‘Get in at the right time, you’ll outperform’: Steinberg exits Dexus

“The risk team and the operations teams were coming to me as CEO and saying, ‘can we let the people go home?’” says Steinberg.

“We were getting pieces of information, and at times quite irate tenants wanting to exit the buildings, but the police were telling us we couldn’t. That is something you’re just not trained for.”

On March 28, Steinberg steps down, handing over to chief investment officer, and long-term colleague, Ross Du Vernet, and bringing to a close two decades of high-profile commercial property leadership.

Before joining Dexus in March 2012, he was the managing director for property at Colonial First State, and before that the chief executive of Stockland’s shopping centre division.

He is also a former national president of the Property Council of Australia.

This week he took time out to give some advice to the Steinbergs of the future.

“One of the great successes we had, and it goes to the success of any company, is that we were able to attract a lot of very good talent, very early on, and they helped set out our strategies and we were then able to execute very, very well.”

Many of the core group are still at Dexus, including Du Vernet, Deborah Coakley, now chief executive for funds management, Stewart Hutcheon, executive general manager for industrial, healthcare and alternates, Melanie Bourke, chief operating officer, and Jonathan Hedger, chief strategy officer.

Two other core executives, Kevin George and David Yates, have only recently left the group.

“The way I have always operated with my team is that I will bring 100 ideas, 99 per cent of them will be stupid, but I will work with the team, work out the ones we think are viable, and then we will go and execute them,” says Steinberg.

“Fortunately, we have more often than not executed on the right things at the right time.”

It is a team that, as Steinberg told his AGM last year, has “come a long way from 2012”.

Back then Dexus had $13 billion of funds under management; by last December the figure was $57.1 billion, 28 per cent of which was on balance sheet and the remainder in a broad range of funds.

Steinberg and his team have moved from an initial focus on leadership in the office market to a capability across a range of sectors, including healthcare, to a broader funds management offering including Jandakot airport and smaller listed funds, and most recently to aspirations as a real assets manager with the acquisition of most of AMP’s property and local infrastructure funds platform.

“What we have always done is had a strategy and a plan and evolved it as we have gone through,” Steinberg says.

The Dexus evolution reflects one of the broader changes in Australia’s listed property sector.

Today, so many in the property sector want to be fund managers – but as the AMP demonstrated, it is not that easy.

“It really is a relationship business,” says Steinberg. “Investors want to be able to pick up the phone to myself, or Ross, or any of the senior team, and discuss their issues.”

Despite the focus on funds management, the majority of Dexus income still comes from owned assets with, at the last half, 60 per cent of funds from operations derived from the office towers, 16 per cent from industrial facilities and 7 per cent from co-investments.

By comparison only 15 per cent of FFO is derived from funds management, property management and development management.

The COVID-19 drag on office towers has weighed on the Dexus performance. Before March 2022, the total return – income and capital – under Steinberg’s leadership was 16.9 per cent. Today the 12-year figure is just above 9 per cent.

“I would have loved to have sold a lot more office pre-COVID,” he says, while pointing out that the group has successfully sold assets in the last four years.

Opening up debt markets

Steinberg acknowledges the big shifts in property investment, with more power to private equity and the pension funds.

Within listed property, the institutional investors, that you could “meet on the street”, have been replaced by the faceless index funds, which in Steinberg’s view makes M&A harder.

“Australia, with the opening up of the debt markets and the broadening of the investor base, is going to operate more like some of the larger US and UK markets,” he says.

“It becomes a timing thing. You get in at the right time, you’ll outperform.”

So what are the right sectors now? The Dexus opportunistic fund is a guide.

“We are investing in real estate debt,” Steinberg says. “And we are seeing excellent opportunities in residential development, particularly in the major markets of Sydney, Melbourne and Brisbane, in residual stock or funding small to medium developers on great projects, provided they have appropriate costings in place for their construction.”

At the same time, Steinberg remains a strong supporter of the real estate investment trusts.

“The REITs are still a really good way to access core Australian real estate, in a tax-effective manner, in assets of quality, and with liquidity,” he says.

“Right now is as attractive a time as any to access the REITs. Assuming we are at or thereabouts a low point, if I can access REITs at 20-30 per cent discount to today’s values, it looks like I am buying pretty well.”

And what makes a good real estate executive? “It’s the ability to get on with people, to understand the markets they operate in, and have a feel for the product the customer really wants,” he says.

“And to understand the numbers, but take that as a given.

‘A lot of impatience today’

“It’s a transactional game. Know when to buy, when to hold, when to sell. Hopefully, you get that right more often than you get it wrong.”

Steinberg says he has been “fortunate to work with great people”, including the Lowys and John Gandel.

“I am a bit of a sponge. You take the best from people around you and try to evolve your own style.

“When it comes to young executives, there is a lot of impatience today.

“I spent the initial five years of my career in property management, which in hindsight may have been too long, but I learnt the nuts and bolts of the real estate industry. I learnt how to lease properly, I learnt how buildings operate from an FM perspective, from a leasing perspective, from a cash-flow perspective.

“Friends were going into sales and leasing and making a hell of a lot more money and living a different life, but that grounding and the running of teams at an early age did put me in good stead for the future.”

At the same time he encourages young people to move, particularly interstate, to enhance their capacities.

“A move does not have to be forever. But it gives you the opportunity to grow your network, learn new markets, to meet new people, and that’s put me in good stead in my career.”

And where will Steinberg continue to grow? “I am going to have a break, and just think through a variety of things that are bouncing around,” he says.