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DEXUS Investor Presentation 2009

Nov 30, 2009

64807_rns_2009-11-30_82c43aa2-ccee-45a9-a3ea-8ba346631456.pdf

Investor Presentation

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DEXUS Funds Management Limited ABN 24 060 920 783 AFSL: 238163

Level 9, 343 George Street Sydney NSW 2000

PO Box R1822 Royal Exchange NSW 1225

Telephone 61 2 9017 1100 Direct 61 2 9017 1134 Facsimile 61 2 9017 1110

Email: [email protected]

Dear Sir/Madam

The Manager

20 Bridge Street Sydney NSW 2000

DEXUS Property Group (ASX: DXS) Sydney Office Tour 2009 presentation

DEXUS Funds Management Limited, as responsible entity for DEXUS Property Group (DXS), provides a copy of the 2009 Sydney Office Tour presentation.

For further information, please contact:

Australian Securities Exchange Limited

Investor Relations: Daniel Rubinstein (02) 9017 1336
Media Relations: Emma Parry (02) 9017 1133

Yours sincerely

Tanya Cox Company Secretary

1 December 2009

DEXUS Funds Management Limited ABN 24 060 920 783 Australian Financial Services Licence Holder

Welcome

Victor Hoog Antink Chief Executive Officer

1 December 2009

About DEXUS

Delivering on strategy

Australia's leading owner, manager, developer of superior quality office and industrial properties

  • No. 1 in office and No.3 in industrial in Australia
  • Quality portfolio delivering strong results
  • Progressed selected non-core asset sales
  • Repositioning international portfolio
  • Property management model integration
  • –Completed in office portfolio
  • –Underway in Australian industrial portfolio
  • Recognised leadership position in Corporate Responsibility & Sustainability
  • Creating the next generation of quality office and industrial workspaces
  • 6 Star office developments: 1 Bligh Street and 123 Albert Street
  • Quality industrial development pipeline: Laverton and Greystanes

Agenda

  • Overview of DEXUS Office sector Louise Martin The market Peter Studley Portfolio performance – September quarter Louise Martin The leasing market John Swadling Development Tony Gulliver Questions
  • Tour of Western Corridor, North Sydney, Chatswood Chris Fisher

Brett Sims

DEXUS Office Sector Louise Martin

Integrated office model

DEXUS office sector – our business

  • Investing in prime office properties, business parks and car parks
  • DXS, DWPF, STC, AXA
  • 46 assets1
  • \$6.0bn value 2
  • 810 tenants
  • 860,000 sqm 2

Asset Diversification

  1. Excludes 509 St Kilda & 343 George. Complexes (1 asset): ASQ, GPT, Kent St, Flinders Gate, Southgate, Gateway

  2. At ownership

Structure

The Market Peter Studley

Investment climate now less uncertain

Economic growth forecasts

  • Many global leading indicators have turned
  • Economists getting more optimistic about 2010
  • Credit conditions tight but slowly improving
  • Weak prognosis for US Japan & Western Europe
  • Caution still warranted as stimulus washes through

Source: Deutsche Bank Sept 2009 forecasts to end year

Confidence back

Back to pre-GFC levels ….

  • Sharp lift in confidence
  • Part stimulus effect…
  • …but also well-founded based on house prices, stock market, and modest unemployment levels

Source: Westpac Melbourne, NAB, DEXUS Research

Australian CBD office demand

National net demand & employment growth

  • GDP growth up
  • Business investment up (from low base)
  • Employment up
  • Global growth up

Limited by:

  • Ongoing cost control
  • Tight credit for expansion
  • Multinationals

Source: Jones Lang LaSalle, DEXUS Forecasts

Supply pressure mild in major markets

National completions

(% of stock)

Supply pressure points as at Sept 2009

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Source: Jones Lang LaSalle, DEXUS forecasts

Sydney office market – outlook

Supply, demand & vacancy

  • Demand increasing, slowly at first
  • Low supply 2010-2013 (1 Bligh St, 420 George St, 163 Castlereagh St)
  • Vacancy peaking around 11% in 2010, declining 2011
  • Low vacancy rates by 2012

Source: Jones Lang LaSalle, DEXUS forecast

Why & when incentives will tighten

Sydney CBD, vacancy rate & incentive

Peaks in vacancy are followed by strong growth

Gross effective & face rents vs vacancy rate (Sydney CBD)

Transaction activity

National sales >\$5m

  • Volumes less than half pre-GFC levels
  • Privates & foreign
  • Mainly smaller transactions <\$50m
  • Signs of some larger transactions occurring
  • Cost of capital a major constraint

Source: DEXUS Research, Jones Lang LaSalle as at Sep 2009

Office values

Prime office yield spreads over bonds

Dec-92 Dec-94 Dec-96 Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08

  • Values have fallen by between 21% (Melbourne) and 37% (Brisbane)
  • Situation expected to improve in 2010 due to:
  • -Positive yield spreads
  • -Improving credit markets
  • -Higher growth expectations
  • -Greater buyer competition

Source: DEXUS Research, IRESS, IPD, Jones Lang LaSalle

Office cycle close to bottom

Source: DEXUS Research

Portfolio Performance - September Quarter Louise Martin

Stable performance

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  1. As at 30 November, terms had been agreed on 55 transactions over 37,507 sqm with 8.7% rental growth on passing and a 23.5% average incentive.

