Dexus Convenience Retail REIT - FY24 Financial Results and Strategic Updates

Financial Performance

Dexus Convenience Retail REIT (DXC) reported strong financial results for the year ended 30 June 2024, achieving Funds From Operations (FFO) and distributions of 21.0 cents per security, at the upper end of their guidance range. This performance was driven by resilient income streams and active capital management.

Like-for-like net property income growth increased to 2.8%, supported by average rent reviews of 3.4%. The REIT maintained a solid balance sheet with gearing of 32.9%, around the midpoint of their target range, and 75% of average debt hedged during the year, providing significant protection from higher interest rates.

Capital Management and Divestments

DXC successfully settled $23.3 million of divestments and post 30 June 2024, exchanged contracts on the sale of two assets for $5.9 million at a 2.4% average premium to prior book values. These transactions are expected to reduce pro forma gearing by around 50 basis points. Additionally, up to $40 million of further divestments are under negotiation, which could reduce pro forma gearing by another 380 basis points.

Portfolio and Tenant Performance

The REIT's portfolio continues to benefit from a diverse and high-quality tenant base, with 95% of income derived from national and international major tenants. Three major tenants invested in their convenience retail capabilities through acquisitions during the year, demonstrating their commitment to long-term site performance.

Despite a challenging interest rate environment, fuel and convenience transaction volumes remained robust, allowing for material price discovery to inform asset valuations and Net Tangible Assets (NTA). The portfolio's weighted average capitalisation rate expanded by 30 basis points to 6.40%, reflecting price discovery across relatively robust transaction market volumes.

Development and ESG Initiatives

The Glass House Mountains redevelopment project is a key focus, with plans to enhance the Northbound site to include a new, expanded On The Run convenience retail offering. The redevelopment is expected to deliver strong returns and significantly increase exposure to high-quality quick-service restaurant tenancies.

DXC remains committed to delivering meaningful sustainability outcomes, aligning with the Dexus Sustainability Strategy. Initiatives include sourcing 100% renewable electricity for assets under operational control, maintaining a carbon-neutral position, and progressing solar PV and EV charging rollout across 22 sites.