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DEXUS Interim / Quarterly Report 2007
64807_rns_2007-03-15_3b31c7cd-5c81-4735-bb5d-a0dcc085e3c8.pdf
Interim / Quarterly Report
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DB RRFFF
Managed in partnership with Deutsche Bank $\boxdot$
DB RREEF Funds Management Limited ABN 24 060 920 783 Australian Financial Services Licence Holder
Level 9, 343 George Street Sydney NSW 2000
PO Box R1822 Royal Exchange NSW 1225
Telephone 61 2 9017 1100 Direct 61 2 9017 1266 Facsimile 61 2 9017 1110
Email: [email protected]
Dear Sir / Madam
DB RREEF Trust (ASX: DRT) - Half year report 2006
DB RREEF Funds Management Limited, as responsible entity for DB RREEF Trust (DRT), will mail the half year report to security holders today and provides a copy to the Australian Stock Exchange.
For further information, please contact
Australian Stock Exchange Limited
| Victor Hoog Antink | CEO. | $(02)$ 9017 1130 |
|---|---|---|
| Ben Lehmann | Fund Manager | $(02)$ 9017 1266 |
| Karol O'Reilly | Investor enquiries | $(03)$ 8611 2930 |
Yours sincerely
Tanya Cox Company Secretary
16 March 2007
The Manager
20 Bridge Street
Sydney NSW 2000
DB RREEF Trust
half year report 2006
Meneged in partnership with Deutsche Bank $Z\hspace{-0.1cm}Z$
contents
key results
chief executive officer's report
LAM PLEASED TO PRESENT THE HALF YEAR REPORT TO SECURITY HOUDERS OF DR RREEF TRUST FOR THE SIX MONTHS. TO 31 DECEMBER 2006
ACQUISITIONS IN THE HALF YEAR PERIOD INCLUDED. LAND IN AUSTRALIA FOR DEVELOPMENT OPPORTUNITIES AND INDUSTRIAL PROPERTIES IN THE US. FRANCE AND GERMANY.
In this period, we continued to deliver on our objective to enhance security holder. value with a strong performance across. the business.
portfolio performance
delivering growth
Total income was \$728 million, with profit attributable to security holders of \$510 million. DB RREEF Trust will pay distributions for the half year of \$159.6 million. This represents 5.60 cents per security compared to 5.45 cents for the same period last year ~ an increase of 2.8 percent.
At 31 December 2006, total assets were \$9 billion. Net tangible assets increased during the half year by 9.7 percent to \$4.7 billion, representing \$1.65 per stapled security.
DB RREEF Funds Management Limited manages approximately \$13.0 billion of assets, including \$4.3 billion managed on behalf of third party clients.
strong fundamentals.
Our continued focus has been to enhance and maintain our high quality portfolio in Australia and overseas, undertake quality building refurbishments and concentrate on development opportunities, thereby attracting and retaining quality tenants. Key fundamentals of the portfolio have remained strong throughout the half year.
During the period, DB RREEF Trust leased approximately 220,000 square metres of space across the portfolio, which resulted in an overall occupancy rate of 95.7 percent. and an average lease duration of 5.3 years. The portfolio value increased by \$770 million. driven primarily by strong acquisition activity. in the period of over \$400 million and revaluations contributing a further \$359 million.
domestic and international expansion.
Acquisitions in the half year included land in Australia for development opportunities and industrial properties in the US. France and Germany. In addition, we have secured approximately \$627 million of future commitments in the USA, Canada and Europe which includes the Whirlbool international investment program, announced in August 2006.
Together these acquisitions build on DB RREEF Trust's strategy for international expansion, and provide investors with exposure to quality international assets. diversified across geographic regions. These acquisitions progress us further fowards our target international asset mix of 35 to 50 percent, and demonstrate the effectiveness of our strategic relationship with RREEF in our international expansion plans.
We have delivered on our strategy to enhance our development pipeline with eight development projects underway in the industrial, office and retail portfolios. with an estimated cost of \$459 million. Total developments including future pipeline has an estimated value on completion of morethan \$2.2 billion.
diversification
Our portfolio is diversified across office. industrial and retail sectors in Australia and internationally, as shown in the graph.
portfolio diversification as at 31 december 2006
| 鵽 | - Anstralia & N7 office | 48% |
|---|---|---|
| 豂 | - Australian retail | 12% |
| 除。 | - Australian industrial | 20% |
| _ | - ES industrial | 17% |
| 38 French industrial | 1% | |
| 縣 German industrial | つる | |
1 Germany excludes the property located in Düsseldorf which is contracted to be purchased in May 2007.
- 2 US excludes the Whirlpool International Investment Program, Summit Oaks and 20 percent minority. interest in joint venture assets.
