Property manager and investor Dexus (ASX:DXS) saw its shares suffer their worst trading day in three years on Tuesday as the authenticity of the real estate crisis took a toll on the company.
Dexus shares fell 8. 5% to $6. 86, marking their worst intraday decline since July 2021, and were among the biggest losers on a firmer ASX 200. Focus on the performance of the group.
In fact, the big surprise for many investors is the sharp drop in the distribution forecast for 2024-25, to 37 cents consistent with the percentage. That’s a whopping 22. 95% below the 48 cents consistent with the constant percentage for 2023-2024, which Dexus boasted about. He had fulfilled his prediction. However, investors had to keep reading the earnings announcement for a dozen more paragraphs before learning of the sharp relief in bills expected for this fiscal year.
Dexus reported a larger-than-expected loss for 2023-2024, due to another sharp drop in its home valuation (which was reported in June). The billions of dollars in write-downs over the past 18 months (although inventories have fallen more than 40% over the past five years) have not had as much of an effect on stock values as one might have thought. But that seemed to change in early July when the value fell to $6. 30, its lowest point. in a year (actually, a five-year low!) before rallying past $7, peaking at $7. 50 on Monday. And then he got out of bed Tuesday after Dexus disclosed that its legal net loss attributable to security holders widened to $1. 58 billion for the fiscal year. year that ended on June 30, narrowly missing the market consensus of a loss of $488. 5 million.
This is double the $752. 7 million loss in 2022-23, and the group’s average capitalization rate on its labor and business assets has soared from 4. 76% as of June 30, 2023 to a high of 6. 05%. The valuation of Dexus’ portfolio fell to 13. 9%, or $1. 9 billion, in 2023-2024, a steeper devaluation than last year’s roughly 7% — a whopping 20% in two years. Dexus’ workplace assets, which account for more than two-thirds of the total portfolio, lost more than 15% of their price in the year to June alone, a big drop.
Its adjusted or consistent financial budget (AFFO), which excludes valuation adjustments and one-time charges, also fell 7% to $516. 3 million, down from the consensus of $532. 2 million. Dexus reported a final distribution of 21. 3 cents per constant percentage, down 10%. From a year earlier, reducing the full year by 7% to 48 cents depending on the percentage. The company provided AFFO guidance of 44. 5 to 45. 5 Australian cents based on the constant percentage for the 2024-25 year, which missed consensus expectations by 7%. according to market forecasts.
Chief executive Ross Du Vernet was reportedly pleased with the result, saying the company had maintained a high occupancy rate across its retail and office portfolios, ensuring strong cash flows but moderate return expectations in a “challenging environment. ” “. a FY25 distribution of less than 37 cents, representing a payment of 80% to one hundred percent of adjusted funds. That’s why inventory costs weakened on Tuesday.
“Markets move in cycles and even if situations are difficult at the moment, we are making a long-term investment,” said Mr S. But it will take more than lyrical words from Dexus and the real estate teams to triumph over the set of The effect of decade-high interest rates and the pressures they have put on asset valuations, just as growing demand for escape from home and e-commerce is leading renters to reconsider their land needs , current and future.
And the most sensible thing is that, while higher rates lead to higher capitalization rates, high borrowing costs make it more expensive to pay down debt on buildings and projects with falling valuations. Rents are also under pressure, a further slowdown in the economy is imaginable, and economists say many disruptions may arise, especially if asset values stagnate at those declining levels.
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