Prime retail property demand lifts BWP Trust portfolio

Investor demand for prime retail property lifted valuations in BWP Trust’s portfolio by $108.5 million in the 2015 financial year as the trust reported a strong full-year result. 

BWP Trust, which owns retail properties mainly tenanted by Bunnings, reported a full-year net profit of $210.1 million, up from $149.1 million in 2014. Its income increased by 13.7% to $144.9 million.

“Our objective is to keep building on the current portfolio, and that’s from a pretty solid base,” BWP’s managing director Michael Wedgwood said in announcing the result. 

The trust bought one Bunnings Warehouse development site at Australind, Western Australia, in 2015. It completed the development there, along with six other developments. 

Wedgwood said it would be difficult for the trust to grow by acquiring additional properties in the near term as low interest rates were encouraging investors to look to property for yield, pushing capitalisation rates lower.

“It’s certainly a sellers’ market,” he said. 

The trust plans to divest a property in Cairns after Bunnings relocated to a nearby site. It sold six properties in 2015.

“We will continue to review the portfolio regularly and assess all properties. If it makes sense to over time, we will look to divest properties but it’s not top priority at the moment,” Wedgwood said. 

The portfolio has a 100% occupancy rate. Its weighted average lease expiry was 6.6 years as at June 30, 2015. 

Low inflation limited rental growth to 2.6%, compared with 4% for the previous year. Around 65% of the trust’s rental income is subject to CPI increases. 

BWP Trust was one of the strongest performing shares in the property sector during July, when the A-RIET index outperformed the broader market.

It paid a final distribution of 8.17 cents, making a total of 15.84 cents for the full year, up 7.7% on the previous year. It forecast distribution growth of about 5% for the 2016 financial year.