This article is from the Australian Property Journal archive
AUSTRALIA’S biggest owner of Bunnings warehouses, BWP Trusts, has finally been hit by unfavourable revaluations, as it booked a small fall in annual profit to $113.5 million and turns its attention to repurposing vacated properties and progressing store upgrades.
It declared a final distribution of 9.27c per unit, taking total ordinary distributions for the year to 18.29c per unit, in line with FY22. The trust expects FY24 distributions ”to be similar”.
Profit on investment properties was down 1.0%, while revenue from ordinary activities lifted 3.2% to $158.1 million.
After bucking the trend seen across the broader commercial real estate industry at its half-year results and posting a rise in portfolio value, the value of the trust’s portfolio decreased by $64.6 million to more than $2.936 billion during the year.
“The net revaluation loss was predominantly a result of the increase in capitalisation rates across most of the portfolio, reflecting declines in commercial property values more broadly in Australian property markets during the year,” it said.
The trust’s weighted average capitalisation rate for the portfolio lifted over six months from 5.05% to 5.38%.
“The trust’s primary focus for the 2023/24 financial year is on progressing the repurposing of ex‐Bunnings properties in the portfolio, filling any vacancies, progressing and completing store upgrades, extending existing leases with Bunnings through the exercise of options, completion of market rent reviews, and the continued rollout of energy efficiency improvements at its properties,” it said.
“The trust will be active in assessing and actioning any opportunities to grow the portfolio that will create value for the trust.”
During the year, Bunnings exercised a 10-year option for Balcatta, Western Australia, and five-year options for Artarmon and Belrose in NSW. The trust recorded like-for-like rental growth of 5.0% over the year, taking into account the average inflation on Consumer Price Index-linked leases of 6.7%. The portfolio was 97.1% leased.
Construction is progressing for the upgrade of the Lismore in NSW and Coburg in Melbourne, while a construction contract has been signed for the upgrade of the Dubbo, NSW store.
It said “good progress” has been made on repurposing and re-leasing any properties that have recently been vacated by Bunnings. A development application has been approved for the repurposing of the Hervey Bay, Queensland ex‐Bunnings property, where lease commitments are in place for 100% of the available space post-redevelopment. A development application has been approved for the repurposing of the Port Kennedy, Western Australia ex‐Bunnings tenancy for large format retail and pre‐leasing of the retail space.
Variables that could have the most influence on the financial performance of the trust in the near term include inflation, cost of funding, property valuations, property transaction activity, and the time taken, and cost of repositioning properties in the portfolio vacated by Bunnings, it said.
“The trust has low gearing and a high returning property portfolio, so is well positioned for any unexpected circumstances, and to be able to participate in investment opportunities that might become available.”
Few Bunnings warehouses have changed hands of late as buyers and sellers across the commercial real estate market remain in a stand-off over pricing. Among the recent sales have been the circa $65 million sale of the Bunnings in Melbourne’s Collingwood, which cemented itself as the third-highest price achieved for a freestanding Bunnings in Victoria.
