DEXUS — Investor Presentation 2015

Nov 17, 2015

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DEXUS Property Group (ASX: DXS)
ASX release
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18 November 2015

Morgan Stanley 14th Annual Asia Pacific Summit presentation

DEXUS Property Group (DEXUS) provides an overview presentation which will be used as a basis of discussion at the Morgan Stanley 14th Annual Asia Pacific Summit on Wednesday 18 and Thursday 19 November 2015 at the Mandarin Oriental in Singapore.

For further information please contact: Investor relations Media relations Rowena Causley T: +61 2 9017 1390 Louise Murray T: +61 2 9017 1446 M: +61 416 122 383 M:+61 403 260 754 E: rowena.causley@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 $19.9 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 21 countries. With 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

– MORGAN STANLEY ASIA-PACIFIC SUMMIT PRESENTATION NOVEMBER 2015

DEXUS Funds Management Limited ABN 24 060 920 783 AFSL 238163 as responsible entity for DEXUS Property Group DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

Slide 1

AGENDA

• DEXUS today

• Property portfolio

• Property portfolio – Development

• Property Portfolio – Recent transactions

• Third party funds management

• Trading

• Market outlook

• Summary

All data as at 30 June 2015 unless otherwise stated.

Slide 2

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

DEXUS TODAY

Australia’s largest prime office portfolio

A significant and growing Third Party Funds Management business

A deep pipeline of value enhancement opportunities

8.6% average growth in distributions p.a. and 15.8% p.a. TSR[1] since FY12

Underpinned by a strong balance sheet

1. Compound annual total security holder return over the three years to 30 June 2015.

Slide 3

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– DEXUS TODAY DEXUS today

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DEXUS THIRD PARTY FUNDS TOTAL
PORTFOLIO [1 ] PORTFOLIO [2 ] GROUP PORTFOLIO [1,2 ]
$9.5bn $10.1bn $19.6bn
Management of a diverse
DEXUS owned and managed
portfolio of office, industrial and
portfolio of Australian office
retail properties on behalf of
and industrial properties
third party partners and funds
OFFICE: $7.8bn OFFICE: $5.0bn OFFICE: $12.8bn
INDUSTRIAL: $1.7bn INDUSTRIAL: $1.2bn INDUSTRIAL: $2.9bn
RETAIL: $3.9bn RETAIL: $3.9bn
DEVELOPMENT PIPELINE (future growth) [1 ]
DEVELOPMENT: $1.2bn DEVELOPMENT: $2.3bn DEVELOPMENT: $3.5bn
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1. DEXUS portfolio and Development pipeline information is as at 30 June 2015. 2. Third party funds portfolio information is as at 30 September 2015.

Slide 4

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– DEXUS TODAY Key earnings drivers

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PROPERTY FUNDS MANAGEMENT TRADING
PORTFOLIO & PROPERTY SERVICES
Maximising Driving performance Delivering trading
performance from and generating profits from
the DEXUS property revenue from funds identified properties
portfolio management and
property services
80-90% of FFO [1 ] 10-20% of FFO [1]
UNDERLYING BUSINESS TRADING
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1. Represents target contribution to FFO before Finance costs and Group Corporate costs. FFO means Funds from Operations. As previously announced, DEXUS adopted FFO as defined by the PCA White Paper “Voluntary Best Practice Guidelines for disclosing Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO)” for its reporting from 1 July 2014.

Slide 5

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– – PROPERTY PORTFOLIO DEXUS office 82% of balance sheet assets

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$7.8bn Prime office portfolio

>85% Prime grade portfolio composition

94.1%[1 ] 6.71% Occupancy (by income) Average capitalisation rate

1. Occupancy was 93.7% at 30 September 2015 and increased to 94.1% at 22 October 2015 including heads of agreement signed post quarter end.

