Slide 1: Investor briefing: FY13 results, portfolio acquisition and upgrades
For personal use only Investor briefing FY13 results, portfolio acquisition and upgrades transaction, and changes to BWP’s constitution Sydney 10/09/13 Melbourne 11/09/13
Slide 2: Important notice
Important notice For personal use only The information provided in this presentation should be considered together with the financial statements for the period and previous periods, ASX announcements and other information available on the Trust’s website. This presentation has been prepared by BWP M
Slide 3: Presentation outline
Presentation outline For personal use only Grant Gernhoefer General Manager > Strategy BWP Management Limited > FY13 results Andrew Ross > Portfolio acquisition & Portfolio Manager upgrades transaction BWP Management Limited > Changes to constitution David Hawkins > Outlook Finance Manager BWP Manag
Slide 4: BWP's core purpose and strategies
BWP’s core purpose and strategies For personal use only …to provide a premium commercial real estate investment product, delivering unitholders a secure and growing income stream and long-term capital growth 4
Slide 5: Investment criteria
Investment criteria For personal use only > Properties acquired for BWP will typically have the following features: – Ample land area (average 3 hectares) – Visible and accessible from a major road, highway or freeway – Ready vehicle access and ample on-site parking – Significant catchment area – Of
Slide 6: BWP - market performance
BWP - market performance For personal use only BWP unit price vs S&P/ASX 200 A-REIT index & All Ordinaries index 1 year to 30 June 2013 BWP unit price outperforms the sector for the year 5 years to 30 June 2013 ...and significantly outperforms the market longer term Source: Reuters, rebased to 100 f
Slide 7: BWP - total returns
BWP – total returns For personal use only > BWP total returns compared to market – periods ended 30 June 2013 Total returns include distributions and movement in price (assumes distributions are reinvested). Source: UBS 7
Slide 8: Strength of major tenant
Strength of major tenant For personal use only > Majority (93%) of BWP income underpinned by the highly successful Bunnings business > Bunnings had 4.4% store-on-store sales growth for 12 months to 30 June 2013 (vs. pcp) Revenue ($m) Bunnings Group Limited EBIT ($m) 8,000 1,000 Trading revenue (LHS)
Slide 9: BWP performance against peer group
BWP performance against peer group 1 2 For personal use only Revenue growth Cap rate movement (basis points) Peer avg Peer avg Peer low Peer low Peer high Peer high BWP BWP -5% 0% 5% 10% -6 -4 -2 0 EPS3 growth NTA growth Peer avg Peer avg Peer low Peer low Peer high Peer high BWP BWP 0% 1% 2% 3% 4%
Slide 10: BWP - revenue & EPS growth drivers
BWP – revenue & EPS growth drivers For personal use only > Increased property revenue, primarily from recent acquisitions and rent reviews, drove growth in distributions ($m) 80 Developments (17%) 78 76 Rent Reviews (35%) 74 Acquisitions (48%) 72 70 68 66 64 62 60 Distributable profit - Property rev
Slide 11: FY13 rent reviews
FY13 rent reviews For personal use only Proportion of rental income Average increase 3% Market 3.9%1 24% Fixed 3.1% 2.1% like-for-like CPI 1.7% rental growth 73% Like-for-like rental growth2 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Rental growth 8.2% 4.1% 3.0% 4.4% 2.8% 7.1% 2.9% 3.4% 4.0%
Slide 12: Market rent reviews - Bunnings Warehouses
Market rent reviews – Bunnings Warehouses For personal use only > Typical Bunnings Warehouse market rent review clause: – assumes free and open market with vacant possession – has regard to the rent paid by Bunnings at other Bunnings Warehouses – has regard to the rental value of other properties of
Slide 13: Market rent review profile
Market rent review profile For personal use only > Market rent review results variable, based on property specific factors and market factors (refer to next page) > Increasing number of Bunnings leases are cycling through 2nd or 3rd market rent reviews BWP Market Rent Reviews ("MRR") $m Bunnings War
Slide 14: Market rent review drivers
Market rent review drivers For personal use only > Property specific factors affecting market rent review outcomes: – High land/development capital outlay results in higher commencing rent – Physical attributes: location and configuration of site; size, format and age of building and improvements >
Slide 15: Revaluations
