This article is from the Australian Property Journal archive
THE Dexus Convenience Retail REIT (ASX: DXC) was back in the green in FY24, delivering a $3.4 million net profit after tax, after a loss of $8.4 million last year.
DXC delivered FFO and distributions of 21.0 cents per security, at the upper end of the group’s guidance range of 20.8 to 21.1 cents, reflecting a decline of 2.9% due to the impact of higher cost of debt.
DXC’s portfolio like-for-like net operating income growth of 2.8%, was supported by average net rent review of 3.4%.
“We delivered FFO and distributions at the upper end of guidance, as our portfolio continues to deliver a resilient income stream backed by high-quality tenant covenants,” said Jason Weate, fund manager at DXC.
DXC had 96 of its 100 investment properties independently valued over the year, resulting in a decline of 3.1% on prior book values to $741 million.
With 95% of rental income derived from major tenants, while 12% of income is generated from convenience retail tenancies.
“DXC benefits from a diverse and high-quality tenant base, with 95% of income derived from national and international major tenants,” said Weate.
“Pleasingly, three of our major tenants invested in their convenience retail capabilities through acquisitions during the year, demonstrating their commitment to the long-term performance of their sites.”
Portfolio occupancy was up to 99.7%, with a WALE of 8.8-years, a WACR of 6.40% and 89% of income expiring in FY30 or beyond.
“Capital recycling and active debt management moderated the impact of higher interest rates. Gearing of 32.9% remains well positioned in the current environment and in the context of our defensive portfolio attributes,” added Weate.
Additionally, balance sheet strength was supported by 75% average debt hedged during the year creating a buffer against higher interest rates.
With weighted average debt maturity of 4.2 years and no near-term debt maturities after $130 million of facility extensions at lower margins.
Over the period, DXC settled $23.3 million in divestments, with an additional circa $40 million still under negotiation, which would cut back pro forma gearing by 380 basis points.
“Despite a challenging interest rate environment, fuel and convenience transaction volumes have remained relatively robust, allowing for material price discovery to inform asset valuations and NTA,” said Weate.
DXC provides FY25 guidance for FFO and distributions of 20.6 cents per security, reflecting a distribution yield of 7.3%.
