DEXUS — Investor Presentation 2014

Oct 15, 2014

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DEXUS Property Group (ASX: DXS)
ASX release
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16 October 2014

DEXUS presentation to ASX Investor Series

DEXUS Property Group (DEXUS) provides an overview presentation that will be presented at the ASX Investor Series in Sydney today.

For further information please contact: Investor relations Media relations David Yates T: +61 2 9017 1424 Louise Murray T: +61 2 9017 1446 M: +61 418 861 047 M:+61 403 260 754 E: david.yates@dexus.com E: louise.murray@dexus.com

About DEXUS

DEXUS Property Group is one of Australia’s leading real estate groups, investing directly in high quality Australian office and industrial properties. With $17.8 billion of assets under management, the Group also actively manages office, industrial and retail properties located in key Australian markets on behalf of third party capital partners. The Group manages an office portfolio of 1.7 million square metres located predominantly across Sydney, Melbourne, Brisbane and Perth and is the largest owner of office buildings in the Sydney CBD, Australia’s largest office market. DEXUS is a Top 50 entity by market capitalisation listed on the Australian Securities Exchange under the stock market trading code ‘DXS’ and is supported by more than 32,000 investors from 20 countries. With nearly 30 years of expertise in property investment, development and asset management, the Group has a proven track record in capital and risk management, providing service excellence to tenants and delivering superior risk-adjusted returns for its investors. www.dexus.com

Download the DEXUS IR app to your preferred mobile device to gain instant access to the latest stock price, ASX Announcements, presentations, reports, webcasts and more.

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DEXUS Funds Management Ltd ABN 24 060 920 783, AFSL 238163, as Responsible Entity for DEXUS Property Group (ASX: DXS)

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DEXUS PROPERTY GROUP

– ASX INVESTOR SERIES PRESENTATION 16 OCTOBER 2014

DEXUS Funds Management Limited ABN 24 060 920 783 AFSL 238163 as responsible entity for DEXUS Property Group DEXUS Property Group – ASX Investor Series 2014

Slide 1

IMPORTANT INFORMATION

• This presentation is issued by DEXUS Funds Management Limited (DXFM) in its capacity as responsible entity of DEXUS Property Group (ASX:DXS). It is not an offer of securities for subscription or sale and is not financial product advice.

• Information in this presentation including, without limitation, any forward looking statements or opinions (the Information) may be subject to change without notice. To the extent permitted by law, DXFM, DEXUS Property Group and their officers, employees and advisers do not make any representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of the Information and disclaim all responsibility and liability for it (including, without limitation, liability for negligence). Actual results may differ materially from those predicted or implied by any forward looking statements for a range of reasons outside the control of the relevant parties.

• The information contained in this presentation should not be considered to be comprehensive or to comprise all the information which a DEXUS Property Group security holder or potential investor may require in order to determine whether to deal in DEXUS Property Group stapled securities. This presentation does not take into account the financial situation, investment objectives and particular needs of any particular person.

• The repayment and performance of an investment in DEXUS Property Group is not guaranteed by DXFM, any of its related bodies corporate or any other person or organisation.

• This investment is subject to investment risk, including possible delays in repayment and loss of income and principal invested.

Slide 2

DEXUS Property Group – ASX Investor Series 2014

AGENDA

 Overview

 Portfolio overview

 Development

 Third Party Funds Management platform

 Capital Management

 Summary

Information as at 30 June 2014 unless otherwise stated and quoted in Australian dollars.

Slide 3

DEXUS Property Group – ASX Investor Series 2014

– OVERVIEW DEXUS Property Group

bn $17.8 Total funds under management

$9.1bn DEXUS portfolio

$8.7bn Third Party Funds Management

• A leading Australian real estate group

• A Top 50 entity by market capitalisation on the ASX

• 30 years of experience in property investment, development and asset management

• 32,000 investors from 20 countries

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Slide 4

DEXUS Property Group – ASX Investor Series 2014

– OVERVIEW A clear and focused strategy

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Slide 5

DEXUS Property Group – ASX Investor Series 2014

– OVERVIEW Earnings composition

PROPERTY PORTFOLIO FUNDS MANAGEMENT & PROPERTY SERVICES TRADING Maximising performance from the DEXUS property portfolio Driving performance and generating revenue from funds management and property services Delivering trading profits from identified properties FY15 FORECAST $35-40 million approx. $40 million Target positive like for like income growth EARNINGS TARGET 10-20% 80-90% FY15 DRIVERS	PROPERTY PORTFOLIO FUNDS MANAGEMENT & PROPERTY SERVICES TRADING Maximising performance from the DEXUS property portfolio Driving performance and generating revenue from funds management and property services Delivering trading profits from identified properties FY15 FORECAST $35-40 million approx. $40 million Target positive like for like income growth EARNINGS TARGET 10-20% 80-90% FY15 DRIVERS	FUNDS MANAGEMENT & PROPERTY SERVICES	TRADING
		Driving performance and generating revenue from funds management and property services	Delivering trading profits from identified properties
	Target positive like for like income growth	$35-40 million	approx. $40 million
	80-90%	10-20%