Slide 6

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– PROPERTY PORTFOLIO DEXUS office occupancy and lease expiry profile

• Maintained office occupancy rates well above National average and 90%[1 ] since 2004

• No more than 12.1%[1] 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 4.4% of income[2 ]

Historical outperformance vs. National office occupancy rates[3 ]

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100%
95%
90%
85%
80%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q16
DEXUS National
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DEXUS Office portfolio lease expiry at 30 September 2015[1 ]

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20%
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18.6%
15%
12.1%
10%
7.9%
5% 6.3%
5.6%
0%
Available FY16 FY17 FY18 FY19
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1. By income.

2. 30 June 2015 fully leased DEXUS Portfolio passing income. 3. Source: DEXUS Research and Jones Lang LaSalle.

Slide 7

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– – PROPERTY PORTFOLIO DEXUS industrial 18% of balance sheet assets

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$1.7bn Prime industrial portfolio

93.4%[1 ] Occupancy (by income)

7.77% Average capitalisation rate

1. Occupancy as at 30 September 2015. 2. Jointly owned by DEXUS and Australian Industrial Partner.

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Lakes Business Park, Lord Street, Botany
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Quarry at Greystanes, 1 Basalt Road, Greystanes [2 ]
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Slide 8

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– PROPERTY PORTFOLIO Development pipeline as at 30 June 2015

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$3.5bn
Group development pipeline
$1.2bn $2.3bn
DEXUS portfolio Third Party Funds
$808m $420m
committed projects uncommitted projects
$296m
committed projects remaining spend
FY16 FY17 FY18+
5 Martin Place, Sydney $111m [1,2] ($9m)
480 Queen Street, Brisbane $288m [1 ] ($128m)
Kings Square, Perth $213m [1,2 ] ($42m)
Quarrywest at Greystanes $96m [1] ($56m)
$12m [3] ($5m) Quarry at Greystanes [4] $26m ($26m)
Radius Estate, Larapinta $15m [1] ($12m)
141 Anton Road, Hemmant $47m [1] ($31m)
Kathmandu at Laverton $26m ($13m) DEXUS Industrial Estate, Laverton North $108m (S72m)
Developments committed Future opportunities: 105 Phillip St, Parramatta [5] $120m ($110m), 12 Creek St,
Developments uncommitted Brisbane $24m ($24m), 180 Flinders St, Melbourne $142m ($142m)
Note: Development pipeline shows total est. project cost and (est. cost to complete) at FY15. 3. Lots WH11, WH12 and A4 are committed.
1. 4. Lot A2 is uncommitted.
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• Note: Development pipeline shows total est. project cost and (est. cost to complete) at FY15. 1. DEXUS interest in development costs. 2. Practical completion expected in September 2015. DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

• Also included in DEXUS trading pipeline. Property has DA approval for an office project.

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Slide 9
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– PROPERTY PORTFOLIO Key office developments

5 Martin Place, Sydney1	Kings Square, Perth2	480 Queen Street, Brisbane2
29% forecast project IRR	15% forecast project IRR	17% forecast project IRR
7.3% yield on cost	8.2% yield on cost	7.0-7.2% yield on cost

1. Jointly owned by DEXUS and DEXUS Office Partner.

2. Jointly owned by DEXUS and DEXUS Wholesale Property Fund.

Slide 10

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– PROPERTY PORTFOLIO Industrial development

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Quarry [1] at Greystanes and Quarrywest [2]
319,000 square metres of prime industrial facilities
1. Jointly owned by DEXUS and Australian Industrial Partner.
2. Jointly owned by DEXUS and DEXUS Industrial Partner.
DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015 Slide 11
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– PROPERTY PORTFOLIO Recent transactions

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Acquisition of Waterfront Place Complex, Brisbane [1] Sale of 36 George Street, Burwood [2]
Acquisition price: $635m Sale price: $95m
Favourable rate of $9,644/sqm 44% premium to book value
Long term core investment Achieved a 32% IRR on investment
Eagle Street Pier offers one of the best
future development sites in Brisbane CBD
1. Jointly owned 50/50 by DEXUS and DEXUS Wholesale Property Fund.
2. DEXUS Office Partnership, in which DEXUS has a 50% interest, announced on 29 September 2015 that it had entered into an agreement to sell the property.
DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015 Slide 12
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– THIRD PARTY FUNDS MANAGEMENT Platform set up for organic growth

