This article is from the Australian Property Journal archive
AMIDST a weakened market, Dexus Convenience Retail REIT (ASX: DXC) has posted a net loss of $8.4 million after devaluations across its portfolio.
The statutory net loss after tax of $8.4 million is down from FY22’s net profit after tax of $41.3 million.
Reflecting $41.3 million in asset devaluations for a 5.0% decline on prior book values, after valuation gains of $30.8 million in the year prior and contributed its NTA per security decreasing by 28 cents, or 6.9%, to $3.75. The devaluation comes after a circa $23.7 million drop for the first six months of the year.
Despite the loss, DXC delivered on its FY23 guidance with FFO and distributions per security of 21.6 cents.
FFO was at $29.8, reflecting a 5.3% decline on the prior year and like-for-like net operating income of 2.7%.
“We are pleased to have delivered guidance for Security holders while continuing to deliver resilient top line growth, underpinned by some of the highest-quality tenant covenants in the market,” said Jason Weate, fund manager at DXC.
“We continued to pursue asset divestments to further strengthen our balance sheet and enhance the strategic positioning of the portfolio.”
DXC’s divestment program successfully delivered $52.3 million in proceeds, reflecting 7% of the portfolio at an average 2.5% discount to prior book values.
Across its portfolio, DXC saw moderate income growth with an average rent review of 3.7% over the period.
“Today’s result demonstrates the positioning of our portfolio, to provide investors with defensive income with embedded growth. We have delivered on our strategic objective to further strengthen DXC’s capital position via an expanded divestment program, executing on $52.3 million of disposals at attractive pricing for our investors,” added Weate.
“This reflects a strong outcome in a subdued market, reducing pro forma gearing to below the midpoint of our target 25 to 40% target range and lowering exposure to floating rate debt, as well as improving overall portfolio quality with 42% of asset sales in regional locations.”
DXC’s capital position was also strengthened over the period, with pro forma gearing down from 35.0% to 31.8% and FY24 average hedging expected to sit above 70% after contracted asset sales and incremental hedging.
Weighted debt maturity was maintained at 4.2-years with no maturities until FY26.
At the end of the period, DXC’s property portfolio included 105 assets valued at $781 million, diversified by geography, tenant and site type.
DXC had 82 of its 105 investment properties independently valued during the year, with the remainder subject to internal valuations.
The portfolio is 85% weighted by value to metropolitan and highway assets, with the remainder comprised of regional properties.
Weighted average capitalisation rate was up 36 basis points over the past 12 months to 6.10%.
Portfolio occupancy was at 99.4%, with 88% of rental income derived from 10 major tenants and a WALE of 9.7-years with 89% of income expiring in FY30 or beyond.
DXC provided a FY24 guidance for FFO and distributions of 20.7 – 21.1 cents per security, reflecting an attractive distribution yield of over 8%.
“We will continue to actively manage the portfolio and balance sheet to position the vehicle for long-term growth opportunities for security holders,” concluded Weate.
