Getting real: Darren Steinberg takes Dexus through the cycle

Big developments, including the planned $2.1bn Waterfront Brisbane, are also a feature of the scaled up Dexus funds platform

Property company Dexus faces a tough environment. Rocky markets. Shifting values. And competition from rivals keen to spoil its landmark acquisition of the $28bn Collimate Capital local real estate and infrastructure platform.

But if CEO Darren Steinberg is worried it’s not showing. Sitting in his Australia Square office, the veteran property chief is right in his element.

He’s seen plenty of cycles since starting out in late 1980s Perth. But the transformation of Dexus over the last decade is where his big mark is being made.

The company has been a player in much of the corporate action over the last decade as it became a premiere property house and now looks to establish an unassailable position in funds management.

The initial battle for the Collimate empire has been won by Dexus, with it acquiring the management platform from the beleaguered AMP.

But the fight to keep it intact has only just begun, with a key vote next month on the prized $7.5bn AMP Capital Wholesale Office Fund.

Dexus is not to be underestimated. Positioning the company to make a lasting play for the Collimate operation has been a decade-long affair, which saw the company dramatically transformed.

The company’s $45.3bn property portfolio now spans $18.3bn of office and industrial properties, with a further $27bn of office, retail, industrial and healthcare assets in its funds wing. More is to come from the $17.8bn development pipeline.

Scale is only one element in getting to the table for Collimate. It’s also about the hard-edged team Steinberg has built as he has turned Dexus into a top operator across multiple sectors.

“We’ve been tilting towards real assets,” Steinberg says.

Dexus has been alive to the shift among its clients for years. “Our investor base is starting to allocate more and more to real assets, which, for the most part, is real estate and infrastructure,” he says.

And traditional boundaries are melting.

“We’ve also been noticing a bit of a blending of the asset classes over the last five years,” he says.

Major health projects – like the company’s North Shore Health Hub – have ”grey areas” where property and infrastructure overlap.

The move on Collimate will also take the company deep into student accommodation. And big investors have noticed.

“Since we’ve announced the transaction we’ve had parties come to us and talk about how can we get further invested into that space,” he says.

Dexus was already going down this path. It assembled a consortium which bought Perth’s Jandakot Airport for $1.3bn last year. The play was less about aviation than unlocking the industrial development play around the facility.

The Collimate deal will see the Dexus platform inherit a slice of Melbourne Airport.

“We’ve already started to have dialogue with the team at AMP and the other investors as to how we can help accelerate unlocking the real estate development around that asset,” Steinberg says.

Dexus chief executive Darren Steinberg. Picture: Britta Campion

Since joining Dexus in 2012, the CEO has pushed both growth and transformation of the group. His team worked to earn its stripes in funds management, which was already imbued in the company.

It worked to evolve its offering, first in offices, where it became a leader, then in industrial, retail, and a myriad of newer areas. Including infrastructure – finally achieved via the Collimate deal – was always going to take time.

“We’ve been waiting for the right team and the right cultural fit,” Steinberg says. And it is working at the coal face. “We’ve already started to raise money in one of the funds.”

Dexus appears to be pulling off a natural evolution which matches the changing nature of commercial property. But having deep resourcing is essential. “It is really important that whatever you decide to go into, that you have good capability,” he says. ”The capital will be attracted to the capability.”

Dexus has built up a hefty roster of senior executives across funds, development, property and newer asset classes as part of its internalised structure.

Steinberg says the company has evolved over the last decade. Office was bolstered with the 2014 takeover of the Commonwealth Property Office Fund and projects like 100 Mount St in North Sydney.

It moved decisively into logistics, becoming one of the most active developers in the field, and partnering with top global investors. Healthcare followed as did an expansion into listed funds with the purchase of APN.

The ambition for the next period is clear – and purposeful.

Dexus is shooting to be one of the key players in real assets in Australia and New Zealand.

“There’s a global trend for a fewer number of large managers that become more like one-stop solutions for clients,” Steinberg says. “We have the investment capability to drive outperformance, whether the market is going up or going down.”

The company will be one of a handful of property and real asset fund managers of scale in the country, crucial for getting opportunities in an increasingly competitive environment. That’s looking ahead. But it goes back to the company’s legacy when it was created out of a funds shop in 2004.

Steinberg says this is critical to the company‘s long record in running and governing pool funds as a steward of capital.

But it also matters on the ground.

“In volatile markets, it‘s the strong players with the balance sheets to support the business that will still be there,” he says. It’s a big switch from the ”easy money” of recent years.

“Everyone’s wanted to be a fund manager,” he says. “It’s not that easy.”

The Dexus model was already tested in the coronavirus crisis.

“What’s really become evident during the Covid period is the power of diversification.” Steinberg says the local market has caught up to offshore markets which have a more normalised spread of property asset classes.

“Having a diversified portfolio and diversified exposure is going to be a good thing moving forward.”

And is all about meeting investor requirements. Dexus is embedded across corporate Australia as a real estate provider and real assets are to follow.

The CEO is bullish about the opportunities. “Well be able to create opportunities for investors to deliver alpha,” he says.

Big developments, including the planned $2.1bn Waterfront Brisbane, are also a feature of the scaled up Dexus funds platform.

“Having multiple pools of capital enables you to share that risk to get to the really great projects, without any one source of capital having to take on too much risk,” Steinberg says.