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Developments and expansions
COMPLETION OF EXPANSION OF BUNNINGSWAREHOUSE
LISMORE, NEWSOUTHWALES
In August 2015, a $4.6 million expansion of the Trust’s Lismore
Bunnings Warehouse was completed by Bunnings for the Trust.
As at 30 June 2015, the Trust had accrued $3.2 million of the
$4.6 million in capital expenditure. The annual rental increased
by approximately $0.3 million to $1.3 million on completion of
the expansion works.
Following completion of the expansion, the parties entered into
a new 12 year lease of the Bunnings Warehouse with four, five-
year options, exercisable by Bunnings. The rent will be reviewed
annually to a fixed three per cent and is subject to a market rent
review at the exercise of each option. Market rent reviews are
subject to a 10 per cent cap, meaning the rent cannot increase
more than 10 per cent above the preceding year’s rent, and a
10 per cent collar, meaning that the rent cannot fall more than
10 per cent below the preceding year’s rent.
COMPLETION OF EXPANSION OF BUNNINGSWAREHOUSE
ROCKINGHAM, WESTERN AUSTRALIA
In October 2015, a $4.6 million expansion of the Trust’s
Rockingham Bunnings Warehouse was completed by Bunnings
for the Trust. As at 30 June 2015, the Trust had accrued $2.5
million of the $4.6 million in capital expenditure. The annual
rental increased by approximately $0.3 million to $2.0 million
on completion of the expansion works.
Following completion of the expansion, the parties entered
into a new 12 year lease of the Bunnings Warehouse with four,
six-year options, exercisable by Bunnings. The rent will be
reviewed annually to CPI and is subject to a market rent review at
the exercise of each option. At the exercise of the first option, at the
commencement of year 13, the revised rent can be no lower than
the rent in the immediately preceding year, but may not increase
by more than 10 per cent of the preceding year’s rent. Thereafter,
market rent reviews are subject to a 10 per cent cap and collar,
meaning that the rent cannot rise or fall by more than 10 per cent
of the preceding year’s rent.
FLOOD DAMAGE BUNNINGSWAREHOUSE MAITLAND,
NEWSOUTHWALES
During the period, the Trust incurred $2.1 million in capital
expenditure to rectify the damage to the Maitland Bunnings
Warehouse from the floods in April 2015. Bunnings commenced
partial occupation of the store in August 2015 and resumed full
occupation of the store in May 2016.
Other improvements
Approximately $2.0 million was spent on various other non-income
producing improvements to the portfolio during the year.
Capital commitments
AGREEMENT TO EXPAND BUNNINGSWAREHOUSE
VILLAWOOD, NEWSOUTHWALES
In April 2016, the Trust committed to expand its Villawood
Bunnings Warehouse, New South Wales, at a cost of $4.0
million. The annual rental will increase by approximately $0.1
million. Following completion of the expansion expected in mid
2017, the parties will enter into a new seven year lease with five,
five year options, exercisable by Bunnings. The rent will increase
by a fixed three per cent per annum. At the end of the initial term
and at the exercise of each option by Bunnings, the rents are
subject to a market review. Market rent reviews are subject to a
10 per cent cap, meaning the rent cannot increase more than 10
per cent above the preceding year’s rent, and a 10 per cent collar,
meaning that the rent cannot fall more than 10 per cent below
the preceding year’s rent.
Rent reviews
The rent payable for each leased property is increased annually,
either by a fixed percentage or by the CPI, except when a
property is due for a market review. Market reviews occur for
most of the Trust’s Bunnings Warehouses every five years from
the date of the commencement of the lease. The market rental is
determined according to generally accepted rent review criteria,
based on rents paid at comparable properties in the market.
ANNUAL ESCALATIONS
During the year, 99 leases in the portfolio had annual fixed or
CPI increases, resulting in an average increase of 2.2 per cent in
the annual rent for these properties.
MARKET RENT REVIEWS
During the year market rent reviews were concluded on
10 Bunnings Warehouses and four showroom tenancies. The
market rent review for the Belmont North Bunnings Warehouse,
due during the year is being determined by a third party
independent valuer.
The results of the completed market rent reviews are shown in the
table on the following page.
Balcatta, WA
BWP Trust Annual Report 2016
16
Business Review