across our leadership team. And we are continuing to invest in our capability as we recognize that this enables us to unlock potential and drive better performance from the real asset investments that we manage and to capitalize on attractive growth opportunities. Looking forward, we see 3 growth areas that are underpinned by the macro tailwinds that Jonathan previously talked about today. Across social and living, transport and energy, we see around $15 billion of near-term investment opportunities. Now this is very exciting as across these 3 verticals, we already have substantial exposure and many years of experience, providing both insight and foresight on the ground Intel and relationships to make the most of the deal pipeline. Across social and living such as student accommodation and schools, we are one of Australia's largest manager of brownfield, social, public private partnerships or PPPs, with more than 20 currently active assets across our funds. Within the transport sector, we are the majority owner of Reliance Rail, providing the Waratah trains for Transport New South Wales. I'm the largest owner of the strongly growing Melbourne Airport. Across the energy sector, whilst our current exposure is smaller than the others, we have key investments in energy distribution through Powerco in New Zealand and in the renewable sector through the McArthur Wind Farm, one of the largest wind farms in the Southern Hemisphere. Combined with our experienced management teams and asset managers, we are well positioned to continue to drive growth and performance from our current assets and ensure that we are courtside as these opportunities come to market. What has been truly stimulating since joining Dexus, is exploring the natural synergies between real estate and infrastructure. The potential value that this can unlock is substantial. Whether it's from precinct planning and development approvals through the cost savings by leveraging Dexus' property management expertise as many of these infrastructure assets have substantial property management property portfolios as well. Whilst it's only been 6 months since first completion, we have already completed our first real asset deal and have brought a new fund to market, illustrating the effectiveness of this enhanced platform. Australian airports are recognized as some of the best in the world, but most have traditionally been tightly held by institutional investors. And since the privatization of Sydney Airport, it has become a rare commodity for retail and wholesale investors looking for exposure to Australian airports. Earlier this year, we became aware of an institutional investor looking for liquidity, offering an opportunity to secure a small stake of the Australian Pacific Airports Corporation, now that's the holding company that owns 100% of Melbourne Airport and 90% of Launceston Airport. As the seller was looking for an efficient and smooth process, we rally together across our team to provide liquidity -- to provide a liquidity solution for the seller and at the same time, provided an opportunity to engage with our investors in the wholesale market. Engaging the broader Dexus platform, there was strong enthusiasm for the deal, and we worked quickly to meet the sellers' time line expectations. The Dexus investment portfolio was able to proceed with the transaction, warehousing and underwriting the opportunity that could then be brought to market through a new vehicle, the wholesale Airport Fund. This was the first fund Dexus has brought to market since the acquisition of the AMP Capital business. We leverage the relationships and experience of the Dexus distribution team and successfully raised $180 million, exceeding our initial target of $130 million. We have since been able to deploy the additional equity, providing further liquidity to another of our institutional investors. Now this deal would not have been possible without the Dexus balance sheet moving quickly to secure the deal and the distribution team marketing the fund and securing strong private capital interest. This is a great example of how the broader Dexus team realized the strategic value of the asset and the role we continue to play to drive value, and we have full confidence and conviction that market would see it in the same way. Another good data point to demonstrate the benefits of our real asset platform was our first cross fund deal announced back in March this year. Where Dexus acquired an additional 30.6% interest in the Royal Adelaide Hospital asset across 3 funds, taking Dexus' total stake to approximately 73%. This 800-bed hospital, which is delivered as a 35-year PPP with the South Australian government is one of Australia's most advanced hospitals with sector-leading sustainability performance, making it an incredibly attractive infrastructure investment. Our infrastructure team have managed an investment in this hospital PPP since 2021, primarily through our community infrastructure fund, COMMIF. This additional large block became available as a co-investor was looking to recycle their capital. Our health care, of course, is a sector where real asset synergy really comes to life, transversing the growth and income requirements of the funds like the Dexus Healthcare Property Fund, whilst also meeting the requirements of reliable, stable income for infrastructure funds such as COMMIF and the Dexus Core Infrastructure Fund. Leveraging valuable insights from our existing experience with the asset, our strong active management and governance meant that 2 infrastructure funds and 1 real estate fund were able to come together and secure the deal. Importantly, each fund went through its own investment committee processes, ensuring the investment met their specific mandate and return hurdles. So I think you'll agree that we've already made solid progress over the last 6 months, and we look forward to building more momentum as a real asset investment manager. Thank you, and I'll hand you back to Deb.