Revaluations For personal use only > Process: – entire portfolio revalued every six months – independent valuations on a three year cycle for each property – balance of portfolio – internal valuations using recognised valuation methodology, having regard to market evidence and the independent valuat
Slide 16: Revaluations - cap rate trends
Revaluations – cap rate trends For personal use only Historical BWP cap rates compared to other asset classes Cap rate 9.0% 8.5% 8.35% 8.12% 8.0% 7.86% 7.5% 7.36% 7.0% 6.5% 6.0% 5.5% 5.0% Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Prime Industrial Sub-Regional Retail Neighbourhood SC's
Slide 17: Cost of debt
Cost of debt For personal use only Average for year FY13 FY12 Cost of debt1 7.3% 8.2% Borrowings $295m $250m Facility Limits $430m $375m Utilisation 69% 67% 9% Average cost of debt1 8% 7% 2.8% 6% 2.6% 5% 0.8% Bank fees & margins 2 4% 1.5% 3 Fixed interest (hedges) 3% Floating interest 2% 4.6% 3.2% 1
Slide 18: Interest rate hedging
1 Interest rate hedging For personal use only > Restructuring hedge book not considered to deliver sustained benefits > Have taken advantage of low forward yields to enter into $25 million of delayed-start swaps in the 12 months to 30 June 2013 $m % Interest rate hedge book profile 250 5.8 5.6 200 5
Slide 19: Portfolio transaction & equity raising
Portfolio transaction & equity raising For personal use only Acquisitions > Portfolio of 10 Bunnings Warehouse properties from Bunnings (“Warehouse Properties”) and one Bunnings Warehouse anchored bulky goods centre from an unrelated party (collectively “Acquisitions”) > The total purchase price for
Slide 20: Transaction rationale
Transaction rationale For personal use only > The Acquisitions, Upgrades and Entitlement Offer are expected to provide the following benefits to the Trust – Neutral to earnings in FY14 and then accretive from FY15 – Secures a significant portfolio of established and new properties, representing an a
Slide 21: Platform for growth
Platform for growth For personal use only > BWP has demonstrated a prudent and disciplined approach to acquisitions and developments – track record of generating above market returns for investors over the longer term > The Acquisitions and Upgrades are consistent with BWP's core purpose of providin
Slide 22: Acquisitions
Acquisitions For personal use only > Each of the Warehouse Properties will be leased by Bunnings on settlement (for operational assets) or upon completion (for development sites), for an initial fixed term of 12 years with a further five optional terms of six years each, at Bunnings’ election > The
Slide 23: Warehouse Properties - lease structure
Warehouse Properties – lease structure For personal use only > Lease structure consistent with sale and lease back market terms since around 2005 to 2007 - Fixed annual 3% increases - No market rent reviews (“MRRs”) in initial term - MRR caps & collars (limiting downward and upward movement to 10% o
Slide 24: Upgrades
Upgrades For personal use only > BWP has agreed terms regarding upgrades to the Trust’s Bunnings Warehouses at Minchinbury and Rockingham and agreed revised terms regarding the previously announced upgrade at the Trust’s asset at Rocklea, totalling $19.9 million > The Upgrades will reflect an initia
Slide 25: Upgrades
Upgrades For personal use only > Upgrades will modernise and improve the quality of the three existing Trust assets > Secures additional rental income and increased committed term > Change to lease terms considered appropriate due to the nature and extent of the improvements1 Minchinbury (NSW) Rockl
Slide 26: Acquisitions & Upgrades - geographic diversity
Acquisitions & Upgrades – geographic diversity For personal use only > The Acquisitions will complement and Upgrades will improve the Trust's existing portfolio1 North Lakes No. of No. of Brisbane Manly West State properties properties West Ipswich Rocklea (pre2) (post3) Bethania Arundel NSW/ 18 20
Slide 27: Entitlement Offer
Entitlement Offer For personal use only > New, fully-ranking units issued at $2.30 per unit to raise approximately $200 million > Wesfarmers subscribed to its full entitlement (approximately $49 million) > Total of approximately 87 million new units issued, taking the amount of units on issue to app
Slide 28: Constitution amendments
Constitution amendments For personal use only > The proposed changes to update the Constitution reflect developments in market practice and changes to the law governing managed investment schemes (ASIC Class Order 13/655) > Changes to BWP’s constitution regarding issuing new units and satisfying dis
Slide 29: Unitholder approval
