Dexus warns of 10% drop in values

In a portfolio update, the global diversified trust also warned of a further weakening in the leasing market and although rental conditions are stable, incentives in leasing contracts are rising, particularly in Perth.

Analysts said the drop in values, across its Australian, United States and European assets, to June 30, was a warning for investors as they brace themselves for some tough results from a year when the overall market capitalisation of the sector fell about 60 per cent in value.

The chief executive of Dexus, Victor Hoog Antink, said the group's weighted average capitalisation rate (a measure of value used in the property industry) has continued to increase by approximately 50 to 70 basis points and leasing assumptions have also weakened.

"Consequently, the total expected valuation decrease as at June 30, 2009, is in the range of $870 million to $890 million for the portfolio. The resultant gearing is expected to be 32 per cent," the report said.

Goldman Sachs JBWere's head of property research, Simon Wheately, said the drop in values and softening of capitalisation rates "effectively wipes off all the $749 million raised in the Dexus equity issue in April".

"Our estimates and valuation are under review," he said.

Despite the dramatic decline in values and the recent refinancing, Dexus said its revised June 30, 2009 earnings guidance is 10.43c per security (8.1 cps on an annualised fully diluted basis) resulting in a distribution to security holders of 7.3 cps (5.7 cps on an annualised fully diluted basis).

Dexus said it has completed refinancing all 2009 debt maturities and has sufficient liquidity to fund medium-term note maturities in both 2010 and 2011. The group is also having discussions regarding the refinancing of 2010 bank debt maturities.

Meanwhile, Goodman group was up 1.25 per cent to 41c yesterday amid broker suggestions that the group may be about to embark on a capital raising "sooner rather than later". Analysts have speculated this could be in the next few weeks and worth up to $1 billion.

Goodman recently announced a refinancing deal that saw the China Investment Corporation and Macquarie Group emerge with a combined 15 per cent holding, which could rise after options were exercised.