BWP Trust (ASX:BWP) executives told investors the group made “continued progress” across its strategic pillars of portfolio optimization, profitable growth and portfolio renewal during the half-year ended 31 December 2025, supported by leasing activity, portfolio revaluations and ongoing repurposing and expansion projects.
Portfolio activity lifted WALE and supported rental growth
Managing Director Mark Scatena said portfolio optimization outcomes were underpinned by the completion of management internalization and progress on the Bunnings lease reset. He said the reset and extension of 62 Bunnings leases materially increased the portfolio’s weighted average lease expiry (WALE) to 7.5 years at 31 December 2025, up 3.1 years from the prior corresponding period.
Leasing activity in the LFR portfolio delivered positive rental reversion, with leasing spreads across eight LFR tenancies averaging 7.6% during the half. Management also noted incentives remained low, which it attributed to tenant demand and the quality of the portfolio.
Valuation uplift, profit mix, and distribution details
The entire portfolio was revalued in the period, resulting in a weighted average capitalization rate of 5.27%, representing compression of 13 basis points over the half. Net fair value gains totaled AUD 155.9 million, which management said was driven by improved rental income and cap rate compression.
Attributable profit after fair value movements and income tax was AUD 221.8 million, up from AUD 157.1 million in the prior period. Profit before fair value movements and tax was AUD 66.4 million, which management said was largely in line with the prior corresponding period, as increased rental income was offset by one-off transaction costs associated with internalization and the lease reset.
Funds from operations (FFO) increased 6% to AUD 70.4 million. The interim distribution declared was AUD 0.0958 per security, payable 27 February 2026, and management said the half-year distribution reflected 98.6% of FFO and was “fully supported by cash generation” despite repurposing activity reducing rental income in the period.
Management reaffirmed full-year distribution guidance, subject to no major disruption to the Australian economy or material change in market conditions, targeting total distributions for the year ending 30 June 2026 of AUD 0.1941 per security, a 4.1% increase over the prior year’s AUD 0.1865. Executives also reiterated a targeted distribution payout ratio of 90% to 110% of FFO, describing the range as providing flexibility for timing differences related to transaction activity and redevelopment downtime. Management said most repurposing-related timing impacts were expected to be completed in the first half of the next financial year.
Growth initiatives: acquisitions, repurposing and tenant-led expansions
Scatena said BWP continues to increase its participation in LFR. Since 2020, the LFR portfolio has grown to approximately AUD 1.2 billion, driven by rental growth, acquisitions and asset repurposing, which he said makes BWP Australia’s fourth largest owner of LFR assets. Management highlighted a tenant-led expansion and site repurposing pipeline of approximately AUD 100 million.
During the half, BWP acquired Home Centre Morayfield in Queensland for AUD 48 million at a 5.75% market capitalization rate. Management said the fully leased, off-market acquisition comprises about 12,100 square meters of lettable area and was funded from existing debt facilities. Tenants cited included AMART Furniture, Nick Scali, Supercheap Auto and Sydney Tools. Management said the acquisition was earnings accretive from settlement.
Repurposing activity accelerated, with construction commencing at Fountain Gate (Victoria) and Noarlunga (South Australia), and progress made on the Broadmeadows Homemaker Centre expansion (Victoria). In response to investor questions, management said it is not seeking to buy vacant land and build new LFR centers that would create an earnings drag, and emphasized confidence in returns given tendered construction costs and leasing progress. For repurposing projects, management said it expects “10% and above” yield on cost on the relevant capital expenditure.
BWP also continued progressing agreed tenant-led expansion projects totaling AUD 81 million in commitments. Management highlighted:
- AUD 14 million expansion at Bunnings Pakenham (Victoria), expected to commence before 30 June 2026
- AUD 11 million car showroom redevelopment and expansion at Midland (Western Australia), also expected to commence before 30 June 2026
Executives said five Bunnings store expansion projects agreed as part of the internalization and lease reset transaction were advancing in planning. In follow-up Q&A, management said the development “rate gets struck once both parties have got board approval,” and noted none of those developments were included in FY2026 guidance. It also explained that for Bunnings redevelopments, Bunnings takes on construction risk and BWP receives rent when it makes the payment at completion.
Capital recycling, balance sheet, and governance updates
Portfolio renewal activity included divestments of non-core assets. During the half, BWP sold the ex-Bunnings Morley property in Western Australia for AUD 19.5 million, and after the balance date completed the sale of the ex-Bunnings Port Kennedy property in Western Australia for AUD 14.3 million. Management said both were completed at premiums to book value.
Subsequent to period end, BWP entered into an unconditional contract to sell the Chadstone Homeplus Homemaker Centre in Victoria for AUD 86.0 million, with settlement expected in June 2026. Management said the sale followed a negotiated lease extension with Bunnings to July 2030 and achieved a realized internal rate of return of 15.2% since the asset entered the portfolio via the NPR transaction. Proceeds are expected to be applied initially to reduce drawn debt.
On financing, management said gearing was 24.7% at 31 December 2025, within the board’s preferred 20% to 30% range, and the weighted average cost of debt was stable at 4.4%. Scatena said the group completed a debt refinancing in October 2025, issuing an AUD 300 million five-year Australian medium-term note, and noted Moody’s revised BWP’s credit rating upward to A3 stable. The company said it has liquidity to address upcoming maturities, including an AUD 150 million bond maturing in April 2026.
In Q&A, management said it expects gearing to remain broadly consistent with current levels, potentially trending “a little bit lower over time,” absent inorganic activity. CFO David Hawkins said BWP’s recent transaction margins were 105 basis points, which he described as “pretty relatively close” to margins across the book, and he did not expect meaningful further savings absent market dislocation.
Governance changes during the period included the retirement of Chair Tony Howarth AO, with Audit and Risk Committee Chair Fiona Harris AM appointed as the new Chair, which management said would provide continuity as BWP transitions to an internally managed model.
Outlook: capex ramp and leasing priorities
Looking ahead to the remainder of FY2026, management said BWP will continue focusing on portfolio optimization, profitable growth and portfolio renewal, while further embedding the internalized operating model through systems enablement, remuneration alignment and additional resourcing in investor relations and sustainability.
The group expects capital expenditure of AUD 60 million to AUD 70 million for FY2026, subject to construction progress and timing, reflecting repurposing and tenant-led expansion projects. Management also flagged rent reviews as a near-term contributor to income growth, noting 93 leases are scheduled for CPI-linked or fixed percentage increases in the second half, and three market rent reviews for Bunnings warehouses were in the process of being finalized and expected to complete during the second half.
About BWP Trust (ASX:BWP)
Established and listed on the Australian Securities Exchange (ASX) in 1998 (see prospectus), BWP Trust (BWP or the Trust) is a real estate investment trust investing in and managing commercial properties throughout Australia. The majority of the Trust's properties are large format retailing properties, in particular, Bunnings Warehouses, leased to Bunnings Group Limited (Bunnings). Bunnings is the leading retailer of home improvement and outdoor living products in Australia and New Zealand, and a major supplier to project builders, commercial trades people, and the housing industry.