Occupancy above average

  • Occupancy rates above PCA average in all Australian markets1
  • 16 of 26 assets with occupancy greater than 98% (13 fully occupied)
  • Occupancy to Sept 09 fell 1.1% to 96.5%2, primarily due to a few key tenancies:
  • – Relocation due to government decision - Police (130 George St and 45 Clarence St), Alzheimer's Association (40 Talavera Rd)
  • – Relocation due to corporate consolidation – CBA at 44 Market St

    1. PCA Australian Office Market Report Jul 09.
    1. This reflects 18,760 sqm of vacancy at ownership level

Weighted average lease expiry – smooth profile

  • WALE as at 30 September 2009 is 5.4 years by income and 4.8 years by area. This is unchanged from 30 June 2009
  • Expiry profile is quite smooth with no large spikes over the next 7 years

Lease Expiry Profile 30 September 2009

Secure office income

  • FY10 Expiries reduced from 10% to 5%
  • Positive rental growth in leasing and structured leases to Sept 09
  • –91% of leases locked away
  • –Average increase on fixed or CPI leases is 4.0%
  • –Average increase on new leases and renewals is 11.5%
  • Offsetting this has been:
  • –Long term vacancy
  • –Extended let up periods
  • –Lower retention

FY10 Income Profile

Valuations

  • Portfolio last valued at 30 June 2009
  • Including developments, DXS office valued at \$4.0bn, down from \$4.6bn as at 30 June 2008
  • Weighted average cap rate as at June 2009 is 7.7%
  • 0.25% Movement in cap rate equals 3.5% of value
  • Cap rates appear to be stabilising. Value influenced by underlying drivers in certain assets (letup times, incentives etc) being less favourable.

Sustainability

  • Progress for the year to June 2009
  • –Energy consumption down 8%
  • –Greenhouse Gas emissions down 7%
  • –Water usage down 11%
  • NABERS rating completed average 3 Star portfolio: current market best practice

The Leasing Market John Swadling

Active leasing approach

  • Appointed agents on all vacancies
  • Fortnightly minuted meetings to review all enquiry, issue proposals and negotiate leases
  • All CBD demand tracked, collated and analysed
  • External agencies reviewed monthly

Demand increasing

  • The number of enquiries for Sydney CBD office properties is up 15% since June 09, from 122 to 160 enquiries
  • Total demand (sqm) for enquiries increased from 96,000 to 150,000 between June and Sept 09
  • While enquiry is increasing there is still lag effect in flow through to deals

DXS Office - Demand Tracker

Sublease is decreasing

CBRE Sydney CBD sublease barometer (Sep 09) shows total sublease space at 86,690 sqm (1.5-2% of stock)

Marketed sublease space in DXS portfolio as at September 09 was approx 10,400 sqm or 1.9% of NLA. Has fallen in recent months from 13,300 sqm

Lease activity gaining momentum

  • 18,0611 sqm leased over 34 deals in the September quarter, major leases include:
  • – 383 Kent St, Sydney – 3,154 m 2to InterSystems for 10 years
  • – Governor Macquarie Tower, Sydney – 2,468.9 m 2to Piper Alderman for 8 years
  • – The Zenith, Chatswood – 1,081.3 m 2to GP Information for 5 years
  • Terms have been agreed on a further 19,000 square metres
  • 5 Heads of Agreement over 383 Kent Street, 45 Clarence Street, The Zenith and 11 Talavera Road
  • Avg rent increase for FY10 likely between 5 10%
  • Average incentive for FY10 likely to be in the low 20%

  1. At ownership. 24,735 sqm at 100%.

Proactive leasing focus

  • Agreeing price for tenant make goods
  • Incorporating into Lessor's upgrades of T5 lights, carpets, ceiling tiles etc.
  • Undertaking speculative fit outs where needed
  • Reviewing agency performance
  • Actively engaged with all FY10 and FY11 expires

Action on current vacancy

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Development leasing – enquiries

123 Albert Street, Brisbane – 6 Star Green Star, 5 Star NABERS

  • 68% leased (RIO Tinto)
  • Available Levels 4 – 12 (13,500 sqm) – 32%
  • 1,500 sqm floor plates
  • Agents well underway with all marketing collateral
  • Leasing proposals issued and negotiations underway
  • Diverse range of tenants eg. Legal, Accounting, Government & Finance
  • No competing product 9 months either side of PC
  • 1 Bligh Street, Sydney – 6 Star Green Star, 5 Star NABERS
  • 55% leased (Clayton Utz)
  • Levels 18 – 28 available for lease (17,400sqm) – 45%
  • Typical floor plate – 1,630 sqm
  • All premium multi-floor target tenants identified with marketing well underway
  • Marketing to single floor users begins Q1 2010

Development Tony Gulliver

1 BLIGH SYDNEY

Section through the building

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LEVEL 29 MEZZ PLANT - 148.700 RL FLANT
LEVEL 29 PLANT - 146.300 RL
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LEVEL 23 - 122.250 RL ATRIUM T2-Area:1634.0
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Typical high rise

Double skin facade details

Key feasibility criteria - summary

  • Entire low-rise pre-committed: 55% of total net lettable area
  • Average low rise rent achieved: approx \$1000 / m2 net face
  • High rise area 18,800 m2: to be leased by mid 2011
  • Estimated yield on total cost: 7.1 %
  • DXS 33.3% of total cost: \$210 million

123 Albert Street, Brisbane

Design fundamentals

  • Office NLA 38,600m 2
  • Twin offset cores with 1500m2 open floor plates
  • 380 carparks
  • 7 retail offers
  • Premium Grade – Property Council of Australia rating matrix
  • 6 Star Green Star world's best practice (certification received Dec 09)
  • 5 Star NABERS highest energy and water sustainability rating

PROFILE

Key feasibility criteria - summary

  • 25,500m2 pre-committed: 68% of total net lettable area
  • Average anchor tenant rent achieved: approx \$537/m2 net
  • Area available 13,100 m2: to be leased by mid 2011
  • Estimated yield on total cost: 6.9 %
  • Total cost: \$349 million

Focus FY10Louise Martin

Questions

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