BWP GROUP — Interim / Quarterly Report 2020

Feb 3, 2020

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Half-year results to 31 December 2019 February 2020

Important notice

The information provided in this presentation should be considered together with the financial statements for the period and previous periods, ASX announcements and other information available on the Trust’s website.

This presentation has been prepared by BWP Management Limited as the responsible entity for BWP Trust. The information provided is for information purposes only and does not constitute an offer to arrange to issue securities or other financial products, nor is it intended to constitute legal, tax or accounting advice or opinion. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. This presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person.

All reasonable care has been taken in preparing the information contained in this presentation, however no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. Without limiting the preceding sentence, no representation or warranty, express or implied, is given as to the accuracy, completeness, likelihood of achievement or reasonableness of any forward-looking statements, forecasts, prospects or returns contained in this presentation. Such forward-looking statements, forecasts, prospects or returns are by their nature subject to significant uncertainties and contingencies, many of which will be outside the control of BWP Trust or BWP Management Limited. Also, past performance is no guarantee of future performance.

Before making an investment decision, you should conduct your own due diligence and consult with your own legal, tax or accounting adviser as to the accuracy and application of the information provided in this presentation and in respect of your particular investment needs, objectives and financial circumstances.

Presentation outline

Michael Wedgwood Managing Director BWP Management Limited

Andrew Ross Portfolio Manager BWP Management Limited David Hawkins Finance Manager BWP Management Limited

Summary

Results

Portfolio

Core portfolio

Alternative use properties

Capital management

Outlook

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3 HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Summary
Hawthorn, VIC
4 SUMMARY | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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2019/20 half-year at a glance

$76.2m $57.9m⇧	9.02 cpu⇧	$3.04⇧	14.5 % pa
Total revenue 3.5%1 Dist. amount 1.0%1	Distribution 1.0%1	NTA 5.2%1	10 yr total return
PORTFOLIO	PORTFOLIO		CAPITAL
PERFORMANCE	MANAGEMENT	MANAGEMENT
2.2% like-for-like rental growth	97.5% leased		A- S&P rating/ A3 Moody’s rating
6.08%	Hoxton Park		18.0%
redevelopment completed portfolio cap rate			gearing
Mindarie rezoning completed 4.3 years portfolio WALE			3.5% cost of debt at 31 Dec 2019

1 In comparison to prior corresponding period

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Results
Southport, QLD
6 RESULTS | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Financial erformance 6 monthl p y

		6 months to Dec 19	6 months to Dec 18
	Total revenue	$76.2m	$79.0m
	Management expense ratio	0.63%	0.62%
	Other expenses	$4.2m	$3.5m
	Distributable amount	$57.9m	$57.4m1
	Property net revaluation gains	$78.5m	$20.1m
	Net profit including property revaluations	$135.6m	$78.9m
	Number of units on issue2	642.4m	642.4m
	Six months distribution (per unit)	9.02 cents	8.93 cents
	Total assets2	$2,487.1m	$2,375.3m
	Borrowings2	$447.0m	$437.9m
	Weighted average cost of debt3(p.a.)	3.53%	4.31%
	Net tangible assets2 (per unit)	$3.04	$2.89
	Weighted average cap rate2	6.08%	6.40%

• 1 Excludes $1.4 million retained in reserves

• 2 As at 31 December not 6 months to December

• 3 Finance costs divided by average borrowings for the six months

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Portfolio
Maribyrnong, VIC
8 PORTFOLIO | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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FY2020 Bunnings market rent review outcomes

• 4 Bunnings market rent reviews from FY2019 were resolved during the six months to 31 December 2019

Property location	Passing rent ($pa)	Reviewed rent ($pa)	Variance (%)	Effective date
Balcatta, WA1,2	2,336,761	2,220,000	(5.0)	23-Sep-18
Coburg, VIC1,3	1,531,347	1,684,481	10.0	3-Nov-18
Tuggeranong, ACT1,2	1,847,740	1,800,000	(2.6)	1-Dec-18
Cannon Hill, QLD1,2	2,548,846	2,550,000	0.1	1-Apr-19
Total	8,264,694	8,254,481	(0.1)

• 1 The market rent review was due during the year ended 30 June 2019, but the outcome of the negotiation was only completed during the current financial year.