Thanks, Michael. In summary, our funds management business is in a great place to unlock the potential for real assets across the platform. We have a highly capable management team with decades of experience. We have the relationships, knowledge and skills required to deliver value for our investors. And when combined with our broad access to pools of capital, a diverse product offering and the existing upside exposure to some of those key growth areas that we have touched on, the Dexus Funds Management business will be a key driver of future growth for the company. I'll now hand you over to Ross who will take you through transactions and developments.

Thanks, Deb. Hello guys, we're nearly there. I know you've been very patient. Well you've just heard -- you've heard from my colleagues really read the operating model, a lot of the exciting investment strategies in the platform. A lot of them really come to life through transactions and through developments, which create product for our business. So what I thought I'd do in my session is really talk through some case studies around how we look to create value-added transactions and developments are really with the real estate focus. And I think Michael has given you some color around the infrastructure side. And for those of you who are attending, I guess, the site to this afternoon, you'll get more flavor from the Atlassian site tour. So I think sourcing attractive investment opportunities, recycling capital and assets and creating product through developments. These are being consistent pillars of our strategy for many, many years, and we've developed really strong capabilities and track record in this space. I think as Darren mentioned, it is actually all about the people. That -- the buildings don't build themselves, the deals don't walk in through the door. And we are very fortunate that we have a dedicated team of over 70 executives in our Development & Transactions group. And this group is -- what I find interesting about this group is actually the diversity in the background and experience of these individuals. So we have people from office, retail, industrial, health care. We have residential development, mixed-use development. We have engineers, we have architects. We have sustainability experts with a very, very broad range of experience. And that dedicated team is very ably supported by the rest of the Dexus platform. When we do a deal, it's not just the transactions group or the development group, we're leaning into our finance team, our treasury team, our tax team, our asset management team. It's not just this transactions group. In terms of people, I think we do believe real estate is very much a local game. And where we can, we do try to hire people out of their local market and keep them in their local market. And we do have Development & Transactions people spread around the country through our national offices. In terms of the operating model for this part of the business, the design principles that are really important to us are really around scalability and agility. We want the ability to be able to deploy a lot of that resource to these large complex transactions where we think we can add a lot of value. And as you've seen, the business has grown a lot over the last few years and so we want that growth to be done in a scalable way. And obviously, we brought a lot of people into the business through that time. So bringing them up to speed very quickly and efficiently is important. We look to control, I think what we think are the key parts of those processes around Transactions & Development. So things like deal underwriting, things like development management, and we're much more relaxed around outsourcing other components of the process. So things like being the principal contractor, we feel there are other groups that are better placed to deliver that. And we have horses-for-courses type approach. If we were constrained by our contracting business, we think that would, again, kind of limit our agility as an organization. So there's some of the design principles. I think from a track record perspective, I think we do have some runs on the board. That's not to be complacent about things. There's always things that we can do better. We have a very much a continuous improvement mindset, and we're very aware of the changing competitive dynamics and also the investment market dynamics as well. So I'll talk through a few examples of how we think we can create value for Dexus shareholders and also our clients. This slide should have a big rider on it in hindsight. This is why in some ways we look to create value for clients with a development and transactions lens. There's lots of other ways. And I think you've heard parts of that through the presentations today, whether it be our funds teams developing very specialized investment strategies, whether it be our treasury teams on the financing, whether it be our asset management teams on leasing. So we look to create value in lots of ways. This -- I guess, the case studies that I'm going to talk to today are really with that development and transactions lens. So some of the ways we look to create value is through deal flow. I think one of the benefits of a business that has the scale that we have is really the number of relationships we have across the organization. And it's not just the relationships of the deals and this is the relationships over the 1,000 people that they sit in Dexus. And these relationships, and I'd say our brand, really enable our deal teams to quite systematically and consistently generate some high-quality investment opportunities for the balance sheet and our clients. I think the origination effort in the opportunistic space, I think, is a really good example of the diversity in the origination. I think the systematic approach that the team take and also the efficiency of the machine. So the opportunistic origination effort, it's a bit of a mouthful. This effort is led by 4 executives. So this team is specifically looking for deals for trading for the balance sheet and also DREP the fund series that Deb talked about earlier. So we've got 4 executives that are purely focused on this trying to leverage all the relationships across the platform. And I think while no one has a monopoly on deals, we're kind of very aware of that. I think we do see more than our fair share. And in the last 12 months alone, the deal -- the team looked at over 350 deals. They underwrite 150 of those to transact online, and you can see some of the composition of that deal flow here. I think what I certainly believe in is the quality of the deals that we're doing, now whether that be for the trading business, whether that be for our DREP clients, the quality of the deals that we do is directly proportional to the volume of deals that we're looking at. And so we need to be -- we need to have spread the net really wide, and we need to be really efficient as to how we process and review those deals. So I think ways we create values through deal flow. Another way we look to create value is really making sure that we're leveraging the entire platform and Deb actually referred to this, and I'll go earlier in her presentation. But this is a fantastic opportunity around how all the moving parts of the platform, the origination team, the development team and the asset management team come together. So this was a deal that was originated actually by our opportunistic team. So there's 4 individuals I talk to. They found this local developer. We had a great site, they had a scheme. It was very close to [ North Shore ] Hospital. They didn't have a tenant. So they locked up the deal. They've got exclusive due diligence. They then work through the development and asset management teams to find an existing customer that we had that we'd actually put into our North Shore development hub -- North Shore Health Hub rather development here in St Leonards. And so while they had locked up the deal in due diligence, we brought the customer in, can currently negotiate in AFL. So by the time we closed the deal, it had been significantly derisked. And that deal sits in DREP at the moment. So I think it's really a great example of how the teams are leveraging the wider platform. Another way that we look to create value is unlocking unique and scarce opportunities. And for those of you who