Dexus Convenience Retail REIT assets decrease in valuations

7 August 2023

Dexus Convenience Retail REIT (ASX:DXC) delivered on FY23 guidance of $29.8 million, the result represents 5.3% decline on the prior year.

The portfolio consistently generates organic rental growth with an average rent review of 3.7% achieved for the year. The portfolio generates 75% of income from fixed rental increases, while 25% is from CPI escalations with approximately half of these subjects to caps of 3 to 4%.

Jason Weate, DXC Fund Manager said: “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. We continued to pursue asset divestments to further strengthen our balance sheet and enhance the strategic positioning of the portfolio.”

The results reflect a net loss after tax of $8.4 million, compared to the prior year’s net profit after tax of $82.6 million, primarily driven by $41.3 million of investment property valuation declines, compared to valuation gains of $30.8 million in the prior year.

DXC had 82 of its 105 investment properties independently valued during the year, with the remainder subject to internal valuations. The external and internal valuations resulted in a 5.0% decrease on prior book values. The assets are diversified and underpinned by occupancy of 99.4%, with a weighted average lease expiry of 9.7 years with 89% of income expiring in FY30 or beyond.

The portfolio will continue to retain its focus on generating defensive income with embedded growth for its investors. The strategy will consist of preserving portfolio attributes that deliver certainty of income, while maintaining a prudent capital structure and an active approach to portfolio optimisation.

DXC provides FY24 guidance for fund for operations and distributions of 20.7-21.1 cents per security, reflecting a distribution yield of over 8%. Guidance has been provided based on property income growth supported by contracted rental increases, current interest rates expectations and barring unforeseen circumstances.