Coronavirus crisis is having a devastating impact on the Australian property market, with sales down by hundreds of millions of dollars and tenants handing back the keys because they can no longer afford their rent.
This black swan event has turned the property market upside down- The COVID-19 and the related business closures have induced a dramatic shock to the real estate market. There has been a considerable surge in the number of residences being discounted. As per some industrial experts, it is anticipated that the property prices could fall between 15 and 30%.
Temporary visa holders have been hit hard, with many losing their jobs and are returning back to their domicile. This would throw spanner on the migration front in the coming years. The government is anticipating a whopping 85% drop in 2020-21.
Contrarian Views or Brave Hearts
However, some Australian real estate experts do not believe that the property market in Australia is going to hit hard this year. As per them, the next stage of the Australian real estate boom will kick off. It is just about getting the right timing to find the prime Aussie real estate selling at the prices which have not observed in years.
Only time will tell if this price fall is temporary or the new normal. In this backdrop let us delve deep and discuss two ASX listed property stocks- DXS, LLC
Dexus’ Property Portfolio Remains in Strong Shape
One of Australia’s leading real estate groups Dexus Property Group (ASX:DXS) is engaged in managing a high-quality Australian property portfolio valued at $33.8 billion. Dexus is the preferred office partner across Australia, with approximately 1.8 million m2 of office workspace across 55 properties.
On 5 May 2020, Dexus disclosed an update on its response to COVID-19 and property portfolio for the March quarter.
The Company mentioned that this is a challenging time for several of its valued customers and appreciate that all are in this together. Dexus is consistent with the code of conduct provided by the government and is also dedicated to helping its customers. Furthermore, the Company’s focus is on prioritizing assistance for backing the sustainability of small business customers.
Quarterly Highlights for March 2020 (ended 31 March 2020)
- The Company disclosed that it leased 33,284 square metres of office space across 62 transactions in the core portfolio and at development projects underway or completed, with office portfolio occupancy remaining high at 97.2%
- Addition to this for industrial space the Company leased 21,094 square metres space across 22 transactions, with industrial portfolio occupancy staying robust at 96.0%
- Post 31 March 2020, DXS disclosed the settlement of GIC’s additional 24% investment of nearly $366.1 million in Australian Logistics Trust Company in addition to the establishment of a new Joint Venture (JV) with GIC that had exchanged contracts to acquire a 50% interest in Rialto Towers, 525 Collins Street, Melbourne for $644 million.
Moreover, the Company highlighted that currently, it is working along with its customers for responding to the near-term as well as longer-term outcomes of the pandemic.
Dexus also mentioned that this time immediate priority of the Company is to support minor and medium enterprise customers (SMEs), including the city retailers that help the office community and who have been drastically affected by the ongoing turmoil. The Company is continuing discussions with these customers on a variety of forms of rental relief.
Office and Industry Portfolio of Dexus-
Office Portfolio- In the March quarter, approximately 33,284 m2 of office space was leased through 62 transactions in the core portfolio and at the ongoing or completed development projects.
Remarkable activities during the quarter in the office portfolio included signing heads of agreement for a new customer at 180 Lonsdale Street, Melbourne across 3,574 m2, the state of NSW has exercised the option to extend their lease across 2,952 m2. And also comprises the renewing customers at Waterfront Place, Brisbane and King Square, Perth across 3,736 m2 and 3,657 m2, respectively.
Industrial space- During this quarter, a total 21,094 m2 of industrial space was rented across 22 transactions, with notable activity including-
- Securing new customer, renewing existing customer across 4,356 m2,
- Securing rental across 3,616 square metres at Axxess Corporate Park through 12 transactions and,
- Renewing three customers and securing two new customers across a total 2,642 m2.
Moreover, the Company also acknowledges the considerable disruptions in business as well as impacts to its larger customers, and is grateful to them for supporting the approach to prioritise assistance to small businesses.
On 6 May 2020, the share price of DXS fell by 1.7% and closed at $8.880, with a market cap of $9.86 billion. The 52-weeks high and low price of DXS stock noted to be $13.960 and $8.030, respectively.
Lendlease Raised Equity To Strengthen its Balance Sheet
ASX-listed real estate company Lendlease Group (ASX:LLC) deals in the retail property, asset management and construction. The Group has its operations in four regions- Europe and Asia, Australia and the Americas and has delivered a total of 1,623 residential apartments for sale including in Sydney, Melbourne, and London.
On 29 April 2020, Lendlease announced equity raising to strengthen the balance sheet. The Company revealed completion of the placement to investors (institutional) of completely paid ordinary stapled securities in Lendlease at the per-share offer price of $9.80, in conjunction with a security purchase plan (SPP).
The Company will be providing its eligible security holders with the opportunity to join in a non-underwritten security purchase plan up to $30,000 each, which will be without any brokerage or transaction costs, to emerge to $200 million.
Related to the SPP Lendlease provided information on 5 May 2020, Eligible Lendlease security holders in Australia and New Zealand now have the opportunity to apply for up to $30,000 each of new fully paid ordinary stapled securities in Lendlease (SPP Stapled Securities), free of any brokerage or other transaction costs.
Notably, the Company mentioned that the SPP is not for release or distribution in the US.
On 6 May 2020, the share price of LLC fell by 0.086% to close the day’s trade at $11.680, with a market cap of $7.75 billion. The company has nearly 661.73 million outstanding shares on ASX.