2 The market rent review was determined by an independent valuer.

• 3 The market rent review was agreed between the parties at the 10 per cent cap in the lease.

Capitalisation rate trends

New Bunnings Warehouse store yields continue to tighten with the most recent transaction recorded at 4.5%

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Bunnings transaction yields
10.00%
9.00%
8.00%
7.00%
Bunnings Portfolio
Acquisitions by BWP
6.00%
5.00%
4.00%
3.00%
Jun‐10 Jan‐11 Jul‐11 Feb‐12 Aug‐12 Mar‐13 Oct‐13 Apr‐14 Nov‐14 May‐15 Dec‐15 Jun‐16 Jan‐17 Aug‐17 Feb‐18 Sep‐18 Mar‐19 Oct‐19 Apr‐20
New Bunnings Store Transactions BWP Portfolio Cap Rate
Secondary Market Bunnings Transactions Portfolio Transaction Average Cap Rate
10 PORTFOLIO | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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December 2019 revaluation

• December 2019 weighted average capitalisation rate 6.08% (June 2019: 6.30%)

• 18 independent valuations (25% of BWP portfolio value), average cap rate 6.00%

• 57 internal valuations, average cap rate 6.11%

• Stand alone Bunnings Warehouses weighted average cap rate of 5.91%

• HY19/20 gross fair value gain of $80.1m[1] on revaluation

• Cap rate compression largely contributed to the net fair value gain during the period after the portfolio average cap rate decreased 22bps

• Cap rate movement; 38 properties decreased, 32 properties no change and 5 properties increased

	Revaluation by state 31 Dec 2019 No. of properties Rental $m/annum2 Cap rate Value $m NSW/ACT 18 32.3 6.14% 575.5 QLD 19 37.9 6.06% 621.1 SA 2 4.1 5.93% 68.9	Revaluation by state 31 Dec 2019 No. of properties Rental $m/annum2 Cap rate Value $m NSW/ACT 18 32.3 6.14% 575.5 QLD 19 37.9 6.06% 621.1 SA 2 4.1 5.93% 68.9	Revaluation by state 31 Dec 2019 No. of properties Rental $m/annum2 Cap rate Value $m NSW/ACT 18 32.3 6.14% 575.5 QLD 19 37.9 6.06% 621.1 SA 2 4.1 5.93% 68.9	Revaluation by state 31 Dec 2019 No. of properties Rental $m/annum2 Cap rate Value $m NSW/ACT 18 32.3 6.14% 575.5 QLD 19 37.9 6.06% 621.1 SA 2 4.1 5.93% 68.9	Revaluation by state 31 Dec 2019 No. of properties Rental $m/annum2 Cap rate Value $m NSW/ACT 18 32.3 6.14% 575.5 QLD 19 37.9 6.06% 621.1 SA 2 4.1 5.93% 68.9	Revaluation by state 31 Dec 2019 No. of properties Rental $m/annum2 Cap rate Value $m NSW/ACT 18 32.3 6.14% 575.5 QLD 19 37.9 6.06% 621.1 SA 2 4.1 5.93% 68.9
	Revaluation by state 31 Dec 2019	No. of properties	Rental $m/annum2	Cap rate	Value $m
	NSW/ACT	18	32.3	6.14%	575.5
	QLD	19	37.9	6.06%	621.1
	SA	2	4.1	5.93%	68.9
	VIC	20	46.6	5.68%	794.1
	WA	16	27.0	6.83%	400.8
	Total/weighted average	75	147.9	6.08%	2,460.4

• 1 Gross movement in valuations; statutory accounts reflect a $78.5 million revaluation gain after adjustments made for straight-lining of rent 2 Subject to rounding