are not familiar with Jandakot, Jandakot is a very unique asset. It's 80 hectares of industrial development land, it's 49 industrial assets. It just happens to have an airport in the middle of it. Opportunities like this scale opportunities in Industrial are just very, very unique at the best of times trying to get that in Perth is near on impossible. So unlocking this opportunity for us required a few things. It required really good relationships. The deal was actually sourced off market through long-standing relationships of the platform. It required a track record of actually closing on complex deals. This was very important to the vendor. The vendor was paranoid about leaks and they were paranoid about the party they brought into due diligence, not closing on the deal. It required a significant team so that kind of concept I talked before around deployable resource, the ability to throw a lot of people at a big complex deal. It was big and complex. So I think with the amount of due diligence, you've got to do 49 assets, 80 hectares of land. You've got operating companies that you're buying, you're buying a live active airport. The transaction documents on this alone were more than 5,000 pages to give you some sense of the scale of it. So you had to do that and you had to do that in an accelerated time frame. You need access to broad pools of capital. This is -- we've talked about this opportunity in different case studies before about how we use the balance sheet to secure the deal. We brought DXI and our listed fund and often bought Cbus Super in as well. So you needed access to broad pools of capital. And you needed to do all of this actually when the borders were closed. Physically having boots on the ground were critical. So we leveraged our asset management teams that were in the market. We leveraged our consultant relationships that we have nationally to help us actually do the due diligence during COVID. It seems like a long time ago, I know that the borders are actually closed. Another way that we look to create value is leveraging data and research. And our industrial development team and transactions team have been harnessing the power of data for some time now. And I think this case study from back in 2018 was actually one of the first transactions that they brought this to bear. So this was a 10-hectare brownfield industrial site that we secured in Granville. This precinct was identified really from the team using logistics mapping in data software. So identifying areas that we thought weren't traditional logistics locations but had all the attributes that will be highly valuable to our customers. And that led us to identify this precinct and then through relationships we had in the platform, we proactively secured the acquisition opportunity from a private family. So I think this is a great example of using data. It gave the team the conviction to be able to underwrite rents, what would be quite bullish numbers because if you were looking at the market precedence, there weren't many, but it was really a lack of that high-quality product in that location and the confidence that it had all the locational attributes that customers should be able to pay very, very strong rents. And obviously, generated very, very strong returns for Dexus that was an unlevered IRR of just under 60%, and that was a JV. Dexus had a 50% interest in. Another way we look to create value, I think, is navigating complexity. I think it's the same goes. If it was easy, it would already be done. I think we hear that around the Dexus office quite often. And I think if you look at projects like Waterfront, it's an amazing development opportunity on paper. You've got 2 hectares on the river there in Brisbane, an underdeveloped Eagle Street Pier. And it is an exciting project. But in reality, there's a lot of complexity to actually bring this project to the table. So some of the complexities, simple things like titling. It's actually not -- or wasn't all freehold title. It was actually a sublease to council that was actually a lease to the state. So activating the development required us to collapse all those lease interests and ultimately negotiate to buy freehold from the state, not an easy task. It actually required the freehold to be created. The freehold didn't exist and pad was in the river. So the physical process of creating that -- creates further complications. And now our development program is even longer because you've got to physically go into the river create freehold. That creates further complications because now we've got a development program that's 5 or 6 years, and we're asking customers to commit to a future office that might be 5 or 6 years. That's a tough ask in a normal market. That's a really tough ask when you're in the middle of COVID, right? But the product is exceptional, and the team have done an amazing job in navigating all of those challenges. And obviously, we started that project this year. It's now the more than 50% leased, has a great following in the Brisbane Committee, and it will certainly change, I think, the landscape of the Brisbane CBD. So navigating complexity unlocking those complex projects is a way that we like to add value. Another way we like to add value is through scale transactions. And I think buying projects that are large, particularly projects that have risk to create projects or transactions and really breaking those projects for opportunities up and essentially syndicating to different pools of capital. This has really created a lot of value for ourselves and for our clients. And I think for the Dexus listed investor, which I know is the primary audience today, I think this is one of the prime benefits of actually having a funds management business and access to all those diverse pools of capital. I know there's a focus on the fee streams and those sorts of things and they're nice. But it's actually the access to opportunities that would normally be outside of our risk tolerances that actually have really attractive risk-adjusted returns. And a couple of examples of these include things like large land bank acquisitions, things like assets that the concentration risk would be too high. So things like the Bragg Centre in Adelaide. It's a very specialized facility. We did that project in joint venture with our Health Fund. The very successful acquisition of our Ravenhall estate down in Melbourne. So that was 134 hectares of industrial land. I'm sure and I know we got a lot of the brokers in the room today. If Dexus balance sheet said, we've got this great idea, we're going to buy a whole bunch of stuff that looks like farms, it's got horses on it. It's 134 hectares, but don't worry, we'll work it out. We're going to create value. I don't know that, that conversation will go that well. But being able to bring in capital partners with us, which we did, we brought in GRC and we brought in our diversified fund DWPF chunk that project down. That's been one of our best performing industrial precincts and certainly a model that we're looking to replicate going forward. And finally, I think projects that have maybe at the more point end of risk, so things like 100 Mount Street in North Sydney. We essentially expect, developed an office building. I know that feels like quite controversial now. But back then, it was a good strategy, and we could see the market was tightening. But in for the Dexus balance sheet, that was going to be too much risk for us to take. So we shared that with our diversified wholesale fund again and generated some very, very strong returns for us in the process. So I think you can see there's a number of different ways. It's not the exhaustive list, but we're really trying to leverage not just the transactions and development team, but the wider platform and how we create value for clients. So I think in summary, we have a team and a capability and a track record of significant scale and experience. There's many ways that we're looking to create value for the balance sheet and our clients. And I think the interesting thing is really the diversity in the capability set, really does mean that we should be able to create value in a whole range of market circumstances and situations. And that's pretty exciting for us now given where the market dynamics are at right now. So thank you. I'll pass you back to Darren to wrap up.

