This article is from the Australian Property Journal archive
AS valuations lift Dexus Convenience Retail REIT’s (DXC) portfolio to $812 million, the fund has snapped up two new assets in Queensland for $20.8 million.
The REIT has exchanged contracts for two purpose-built metropolitan convenience retail properties, Puma Chandler and BP Brendale, with the combined purchase price reflecting an average purchase yield of 5.5%.
“These acquisitions reinforce our active and disciplined approach to creating a resilient portfolio of high-quality assets. Both are recently constructed assets, with long WALEs and favourable rent reviews providing income security and a sustainable source of income growth,” said Chris Brockett, fund manager of DXC.
The Chandler property, which was built in 2019, was purchased for $11.7 million for a purchase yield of 5.7% and boasts a WALE of 11.3-years and a WARR of 3.0%.
Chandler features Chevron as its anchor tenant with 13.2 years of their term remaining, while the site includes leases with Taste My Bean, Chicken & Pizza, Kebab.
The 2021-built Brendale site was acquired for $9.1 million reflecting a 5.2% purchase yield and includes a WALE of 12.2-years and a WARR greater of 2.5% or CPI, with settlement expected for next month.
On top of the BP petrol station, the property includes a Wild Bean branded convenience store.
Both of the properties are strategically placed on main arterial roads bringing exposure to high levels of traffic.
Both acquisitions will be funded by existing debt capacity from DXC and will bring the fund’s gearing up to 34.4% on a pro forma basis, well within its target range.
“While we have taken the opportunity to acquire quality properties that enhance value, we continue to actively review capital management initiatives to close the trading discount to NTA per security,” added Brockett.
While DXC announced their portfolio would grow to 113 properties valued at $783 million, for a WACR of 5.9% and a WALE of 11.6-years, it has since announced the results for its external valuations.
48 assets in the DXC portfolio were externally valued for a net revaluation uplift of $22 million to circa $812 million, while the remaining properties will be subject to internal valuations.
“While we have taken the opportunity to acquire quality properties that enhance value, we continue to actively review capital management initiatives to close the trading discount to NTA per security,” said Brockett.
This net uplift is approximately 4.4% on a like-for-like basis compared to 20 June 2021, while in isolation the uplift is anticipated to increase DXC’s NTA backing by circa 16 cents per security.
DXC’s WACR across its total portfolio compressed by 20bps from 6.02% to 5.82% over the six month valuation period ending 31 December 2021.
“While we have taken the opportunity to acquire quality properties that enhance value, we continue to actively review capital management initiatives to close the trading discount to NTA per security,” concluded Brockett.
When announcing the acquisitions the board of Dexus Asset Management Limited upgraded DXC’s FFO and distribution guidance for FY22 to 23.1 cps, a 5.5% increase on FY21.