$10.1bn[1 ]

Third Party Funds under management

48 Investors from seven countries

>70%

Growth in third party funds since June 2012[1 ]

$2.3bn Development pipeline

Management operations profit

Growing investor/fund base[1 ]

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$45-50m
$37.9m
$27.9m
$20.8m
$17.9m
FY12 FY13 FY14 FY15 FY16
Actual Forecast
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DEXUS Industrial
Partner
DEXUS Office <$0.1bn
Partner
$1.8bn DWPF
$6.3bn
Australian
Industrial
Partner
$0.3bn $10.1bn
Australian
Mandate
$1.6bn
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1. As at 30 September 2015.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

TRADING

• Since 2010, DEXUS has had a trading strategy and included trading profits in FFO

• Already settled on properties that comprise FY16 trading profits to deliver approximately $60 million (post tax)

• In late October 2015, entered into an agreement to sell 57-65 Templar Road, Erskine Park contributing approximately $12 million (pre tax) to trading profits in FY17

History of delivering trading profits

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Approx. $60.0m
$42.6m
$5.8m
$4.3m
$1.5m
FY12 FY13 FY14 FY15 FY16
Trading profits delivered Forecast
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Slide 14

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

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TRADING PIPELINE
FY16
FY15 FY17 FY18+
30 Distribution Drive, Laverton [1]
Sold for $19m ($1m profit, 16.3% IRR)
50 Carrington Street, Sydney [1]
Sold for $88m ($12m profit 13.2% IRR)
40 Market Street, Melbourne [1]
Sold for $105m ($17m profit 26% IRR)
Trading profits settled/secured
5-13 Rosebery Ave and 22-55 Rothschild Ave, Rosebery [1 ] Trading profits being progressed and yet to be secured
Sold for $190m ($17m profit in FY15, $74m profit in FY16)
154 O’Riordan Street, Mascot
Sold for $32m (approx. $12m profit)
57-65 Templar Rd, Erskine Park
Sold for $50m (approx. $12m profit)
32 Flinders Street, Melbourne
Lakes Business Park, Botany (Southern site)
105 Phillip Street, Parramatta [2 ]
12 properties in existing portfolio with development potential
$42.6m (post tax) Approx. $60m (post tax) Target $20m p.a. (pre tax)
1. FY15, FY16 and FY17 trading profits quoted for each property are pre-tax.
2. Also included in DEXUS development pipeline as property has DA approval for an office project.
DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015 Slide 15
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– MARKET OUTLOOK Sydney CBD vacancy to fall below 6.5% by FY18

DEXUS EXPECTATIONS

444,000sqm of 281,000sqm of supply withdrawals over the next 3 years over the next 3 years

240,000sqm of net absorption over the next 3 years

Flight to quality above average take up in prime space

Vacancy to increase in FY16 Barangaroo effect

• 8.9% of stock,  42% of withdrawals  Comparable with 20 around 1.5 times will be permanent year historic average average  Withdrawal rate net absorption of

• Barangaroo higher than previous 87,000sqm p.a. (ex Tech Wreck &

• completion in FY17 decade average GFC)

• followed by decline (~43,000sqm p.a.) in supply in FY18

• Past 12 months +158,000sqm net absorption of Prime

• Includes +21,000sqm net movement (secondary to prime)

• 265,000sqm of supply (73% committed)

• Limited supply FY1718 will see vacancy quickly reduce

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'000sqm
Net absorption Underlying demand Vacancy (RHS)
300 15%
200 10%
100 5%
0 0%
-100 -5%
20yr historic avg. net abs
of ~87,000sqm p.a. Forecast avg. net abs
-200 (ex Tech Wreck & GFC) of 80,000sqm p.a. next 3yrs -10%
-300 -15%
FY95 FY98 FY01 FY04 FY07 FY10 FY13 FY16
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FY18
vacancy
rate below
6.5%
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Source: DEXUS Research, JLL Research, Deloitte Access Economics.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

