Report from the Chairman and Managing Director

In challenging market conditions, DHA’s performance in its 25th year of operation has been very satisfactory. We housed almost 16,000 Defence families in our properties, a further 240 singles in our off-base apartments and administered the payment of Rent Allowance (RA) to nearly 14,500 Defence members (families and singles) in private rental housing. In a market with limited suitable offerings, we pursued opportunities to acquire well-located land and can report good progress on the development of major holdings. 

There has been strong interest from the public in land sales from these developments. We completed the construction of 98 new houses on Larrakeyah Barracks, Darwin and Parliament approved new projects there and on RAAF Base Tindal. Defence approved a five-year extension to the Services Agreement to 1 July 2023 and awarded DHA a contract to provide booking and allocation services for its Living In Accommodation (LIA). In a subdued property market with very flat capital growth, we generated $353.4 million in revenues from our SLB program. Earnings Before Interest and Tax were $116.9 million and Net Profit After Tax was $85.1 million.

DHA’s main role is the supply of housing and related services to Defence members and their families in support of Defence operational, recruitment and retention goals. We have become a major player in the national residential property market acquiring and developing land, building and buying houses and managing a large property portfolio. DHA provided and maintained 17,507 dwellings for Defence members and their families (at 30 June 2013), which met the key performance measure for housing provisioning. We met customer satisfaction targets set by Defence and the DHA Board. Average occupancy rates on the DHA owned and leased portfolio were maintained at around 92%. The completion rate for routine maintenance was held at 89% within 15 days compared to a target of 80% in 28 days.

During 2012–13, Defence invited DHA to submit a proposal to provide booking and allocation services for all its LIA. The proposal was accepted and, following successful negotiations, the new services were incorporated in the Services Agreement for an initial five-year period.

The acquisition of well-located and reasonably priced land within 30 kilometres of Defence bases and establishments is challenging and an ongoing concern to the DHA Board. In the absence of sufficient retail land, we have been able to acquire some development land including surplus Defence land. In all cases, this land is well-located relative to Defence bases and establishments. In 2012–13, the total value of development projects exceeded $1 billion. These projects are subject to the scrutiny of the Parliamentary Standing Committee on Public Works (PWC) and must comply with State/Territory and Local Government planning requirements. In addition, DHA has negotiated an arrangement with the Queensland Government for the supply of well-located land for Defence housing in consideration of which DHA will construct some apartments for them. Similar arrangements are being pursued with other State and Territory Governments.

Good progress is reported on all development projects and, in particular, Breezes Muirhead in Darwin where sales of surplus land lots have been very pleasing. The first 50 houses for Defence members have been completed and occupied. The Lindfield and Ermington developments in Sydney are underway. Multi-unit lots at Ermington were sold during 2013. Rasmussen in Townsville, Weston in Canberra, Voyager Point in Liverpool and Largs North in Port Adelaide are also well-advanced. DHA has invested in the acquisition of in-house expertise and carefully selected industry partners to assist with these developments.

DHA is committed to a $360 million investment program in Defence-owned housing on-base and off-base to assist in bringing this portfolio to the required minimum standard by 2017. It has been a positive partnership, particularly in Darwin where 98 new dwellings on an ocean facing promontory at Larrakeyah Barracks were completed ahead of schedule. The PWC has also approved a follow-on project to upgrade 48 houses on the barracks and a new phase in the upgrade of nearly 200 houses on RAAF Base Tindal near Katherine.

During 2012–13, DHA spent $305.0 million on a capital program to acquire 590 new houses by construction or purchase and $14.4 million on the acquisition of 38 apartments for its off- base singles portfolio. This program was funded without additional borrowings, mainly through the SLB program, the disposal of properties no longer required and the sale of land from DHA developments. Total revenues from these sources were $463.4 million, including $353.4 million from SLB. This was a pleasing result, especially in light of difficult market conditions, confirming the continued attractiveness of SLB to investors and of our development land to builders and prospective home owners. Marketing activities have been successful with a record number of registrations of interest in buying in the year. The establishment of an unlisted property trust was approved by the Minister for Finance and Deregulation on 16 November 2012. Known as DHA Residential Property Fund No. 1, the fund will be fully operational during the 2013–14 financial year. DHA formed DHA Investment Management Limited to be the Responsible Entity and to hold an Australian Financial Services Licence issued by the Australian Securities and Investments Commission.

DHA was advised during 2012–13 that its contract with Customs for the provision of residential property management services would not be continued. DHA will continue to lease about 14 properties to Customs. The loss of this business has been more than offset by growth in the off-base singles portfolio.

The Board wishes to thank DHA staff for their excellent performance in 2012–13. At a time when attention is being drawn to the need for productivity growth, DHA has significantly broadened the range of its activities and is delivering and managing higher numbers of dwellings with stable staff levels. Innovative information and communication technologies are making a significant contribution to this effort.

During 2012–13, Jan Williams was appointed to the DHA Board. Five existing members were reappointed. Michael Del Gigante completed his term as Managing Director and was replaced by Peter Howman. There were no other changes.

Under Section 9 of the Commonwealth Authorities and Companies Act 1997, the Directors are responsible for the preparation and content of this report, in accordance with the Finance and Deregulation Minister’s Orders. This report is made in accordance with a resolution of the Directors.

The Directors of DHA are pleased to present this Annual Report for the financial year ended 30 June 2013.