Thanks, Ross. So our trajectory over the next decade will take us through 3 horizons. In the next year, as we strive for '25, our focus will be on strengthening the balance sheet and improving our sector mix, while driving organic growth of our funds business and completing the integration of the AMP Capital business. So we are set up to maximize the benefits of our real asset platform. And pleasingly, we received our final approval from the Chinese government last Friday, a lot of celebrations in the office, [indiscernible] were very relaxed. So we're well and truly on track to have that integrated this financial year. From '26 to '28, we'll be positioned to expand our footprint, building out capability in new verticals that we've identified, attracting capital to enhance domestic and offshore distribution teams and executing our development pipeline alongside our funds management partners. So to conclude, we're on track to realize our vision to be Australasian's leading real asset manager to an established funds management platform that's set to grow and a high-quality balance sheet that supports our capacity to invest in new opportunities alongside third-party clients. This will enable us to have a capital-efficient business model, which will drive returns through the cycle. And I think there's no point than looking today and saying real estate, real assets operating cycles, this business is set up to run through those cycles. We'll still be here. Well, some may not make it through what is currently a very difficult environment, as we all know. So thanks very much for your attention this afternoon. We'll now open up for any questions you've got.

Guys do you want to come up and sit up here, and we'll file the questions around the panel.

Hi, Darren, Richard. Just wanted to clarify just your comment there on the strive for '25. Just the strengthened balance sheet, improved sector mix. Can you just elaborate on what you're going to do there?

Yes. Well, I think as you've seen over time, I think if you looked at this business a few years ago, we were probably 80% office across the platform today, it's about 30%. And then for the balance sheet, it's about 40%. So I think I've spoken before about the power of diversification that became very evident during COVID. You've seen that with people that were retail specific, we've seen it play across the globe. Dexus is going towards a more diversified, more capital-efficient model. So hopefully, we'll continue on that trend. And that trend might be linear because as we know, it's really challenging today to sell various assets. So we have a very strong financial lens that we look at opportunities for the balance sheet. So -- it's not the most liquid market we've ever been in, but we're very fortunate, as you've seen today, to have a variety of places to allocate capital. Pricing is changing. So if we can get a right price for an office building, it might not be the best real estate decision at the time because it might look really cheap. But when we look at the returns that we're getting there versus reallocating to a development project or to an infrastructure project, we might be able to get 2x the return. So that's the kind of thought process we're going through at the moment.

