Dexus Reports AU$867 Million Decline in Portfolio Valuation

Highlights:

• Significant Valuation Decline: Dexus's portfolio valuation dropped by AU$1.3 billion (approximately AU$867.36 million), or 9%, in the first half of the year.
• Market Challenges: The office and retail real estate sectors are struggling due to the work-from-home trend, e-commerce constraints, and rising interest rates.
• Stock Impact: Dexus shares fell 1.8%, reaching a seven-month low, and have declined nearly 15% year-to-date amid ongoing valuation pressures.

Significant Valuation Drop

Australian real estate firm Dexus (ASX:DXS) announced on Thursday that the book value of its portfolio has decreased by AU$1.3 billion (approximately AU$867.36 million), or 9%, for the six months ending in June. This decline follows a previous drop of AU$762.4 million, or 5.2%, in the six months ending in December, highlighting an accelerating downturn in the office real estate market.

Market Challenges and Stock Impact

The Australian real estate market, particularly in office and retail sectors, continues to face significant challenges. The shift to remote work and constraints in e-commerce are pressuring property valuations. Additionally, higher interest rates are reducing building values and increasing debt costs. In response to these pressures, Dexus shares fell by 1.8% to their lowest point in over seven months as of 0051 GMT. The company's stock had already dropped nearly 15% this year, exacerbated by a substantial half-yearly loss reported in February.

CEO's Perspective and Portfolio Breakdown

Ross Du Vernet, CEO and Managing Director of Dexus Group, commented on the situation, stating, "The investment metrics displayed by recent sale activity support a softening in office market valuations. However, as a long-term investor, we have confidence in the value of our high-quality portfolio through the cycle." Despite the current downturn, Dexus remains optimistic about the future value of its assets.

Detailed Valuation Metrics

The draft external independent valuation reviewed 170 of Dexus's 176 assets. The valuations for its office portfolio saw an 11.3% decrease, while the industrial portfolio experienced a smaller decline of 1.2%. The weighted average capitalisation rate, a key metric for measuring the return on investment for real estate assets, increased to 5.87% from 5.45% at the end of December.

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