Why Did Dexus Convenience Retail REIT’s Profit Skyrocket 144% This Half?
Dexus Convenience Retail REIT has reported a striking 143.8% increase in net profit for the half-year to December 2025, underpinned by strong portfolio occupancy and rising property valuations. The REIT reaffirmed its FY26 guidance, signalling confidence in its defensive income strategy and development pipeline.
- Net profit after tax jumps 143.8% to $35.8 million
- Funds From Operations (FFO) rises 1.3% to $14.5 million
- Portfolio occupancy remains near perfect at 99.9%
- Net tangible assets per security increase 4.4% to $3.80
- Gearing steady at 29.8%, with no debt maturities until FY28
Robust Financial Performance
Dexus Convenience Retail REIT (ASX – DXC) has delivered a standout half-year result for the six months ending 31 December 2025, with net profit after tax soaring by 143.8% to $35.8 million. This leap primarily reflects significant property valuation gains and a stable operating income base, despite a slight 5.9% dip in revenue to $27.4 million.
Funds From Operations (FFO), a key measure of underlying earnings, edged up 1.3% to $14.5 million, translating to 10.52 cents per security. This modest growth was supported by a 2.9% like-for-like income increase, driven by contracted annual rental escalations and a portfolio largely leased to major national and international tenants.
Portfolio Strength and Asset Valuations
The REIT’s property portfolio, valued at approximately $760 million, remains highly resilient with occupancy at an impressive 99.9%. The weighted average lease expiry stands at 7.6 years, with 92% of income secured beyond fiscal year 2030, underscoring the long-term income stability of the assets.
Independent and internal valuations contributed to a net revaluation uplift of $19.8 million, or 2.7%, supported by a 9 basis point compression in capitalisation rates and steady rental growth. This uplift drove a 4.4% increase in net tangible assets (NTA) per security to $3.80, reflecting enhanced asset quality and market confidence.
Capital Management and Development Pipeline
Capital management remains conservative, with gearing at 29.8%, comfortably within the target range of 25–40%. Notably, the REIT has no debt maturities until fiscal year 2028, providing balance sheet stability amid a volatile interest rate environment. Approximately 71% of debt is hedged, offering protection against rate fluctuations.
DXC is actively progressing its development projects, including the Glass House Mountains two-stage redevelopment, which aims to enhance convenience retail offerings and increase exposure to high-quality service centres. The Northbound site is fully pre-leased with an 18-year average lease term and is expected to deliver a yield on cost of around 5.8%. The Southbound site is advancing through design and tenant negotiations.
Post-period, DXC agreed to acquire two fund-through developments valued at circa $35 million, subject to lease finalisations. These acquisitions are expected to extend the weighted average lease expiry to approximately 15 years, further strengthening the portfolio’s income profile.
Sustainability and Market Outlook
DXC continues to prioritise sustainability, maintaining 100% renewable electricity use and achieving net zero Scope 1 and 2 emissions across its operations and controlled portfolio. Tenant-led initiatives such as solar PV installations and electric vehicle charging infrastructure are progressing, notably at the Glass House Mountains development.
The REIT reaffirmed its FY26 guidance for FFO and distributions of 20.9 cents per security, reflecting an attractive distribution yield of 7.7%. With strong tenant covenants and contracted rental growth, DXC is well positioned to deliver defensive and growing income streams despite broader economic uncertainties.
Bottom Line?
Dexus Convenience Retail REIT’s strong half-year results and strategic developments set the stage for sustained income growth, but investors will watch closely for progress on acquisitions and market conditions.
Questions in the middle?
- How will the finalisation of lease agreements impact the timing and returns of the two fund-through developments?
- What are the potential risks if capitalisation rates reverse or rental growth slows in the convenience retail sector?
- How might evolving sustainability regulations and tenant demands influence DXC’s future asset management and development strategies?