Just kind of wondering how you do that in the next 2 years, when you're obviously building Waterfront, you're building Atlassian, you're potentially building 60 columns. Do you have multibillion-dollar asset sales plan? Is that...

I think it's the key to date, so all those developments are funded today. We have capital partners on some of them as well. And despite the market being challenging, what is really important is we are building the next generation of products. So -- as I said to the team, I was up in Asia a month or so ago. And for the first time in 2.5 years, I had someone that said, I'm under rate office. I can only buy sort of 6 star, and I said, "Well, maybe I've got the product for you and at the right time, I'll take it up there. And hopefully, they'll come and join us.

Darren, [indiscernible] coming from Jefferies. Just on from Jones' question. You said in the preso, which is good preso, no more than 50% of it is in office. You got several burning development in premium, which is great product, which will increase that. So it looks like you have to sell several billion to see how you get there will be partly from sales and then growing the other asset classes? Or what's sort of mix do you think...

They could be in a combination of both. But Jonathan or Ross, do you want to make some comments on that?

I'm happy to answer. I mean, I think it's going to take some time, right? So it's a medium-term target. I think the exact wording there was over time. If you think about the past few years, we've sold, I think, $1 billion to $1.5 billion of offers per annum. So if you sort of utilize as a run rate over time and assume it's recycled into other sectors.

And also offset the asset sales with some new asset classes or growth there is. And then, Darren, I think when you joined several years, one of the longest-serving CEOs in the sector, you wanted to be at the Westfield of office, I think you said at the time. You've done a very good job with CPA originally, but now I think you can in that real asset. Is that sort of mission that you want to get more better risk-adjusted returns through the platform with ROE giving you real assets?

I think we've set up an agile, flexible platform, and you've got to move with the times like if Coke just stuck distributary drinks, that would be dead by now. So the successful true businesses that I look at over many years are ones that are flexible and will move with the trends. And so if we just stuck to being office, yes, we would probably be taken over in the next couple of years. and pretend to be terrible. What we're setting us up for growth into the future, and I think I hope we look back in time and see what we've done over the last 10 years is going to set up a platform that's going to be sustainable and create amazing returns for those who are back this business over the coming decade.

Rebecca Parker from Bank of America. You were talking to your funds, I mean, how you had achieved a reduced overall fee structure for investors. Just wondering what your future plans are with phase there and how easy it is to maybe increase those phase?

I think I'll make a couple of comments, and I'll flick over to Deb. So I think it's -- undoubtedly, there's been a lot of pressure on fees right throughout the industry and not just real assets, equities, I think some people are doing some stuff for almost free at the moment. I think there's a couple of points here. First of all, you've got to be hyperefficient in your platform. And I suppose we've spent the money to run efficiently. You've got to have scale in your funds. Like -- and you've got to have an established business. Some people are getting into funds management because it's the sexy thing to do. We've done this for 30 years. We don't do it for love. We do it to make money for our investors that support us, a, as customers on the platform and be that those and invest in the platform. So some people said, look, I'll manage your money. They're not making any money. They haven't got the structures. They haven't got the sustainability teams. They haven't got the finance teams. They haven't got the hyperefficient platform to push the button and spit out of the reports. Like this is a scale business. And those of you that are in equity businesses now, you need scale to actually run these businesses profitably. Then when it comes to fees, you've also got to say, no, that there's a certain level of fees that you that's not going to do the business for. The clients that invest in your platform have to value all the skills and expertise that we spoke about today. If they don't value that, they'll go anywhere and they will just go for the lowest fee and good luck, hopefully, they're paying for the returns. Deb?

Darren is completely correct that scalability.

Deb never said that, by the way.

I'm saying it today, they go on record. He's completely correct on this point. The scalability is what's important. So when we -- the case study we had there, when you add $5 billion because the fees are layered or tranched, the more -- the size and scale of that fund means overall, you're always delivering a discount or a lower fee overall for unitholders, but I think the key thing here is really not taking the IMF in its isolation. It's the modernization of the terms and conditions that are associated with the funds. We've got a lot of very old long-dated funds that have been around for a long time, where they are actual constitutions, fee schedules, those things have not been modernized. And a lot of the investors are rolling up against that and saying, come on, where are you up to? I think what we do very well is we constantly look at where the market's at. What is the appropriate governance model, what is the appropriate fee model and making sure that, that component of our funds is really relevant to the investors because that's the piece that they're really looking at when doing due diligence on putting another dollar out the door.

