Slide 1: Full-year results to 30 June 2014
For personal use only Full-year results to 30 June 2014 August 2014
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 Michael Wedgwood > Overview Managing Director BWP Management Limited > Results > Portfolio Andrew Ross Portfolio Manager > Capital management BWP Management Limited > Strategic agenda David Hawkins > Outlook Finance Manager BWP Management Limited
Slide 4: Overview
Overview For personal use only > Acquisition of 10 Bunnings Warehouse properties, one Bunnings Warehouse development site, and two Bunnings anchored large format retail centres across Australia > Increased rental income from acquisitions, developments and rent reviews lifts revenue (up 16.7%) and di
Slide 5: Results – total returns
Results – total returns For personal use only > BWP total returns1 compared to market – for periods ended 30 June 2014 Source: UBS 1 Total returns include distributions and movement in price (assumes distributions are reinvested) 5
Slide 6: Results – performance vs pcp
Results – performance vs pcp1 For personal use only FY2014 Previous corresponding period Revenue $127.4 million 16.7% Net profit including revaluations $149.1 million $110.6 million Distributable profit (excluding revaluations) $92.8 million 22.4% Number of units on issue 634.4 million 537.8 million
Slide 7: Results – performance: monthly
Results – performance: 6 monthly For personal use only 6 months 6 months 6 months to Jun 14 to Dec 13 to Jun 13 Revenue $67.7m $59.8m $55.2m Distributable profit $49.9m $42.9m $38.4m Unrealised property revaluation gains $33.3m $23.8m $23.3m Net profit including property revaluations $82.4m $66.7m $
Slide 8: Results – distributions per unit (DPU)
Results – distributions per unit (DPU) For personal use only (cents) 16 14.67 14.71 14.14 14 13.27 1.17 7.75 12.98 7.14 12.61 6.72 12.08 11.98 6.87 11.96 6.56 12 11.38 6.39 11.57 6.17 5.98 5.80 10.50 4.87 5.87 9.56 9.77 10 9.18 5.35 4.86 4.97 4.68 8 7.00 6.83 6 6.55 6.70 6.63 6.22 6.42 6.10 6.09 5.7
Slide 9: Results – distribution variance to pcp
($m) Results – distribution variance to pcp1 For personal use only 100 95 Upgrades (3%) 90 Acquisitions (76%) 85 80 Rent Reviews (21%) 75 70 65 Distributable profit - Property revenue Net finance costs Responsible entity's Other operating Distributable profit - FY13 fees expenses FY14 1 pcp = previo
Slide 10: Major customer (Bunnings)
Portfolio – major customer (Bunnings) For personal use only > Majority (92%) of BWP income underpinned by the Bunnings business > 7.8% store-on-store sales growth for 9 months to 31 March 2014 (vs. pcp) 8 1,050 Bunnings 7 900 Sales (LHS) EBIT (RHS) 6 750 5 600 Sales ($billion) EBIT ($m) 4 450 3 300
Slide 11: New properties in FY2014
Portfolio – new properties in FY2014 For personal use only Rent Purchase price State Property Description ($000)1 ($000)2 BWH3-anchored NSW Hoxton Park 3,401 40,750 centre NSW Rydalmere BWH 2,810 38,760 QLD Arundel BWH 2,120 26,470 QLD Bethania BWH 1,724 21,720 BWH development QLD Brendale N/A 7,600
Slide 12: Developments completed in FY2014
Portfolio – developments completed in FY2014 For personal use only Sunbury, VIC (opened Jun 2014) Springvale, VIC (opened Dec 2013) Rydalmere, NSW (opened Mar 2014) Ellenbrook, WA (opened Dec 2013) 12
Slide 13: Developments completed in FY2014
Portfolio – developments completed in FY2014 For personal use only Townsville North, QLD (opened Dec 2013) North Lakes, QLD (opened Oct 2013) 13
Slide 14: Developments completed in FY2014
Portfolio – developments completed in FY2014 For personal use only > Bunnings Warehouse - Wallsend, NSW ($21.2m) – Land acquired in Jan 2013 for $3.0m (including acquisition costs) – Development completed May 2014 – 16,863m2 fully-enclosed covered area – Commencing annual rent $1.9m – 10 year lease
Slide 15: Developments completed FY2014
Portfolio – developments completed FY2014 For personal use only > Bunnings Warehouse > Harrisdale showrooms Rocklea, QLD ($5.4m) Harrisdale, WA ($3.4m) – 3,640m2 expansion of the fully-enclosed – Constructed on surplus land acquired covered area of the Bunnings Warehouse Apr 2011 for construction of
