Dexus Convenience Retail REIT Posts 7.9-Year WALE and 99.9% Occupancy in FY25

• Portfolio valued at $728 million with 91 properties
• 99.9% occupancy and 7.9 years weighted average lease expiry
• FFO and distributions slightly declined but remain robust
• Glass House Mountains Northbound redevelopment on track for Feb 2026
• Sustainability focus with carbon neutrality and renewable energy integration

Steady Performance Amid Market Challenges

Dexus Convenience Retail REIT (ASX – DXC) has released its full year results for 2025, showcasing a resilient portfolio and a conservative capital management approach. The REIT’s portfolio, valued at approximately $728 million, comprises 91 strategically located service stations and convenience retail assets predominantly along Australia’s eastern seaboard. Despite a slight 1.5% decline in funds from operations (FFO) and distributions compared to the previous year, the REIT maintained an impressive 99.9% occupancy rate and a long weighted average lease expiry (WALE) of 7.9 years, underscoring the stability of its income streams.

Embedded Growth and Income Security

The portfolio benefits from contracted annual rent increases averaging around 3%, with a mix of fixed and consumer price index (CPI)-linked escalations providing embedded growth. This rental structure, combined with a diversified tenant base including major national and international convenience retailers such as Viva Energy, Chevron, and 7-Eleven, supports a defensive income profile. The REIT’s gearing remains conservative at 29.4%, comfortably within its 25–40% target range, and its debt maturity profile has been extended to an average of 4.5 years with no expiries until FY28, reflecting prudent financial management.

Strategic Redevelopment and Portfolio Optimization

A highlight of the year is the ongoing Glass House Mountains Northbound redevelopment, expected to complete in February 2026. This $24 million project will expand the convenience retail offering with a focus on food-on-the-go and quick-service restaurants, including tenants like McDonald’s and KFC. The redevelopment is fully pre-leased with an 18-year average lease term, promising attractive returns with a yield on cost of approximately 5.8%. Additionally, the REIT executed $38.8 million in strategic divestments during FY25, enhancing portfolio quality and providing capital for growth initiatives.

Sustainability and Future Outlook

Dexus Convenience Retail REIT continues to embed sustainability into its operations, maintaining carbon neutrality across its controlled assets and integrating renewable energy solutions such as solar panels and electric vehicle charging bays in its developments. These initiatives align with broader shifts in energy consumption and tenant strategies, positioning the REIT well for future market trends. Looking ahead, DXC projects modest growth in FFO and distributions of 20.9 cents per security for FY26, reflecting confidence in its income resilience and development pipeline.

Investor Considerations

Trading at a circa 19% discount to net tangible assets (NTA) and offering a distribution yield of 7.1%, DXC presents an attractive proposition for investors seeking defensive income with growth potential. However, the slight decline in FFO due to higher debt costs and divestments warrants attention, as does the uncommitted status of the Glass House Mountains Southbound redevelopment. The REIT’s ability to navigate evolving tenant demands and energy transitions will be critical in sustaining its market position.

Bottom Line?

With a solid foundation and strategic growth projects underway, DXC is poised to navigate market shifts while delivering steady income and value to investors.

Questions in the middle?

• How will rising interest rates impact DXC’s cost of debt and future FFO?
• What are the prospects and timelines for the Glass House Mountains Southbound redevelopment?
• How effectively can DXC leverage sustainability initiatives to attract and retain tenants amid energy transition?