James Druce from CLSA. I was wondering if you could get a bit of a taste for some of the new product lines and verticals that you're currently envisaging?

Jonathan, do you want to talk to that? Deb, Ross?

Yes, sure. I mean, I'll take sort of first half and then I think others can add. I mean, I think we sort of laid out some criteria there on how we think about those new segments. In terms of some specific things within the platform, so a student accommodation something that is new. We do have exposure to build to rent through the funds platform as well in some of our large retail sites. So that's definitely an interesting opportunity. Obviously, industrial was walked through in terms of very large strong dynamics behind that sector, great platform and significant development exposure and experience as Ross has touched on. And opportunistic and credit. I think it was discussed in the presentation, we have launched our second in the series, really leverages the overall platform and sort of a product for this times as well.

So if you consider the different component parts of the Funds Management business, where you've got your pooled funds, so our diversified fund is what it says on the sticker, it's diversified and it will continue to diversify the asset classes that it's invested in. It's sort of next 2 areas will include that residential component to retail and health care. So they're both part of its investment universe. When we look at the joint ventures, it needs to be of size and scale. So Ross's example of Jandakot, how -- the size and scale of something like that means we can potentially either look at new sectors or new opportunities to start a fund. So not all funds are equal, if that makes sense. And we will look at opportunities for joint ventures that will work across a number of those themes. But DREP and -- or the sorry, the opportunity strategy itself is diversified. So even on a credit or equity perspective, it's looking at deals that are there, it has done deals in the residential space on both sides. It has done industrial, health care, residential and office, but taking different lenses to them. And then the other side for that -- for DREP is deal size. So we'll look at bigger chunkier deals in joint ventures, but we'll look at some smaller ticket size style deals from really across any sector for DREP for that opportunity strategy.

And maybe one follow-up, if I may. Can we get a comment on some of the regulatory changes we've seen with taxation in relation to stamp duty in Victoria and New South Wales as well as sort of absentee landlord taxes, how that might affect flows in the funds management industry?

Without going into specifics, the vast majority of those changes are not good from an underwrite perspective. So if you're an offshore investor coming into almost every jurisdiction here in Australia at the moment, you are going to have to be taking a hit effectively in the underwrite compared to an Australian investor, and that particularly in a market like we're in today is a meaningful reason to not invest. And one of the things that we have been able as Australians, all Australian fund managers to go offshore and talk about has been the transparency and consistency of our taxation, our regulatory environments. And the more that, that keeps occurring, the less we can tell that story. So it does create a lot of apprehension, I think, for investors coming into the country. If you want to talk anything specific, but that would be a general comment on how it's impacting.

No, I think that's a fair comment. Obviously, impacts depend on particular sector. You're in the type of assets, but I think that's a very fair assessment from Deb.

I've got one, this is one answer. It's one word answer. Just in terms of how we should think about the co-investment stake moving from the ratio of 2.1:1 to 5:1 over time from funds management capital to balance sheet capital. Are we looking at sort of 10% co-investment stakes or 5% co-investment stakes in your funds going forward? Or what's the what's the number we should stick in our model.

Jonathan, you've got a view there. I mean it's interesting. DWPF, we don't have any stake in that one as you're aware, but we co-invest in some assets together. So it's not its below or near of that, but I'd probably overall put it, call it, 5% as a starting point because that will cover the ones we don't have any equity or reduced equity.

Lauren Berry, Morgan Stanley. Just on the 5:1 target. If you put that, considering your current balance sheet and external funds management, it implies you're going to get another close to $50 billion. That seems like a lot by 2030. So I was just wondering if you're considering possibly a more wholesale reduction in your balance sheet rather than simply growing at all externally?

I think there's some simple math there, but do you want to do that math, Jonathan, at a high level?

I think the general math there is right, Lauren. I mean, from a growth rate perspective, so I think you'll find that the growth rate that, that implies is roughly the same as what it's been historically, but obviously, the numbers are a lot larger and the ours is a lot larger. But against that, the platform is broader. We've got access to a broader range of capital and significantly enhanced capital raising sort of resources and contacts as well.

So we expect the balance sheet to stay the same size. But then you've got developments coming through. You've got a lot more buckets than what we've had previously in sectors that have got good tailwinds behind them.

And you've given a lot of color.

Sorry, sorry, just a bit more color. And that does not anticipate a lot happening in the next 12 to 18 months while the markets normalize.

