DEXUS — Investor Presentation 2019

Oct 14, 2019

Dexus (ASX: DXS)

ASX release

15 October 2019

Citi Australian and New Zealand Investment Conference presentation

Dexus provides the attached presentation which will be used as a basis of discussion at the Citi Australian and New Zealand Investment Conference, to be held at the Sheraton Grand in Sydney on Wednesday, 16 October 2019.

For further information please contact:

Investor Relations Rowena Causley +61 2 9017 1390 +61 416 122 383 rowena.causley@dexus.com Media Relations David Yates +61 2 9017 1424 +61 418 861 047 david.yates@dexus.com

About Dexus

Dexus is one of Australia's leading real estate groups, proudly managing a high quality Australian property portfolio valued at \$31.8 billion. We believe that the strength and quality of our relationships is central to our success, and are deeply committed to working with our customers to provide spaces that engage and inspire. We invest only in Australia, and directly own \$15.6 billion of office and industrial properties. We manage a further \$16.2 billion of office, retail, industrial and healthcare properties for third party clients. The group's circa \$9.3 billion development and concept pipeline provides the opportunity to grow both portfolios and enhance future returns. With 1.7 million square metres of office workspace across 53 properties, we are Australia's preferred office partner. Dexus is a Top 50 entity by market capitalisation listed on the Australian Securities Exchange (trading code: DXS) and is supported by 26,000 investors from 19 countries. With 35 years of expertise in property investment, development and asset management, we have a proven track record in capital and risk management, providing service excellence to tenants and delivering superior riskadjusted returns for investors. www.dexus.com

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

Citi Australian & New Zealand Investment Conference Presentation October 2019

Dexus Funds Management Limited ABN 24 060 920 783 AFSL 238163 as responsible entity for Dexus

Key takeaways Dexus benefits from Australian CBD exposure

Australian office fundamentals are attractive

• Relative pricing and rent growth for Australian office compares favourably to global cities
• Measured supply at a time of record low vacancy levels (Sydney and Melbourne)
• CBDs continue to benefit from strong employment growth

Dexus well positioned for sustained performance

• High quality portfolio with development pipeline weighted to key Australian CBDs
• Diversified lease expiry profile provides upside exposure
• Strong underlying fixed rental increments of 3.5-4.0%
• Customer focus with emphasis on making things 'simple and easy'

Megatrends

Dexus's strategy is orientated around two key long-term growth thematics

We are in a climate of rapid change and the context in which we operate our business, both today and in the future, is informed by the disruption and opportunity created by global megatrends.

Other megatrends that could impact Dexus's strategy and outlook include:

The rise of the millennial worker

Technological change

Environmental sustainability

1. Source: Willis Towers Watson, Global pension assets study 2018.

Dexus overview

\$31.8 billion under management1

PROPERTY PORTFOLIO \$15.6 billion1	Proxy for Australian office property - Overweight position to Sydney market •
FUNDS MANAGEMENT \$16.2 billion1	Outperforming and growing Funds - Management business
DEVELOPMENT	\$9.3 billion1 group development and - concept pipeline
TRADING	FY20 and FY21 trading profits significantly - de-risked3
CAPITAL MANAGEMENT	Strong balance sheet with gearing of 24.0% - Market cap of circa \$13 billion -
FY20 GUIDANCE Confident of achieving circa 5% FY20 distribution growth4	95% of Property FFO already locked in - Trading profits significantly de-risked3 - Cost of debt of mid-3% with appropriate - levels of hedging

1. Funds under management and development and concept pipeline as at 30 June 2019.

2. Adjusted for the one-for-six security consolidation completed in FY15. Compound annual growth rate (CAGR) is calculated over seven years. 3. Post 30 June 2019. Dexus exchanged contracts to sell a 25% interest in 201 Elizabeth Street, Sydney for \$157.5 million and entered into a put and call option to sell the remaining 25% interest in late 2020 for a further \$157.5 million. Trading profits in FY21 are subject to the exercise of either option.

3. Barring unforeseen circumstances, guidance is supported by the following assumptions: Impacts of announced divestments and acquisitions; FFO per security growth of circa 3%, underlying FFO per security growth of circa 3%, underpinned by Dexus office portfolio like-for-like income growth of 4.5-5.5%, Dexus industrial portfolio like-for-like income growth (excluding one-offs) of 3-4%, management operations FFO of \$55-60 million, cost of debt of mid-3%; trading profits of \$35-40 million net of tax; maintenance capex, cash incentives, leasing costs and rent free incentives of \$170-185 million; and excluding any further transactions.