Slide 16: Development pipeline
Portfolio – development pipeline For personal use only > $73 million of capital committed to developments and expansions of existing properties Capital commitment Property Payment date ($m) Developments Manly West Sep 14 21.30 West Ipswich Sep 14 17.87 Brendale Apr 15 19.23 Minchinbury Apr 15 8.58 R
Slide 17: Geographic spread
Portfolio - geographic spread For personal use only 70 Bunnings Warehouses 8 Bunnings Warehouses and showrooms 4 Bunnings Warehouse development sites 1 Large format retail showroom 4 Industrial properties 15 1 14 2 3 1 2 BWP rental income 1 (as at 30 Jun 2014) 1 17 1 VIC 34% 2 NSW 21% WA 17% 22 QLD
Slide 18: Non-core property divestments
Portfolio – non-core property divestments For personal use only > Five properties sold, but not settled at 30 June 20141 > Consideration was given to both re-leasing each property and/or divesting it, with the sale considered to provide the better overall outcome for the Trust Property Tenancy Sale
Slide 19: FY2014 like-for-like rental growth
Portfolio – FY2014 like-for-like rental growth For personal use only Proportion of rental income Average increase 11% Market 2.1%1 25% Fixed 3.1% 2.5% like-for-like rental growth 64% CPI 2.3% Like-for-like rental growth2 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Rental growth 4.1% 3.0% 4.4%
Slide 20: Market rent reviews
Portfolio - market rent reviews For personal use only > 17 market rent reviews for the portfolio resolved during the year (refer Appendix D): – +3.4% increase across the portfolio – 12 Bunnings reviews resulted in +3.8% increase > Current and emerging themes: – Bunnings developing most of its new st
Slide 21: Market rent reviews
Portfolio – market rent reviews For personal use only > 12 Bunnings Warehouse market rent reviews remain to be completed in FY2014 > Negotiations close to finalisation for a number these market reviews with balance likely to be referred for independent determination Due date: Q1 FY2015 Q2 FY2015 Q3
Slide 22: Revaluations
Portfolio - revaluations For personal use only > Jun 2014 weighted average capitalisation rate 7.59% (refer Appendix E): – Dec 2013: 7.71% and Jun 2013: 7.86% – Stand alone Bunnings Warehouses weighted average cap rate of 7.48% • 11 independent valuations (13% of BWP portfolio value), average cap ra
Slide 23: Revaluations
Portfolio – revaluations For personal use only Historical BWP cap rates compared to other asset classes Cap rate WALE (year) 9.0% 10 9 8.5% 8 8.0% 7 7.5% 6 7.0% 5 4 6.5% 3 6.0% 2 5.5% 1 5.0% 0 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Prime Industrial Sub-Regional Retail Neighbo
Slide 24: Rent reviews and revaluations
Portfolio – rent reviews and revaluations For personal use only > Future market rent reviews and revaluations for Bunnings Warehouses (“BWH”) FY20141 FY2015 FY2016 FY2017 FY2018 FY2019 BWH market reviews 12 10 7 7 8 16 % of total2 19% 18% 12% 13% 13% 25% Independent revaluations - 25 28 25 26 28 % o
Slide 25: Vacancies
Portfolio – vacancies For personal use only > 99% occupancy excluding properties sold, but not settled at 30 June 2014 > Three vacant tenancies comprising 0.8% of portfolio rental income, 3.7% taking into account properties that are sold but not settled Percentage Property Tenancy Comments of income
Slide 26: Weighted average lease expiry profile
Portfolio – weighted average lease expiry profile For personal use only 25% 20% 15 13 15% % of Rental Income 13 10 10% Number of Bunnings leases expiring 7 5 5% 6 3 2 3 0% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 Beyond Industrial Showrooms Bunnings > All leases expiring in the next five ye
Slide 27: Bunnings lease expiries
Portfolio – Bunnings lease expiries For personal use only > Nine Bunnings leases expiring in the next three years1 Property Lease expiry Annual rent Comments ($’000) Morley Jul 2015 1,251 In discussions with Bunnings Mt Gravatt Dec 2015 1,129 Too early for consideration Belmont North Mar 2016 939 To
