CEO's Report Continued
Implementing our capital management strategy
DEXUS continued to apply an active and prudent approach to capital management during the year undertaking the following initiatives:
- Refinanced and secured new debt facilities totalling $860 million, resulting in no debt maturing until February 2010
- Revised our distribution policy to adopt a payout ratio of 70% of FFO, with the balance retained for operational and leasing capex
- Successfully completed two equity raisings totalling over $1 billion in December 2008 and April 2009, each receiving good investor support
- Created a joint venture with Cbus Property who acquired a one-third interest in 1 Bligh Street, realising $60 million and reducing the Group’s future development exposure by $210 million
- Commenced a $600 million select property sale program, the proceeds of which will be used to repay debt, improve liquidity, reduce gearing and further strengthen the balance sheet
At 30 June our undrawn debt facilities exceeded $1.4 billion. Subsequent to the reporting period, in July 2009 we issued $160 million of five year medium-term notes, which further improved DEXUS’s liquidity position, diversified funding sources and lengthened debt duration.
DEXUS continues to maintain a prudent financial risk management profile, with 90% of interest rate risk hedged as at 30 June 2009, with the weighted average duration of these hedges averaging over six years. Foreign earnings are conservatively hedged for periods up to five years.
In addition, where practical, we continued to match a material proportion of the currency of our debt with the currency of our investments (90% as at 30 June 2009). This policy provides substantial protection to security holders from adverse movements in net tangible assets due to currency fluctuations.
Together these initiatives have enabled DEXUS to maintain a prudent gearing level of 31.2%, well within our target of below 40%. We continue to maintain a strong credit rating from Standard & Poor’s (S&P) of BBB+ with a stable outlook.