Slide 6

DEXUS Property Group – ASX Investor Series 2014

– OVERVIEW Investor returns and distributions

DEXUS investor returns

• Total security holder return of 17.0%[1 ] for the 12 months ended 30 September 2014

• Distribution per security growth of 4.3% for FY14 and guidance of 8.5% growth for FY15

DISTRIBUTION GROWTH – CENTS PER SECURITY

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7.0
Average growth rate of 6% p.a.
6.0
6.79
6.26
5.0 6.00
5.35
5.10 5.18
4.0
FY10 FY11 FY12 FY13 FY14 FY15 (Guidance)
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1. DEXUS security price appreciation plus distributions paid. Source UBS.

Slide 7

DEXUS Property Group – ASX Investor Series 2014

– OVERVIEW Commonwealth Property Office Fund (CPA) transaction

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CPA transaction

Transaction completed in $3.4bn 9 months transaction significantly and introduced new increased capital partner the Group’s office market share Successfully completed the integration of 20 properties onto the DEXUS platform

$3.4bn transaction significantly increased the Group’s office market share

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Slide 8

DEXUS Property Group – ASX Investor Series 2014

– – PORTFOLIO OVERVIEW DEXUS office portfolio 85% of balance sheet

Geographical weighting by book value

bn $7.7 Prime quality office portfolio

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Other
Perth 4%
9%
Sydney
Brisbane 61%
11%
53
properties
Melbourne
14%
95.2%
Occupancy by income
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 Largest listed office portfolio in Australia

• DEXUS owns interests in 53 office buildings

• Largest owner of office in Sydney CBD with circa 25% share

• DEXUS and its capital partners own interests in four of the seven premium grade towers in the Sydney CBD

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1 Farrer Place, Sydney
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Grosvenor Place, Sydney 1 Bligh Street, Sydney

6.87% Portfolio weighted average capitalisation rate

Slide 9

DEXUS Property Group – ASX Investor Series 2014

– PORTFOLIO OVERVIEW DEXUS office occupancy and lease expiry profile

• Maintained office occupancy rates well above National average and 90%[3 ] since 2004

• No more than 11.9%[3] of the Group’s existing office leases expire in any single fiscal period for the next three financial years

• High proportion of fixed rent reviews

• No single tenant represents more than 4.3% of income[2 ]

Historical outperformance

vs. National office occupancy rates[1 ]

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100%
95%
90%
85%
80%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
DEXUS National
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DEXUS Office portfolio lease expiry (including CPA)[3 ]

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14%
11.9%
12%
10.6%
10%
8.2%
8%
5.4%
6%
4%
2%
0%
Vacant FY15 FY16 FY17
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1. Source: DEXUS Research and Jones Lang LaSalle.

2. 30 June 2014 fully leased DEXUS Portfolio passing income annualised. 3. By income.

Slide 10

DEXUS Property Group – ASX Investor Series 2014

– – PORTFOLIO OVERVIEW DEXUS industrial portfolio 15% of balance sheet

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Geographical weighting
by book value
Melbourne
40%
Sydney
55%
50
properties
Adelaide
2% Brisbane
3%
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bn $1.4 Prime quality industrial portfolio

• 50 industrial properties focused on major industrial hubs and arterial roadways in Sydney, Melbourne and Brisbane

 Allocation to value add/repositioning and development

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27 Distribution Drive, Laverton North 1-3 Distribution Drive, Laverton North
1 Bellevue Circuit, Greystanes 3 Basalt Road, Greystanes
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93.0% Occupancy by income

8.32% Portfolio weighted average capitalisation rate

Slide 11

DEXUS Property Group – ASX Investor Series 2014

DEVELOPMENT – Overview

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$3.3 bn
Up to15%
Group development pipeline
of DEXUS portfolio
allocated to
$1.3bn $2.0bn
development/ trading/value-add
DEXUS portfolio Third Party Funds
42% committed 55% committed [1] 71% committed [2]
Mid-2015 completion Mid-2015 completion Early 2016 completion
5 Martin Place, Sydney Kings Square, Perth 480 Queen Street, Brisbane
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1. Leighton Holdings has provided DEXUS and DWPF with a five year income guarantee on any remaining vacancies at practical completion.

