How Is Dexus Convenience Retail REIT Driving Growth with Glass House Mountains Redevelopment?
Dexus Convenience Retail REIT has reported FY25 results slightly above guidance, underpinned by strong portfolio income growth and a robust balance sheet. The fund is advancing its Glass House Mountains redevelopment, positioning for future income expansion.
- FFO and distributions of 20.7 cents per security, exceeding guidance
- Portfolio occupancy rises to 99.9% with 2.9% like-for-like net property income growth
- Balance sheet strengthened with gearing at 29.4%, enabling growth initiatives
- Glass House Mountains Northbound redevelopment fully pre-leased, on track for early 2026 completion
- Portfolio valuation uplift drives 2.2% increase in net tangible assets per security
Strong FY25 Performance and Income Growth
Dexus Convenience Retail REIT (DXC) has delivered a solid financial performance for the year ended 30 June 2025, reporting Funds From Operations (FFO) and distributions of 20.7 cents per security, slightly above its guidance of 20.6 cents. This outcome reflects the resilience of its convenience retail portfolio, which benefited from a 2.9% like-for-like net property income growth driven by steady rent reviews averaging 3.1% and near-full occupancy of 99.9%.
The fund’s portfolio, valued at approximately $728 million, continues to demonstrate defensive income characteristics, supported by long lease terms and a tenant base dominated by major national and international convenience retailers. This stability underpins DXC’s ability to deliver secure and growing income streams amid evolving market conditions.
Balance Sheet Positioned for Growth
DXC’s balance sheet remains conservatively managed, with gearing at 29.4%, comfortably within its 25-40% target range. This prudent capital management has been bolstered by strategic divestments totalling $38.8 million, which, despite being executed at a modest discount to book value, have enhanced portfolio quality and freed up capital for reinvestment.
The fund also extended its average debt maturity to 4.5 years, with no expiries until FY28, and increased its hedged debt proportion to 72%, securing competitive rates. These measures provide DXC with financial flexibility to pursue development opportunities and pipeline restocking without compromising its conservative risk profile.
Advancing the Glass House Mountains Redevelopment
A key growth initiative is the two-stage redevelopment at Glass House Mountains, Queensland. The Northbound site, spanning 25,000 square metres, is fully pre-leased on an average 18-year lease term and is on track for completion in early 2026. This redevelopment will feature an expanded On The Run convenience retail offering, including food-on-the-go, grocery convenience, and multiple quick-service restaurant (QSR) pad sites leased directly to prominent national and international brands.
With redevelopment costs estimated at around $24 million, the project is expected to deliver a yield on cost of approximately 5.8%, contributing positively to DXC’s future income and valuation growth. Meanwhile, design and tenant negotiations for the Southbound site are progressing, signaling further expansion potential.
Portfolio Valuation and Sustainability Commitments
Independent valuations during FY25 resulted in a net uplift of $16.6 million, a 2.3% increase driven by contracted rent growth and a modest capitalisation rate compression of eight basis points; the first since 2022. This valuation gain contributed to a 2.2% rise in net tangible assets (NTA) to $3.64 per security.
DXC also continues to embed sustainability into its operations and developments. It maintains carbon neutrality across its controlled portfolio and sources 100% renewable electricity where operational control exists. The Glass House Mountains redevelopment incorporates sustainability features such as EV charging stations, rooftop solar, rainwater harvesting, and advanced fuel tank technology, aligning with broader environmental, social, and governance (ESG) goals.
Outlook and Market Positioning
Looking ahead, DXC has provided FY26 guidance for FFO and distributions of 20.9 cents per security, reflecting an attractive distribution yield of 7.1%. Despite a recovery in transaction market volumes and pricing, the fund’s securities continue to trade at a notable discount to NTA, suggesting potential upside for investors who value the predictability of cash flows and strong tenant covenants inherent in convenience retail assets.
DXC’s focus remains on enhancing portfolio quality, maintaining balance sheet discipline, and pursuing value-accretive development projects, leveraging the expertise of its manager, Dexus. The fund’s strategic initiatives and financial discipline position it well to navigate market uncertainties while delivering steady income growth.
Bottom Line?
DXC’s disciplined growth and redevelopment strategy set the stage for sustained income resilience amid evolving market dynamics.
Questions in the middle?
- How will the Southbound Glass House Mountains redevelopment progress and impact future income?
- What are the risks if capitalisation rates shift unfavourably in FY26 and beyond?
- How will DXC balance further asset divestments with growth ambitions?