December 2019 independent valuations

			Jun-19	Jun-19	Dec-19	Dec-19	Ca Rate	Valuation	Dec-19
	Property	State	Cap Rate	Valuation ($m)	Cap Rate	Valuation ($m)	p Movement	Movement ($m)	Term Certain (years)
	Fyshwick	ACT	6.25%	24.0	6.25%	24.3	0.00%	0.3	5.0
	Dubbo	NSW	7.00%	22.6	6.75%	24.0	-0.25%	1.4	2.1
	Minchinbury	NSW	5.50%	52.7	5.50%	52.7	0.00%	0.0	7.3
	Fairfield Waters	QLD	6.75%	25.2	6.50%	26.5	-0.25%	1.3	1.3
	Rocklea	QLD	6.00%	35.1	6.00%	35.6	0.00%	0.5	5.8
	Smithfield	QLD	6.75%	23.6	6.50%	24.5	-0.25%	0.9	1.4
	Caroline Springs	VIC	6.25%	29.4	6.00%	31.2	-0.25%	1.8	1.4
	Mornington	VIC	6.00%	29.3	5.75%	30.3	-0.25%	1.0	2.0
	Pakenham	VIC	6.50%	31.4	6.25%	32.4	-0.25%	1.0	1.6

1 Subject to rounding

December 2019 independent valuations (continued)

	Proert	State	Jun-19	Jun-19 Valation	Dec-19	Dec-19 Valation	Cap Rate	Valuation Movement	Dec-19 Term Certain
	py		Cap Rate	u ($m)	Cap Rate	u ($m)	Movement	($m)	(years)
	Coburg	VIC	6.75%	66.7	6.50%	70.0	-0.25%	3.3	2.9
	Port Melbourne	VIC	4.75%	45.5	3.75%	55.0	-1.00%	9.5	5.2
	Vermont South	VIC	6.25%	36.3	5.75%	39.6	-0.50%	3.3	0.6
	Belmont	WA	6.25%	25.3	6.00%	26.4	-0.25%	1.1	1.3
	Cockburn	WA	6.25%	28.4	6.00%	29.6	-0.25%	1.2	1.3
	Ellenbrook	WA	6.00%	33.1	6.00%	34.1	0.00%	1.0	5.9
	Harrisdale	WA	6.50%	37.5	6.50%	38.2	0.00%	0.7	2.9
	Morley	WA	8.66%	16.9	8.75%	16.9	0.09%	0.0	0.5
	Port Kennedy	WA	6.75%	24.7	6.25%	26.6	-0.50%	1.9	1.4
	Total/weighted average1		6.27%	587.7	6.00%	617.9	-0.28%	30.2	3.0

1 Subject to rounding

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Core portfolio
Mornington, VIC
14 CORE PORTFOLIO | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Core portfolio summary

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67 4.3 years
properties portfolio WALE
14,204m [2]
3.3 ha
average lettable
average land area
area
75%
82%
upgrade
metro located
properties or
properties
occupied <12yrs
5.93%
weighted average
cap rate
15 CORE PORTFOLIO | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Weighted average lease expiry profile

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25%
20%
15%
10%
5%
0%
CY20 CY21 CY22 CY23 CY24 CY25 CY26 CY27 CY28 CY29 Beyond
1
BWH <12 yrs occ. + upgrades BWH >12 years occ. Showrooms
% of Rental Income
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1 Includes both proposed and completed upgrades

Lease expiries next three years

> Five year options recently exercised for Fountain Gate (VIC) and Port Melbourne (VIC)

