Dexus Convenience Retail REIT announces that it has acquired or exchanged contracts to acquire two purpose-built, modern metropolitan convenience retail properties in Queensland, comprising Puma Chandler (Chandler) and BP Brendale (Brendale) and recorded 4.4% valuation gains in the portfolio.
Forty Eight of the Funds assets have been externally valued in the six months to 31 December 2021, with the remainder subject to internal valuations. The outcome of the valuations is a net revaluation uplift of $22 million to approximately $812 million. The net increase is approximately 4.4% on a like for like basis compared to 30 June 20211.
In isolation, the valuation uplift is estimated to increase DXC’s Net Tangible Asset backing (NTA) by circa 16 cents per security. The weighted average capitalisation rate across the total portfolio tightened 20 basis points over the six-month period to 31 December 2021, from 6.02% at 30 June 2021 to 5.82%.
Chris Brockett, DXC Fund Manager, said: “The valuation process demonstrates our disciplined approach to building a high quality, strategically located and resilient portfolio, and reinforces the investment demand for convenience retail assets.
“Transaction volumes have significantly increased over the past 12 months and we expect convenience retail properties to remain highly sought after as a stable and defensive asset class due to their long leases and strong lease covenants.”
Dexus also announced that as a result of the acquisitions of Puma Chandler (Chandler) and BP Brendale (Brendale) DXC’s FFO and distribution guidance for the 12 months ending 30 June 2022 (FY22) will lift to 23.1 cents per security, up 5.5% on FY21. This compares to prior guidance of 22.9 cents per security.
The upgrade will flow through the third and fourth quarter FY22 distributions and the updated guidance is subject to current market conditions continuing and no unforeseen events.
Chandler and Brendale are being acquired for a combined price of $20.8 million, representing an average purchase yield of 5.5%.
Chandler was constructed in 2019 and is anchored by Chevron with 13.2 years remaining on its lease, supported by three additional specialty retail tenancies. DXC settled on the acquisition of Chandler on 5 November 2021.
Brendale was constructed in 2021 and comprises a BP petrol station and Wild Bean branded convenience store. DXC has exchanged contracts to acquire Brendale with settlement expected next month.
Both properties are strategically located on main arterial roads with exposure to high traffic flows. A summary of the acquisitions is provided below:
| Property | Major tenants | Value | Purchase yield | WALE | WARR |
| Puma Chandler, QLD | Puma, Taste My Bean, Chicken & Pizza, Kebab | $11.7m | 5.7% | 11.3 years | 3.0% |
| BP Brendale, QLD | BP | $9.1m | 5.2% | 12.2 years | Greater of 2.5% or CPI |
| Total | $20.8m | 5.5% | 11.7 years | 2.8% |
Chris Brockett, DXC Fund Manager, said: “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.”
“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.”
Following the settlement of Chandler and Brendale, DXC’s portfolio will grow to 113 properties valued at $783 million, reflecting a weighted average capitalisation rate of 5.9% and a portfolio WALE of 11.6 years.
The acquisitions will be funded by existing debt capacity, increasing the Fund’s gearing to 34.4% on a pro forma basis, which is within the Fund’s 25% – 40% target range.
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