Dexus Convenience Retail REIT (DXC) confirmed the sale of three assets at discounts to book value and confirmed lower re-valuations on balance of portfolio.
DXC has divested three assets for a combined price of $15.4 million, representing an average 4.0% discount to the 31 December 2022 book values.
The divestments of these assets are consistent with DXC’s stated strategy of:
- enhancing balance sheet strength, reducing pro-forma gearing by 1.2 percentage points
- reducing exposure to interest rate rises by increasing average hedging by circa 3 percentage points
- reducing property portfolio exposure to regional assets and older tank technology
These transactions bring total sales contracted throughout FY23 to $40.8 million, reflecting circa 5% of the portfolio at an average 2.3% discount to prior stated book values.
The sale of 983 Waterworks Road, The Gap and 127 Kingston Road, Woodridge in Queensland settled on 27 April 2023. The sale of 1182 Chapman Road, Glenfield in Western Australia is expected to settle by early September 2023.
In addition, 57 of DXC’s 105 assets have been externally valued as at 30 June 2023, with the remainder internally valued. These draft external and internal valuations have resulted in an estimated net devaluation of circa $23.7 million for the six months to 30 June, representing a 2.9% decrease on prior book values.
The weighted average capitalisation rate across the total portfolio expanded 20 basis points over the six months from 5.90% at 31 December 2022 to 6.10% at 30 June 2023.
DXC Fund Manager, Jason Weate said: “Despite the impact of capitalisation rate expansion, the valuation outcomes reflect the overall quality of the portfolio which is supported by secure cash flows underpinned by weighted average rent reviews of over 3.5% to high-quality tenants and stable occupancy of above 99%.
“The divestments enhance the overall quality of the portfolio while delivering a strong price outcome in a challenging environment. The combined impact of these divestments alongside asset revaluations result in pro forma gearing of circa 33%3, and we continue to actively assess portfolio composition to enable DXC to take advantage of future investment opportunities.”
Further details on the portfolio’s final valuations will be included in DXC’s FY23 results which will be released to the Australian Securities Exchange on Monday, 7 August 2023.
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