Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BWP Trust (ASX:BWP, Financial) reported a strong like-for-like rental growth of 4.2% for the year.
- The Trust completed the acquisition of Newmar Property REIT, adding two properties to its portfolio.
- Total income increased by 10.3% to $174.5 million, reflecting strong financial performance.
- Portfolio leasing increased to 99.1%, with a weighted average lease expiry (WALE) of 3.8 years.
- BWP Trust declared a final distribution of $0.0927 per unit, bringing the total distribution for the year to $0.1829 per unit.
Negative Points
- The weighted average cost of debt increased to 4.4% from 3.6% the previous year, reflecting a higher interest rate environment.
- The average level of borrowings was 24.2% higher than the previous year, largely due to the NPR acquisition.
- The Trust's gearing ratio increased to 21.5%, although it remains at the lower end of the Board's preferred range.
- High construction costs are a current headwind for repurposing or relocation projects.
- The Trust faces significant lease expiries in FY26 and FY27, which may pose a risk if not managed effectively.
Q & A Highlights
Q: Just on the NPR transaction now that the dust has settled on that, are there any positive or negative surprises you're seeing in the transaction or even some potential repurposing upside that you could be working on over the next few years?
A: Thanks, Howard. Mark here. No, we haven't found any surprises. The process was very comprehensive, and we were well-prepared. Andrew, you might touch on the portfolio.
Andrew Ross - BWP Trust - Head - Property: There are some minor potential expansions at one or two sites in our portfolio identified during the DD process, but these are medium to long-term options.
Q: Can we expect the momentum on corporate activity and transactions to continue into this year?
A: We are keen to continue evaluating our portfolio and other opportunities. The team is focused on optimizing, renewing, and growing where it makes sense, maintaining capital discipline and accretive economics.
Q: Are you taking any assumptions around whether there's going to be more or less income relief from capital like you've done in previous years?
A: Our expectation is that capital profit release will be less than in 2024.
Q: What's the outlook for asset recycling and transactions? Is it picking up, similar, or lower than seen in prior years?
A: It's really a function of what's coming to market. There hasn't been much in the last six months, but we are always evaluating opportunities.
Q: Have there been any discussions around doing any kind of portfolio deal to lay out that expiry profile a little bit more or bring some lease deals forward?
A: No tranche transactions or discussions like that. We are in active dialogue with Bunnings regarding lease expiries.
Q: Can you give us some color on the funding rates for the Scoresby upgrade project?
A: The CapEx is for carpark works due to underlying structural problems. There is no funding like we consider that to be spine business capital expenditure.
Q: How are you thinking about pricing these expansions going forward, given the current cost of debt environment?
A: The funding rate is guided by the underlying lease and our cost of capital. We expect the funding rate to be higher than previously achieved.
Q: Is there any broader discussion you are having on some simulation CapEx programs in individual assets or a bunch of assets?
A: We are looking to have more discussions with Bunnings to support their network optimization plans and expansion activities.
Q: The two adjacent acquisitions you made, are they in response to discussions with Bunnings?
A: No, they were independent of any discussions. We saw some kind of marriage value between owning that real estate ourselves.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