	Property	Lease expiry	Options	Rent ($’000pa)	Comments
	Vermont South	Aug 2020	4 x 5 yrs	2,297	Notification required by Jun 2020
	Northland	Aug 2020	2 x 5 yrs	2,030	Notification required by Jun 2020; Bunnings seeking planning approval for alternative site nearby
	Hawthorn	Oct 2020	4 x 5 yrs	3,381	Notification required by Jul 2020
	Coburg	Nov 2020	3 x 5 yrs	1,707	Board approval to upgrade (refer to slide 18)
	Mt Gravatt	Dec 2020	4 x 5 yrs	1,407	Notification required by Sep 2020
	Bdd	2021	10		Nifii id b O 2020
	roameaows	Jan	yrs	2,007	otcaton requre y ct
	2011 Portfolio	Mar – Oct 2021	5 x 5 yrs	16,258	Properties acquired in 2011 portfolio transaction - Belmont, Cockburn, Fairfield Waters, Pakenham, Wagga Wagga, Port Kennedy, Smithfield, Dubbo, Harrisdale and Caroline Springs
	Midland	Sep 2021	2 x 5 yrs	1,888	Notification required by Jun 2021; Bunnings seeking planning approval for alternative site nearby
	Geraldton	Dec 2021	2 x 5 yrs	1,341	Notification required by Sep 2021
	Mornington	Dec 2021	2 x 5 yrs	1,760	Notification required by Sep 2021
	Frankston	Dec 2021	2 x 5 yrs	2,156	Notification required by Sep 2021
	Gladstone	Feb 2022	3 x 5 yrs	1353	Notification required by Nov 2021
17				,
	Greenacre	Apr 2022	5 x 5 yrs	2,785	Notification required by Oct 2021
	Craigieburn	May 2022	5 x 5 yrs	1,722	Notification required by Nov 2021
	Scoresby	May 2022	2 x 5 yrs	1,943	Notification required by Feb 2022
	Hervey Bay	Dec 2022	1 x 5 yrs	1,347	Notification required by Sep 2022

Coburg upgrade

• Upgrade cost of $2.5 million at a funding rate of 5.5 per cent

• Upgrade increases the total retail area by 918 square metres incorporating an expansion and full enclosure of the timber trade sales area

• Anticipated completion late 2020

• On completion of the works Bunnings will enter into a new 10 year lease with existing 3 x 5 year options to remain (current term certain 0.8 years)

• Annual CPI reviews with a market rent review on the exercise of each option

• 10 per cent caps/collars on the market rent review

• No other changes to the existing lease

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18 CORE PORTFOLIO | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Hoxton Park repositioning

• Bunnings surrendered its lease in June 2019 ($2.15 million surrender fee to BWP)

• Project completed at a total cost of $13.0 million

• Property is 92 per cent leased mainly to national tenants and expect remaining two tenancies to be leased by mid-2020

• WALE 10.2 years at 31 December 2019 (pre-Bunnings lease surrender 2.0 years)

• Fair value on-completion of $58.3 million (7.00 per cent capitalisation rate), resulting in a $19.5 million increase in fair value from 30 June 2019

• Fair value prior to Bunnings advising it would vacate was $45.6 million (June 2016)

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19 CORE PORTFOLIO | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Alternative use
properties
Hawthorn, VIC
20 ALTERNATIVE USE PROPERTIES | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Other stores being repositioned

	Prert	Lee eir1	Prre
	opy	as xpy	ogss
	Mandurah	Expired	Development complete with Amart Furniture and Snooze open and trading. Negotiations with other LFR tenants progressing for the remaining lettable area of 2,560sqm
	Cairns	Expired	Concept and feasibility finalised for multi-tenanted development; heads of agreement secured for up to 2,500sqm of the building; lease discussions with other interested parties ongoing
			Construction progressing for large format retail redevelopment; AFL executed
	Port Macquarie	Expired	with Amart Furniture for 5,000sqm; heads of agreement secured for 430sqm gym tenant; leasing campaign progressing for remaining 1,500sqm of lettable area
	Morley	Jul 2020	Leasing interest received from a number of parties; redevelopment options being carefully considered given location and favourable zoning. Medium term residential and/or mixed-use development potential
	Northland	Aug 2020	Bunnings has lodged a DA for an alternative location. Future options for the site are under review and include possible rezoning and mixed use
21			development
	1 End of the current Mindarie	Bunnings lease term Sep 2021	Scheme amendment and structure plan approved in late 2019 to allow mixed-use development of the site which adjoins Ocean Keys sub-regional shopping centre; interest received from national retailers