-
- Office includes car parks.
sector performance
OFFICE - ENHANCING OUR OUALITY PORTFOLIO
Australia/New Zealand
The Australia/New Zealand office portfolio consists of 24 office buildings and five car parks of which 86 percent are premium and A-grade. The portfolio contributes \$124.9 million of net property income to the DB RREEF Trust or approximately 46.6 percent of total property income for the half year.
As a result of strong leasing activity throughout the half year, our office sector occupancy rate remains high at 97.3 percent (compared to the average market occupancy rate of 93.6 percent1) and the average lease duration increased to 6.4 years, compared to 6.3 years at 30 June 2006.
The Australia/New Zealand office portfolio is valued at \$3.9 billion, following revaluations of \$286 million.
We continue to actively manage our portfolio and since year end we have sold a 50 percent interest in The Zenith, Chatswood, NSW, for \$126.25 million, with proceeds being used to fund future opportunities.
1 Source: Jones Lang LaSatie, June 2006
DB RREEF Trust is currently progressing four development opportunities with an estimated value on completion of \$900 million. These include:
- a an office fower at Bent Street, Sydney, NSW, for which we are seeking tenant pre-commitments. A Stage 2 Development Application is due to be lodged in the second quarter 2007
- a a 20,400 square metre office fower at 105 Phillip Street, Parramatta, NSW
- * an office fower on the existing car park site at Charlotte Street, Brisbane, QLD, for 42,000 square metres
- a an extension to the existing lower five levels of Victoria Cross, North Sydney, NSW, creating an additional 5,000 square metres
Artist's impression of the proposed office tower at Bent Street, Sydney, NSW
australian/new zealand office lease expiry profile as at 31 december 2006.
sector performance (continued)
RETAIL - SECURE INCOME STREAMS
Australia
The Australian retail portfolio consists of a 50 percent interest in six shopping. centres providing net property income of approximately \$27.9 million to DB RREEF. Trust or approximately 10.4 percent of total property income for the half year to 31 December 2006.
Moving annual turnover for the 12 months to 31 December 2006 is up eight percent to \$1.58 billion over the same period last year.
The portfolio's occupancy remains stable at 99.7 percent and the average lease. duration is 5.3 years.
In the retail sector, we continue to maximise value by working in partnership with Westfield to create an optimum shopping environment. for our tenants and, most importantly, our customers.
Throughout the half year, revaluations were completed on the retail portfolio which provided an increase in value of \$64 million. (seven percent).
Works have commenced on two development projects - North Lakes Shopping Centre, QLD, and Plenty Valley Shopping Centre, VIC. Combined the cost of our interest in these developments is approximately \$190 million. and will add a total 66,600 square metres of net lettable area to the portfolio.
Westfield West Lakes Shopping Centre, SA
australian retail lease expiry profile as at 31 december 2006.
Westfield Mount Druitt, NSW
sector performance (continued)
INDUSTRIAL - CONTINUED FOCUS ON PORTFOLIO GROWTH AND DEVELOPMENT
Australia
The Australian industrial portfolio was valued at \$1.7 billion at 31 December 2006. an increase of \$118 million or 7.5 percent. from 30 June 2006.
The portfolio consists of 41 industrial properties and contributed \$56.6 million. of net property income to DB RREEF Trust or approximately 21.1 percent of total net property income for the half year.
Occupancy in the portfolio is 97.2 percent down from 99.2 percent at 30 June 2006. due to a number of anticipated vacancies. arising. The average lease duration remains steady at 4.8 years.
We have sold two properties - Evans Road, Salisbury, QLD, in August 2006, and 706 Mowbray Road, Lane Cove, NSW, in January 2007 - for a total of \$53.3 million.
During the last six months, DB RREEF Trust has secured two significant development sites. a 50 percent interest in 144 Wicks Road, North Ryde, NSW, and the other adjoining the DB RREEF Industrial Estate in Dohertys Road, Laverton North, VIC.
These acquisitions are consistent with the industrial portfolio's overall objective to increase value to security holders through a strong development pipeline.
A number of developments with an estimated end value on completion of \$56.7 million have been completed at four key sites:
- ® DB RREEF Industrial Estate, Laverton North, VIC
- ® Pound Read, Dandenong, VIC
- Kings Park Industrial Estate, Marayong, NSW
- * Axxess Corporate Park Estate, Mt Waverley, VIC
In addition, two development projects with an estimated cost of \$132 million are progressing to accommodate the tenancy requirements of the Coles Group and Fosters Australia tenancies at the DB RREEF Industrial Estate in Laverton North.
