Rising Gearing: What Dexus’ Latest Acquisition Means for Investors
Dexus Industria REIT has acquired two fully leased industrial warehouses in Melbourne’s Dandenong South for $47.5 million, reinforcing its strategic focus on industrial assets and maintaining its FY26 financial guidance.
- Acquisition of two industrial assets in Dandenong South for $47.5 million
- Assets fully leased with a weighted average lease expiry of 4.8 years
- Transaction funded through existing debt, increasing gearing by 2.5 percentage points
- Portfolio benefits from Melbourne’s low industrial vacancy rate of 1.3%
- FY26 Funds from Operations and distribution guidance reaffirmed
Strategic Expansion in Melbourne’s Industrial Hub
Dexus Industria REIT (DXI) has taken a decisive step to strengthen its footprint in Melbourne’s industrial property market by acquiring two prime warehouse assets located at 50 Jayco Drive and 15–31 Americain Way, Dandenong South. The $47.5 million deal underscores DXI’s commitment to focusing on high-quality industrial real estate in key Australian markets.
These assets are modern, high-clearance warehouses that come fully leased, boasting a blended Weighted Average Lease Expiry (WALE) of 4.8 years. This lease profile provides a stable income stream and reflects strong tenant covenants, which are critical in an environment where industrial space demand is robust and supply remains constrained.
Capital Deployment and Portfolio Impact
The acquisition follows the divestment of Brisbane Technology Park, representing a strategic redeployment of capital into Melbourne’s premier South-East industrial precinct. This area benefits from excellent connectivity via major arterial routes like Eastlink and the Dandenong-Valley Highway, enhancing the appeal for logistics and distribution tenants.
Funding for the purchase will come from DXI’s existing debt facilities, resulting in an increase in look-through gearing by approximately 2.5 percentage points. Despite this uptick, pro forma gearing is expected to remain below the low end of the REIT’s target range of 30% to 40%, maintaining a conservative balance sheet posture.
Market Context and Future Outlook
Melbourne’s industrial market is currently experiencing one of the nation’s lowest vacancy rates at just 1.3%, according to CBRE Research. This tight market environment supports strong rental growth potential, which DXI anticipates will drive material reversionary upside in the newly acquired assets.
Jason Weate, Head of Listed Funds at Dexus, highlighted that the acquisition enhances portfolio income resilience and aligns with DXI’s evolution into a focused industrial REIT. The move is expected to contribute positively to the REIT’s long-term income and capital growth prospects.
DXI has reiterated its FY26 guidance, forecasting Funds from Operations (FFO) of 17.3 cents per security and distributions of 16.6 cents per security, signaling confidence in the portfolio’s ongoing performance despite the increased gearing.
Bottom Line?
This acquisition cements DXI’s strategic focus on Melbourne’s industrial sector, setting the stage for sustained income growth amid tight market conditions.
Questions in the middle?
- How will the increased gearing impact DXI’s financial flexibility in the near term?
- What are the specific tenant profiles and industries occupying the new assets?
- Could further acquisitions in Melbourne or other key markets be on the horizon?