Divestments

Property	Lease	Sale price	Progress
	expiry1	($m)
Underwood	Expired	Undisclosed	Under conditional option agreement to sell to unrelated third party, progressing toward satisfaction of conditions
Belmont North	Mar 2021	Undisclosed	Under conditional option agreement to sell to unrelated third party, progressing toward satisfaction of conditions

1 End of the current Bunnings lease term

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22 ALTERNATIVE USE PROPERTIES | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Capital
management
Gladstone, QLD
23 CAPITAL MANAGEMENT | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Debt facilities

• Average borrowings for the half-year $439.0m (down 4.7% on prior corresponding period)

• • 3.53% p.a. weighted average cost of debt after hedging (2018: 4.31% per annum)

• Borrowing costs for the half-year $7.8m (down 21.9% on prior corresponding period)

• Bank facilities with CBA and WBC can be extended a further year each year, subject to agreement

• Cost of debt at 31 December 2019: 3.5% per annum

• Interest cover: 8.5 times at 31 December 2019 (2018: 6.6 times)

• Gearing 18.0% at 31 December 2019 (2018: 18.4%)

• A- / Stable S&P rating and A3 Moody’s rating maintained

	As at 31 Dec 2019	Limit ($m)	Drawn ($m)	Expiry
	WBC	135	69	30 April 2022
	CBA	110	68	31 July 2022
	SMBC	100	100	20 May 2024
24	Corporate bonds- five year	110	110	11 May 2022
	Corporate bonds- seven year	100	100	10 April 2026
	Total /Weighted average	555	447	3.5 years

Debt duration

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Debt maturity profile as at 31 December 2019
300
65.9
200
69.1
100 110.0 42.4
100.0 100.0
67.6
0
FY FY FY FY FY FY FY
20 21 22 23 24 25 26
Bonds Drawn bank facilities Undrawn bank facilities
25 CAPITAL MANAGEMENT | HALF-YEAR RESULTS TO 31 DECEMBER 2019
Volume (A$M)
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Interest rate hedging

	Hedge book profile by	Dec 2019	Jun 2020	Dec 2020	Jun 2021	Dec 2021	Jun 2022
	half-year ending
	Active swaps ($m)	98	85	85	70	40	-
	Swap rates (%)
	Maximum	4.92	4.12	4.12	2.60	2.60	-
	Minimum	2.39	2.39	2.39	2.39	2.60	-
	Wihtd %1	307	279	279	251	260	-
	ege average ()	.	.	.	.	.

> Including fixed rate corporate bonds – $307.5m hedged at 2.08%[2 ] weighted average to maturity, at 31 December 2019

1 Weighted average of active swaps at respective half-year end

2 Excludes margins payable on the fixed corporate bonds

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26 CAPITAL MANAGEMENT | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Outlook
Nunawading, VIC
27 OUTLOOK | HALF-YEAR RESULTS TO 31 DECEMBER 2019
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Outlook

Macro economic environment

• Demand for Bunnings Warehouse properties should remain stable, subject to any significant risk events interrupting capital flows into the Australian property sector

• The Trust is well positioned in the event of any change in the macro economic environment with low gearing, sustainable cashflow and good access to funding

Rental growth

• 19 CPI/ 26 fixed rent reviews in second half FY2020

• 16 Bunnings MRR’s to be finalised

Investment

• Primary focus on finalising outcomes on alternative use sites

• Negotiating with Bunnings to progress opportunities to re-invest in existing portfolio

• Continuing to look for acquisitions that create value for the Trust

FY20 distribution

The Trust could expect the distribution for the year ending 30 June 2020 to be one per cent higher than the ordinary distribution paid for the year ended 30 June 2019, a similar level of growth to the interim distribution. Capital profits will be utilised to support distributions as necessary.

Further information

bwptrust.com.au

Responsible entity: BWP Management Limited Tel: +61 8 9327 4356 Email: investorrelations@bwptrust.com.au

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29 FURTHER INFORMATION | HALF YEAR RESULTS TO 31 DECEMBER 2019
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