Axxess Corporate Park, Mount Waverley, VIC
australian industrial leasing expiry profile as at 31 december 2006
sector performance (continued)
INDUSTRIAL - CONTINUED FOCUS ON PORTFOLIO GROWTH AND DEVELOPMENT
North America
The North American industrial portfolio of 102 properties is valued at approximately \$1.4 billion (based on 80 percent ownership) of joint venture assets). The portfoliocontributes \$54.8 million of net property. income which represents 20.4 bercent of the total net property income attributed to DB RREEF Trust in the half year.
Occupancy increased to 94.1 percent in the half year with the average lease duration being 3.3 years.
In December 2006, DB RREEF Trust secured a 92 percent interest in a suburban. office development site in Summit Oaks, in the strong growth market of Valencia, California. Early works have commenced for the development of a 139,392 square foot, five-storey, office building with a separate car bark. The estimated cost of the development will be \$57 million. This complements other developments within the portfolio and will further enhance the quality and contribution. the North American portfolio will make to DB RREEF Trust.
The \$24 million Turnpike Distribution Centre development in Florida, is now fully leased. with practical completion taking place in January 2007. Works are continuing on the office development at Atlantic Corporate Park, Virginia, with completion due in the first haff of 2008.
Under the Whirlpool international investment program the first distribution centre in Orlando, Florida, has been completed with an estimated value on completion of \$41 million. Whirtpool has begun its fit-out and it is anticipated that DB RREEF Trust will acquire the facility by April 2007. A further site has been secured in Toronto, Canada, with construction expected to be complete by December 2007, DB RREEF Trust expects to acquire the property in the first half of 2008. Additional sites for the Whirlpool international investment program are actively being sought.
During the half year, DB RREEF Trust sold a new core asset. Oak Park Business Centre. Minneapolis, USA, for \$4.0 million.
Yown Park Drive Atlanta, USA
north american industrial lease expiry profile as at 31 december 2006.
sector performance (continued)
INDUSTRIAL - CONTINUED FOCUS ON PORTFOLIO GROWTH AND DEVELOPMENT
Europe
In the half year to 31 December 2006, DB RREEF Trust entered the European property market and acquired two portfolios. When construction is complete, these 19 industrial properties have a combined book value of \$339 million.
In August 2006, a French portfolio was acquired for a total cost of \$119 million. The portfolio consists of six logistics properties in Paris and Lyon - major logistics warehouse markets in France. During the half year, the French portfolio contributed \$3.9 million of net property income, representing 1.5 percent of the total net property income attributed to DB RREEF Trust. The portfolio is 87.6 percent occupied and its average lease duration is 2.7 years.
On 31 December 2006, DB RREEF Trust secured the investment of 14 logistics properties located across Germany for \$220 million, including costs. The German portfolio includes a \$27.1 million development profect in Düsseldorf which will be acquired, upon completion, in May 2007. At 31 December 2006, the occupancy level for the German portfolio was 94.1 percent and the average lease duration was 6.0 years.
Combined, this European portfolio represents. approximately four percent of DB RREEF Trust's direct property portfolio. The average occupancy rate is 92.2 percent with an average lease duration of 4.9 years.
european industrial lease expiry profile as at 31 december 2006
THIRD PARTY FHADS HAIDER MANAGEMENT NOW TOTAL \$4.3 BB HON AN INCREASE OF \$369 MB HON SINCE BINE 2006. IN SUMMARY, DURING THE HALF YEAR OUR HIGH QUALITY. PORTEOUG HAS PERFORMED WELL AND WE ARE WORKING. PROACTWELY TO MAXIMISE ITS FUTURE POTENTIAL
third party funds
delivering growth
Third party funds under management now total \$4.3 billion, an increase of \$369 million since June 2006.
The business, comprising wholesale funds, mandates and syndicates, has performed well against the external benchmarks and has grown through acquisition, development and revaluation. During the half year we have significantly increased our resources servicing this area particularly in respect of retail asset management where we manage 15 retail properties of which six are expected to be redeveloped over the next two years.
During the half year, following the approval of wholesale investors, we completed the fast important step in the stapling proposal approved by security holders in 2004, by acquiring the Responsible Entity managing the wholesale fund from Deutsche Bank. As part of the change of ownership, the Fund has been renamed the DB RREEF Wholesale Property Fund.
active capital management
DB RREEF Trust continues to maintain and enhance its strong balance sheet, which is supported by a Standard and Poors (S&P). long term corporate credit rating of BBB+.