Slide 28: Bunnings Warehouse replacements
Portfolio – Bunnings Warehouse replacements For personal use only > A number of different options for sites, post Bunnings Property Lease expiry Comments Bunnings likely moving to a new site in 2015, consideration being given to re-lease, Cairns Feb 2018 development or sale Joondalup Sep 2018 Bunnin
Slide 29: Capital management
Capital management For personal use only > A- credit rating with S&P supported by: – Low gearing: 24.4% at 30 June 2014 (25.0% covenant gearing) – Strong lease covenant in Bunnings/Wesfarmers – Solid rental base with growth from CPI, fixed and periodic market rent reviews – Low level of maintenance/
Slide 30: Capital management – debt facilities
Capital management – debt facilities For personal use only > Borrowing costs for the year $20.9m (down 4.0% on previous year): - Average borrowings $332.5m (2013: $295.4m) - 6.14% weighted average cost of debt after hedging (2013: 7.30%) > Interest cover: 5.7x at 30 June 2014 (2013: 4.6x) > Addition
Slide 31: Capital management – interest rate hedging
Capital management – interest rate hedging For personal use only > $210.0m interest rate swaps at 4.93% weighted average, including delayed starts > 2.82 years weighted average maturity, including delayed starts Hedge book profile by Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 half-year ending: Active
Slide 32: Strategic agenda
For personal use only Strategic agenda 32
Slide 33: Outlook – key drivers
Outlook – key drivers For personal use only > 2013/14 acquisitions: – Increased rental income from development properties acquired in 2013/14 > Low interest rate environment: – Competition for better quality assets – Expected further reduction in capitalisation rates, with investors attracted to yie
Slide 34: Outlook - priorities
Outlook - priorities For personal use only > Proactive management of existing assets – Additional upgrades of existing properties to support Bunnings’ evolving business model (to increase rental income, improve building format, and extend lease expiry) – Continue to consider redeployment or divestme
Slide 35: Further information
Further information For personal use only bwptrust.com.au Responsible entity: BWP Management Limited Tel: +61 8 9327 4356 Email: investorrelations@bwptrust.com.au 35
Slide 36: Appendix A: Weighted average lease expiry data table
Appendix A: Weighted average lease expiry data table For personal use only Total Lease Total Rental Income Rental Income Bunnings Industrial Showrooms Year Year End Expiries ($) (% of Total) (%) (%) (%) 1 30-Jun-15 4 1,273,134 0.9% 0.0% 0.5% 0.4% 2 30-Jun-16 9 4,662,735 3.4% 1.7% 0.0% 1.7% 3 30-Jun-
Slide 37: Appendix B: Market rent reviews
Appendix B: Market rent reviews 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 a similar
Slide 38: Appendix C: Market rent review drivers
Appendix C: 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 imp
Slide 39: Appendix D: Market rent reviews concluded
Appendix D: Market rent reviews concluded For personal use only Passing rent Reviewed Uplift Property location Tenancy Effective date ($pa) rent1 ($pa) (%) Dandenong, VIC1 Bunnings 1,347,156 1,490,000 +10.6 11-Nov-12 Port Melbourne, VIC1 Bunnings 1,673,123 1,840,443 +10.0 17-Mar-13 Artarmon, NSW1 Bu
Slide 40: Appendix E: Valuations
Appendix E: Valuations For personal use only > Process – entire portfolio re-valued every six months – independent valuations on a three year cycle for each property – balance of portfolio – directors’ valuation using recognised valuation methodology – directors’ valuations methodology reviewed by a
Slide 41: Appendix F: Asset concentration/liquidity
Appendix F: Asset concentration/liquidity For personal use only > Relatively low-medium value per asset: - Diversifies the exposure over different geographies and markets - Appeals to a broader range of property buyers (institutional and private investors, owner/occupiers) 30% 25 25% 20 20% 15 15% 1