Investment Approach

BWP Trust aims to provide unitholders with a secure and growing income stream and long-term capital growth. This is achieved through strong alignment with, and by supporting the ongoing property needs of its customers, and the local communities where it owns real estate.

To achieve this core purpose the responsible entity invests on behalf of the Trust according to the following strategies, objectives and investment criteria:

Investment themes

Large format retailing property ownership - Home improvement / Bunnings focus

Status as at 30 June 2018

• 255 hectares of land
• 79 properties
• 92 per cent of income from Bunnings
• 93 per cent of non-Bunnings income from national tenants

Priorities

• Core portfolio of Bunnings Warehouse properties that meet Bunnings' business model requirements, with annual rent increases and long duration of occupancy

Sustainable portfolio returns supported by balance sheet flexibility

Status as at 30 June 2018

• 10.6 per cent annualised portfolio return on capital
• 19.3 per cent gearing

Priorities

• Focus on long-term value creation by re-investing in and growing the core portfolio of Bunnings Warehouse properties, and from maximizing the alternative use prospects of a number of properties in the portfolio

Property location attributes

Status as at 30 June 2018

• 80 per cent metropolitan
• 20 per cent regionally located property
• 40 per cent of metropolitan properties within 20 kms of a central business district ("CBD")

Priorities

• Well located properties in local communities, accessible, adjacent to other retail/community facilities
• Re-zoning
• Home improvement, supermarkets, activity/experiences, residential, healthcare

Drivers of returns

Annual rental growth

Status as at 30 June 2018

• Approximately 59 per cent of the Trust's rental income is subject to Consumer Price Index ("CPI") adjustments, and
• 41 per cent is subject to fixed annual adjustments, other than in years in which respective properties are due for a market rent review

Priorities

• Continued focus on market rent review outcomes, the Trust will benefit in terms of rental growth from higher inflation levels

WELL PRICED ACUISITIONS AND RE-INVESTMENTS

Status as at 30 June 2018

• No acquisition opportunities met risk adjusted return requirements during the year

Priorities

• Re-investment in existing portfolio, and acquisitions as and when it makes commercial sense to do so

COST OF FUNDING

Status as at 30 June 2018

• S&P A-rating re-affirmed
• Moody's A3 rating assigned during the year
• New $100 million five-year bank facility established post year-end

Priorities

• Continue to diversify funding and extend duration of debt

Long-term value creation

Pro-active management of existing properties

Status as at 30 June 2018

• Portfolio 98.8 per cent leased
• Up to nine properties are being re-positioned for alternative use
• Four properties in the process of being divested
• Five properties are being re-positioned for large format retail
• Two properties being re-zoned for higher and better use

Priorities

• Continue to optimise the value of all properties in the portfolio

Portfolio growth

Status as at 30 June 2018

• Reviewed a number of acquisition opportunities during the year, none met return hurdle requirements

Priorities

• Acquisitions as and when value can be created

Effective management of the trust and its capital

Status as at 30 June 2018

• Ten year average total unitholder return of 14.0 per cent per annum

Priorities

• Secure and growing income stream
• Long-term capital growth