DB RREEF Trust's overall level of debt is \$3.5 billion, which represents gearing of 38.9 percent, as measured by interest bearing debt to total assets (both net of cash).
During the half year, DB RREEF Trust further diversified its sources of debt by successfully completing two medium term notes (MTNs) issues into the Australian debt capital market (for a combined total of \$450 million). Both issues received a strong response. from investors and were increased from the original offer size.
DB RREEF Trust continues to maintain a prudent financial risk management profile. A high proportion of DB RREEF Trust's forecast interest bearing exposure is hedged with a weighted average duration. of approximately six years. In addition, DB RREEF Trust's foreign exchange exposure is conservatively hedged for up to five years.
sustainability
At DB RREEF we are committed to the long term integration of sustainability practices. throughout our business and the period to 31 December 2006 has been no exception. The sustainability projects highlighted in the 2006 Annual Report are now underway and on track for completion in 2007.
Consistent with our commitment to sustainable and economically viable measures, we have committed to buyapproximately 15 percent of the electricity. used in our commercial properties in NSW, VIC, QLD and ACT from renewable sources. DB RREEF estimates this policy will cut around 15,000 tonnes of carbon dioxide. a vear, the equivalent of taking more than 3.750 cars off the road each year.
outlook
In summary, during the half year our higheaality portfolio has berformed well and we are working proactively to maximise its future. potential. We are increasing our investments with \$1 billion of acquisitions and commitments made in the year so far, and have created a development pipeline which will result in another \$2.2 billion of property being available for the group in the future.
We intend to pay a full year distribution of 11.3 cents per stapled security.
Victor P Hoog Antink Chief Executive Officer
26 February 2007
financial reports
THE FOLLOWING FINANCIAL STATEMENTS FOR DB RREEF TRUST ARE A SUMMARY OF THE INCOME STATEMENT, BALANCE SHEET, STATEMENT OF CHANGES IN EQUITY AND CONSOLIDATED CASH FLOW STATEMENT.
The full financial statements, together with the notes to the financial statements and the Directors' Report can be obtained from the DB RREEF Trust website at www.dbrreef.com or by contacting the Infoline on 1800 819 675.
income statement
| 31 December 2006 31 December 2005 | ||
|---|---|---|
| (\$'000) | \$(\$'000) | |
| Property revenue | 348,286 | 326,012 |
| Interest revenue | -4.865 | 4.056 |
| Contribution from equity accounted investments | 29.564 | 8.749 |
| Property revaluations | 340.904 | 184.085 |
| Derivatives gains | -152 | 5.440 |
| Other income | 4.705 | 3.380 |
| Total income | 728,476 | 531,722 |
| Financing costs | (96,044) | (80.080) |
| Impairment of goodwill | (3.267) | |
| Other expenses | (109.291) | (94.358) |
| Total expenses | (205, 335) | (177,705) |
| Profit before tax | 523,141 | 354,017 |
| Income and withholding tax expense | (3.839) | (7,926) |
| Other minority interests (including RENTS) | (8,820) | (10.484) |
| Net profit to stapled security holders | 510,482 | 335,607 |
balance sheet
| 31 December 2006 | 30 June 2006 (\$'000) |
|
|---|---|---|
| $($ \$'000) | ||
| Cash and receivables | 108.051 | 141.682 |
| Investment properties | 8.737.565 | 7.979.058 |
| Other (including derivative financial instruments) | 184.407 | 166.798 |
| Total assets | 9.030.023 | 8,287,538 |
| Payables and provisions | 279.511 | 256.424 |
| Interest bearing liabilities | 3.513.663 | 3.195.047 |
| Other (including derivative financial instruments) | 110.283 | 120.554 |
| Total liabilities | 3,903,457 | 3,572,025 |
| Less minority interest | 422.592 | 427.851 |
| Net assets (after minority interest) | 4,703,974 | 4.287.662 |
statement of changes in equity
| ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, | ||
|---|---|---|
| 31 December 2006 - 31 December 2005 | ||
| Total equity at the beginning of the half year | 4.715.513 | 3.865.713 |
| Opening AIFRS adjustments | 2.5 | 3,443 |
| Exchange differences on translation of | ||
| foreign operations | (164) | 3 783 |
| Net profit | 519.302 | 346.091 |
| Contribution of equity | 71.680 | 45.407 |
| Distributions provided for or paid | (159.646) | (150.735) |
| Minority interest movements during the half year | (20.119) | (2.350) |
| equity at the end of the half year | 5.126.566 |
financial reports (continued)
consolidated cash flow
| 31 December 2006 31 December 2005 | ||
|---|---|---|
| (\$'000) | (\$'000) | |
| Net cash inflow from operating activities | 144.425 | 149.465 |
| Net cash outflow from investing activities | (492.709) | (296.034) |
| Net cash inflow from financing activities | 312.426 | 342.230 |
| Net increase/(decrease) in cash and | ||
| cash equivalents | (35.858) | (4.339) |
| Cash and cash equivalents at the beginning of the period |
106.428 | 68 959 |
| Effects of exchange rate changes on cash and cash equivalents |
123 | 1 ZON 3 |
| Cash and cash equivalents at the end of the half year | 70.691 | 66.320 |
investor information
DB RRFFF Trust is listed on the Australian Stock Exchange (ASX). The ASX code is DRT.