4

High quality portfolio weighted to Australian CBDs With positive outlook for cap rate compression

Recent office transactional evidence2

Price (\$m)	Yield
920.0	4.5%
1,520.0	4.4%
400.0	4.1%
1,079.0	4.8%
830.0	4.8%

Sydney Office cap rate spread to 10-year Aus govt bonds September 1994 – September 20193 , %

12 month capitalisation rate outlook:

Potential 12.5-25 basis point firming for quality office property and at least 25 basis points firming for industrial, supported by spread to bonds

and investor sentiment

1. Stabilised portfolio weighted average capitalisation rate. 2. Source: JP Morgan Equities Research.

2. Cap rate is equal to the average prime yield for the purposes of this analysis. 4. Post GFC 10-year average taken from March 2009 quarter through to September 2019. Source: JLL, RBA

Citi Australian & NZ investment conference presentation

Pricing in Australia remains attractive Relative pricing and rent growth for Australian office compare favourably to global cities

Source: Savills, JLL, Trading Economics, Knight Frank, Dexus Research.

*Effective yields are based on A-grade office space – Australian, EU & Asian yields and bond rates June-19 based on JLL data. US yields are economic cap rates as per Green Street REA's May 2019 Office Sector Snapshot Forecasts are based on JLL data (for Australian cities) and Knight Frank Global Outlook 2019 (for global cities) for average prime net face rents from end 2018 to end 2020 and are not Dexus Research forecasts.

Office portfolio expiry profile Diversified expiry profile provides upside exposure with limited downside

Dexus office lease expiry profile at 30 June 2019

Sydney portfolio 8% under-rented with 23% office portfolio income expiring in Sydney up to end FY22

Sydney CBD supply landscape

FY20-24 Sydney net supply equates to avg +1.8% of total stock per annum, compared to long-run avg of +1.3% pa

47% of Sydney supply up to end FY24 is pre-committed

Office market outlook Dexus's CBD office strategy leverages powerful urban growth trend

NSW employment growth by region

Long-term national growth in white collar employment is running at 2.7%, with total employment at 2.0%

• Job creation remains above average with job vacancies near record levels
• Expect some slowing of the labour market however population growth and infrastructure investment are key supports
• Over the long-term office markets will continue to benefit from disproportionately strong growth in the service sector, particularly in inner city & CBD areas

Source: ABS, Dexus Research.

Office workspace trends

Workspace density has created significant pent up demand

Sydney CBD workspace ratio

Source: ABS, Sydney City Council.

Flexible workspace offering Dexus focus on making things 'simple and easy' for our customers

Flexible space penetration rates

Source: Domestic markets sourced from Dexus Research, JLL Research, Colliers, Cushman & Wakefield, June 2019. Offshore markets sourced from JLL Research, May 2019.

Dexus response

• Co-working competes with other space providers to a degree, however it also increases overall demand by drawing in smaller users and start-ups who might not otherwise be in the CBD
• Dexus is engaged in a range of activities to offer greater flexibility to customers, including offerings such as Dexus Place, Suite X as well as simpler lease agreements
• Dexus has been mindful of diversifying our exposure to coworking providers and taking standard bank guarantees as security on our leases

Dexus exposure

• WeWork makes up 0.6% of Dexus's portfolio income
• Flexible space (which includes co-working and serviced offices) makes up 2% of Dexus's portfolio income

Providing investors with stable growth in the long term Office demonstrates lower income volatility and diversified portfolios absorb one-off shocks

Total returns over various periods Total returns, %, annualised

Source: MSCI.

1. Measured by two standard deviations. Standard deviation based on the annual return on a quarterly basis. Two standard deviations of 1.2% over 20 years means that ~95% of the returns fall within 1.2% of the mean return for the 20 year period.

Summary Dexus well positioned

• Relative pricing and rent growth for Australian office compares favourably to global cities
• Dexus well positioned through its high quality property portfolio, development pipeline, diversified lease expiry profile, fixed rental increments of 3.5-4.0%, and ongoing customer focus
• Confident of achieving FY20 market guidance1 for distribution per security growth of circa 5%
• 95% of Property FFO already locked in
• Trading profits significantly de-risked
• Cost of debt of mid-3% with appropriate levels of hedging

12 Citi Australian & NZ investment conference presentation

^1. Barring unforeseen circumstances, guidance is supported by the following assumptions: Impacts of announced divestments and acquisitions; FFO per security growth of circa 3%, underlying FFO per security growth of circa 3%, underpinned by Dexus office portfolio like-for-like income growth of 4.5-5.5%, Dexus industrial portfolio like-for-like income growth (excluding one-offs) of 3-4%, management operations FFO of \$55-60 million, cost of debt of mid-3%; trading profits of \$35-40 million net of tax; maintenance capex, cash incentives, leasing costs and rent free incentives of \$170-185 million; and excluding any further transactions.

Important information

• This presentation is issued by Dexus Funds Management Limited (DXFM) in its capacity as responsible entity of Dexus (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 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 security holder or potential investor may require in order to determine whether to deal in Dexus 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 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.