SUMMARY

 Solid operating business set up to deliver growth through the cycle

 Delivering consistent performance

• Third party funds management business is set up for strong organic growth

• FY16 guidance[1] for growth in FFO and distribution per security of 5.5-6.0% from FY15

Distribution growth – cents per security

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42.0
Three year average growth rate
40.0
of 8.6% p.a. to 30 June 2015
38.0
36.0
Growth of
34.0
41.04 5.5-6.0%
32.0 37.56
36.00
30.0
32.10
28.0
26.0
FY12 FY13 FY14 FY15 FY16
guidance
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• 1.Barring unforeseen circumstances guidance is supported by the following assumptions: flat like-for-like income across the DEXUS combined portfolio, weighted average cost of debt of circa 4.9%, trading profits of approximately $60m net of tax, Management Operations FFO of $45-50m (including third party development management fees), approximately $150m net proceeds from non-core property divestments during FY16, excluding any buy-back of DEXUS securities, and excluding any further transactions.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

APPENDICES

Slide 18

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– CAPITAL MANAGEMENT Improved diversity, duration and cost of debt

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Key metrics 30 Jun 15 30 Jun 14 Diversified mix of facilities [5 ]
Gearing (look-through) [1 ] 28.5% [2 ] 33.7%
Cost of debt [3 ] 5.2% 5.4%
144A 8%
Duration of debt 5.7 years 5.2 years
Hedged debt (ex caps) [4 ] 69% 51%
S&P/Moody’s credit rating A-/A3 A-/A3 USPP 24%
Bank
Gearing history facilities 48%
0.4
0.3
0.2 MTN 17%
35.6%
33.2% 33.7%
31.2% 29.8% 28.4% 27.2% 29.0% 28.5% Commercial
paper 3%
0.1
0
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Target Gearing Range Gearing Gearing Ceiling
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1. Adjusted for cash and for debt in equity accounted investments.

2. Pro-forma gearing is 29.3% post the disposal of Rosebery/Mascot and the acquisition of the Waterfront Place Complex which have all settled post 30 June 2015.

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

4. Average for the year. Hedged debt (including caps) was 76% for 12 months to 30 June 2015 and 60% for 12 months to 30 June 2014. DEXUS was 95% hedged (including caps) as at 30 June 2015.

5. Position at 12 August 2015 including domestic MTN’s in equity accounted investments.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

SYDNEY CBD OFFICE PORTFOLIO

Slide 20

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

SYDNEY CBD OFFICE PORTFOLIO

L-R: 5 Martin Place, Australia Square and Governor Phillip and Governor Macquarie Towers, Sydney NSW.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

SYDNEY CBD

Aerial view of Sydney CBD, NSW.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

SYDNEY CBD

View of Sydney CBD from Milsons Point, NSW.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

MELBOURNE CBD OFFICE PORTFOLIO

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

MELBOURNE CBD OFFICE PORTFOLIO

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L:R: 385 Bourke Street, Southgate Complex and 180-222 Lonsdale Street, Melbourne, VIC.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

BRISBANE CBD OFFICE PORTFOLIO

Slide 26

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

BRISBANE CBD OFFICE PORTFOLIO

L-R: 123 Albert Street, 480 Queen Street development, 10 Eagle Street and 12 Creek Street, Brisbane, QLD.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

PERTH CBD OFFICE PORTFOLIO

Slide 28

DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

PERTH CBD OFFICE PORTFOLIO

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L-R: 58 Mounts Bay Road, 240 St Georges Terrace and Kings Square development, Perth, WA.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– MARKET OUTLOOK Sydney CBD office

