Property investors and manager Dexus (ASX:DXS) have issued a warning to investors, indicating that they can anticipate reduced returns in the fiscal year 2023-24. This caution follows an annual loss reported by the real estate firm for the period ending on June 30. The decline in values of CBD buildings has significantly impacted the company's performance.
In the specified period, the company reported a statutory net loss attributable to $752.7 million. This stands in stark contrast to the $1.62 billion profit recorded in the preceding year.
The manager experienced a staggering $2.3 billion shift into losses, attributed to fair value losses incurred on investment properties. The Directors elaborated, stating, "This was primarily driven by $1,183.9 million of fair valuation losses on investment property, stemming from softening capitalisation rates across the portfolio. This is in contrast to the $926.0 million fair valuation gains recognised in the previous year."
"The portfolio valuations resulted in a total decrease of $1,183.9 million, approximately 6.9%, in comparison to the previous book values for the 12-month period ending on June 30, 2023.
"These revaluation losses were the main factor contributing to a decrease of $1.40, or 11.4%, in net tangible asset (NTA) backing per security during the same period, amounting to $10.88 as of June 30, 2023.
"The acquisition of the AMP Capital platform had an impact of 26 cents on NTA per security, due to transaction costs incurred, as well as management rights and goodwill, which are categorised as intangible assets."
Dexus revealed that adjusted funds from operations witnessed a decline of over 3%, amounting to $555 million for the fiscal year ending on June 30.
Furthermore, the company has projected a reduced distribution of 48 Australian cents per security for the fiscal year 2023-24, in contrast to the total distribution of 51.6 cents for the current year. This projection is attributed to the anticipation of continued impact on capital flows and market sentiment due to inflation and higher interest rates. These factors are expected to further strain the valuation of the company's real assets.
Dexus forecasted that adjusted funds from operations, excluding trading profits for 2024, will be largely consistent with the results achieved in the 2023 financial year.
CEO Darren Steinberg acknowledged the challenges posed by operating within an uncertain economic environment. He emphasised the company's commitment to diversifying capital sources and expanding their funds management business. Steinberg also highlighted the strategic moves to re-weight the Dexus portfolio, including the announcement of $1.8 billion in balance sheet divestments since the FY22 results. These actions aim to maintain a resilient balance sheet and facilitate the redirection of capital into opportunities with higher returns, as stated in the ASX release.
