Dexus Convenience Retail REIT (ASX:DXC) reported its half year 2026 results, with Fund Manager Pat De Maria—delivering his first results presentation since joining the fund in 2018—highlighting resilient income performance, portfolio valuation gains, and progress on the REIT’s development pipeline.
Half-year earnings, distributions, and guidance
For the half year, De Maria said the REIT delivered funds from operations (FFO) of AUD 0.105 per security and distributions of AUD 0.1045 per security, which he said keeps the trust on track to meet its FY2026 guidance. Like-for-like income growth was 2.9% over the period.
Addressing a question on how guidance was maintained despite higher floating rates during the half, De Maria said the REIT experienced “some outperformance on property leasing versus prior expectations,” which offset higher floating rates in the second half.
Portfolio composition and income characteristics
De Maria described DXC’s portfolio as a national convenience retail network of more than 90 assets valued at AUD 760 million, with “close to 100% occupancy.” He said the portfolio provides access to 2.6 million people living within a 3-kilometer radius of its asset base and includes more than 600,000 square meters of land, with 90% zoned for uses including commercial, industrial, mixed use, and retail.
Management emphasized income quality metrics, including:
- A weighted average lease expiry (WALE) of 7.6 years
- Tenant mix with 95% of tenants described as major national or international brands
- A “balanced exposure” to fixed and CPI-linked escalators that management said is “currently generating over 3% growth per annum”
On portfolio strategy, De Maria said the REIT has made a “concerted effort” to tilt toward metro and highway assets, which he said will help future-proof the portfolio. In response to an analyst question, he said that upon delivery of the development pipeline, around 90% of the portfolio is expected to be in metro and highway locations, and that management is comfortable with that mix while continuing to assess opportunities that strengthen income returns.
Balance sheet, valuations, and market conditions
De Maria said gearing was 29.8%, at the lower end of the REIT’s target range, and noted it is expected to increase as capital is deployed into growth opportunities. He added that the balance sheet features a staggered debt maturity profile with no expiries until FY2028.
During the Q&A, management discussed longer-term gearing expectations. De Maria said that once the development pipeline is delivered, gearing “pro forma gets to that mid-30s,” excluding valuation movements, and that the REIT expects to operate around that level “under most scenarios,” subject to the opportunity set.
Net tangible assets (NTA) per security grew 4.4% over the period to AUD 3.80, which management attributed to underlying rental growth and cap rate compression, supported by what De Maria described as continued liquidity in the direct market.
De Maria said 30 of the portfolio’s 91 assets were independently valued during the half, and property valuations increased 2.7%, driven by rental growth and cap rate compression of nine basis points. The portfolio cap rate was 6.23%. Management said this remained “comfortably above the marginal cost of debt,” which it believes provides support for valuations.
On direct market conditions, De Maria told analysts the past 12 months saw the strongest level of sales activity since 2021, with “strong sales that occurred via auctions” in December despite shifting interest rate expectations. He said many buyers have been private investors who are less affected by interest rate moves, and he continued to see strong liquidity and demand, particularly for assets with QSR (quick service restaurant) retailing attached to fuel.
On interest rate hedging, De Maria said the REIT’s starting position provides flexibility to add hedging over time and that management would look to “continue layering hedging,” while being mindful of forward rates at or above prior cycle peak cash rates. He characterized the approach as opportunistic.
Development pipeline and acquisitions
De Maria provided an update on the REIT’s flagship Glass House Mountains development. He said the northbound site is partly completed and trading, with a staged opening underway. McDonald’s, KFC, and Guzman y Gomez were open and trading at the time of the call, along with six EV charging bays in operation. The balance of the northbound site is due for completion during the June quarter and will include an expanded On The Run convenience retail offering and an internal Hungry Jack’s store.
Management cited approximately 150,000 passing commuters and transport vehicles per day at the Glass House Mountains site and said it was confident the development would provide strong returns upon completion. De Maria added that planning and lease negotiations for the southbound site are progressing and that the REIT expects to begin that project soon after leases are finalized.
Separately, De Maria said that since 31 December the REIT agreed to acquire two fund-through developments for AUD 35 million, subject to conditions precedent. He said the projects would “restock” the value-accretive development pipeline and increase exposure to “high-quality metro and highway sites.” In response to analyst questions, management said it could not disclose locations or tenants due to counterparty confidentiality, but described the projects as aligned with its metro-highway strategy and focused on high-traffic, convenience-led retail nodes, with more details to be provided after conditions precedent are satisfied.
De Maria also outlined expected portfolio impacts from the development pipeline and asset recycling strategy, saying these actions are expected to extend WALE by 1.2 years, reduce average asset age by 24%, increase traffic exposure by 17%, and diversify income through new national QSR tenants.
Sustainability approach
De Maria said DXC’s sustainability approach aligns with the broader Dexus sustainability strategy. He stated the REIT maintains 100% renewable electricity and a net zero position across managed assets, and works with tenants on initiatives including solar installations and EV charging. He also referenced energy-efficient design elements being incorporated into the Glass House Mountains development.
Closing the call, De Maria said the REIT was well placed to continue delivering “defensive and growing property income through the cycle,” supported by active portfolio management and the expanded development pipeline.
About Dexus Convenience Retail REIT (ASX:DXC)
Dexus (ASX: DXS) is one of Australia's leading fully integrated real asset groups, managing a high-quality Australasian real estate and infrastructure portfolio valued at $62.3 billion (pro forma post completion of the Collimate Capital acquisition). We believe that the strength and quality of our relationships will always be central to our success and are deeply committed to working with our customers to provide spaces that engage and inspire. We directly own $17.8 billion of office and industrial assets and investments.