Okay. You've given a lot of color around potential deployment opportunities, but are you able to talk about the other side, which is the capital, what segments of the market are people actually looking to deploy into from the capital point of view?

I think there's a couple of answers to that, and then I'll pass across to the guys. First of all, this is one of the most challenging environments I think I've ever seen in 30 years for capital raising. And you only have to look at the Blackstone numbers that came out last quarter. They are the best in the world, and they're struggling to hit targets. So I think everyone that's in this space knows it's very difficult. But the power of the platform today is there are still channels open. Like you saw the guys raise $200 million, we could have raised more if you had more available for the airport fund, the opportunistic strategy is raising capital. So that goes to the diversification of the platform. What we need to see, not just Texas but the industry is a stabilization of interest rates. What's going on in the Middle East right now is not helping the situation at all because I'm an investor, and I'm like, what the hell is going on now. We've got inflation here. We've got ores there. They've got Ukraine here. Let's sit, we'll see you next year. So I think at a 50,000-foot level, let's get through the next year, hopefully, everything stabilizes. Interest rates need to stabilize. Return hurdles then stabilize on the back of that and everyone gets back to work because we've got so many investors right across this platform coming down, doing all their due diligence, know the platform, know the assets. We're taking meetings, I mean, Ross and Michael Bessell. We've spent last week through Canada and the U.S., they're off to the Middle East and Europe via Asia, like we are getting more meetings than we have ever had before as a platform. People like the assets we've got, they want to deploy. They just want to know at what price they should deploy. So I think in any modeling, whoever you are, this year is going to be very challenging. I'd love to sit there and say it's going to be a record year. It's not going to be. It might be a record low year for everybody at the industry. It's not going to be a record high year. Things should start to normalize. I think I said at the half year and things have probably got worse since then. That middle to end of '24, I think I'm still standing by, let's say, Q3 calendar year '24. And I'm hoping by then all this war situation has stabilized itself or finalize the type and interest rates have sort of peaked down there and thereabouts.

And last one for me. We hear a lot about, I guess, some of the more office-based funds selling assets to improve their balance sheet. Are we able to talk a bit more about what it looks like in infrastructure land, what balance sheets look like? And if there's any pressure to sell any assets, please?

Michael?

I'll have a crack first. So yes, what we're seeing in the marketplace in Australia at the moment is a lot of superannuation funds that have been merging are funding that they're cleaning up their portfolios because they're ending up with these 50 assets in their portfolio. And as they get larger, they're offloading the smaller ones. So a lot of the transactions that are in the market at the moment are a function of that. So just rationalization. That's one driver. It's not so much on cleaning up because it's all mainly in unlisted form, these are pension funds that have long liabilities are going have to pay out for a while, but they're just cleaning up their portfolios. Another key driver at the moment is back on your question about where are investors allocating capital at the moment, what sort of risk return profile they're looking for. Some of the government regulations, federal governments brought in around superannuation fund performance measures has been pushing domestic superfunds up the risk curve a little bit. And so we're then seeing that that's playing out in them slightly repositioning their portfolios to offline some of their core holdings, core infrastructure holdings and taking a slightly more of a core plus approach. And I think that's one of the other drivers. And so we've seen more appetite from offshore players coming into the market to buy core infrastructure as the domestics have been selling. So it's not been about cleaning up balance sheets at all. The sector -- the assets are still performing very well. And I know for many of you here, a real estate -- got more of a real estate focus. Infrastructure is much more highly geared than the real estate investments, but it's always investment grade and it's also sort of things that we're investing in, which means the solid cash flows are still able to pay that. So we're not seeing distressed sales at all. It's all just strategic reasons for selling.

It's really interesting. One of the assets we have on the Platform Reliance Rail. You've got not only the sort of return government guarantee, that's the rolling stock that Michael spoke about before, but the interest rate components are also guaranteed. And so you've got -- I think it's a 20-year return, 9.2% IRR for 22 years fixed. So very low risk. And that's the difference, I suppose, between some of the real estate and infrastructure. You do have some of these long-dated locked up debt.

Certainly just a final point on that. If we speak to banks and we speak to a lot of banks across what is now a very large platform, infrastructure is a real area of interest. So there has been very strong demand to lend in that space, and it's very much the case at the moment.

Any questions on the phone?

Tom here from UBS. I'd just be interested in following on from those comments around capital allocation to infrastructure and whether you see more deployment of the Dexus balance sheet to co-invest alongside your infrastructure funds and seed new fund raisings?