Unitholder approval For personal use only > Due to the value of the 10 Warehouse Properties to be purchased from Bunnings, the Upgrades and the new leases to be entered into, and the fact that the transaction is with Bunnings, a company related to the Responsible Entity, Unitholder approval is requi
Slide 30: Bunnings securitised lease transaction
1 Bunnings securitised lease transaction For personal use only Transaction > Sale and leaseback of a portfolio of 15 Bunnings Warehouses for approximately $304 million > Implied yield for Bunnings/Wesfarmers of 6.57% (after all expected cash flows) > Funded primarily from the issue of 12 year senior
Slide 31: Outlook - key drivers
Outlook – key drivers For personal use only Economic and property market conditions: > Low cash/interest rates: – may see shift from cash to prime commercial property as a yield investment – increases competition for prime property assets leading to yield compression – some property classes showing
Slide 32: Outlook - key drivers
Outlook – key drivers For personal use only Home improvement retail sector performance and growth: > BWP not reliant on turnover rent – BWP rents are referable to lettable area of premises not tenant sales > 93% of annual rental income derived from Bunnings1 > Bunnings continues to trade well in sof
Slide 33: Summary
Summary For personal use only > BWP has delivered above-market investment returns1 – remains conservatively geared – sustainable income growth underpinned by leases to a subsidiary of Wesfarmers (A- credit rating) – predictable rental growth linked to structured and market rent reviews – experienced
Slide 34: Appendices
Appendices For personal use only Appendix A: > 30 June 2013 results Appendix B: > Acquisitions & Upgrades Appendix C: > Pro-forma financial information
Slide 35: A: FY13 performance vs pcp
A: FY13 performance vs pcp1 For personal use only 2012/13 Previous corresponding period Revenue $109.2m 7.9%2 Net profit including revaluations $110.6m $69.9m Distributable profit (excluding revaluations) $75.8m 7.4% Full-year distribution per unit (excluding capital profits) 14.14 cpu 4.7%3 Full-ye
Slide 36: A: FY13 performance by half-year
A: FY13 performance by half-year For personal use only 6 months 6 months 6 months to Jun 13 to Dec 12 to Jun 12 Revenue $55.2m $54.0m $51.8m1 Net profit including property revaluations $61.7m $48.8m $37.9m Unrealised property revaluation gains ($23.3m) ($11.5m) ($2.0m) Capital profit from property d
Slide 37: A: Portfolio - geographic spread
A: Portfolio – geographic spread 1 For personal use only 62 Bunnings Warehouses 5 Bunnings Warehouses and showrooms 2 Bunnings Warehouse development site 1 Bunnings distribution centre 1 Bulky goods showroom 11 3 Industrial properties 1 14 2 1 2 1 15 1 1 1 20 1 1 2 1. As at 30 June 2013 (not adjuste
Slide 38: A: Market Rent Reviews completed in FY13
A: Market Rent Reviews completed in FY13 1 For personal use only Passing rent Reviewed Uplift Uplift Effective Property location Tenant ($000) rent2 ($000) ($000) (%) date Geraldton, WA3 Bunnings 924 1,219 295 +31.9 10 Dec 11 Oakleigh South, VIC3 Bunnings 1,807 1,807 - - 8 Mar 12 Pacific Laboratory
Slide 39: A: Interest rate hedging
A: Interest rate hedging For personal use only > $210.0 million hedged (71%) at 4.99% weighted average including delayed starts > 3.43 years weighted average maturity, including delayed starts (2012: 4.05 years) Hedge book profile by Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 half-year ending:
Slide 40: B: Acquisitions
B: Acquisitions For personal use only Approx. Estimated Gross Purchase land Net rent Initial yield date of State Property Status lettable price2 area ($000) (%) settlement/ area1(sqm) ($000) (ha) completion NSW Rydalmere3 Development 4.8 13,434 2,810 7.25 38,760 Mar 14 Hoxton NSW Operational 3.7 26,
Slide 41: B: Upgrades
B: Upgrades For personal use only Rent BWP Fair Value ($000) ($000) Estimated Surplus land Development On On completion State Property ($000) cost1 ($000) Current2 completion3 Current2 completion3 date NSW Minchinbury 4,2574 8,576 1,676 2,682 26,5575 35,800 Jul 14 QLD Rocklea 1,0006 4,272 1,548 1,97
Slide 42: C: Pro-forma financial information
C: Pro-forma financial information For personal use only Actual – Acquisition, Upgrades and $m 30 June 2013 Entitlement Offer adjustments1 Pro-forma2 Investment properties 1,374 346 1,721 Total assets 1,398 1,741 Borrowings 296 145 474 Total liabilities 361 501 Net assets 1,037 1,241 Unitholders’ eq
Slide 43: Further information
Further information For personal use only Visit: www.bwptrust.com.au Responsible entity: BWP Management Limited Tel: +61 8 9327 4356 Email: ggernhoefer@bwptrust.com.au 43