This article is from the Australian Property Journal archive
OPERATING income growth and contributions from new acquisitions helped fuel station specialist Dexus Convenience Retail REIT (DXC) to a 21.5% uplift in full-year funds from operations.
The trust delivered its upgraded guidance of 23.1c per security. Its current FY23 guidance provides FFO and distributions ranging between 21.2 to 22.0 cps, based on property income growth supported by rental increases and current interest rate expectations.
It made 15 acquisitions totalling $168 million over FY22, with its $850 million portfolio of 112 assets holding a long weighted average lease expiry of 10.3 years and occupancy of 99.7%.
Statutory net profit lifted 11.9% to $82.6 million, driven by higher rental income from acquisitions and fair value gains on interest rate derivatives. FFO hit $31.5 million, supported by a 2.3% like-for-like net operating income growth and the impact of new acquisitions.
“We delivered a solid financial result for the year in line with our upgraded guidance, demonstrating the resilience of the portfolio which provides income certainty backed by some of the highest-quality tenant covenants in the market,” DXC fund manager Jason Wheate said.
“We promptly responded to changes in the economic environment by launching an on-market securities buyback program, pursuing asset sales and strengthening our capital position to support security holder value over the long term.”
The trust purchased 1.4 million securities as part of the buyback program, at an average discount of 15% to net tangible assets per security.
NTA was up 9.6% to $4.03, primarily driven by $30.8 million of property valuation gains with rental growth accounting for 47% of those.
The divestment of four assets delivered an overall premium to book value of 3.8%.
“The strong pricing achieved on sales reinforces the high-quality nature of the underlying portfolio, demonstrating the investor appeal in service station and convenience retail properties as a source of defensive and growing income,” Wheate said.
Solid momentum has been achieved into FY23 and DXC will continue to actively pursue capital recycling initiatives to optimise the portfolio, repay debt and provide value-accretive redeployment optionality including potential further securities buyback activity.
The weighted average capitalisation rate for the portfolio tightened 28 basis points to 5.74%, over 12 months. Valuations of metropolitan assets increased 4.6% on prior book values, while highway assets remained flat and regional assets increased 4.8%.
Three long-term lease deals were completed over the period, including the introduction of a car wash operator on a 15-year term at Redback Plains, extending the lease expiry for 7-Eleven at Redbank Plains from FY30 to FY37, and securing Liberty on a new 15-year lease at Lawnton.