2. Grocon has provided DEXUS and DWPF with a two year income guarantee on any remaining vacancies at practical completion.

Slide 12

DEXUS Property Group – ASX Investor Series 2014

THIRD PARTY FUNDS MANAGEMENT PLATFORM – Overview

bn $8.7

Third party funds management platform

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50
Institutional investors
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• Third party funds represents 49% of total Group FUM

Third party funds under management

• DEXUS strives to be the wholesale partner of choice in Australian office, industrial and retail

• A substantial funds management platform including

• $5.0bn DEXUS Wholesale Property Fund (DWPF) - diversified

• $1.7bn Australian diversified mandate

• $1.7bn[1] Australian Office Partnership with Canada Pension Plan Investment Board

• $0.3bn[1] Australian Industrial Partnership with global pension fund

• Newly formed DEXUS Industrial Partnership with the Future Fund

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DEXUS Industrial
Partner
<$0.1bn
DEXUS Office Partner
$1.7bn
DWPF
$5.0bn
Australian Industrial
Partner
$0.3bn $8.7bn
Australian Diversified
Mandate
$1.7bn
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1. Portfolio value shown at 50% to represent 50:50 joint partnership with DEXUS direct portfolio.

Slide 13

DEXUS Property Group – ASX Investor Series 2014

– CAPITAL MANAGEMENT Conservative and disciplined approach

• Highly experienced team with proven track record

	Key metrics	30 June 14
	Gearing (look-through)1	33.7%
	Cost of debt2	5.4%
	Duration of debt	5.2 years
	Hedged debt3	60%
	S&P/Moody’s credit rating	A-/A3

• Strong investment grade credit ratings

• Maintained a solid balance sheet with gearing well inside 30-40% target range

• Sourced $1.7 billion of new funding in FY14 including $1.3 billion for CPA transaction

Diversified mix of facilities[4 ]

Gearing history

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Bank
144A
facilities
0.4 40% 7%
40%
0.3 30%
USPP
17%
0.2 39% 20%
36%
33% 32% 30% 29% 28% 29% 33.7%
0.1 10%
Commercial
Paper
0 0% 3% Acquisition
2006 2007 2008 2009 2010 2011 2012 2013 2014 MTN bridge
BBB+/ NR BBB+/ NR BBB+/ NR BBB+/Baa1 BBB+/Baa1 BBB+/Baa1 BBB+/Baa1 BBB+/Baa1 A-/ A3 18% facility
15%
Target Gearing Range Covenant Gearing Target Gearing Ceiling
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1. Adjusted for cash and for debt in equity accounted investments.

2. Weighted average across the period, inclusive of fees and margins on a drawn basis.

3. Average for the full year. Actual debt hedged at 30 June 2014 was 64%. 4. Including domestic MTNs in equity accounted investments.

Slide 14

DEXUS Property Group – ASX Investor Series 2014

SUMMARY

 Expect economic conditions to strengthen

• However will face competitive leasing markets where vacancy remains elevated

 Well positioned to deliver earnings growth through the cycles

 Market guidance[1] for FY15

• Property Council of Australia (PCA) Funds from Operations (FFO) of 9.84 cents per security, reflecting 8.5% growth[2 ] from FY14

• Distribution of 6.79 cents per security, in line with free cash flow, reflecting 8.5% growth[3 ] from FY14

• Barring unforeseen changes to operating conditions assumptions include: Targeting positive like-for-like income growth across the office and industrial portfolios, weighted average cost of debt of circa 5.4%, trading profits of approximately $40m and Management Operations revenue of approximately $35-40m.

• Based on FY14 PCA FFO of 9.07 cents per security, refer to FY14 results presentation slide 48 for further details.

• Based on FY14 distribution of 6.26 cents per security, refer to FY14 results presentation slide 48 for further details. DEXUS Property Group – ASX Investor Series 2014 Slide 15

DEXUS PROPERTY GROUP

– ASX INVESTOR SERIES PRESENTATION 16 OCTOBER 2014

DEXUS Funds Management Limited ABN 24 060 920 783 AFSL 238163 as responsible entity for DEXUS Property Group DEXUS Property Group – ASX Investor Series 2014

Slide 16