I think there's a big gap in the Australian listed market for infrastructure product. And so if Dexus ends up with more infrastructure on its balanced over time, I think that's a good thing from investors becoming more and more interested in our stock.

And then just maybe following on around the capital side, maybe one for Key. Just thinking about leverage, you've got pretty clear balance sheet leverage targets? Do you start considering look through leverage? Or how do you think about that? And also the payout ratio as you grow third party funds management?

It's a good question. I mean, Dexus has always quoted look-through leverage targets. We've been quite clear about that. In terms of infrastructure, yes, sometimes there is debt within those structures. And so it's something that we turn our mind to. I think to the point that Darren made, it's a question of leverage, but it's also a question of security of cash flows at the asset level. And so we take all of those factors into account when we're thinking about our gearing position. Still very conservatively geared at the moment, sub-30% at the full year. And in terms of payout ratio, it's always been a factor of the strategy of the business, something that we consider on a regular basis, but we're very comfortable with the payout ratio at the moment. To the extent that changes, we would update the market accordingly.

Yes. Thanks, Darren. I was wondering if you could just comment on, I guess, the operating margin for the funds business and how you're thinking about that going forward in the context of potentially some synergies between the Collimate platform and the existing Dexus Funds platform, please?

Yes. So I think as we said when we first bought it, the Collimate business was on a lower margin than the Dexus business. We've targeted 60% to 65%. That remains in place. That's what we'll be targeting. And I think we'd probably target a 50% margin over time, team. Is that what we're saying here?

Yes. I think over time, I mean, we've got a bit to work through in terms of the integration, but it is quite well progressed. To Darren's point, it did start that business with a lower margin than what we would expect from a Dexus perspective. So once we complete the integration, we would expect that to move towards what we've historically delivered for Dexus margin. But as the business continues to grow, we would expect that there is quite a good prospect for those margins to improve.

I mean, the good thing is the ARD system is all in integration is probably mail just ahead of program touch ahead. Yes. So look, we're well and truly on track to get that done this year. So I expect as we get into '25, things will start to improve.

Hi team, it's David from Macquarie. Just a quick question on infrastructure platform. So you flagged $15 billion of near-term opportunities. And we've had a few other groups speak about venturing into infrastructure. How are you seeing competition for products at the moment and from the capital side as well?

Yes. I think just before I said, so we're not venturing into it because these guys have been doing it for 30 years. So I wouldn't want to start organically. It's one thing we looked at. We looked at the hasting stuff. We looked at starting organically. It's really hard to find teams with the kind of depth and experience that we've been securing here, but it's also difficult to get some of the assets that are sitting on the platform. So good luck starting one organically today, but there is some opportunities out there. But guys, do you want to make some comments?

So when you're talking about competition, there's probably a couple of different angles there. One is competition for assets. So I mentioned before, a lot of what we do is in the core, core plus space, and we are seeing a lot of domestic superfunds vacating that area. So I think a lot of the opportunities are in the market now may not be as competitively bid as you might otherwise have thought because they just aren't -- this is not the appetite from some of the domestic superfunds. So then the challenge is being able to raise capital in the funds that you're actually managing. And that means -- and sources of funds that you're managing. And I think what we've -- our strategy is very much revolving around now having multiple products. So when we bid for an asset, we're trying to draw down capital from a number of different sources. And a lot of those that we think that there's less competition for fundraising in than other spaces. And particularly, as we've seen more and more of the listed companies be delisted that invested in infrastructure. That superannuation, self-managed superannuation, high net worth, wholesale market is becoming quite attractive for us. And hence, that's one of the reasons why we've gone out and raised capital targeting that particular space. And I think what Dexus has done really well in the last few years has broaden that client base and client mix and that enables us to draw down on those sort of funds to do that sort of thing. The other area is bringing offshore capital into the market here. And this is still seen [indiscernible] in North America last week. This is still seen as a very attractive market despite tax changes and things like that. But it's got a very high population growth rate by comparison to the other OECD countries. The regulatory environment is very stable. And so it is seen as a good destination for money. And Dexus already has a big platform of offshore clients that increasingly, we're seeing allocate real estate and infrastructure out of the same pool of capital. And so that's been really important in how we've been cross-selling. So I don't see as much competition. What we're really competing against in some respects is allocations to high areas, and we're seeing that with rates high and fixed interest investments quite attractive.

Are there any questions on the line?

No phone questions.

Perfect. All right, guys, I think that any last questions, no. So I think that ends the formal part of today's presentation. Thanks for your time today. Now who's leading the tour? Ross. The pied piper. So everyone can follow Ross and Crystal. Down to Atlassian. Okay. He's right with the real instructions.