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Sydney CBD office market Sydney CBD office market At 30 June 2015
‘000sqm
Total net lettable area 5.00 million sqm
250 12%
Prime vacancy average 7.5%
200
9%
150 DEXUS Sydney CBD exposure
6%
100
Net lettable area 594,848
3%
50
Number of properties 17
- 0%
-50 -3% % of portfolio by value 50%
-100
-6% Occupancy by area 95.5%
-150
-200 -9% Occupancy by income 94.7%
-250 -12% Weighted average lease expiry 4.5 years
FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19
Net Absorption Net Supply Vacancy (RHS)
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Sydney CBD office market

• Recovery well underway with demand to remain firm FY16-FY17

• Vacancy has fallen to c7.8% (FY15), which is better than expected

• Vacancy to temporarily lift FY16 due to significant new supply

• Positive demand and withdrawal of older stock to drive vacancy down to 6.5% in FY18

Source: JLL Research actual & DEXUS Research forecast.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– MARKET OUTLOOK Melbourne CBD office

Melbourne CBD office market

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‘000sqm
250 12.5%
200 10.0%
150 7.5%
100 5.0%
50 2.5%
- 0.0%
-50 -2.5%
FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19
Net Absorption Net Supply Vacancy (RHS)
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Melbourne CBD office market	At	30 June 2015
Total net lettable area	4.57 million sqm
Prime vacancy average		9.8%
**DEXUS Melbourne CBD exposure1 **
Net lettable area		285,273
Number of properties		7
% of portfolio by value		14%
Occupancy by area		94.6%
Occupancy by income		93.1%
Weighted average lease expiry		3.9 years

• Demand strengthening due to growth in education and professional services

• Tenant migration from the fringe to the CBD anticipated to continue

• Vacancy to tighten over the medium-term due to muted supply

Source: JLL Research actual & DEXUS Research forecast.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– MARKET OUTLOOK Brisbane CBD office

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Brisbane CBD office market
Brisbane CBD office market At 30 June 2015
‘000sqm
Total net lettable area 2.15 million sqm
150 18%
Prime vacancy average 10.2%
100 12%
DEXUS Brisbane CBD exposure [1 ]
Net lettable area 460,005
50 6%
Number of properties 5
- 0%
% of portfolio by value 12%
-50 -6% Occupancy by area 97.6%
Occupancy by income 97.7%
-100 -12%
FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19 Weighted average lease expiry 5.3 years
Net Absorption Net Supply Vacancy (RHS)
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• Government and mining sector consolidation is tapering

• Demand turning a corner with positive net absorption from FY15

• Two tier market as tenants migrate to high quality space

• Should benefit longer-term from significant withdrawals for residential conversion

Source: JLL Research actual & DEXUS Research forecast.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

– MARKET OUTLOOK Perth CBD office

Perth CBD office market

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‘000sqm
250 25%
200 20%
150 15%
100 10%
50 5%
- 0%
-50 -5%
-100 -10%
FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19
Net Absorption Net Supply Vacancy (RHS)
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Perth CBD office market	At 30 June 2015
Total net lettable area	1.64 million sqm
Prime vacancy average	15.9%
**DEXUS Perth CBD exposure1 **
Net lettable area	422,916
Number of properties	4
% of portfolio by value	10%
Occupancy by area	99.6%
Occupancy by income	99.7%
Weighted average lease expiry	3.5 years

• Cyclical slowdown as the mining sector transitions from investment phase to production

• Vacancy to rise due to new supply, and further cutbacks in mining sector

• Rents likely to weaken further

• Perth's longer term prospects will be underpinned by rising exports and population growth

Source: JLL Research actual & DEXUS Research forecast.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

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.

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DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

DEXUS PROPERTY GROUP

– MORGAN STANLEY ASIA-PACIFIC SUMMIT PRESENTATION NOVEMBER 2015

DEXUS Funds Management Limited ABN 24 060 920 783 AFSL 238163 as responsible entity for DEXUS Property Group DEXUS Property Group – Morgan Stanley Asia-Pacific Summit 2015

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