Security holders wishing to trade their security. holding will need to use the services of a stockbroker or online broking facility to be able to trade their DB RRFFF Trust securities.
distribution payments
Distributions are paid for the six months to December and June each year. Security holders can receive their distribution by direct credit into their nominated bank account or receive additional DB RRFFF Trust securities via the distribution reinvestment plan.
Security holders wishing to change their method of payment should contact the DB RREEF Infoline on 1800 819 675.
annual tax statement
After the end of each financial year security holders will receive a fax statement. This statement summarises the distributions paid to you during the year and includes information. required to complete your tax return.
apportionment percentages
Apportionment percentages for DB RREEF Trust stapled securities since stapling can be found on the tax information page on our website at www.dbrreef.com or by contacting the Infoline on 1800 819 675.
enauiries
For englaries about DB RRFFF Trust. please call:
Infoline: 1800 819 675 Outside Australia +61 2 8280 7126 Or email: [email protected]
website
Information relating to the DB RREEF Trust can be found at www.dbrreef.com/drt
The website contains information on DB RREEF's products, property portfolio and corporate information. The site allows security holders access to their investment details. product reports and ASX announcements.
complaints handling
Any security holder wishing to lodge a complaint should do so in writing and ferward. it to DB RREEF Funds Management Limited at the address shown in the directory. DB RREEF Funds Management Limited is a member of Financial Industry Complaints. Service Limited (FICS), an independent dispute resolution scheme who may be. contacted at:
Financial Industry Complaints Services Limited PO Box 579 Collins Street West Melbourne VIC 8007
Phone: 1300 780 808 Facsimile +613 9621 2291 Email: [email protected] Website: www.fics.asn.au.
directory
DB RREEF Diversified Transf ARSN 089 324 541
DB RREEF Industrial Trust ARSN 090 879 137
DB RREEF Office Trust ARSN 090 768 531
DB RREEF Operations Trust ARSN 110 521 223
responsible entity
DB RREEF Funds Management Limited ABN 24 060 920 783
registered office of responsible entity
Level 9, 343 George Street Sydney NSW 2000
PO Box R1822 Royal Exchange Sydney NSW 1225
Phone: +61 2 9017 1100 Fax: +61 2 9017 1101
directors of the responsible entity
Christopher T Beare, Chair Elizabeth A Alexander AM Barry R Brownjohn Stewart F Ewen OAM Victor P Hoog Antink Charles B Leitner III (Alternate Andrew 3 Fay) Brian E Scullin
secretaries of the responsible entity
Tanya L Cox Bohn C Easy
investor enophies
Ernall: [email protected] Freecall: 1800 819 675 Phone: +61 2 9017 1330 Website: www.dbrreef.com
auditors
PricewaterhouseCoopers Chartered Accountants 201 Sussex Street Svdney NSW 2000
security registry
Eink Market Services Limited Level 12, 680 George Street Sydney NSW 2000
Locked Bag A14 Sydney South NSW 1235
Phone: +61 2 8280 7126 Freecall: 1800 819 675 Fax: +61 2 9287 0303 Eraail: [email protected] Website: www.linkmarketservices.com.au
الموارد والمحافظ فالمحافظ والمتحافظ والمحافر فالوجاء والمناور For enquiries regarding your holding you can either contact the Security Registry, or access your holding details via the web at www.dbrreef.com/drt and follow the links to the security registry page. Listed on the Australian Stock Exchange, [ASX Code: DRT. NE | WALCOMENTAL
InfoLine, 1800 819 675, Monday to Friday. between 8.30am and 5.30pm (Sydney time).
Lumley Centre, Auckland, NZ
