Bunnings landlord BWP to undergo $143m management split from Wesfarmers
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The news: BWP has signed an implementation deed with Wesfarmers to internalise management away from the agribusiness conglomerate, reset the terms of its leases with Bunnings and make several capital expenditure commitments at some Bunnings sites.
The numbers: BWP has formed BWP Property Group to acquire BWP Management, which is wholly-owned by Wesfarmers, for $142.6 million, internalising management functions of BWP.
The purchase price consists of $100 million in cash drawdown from an existing BWP debt facility and $42.6 million of BWP Trust scrip representing just under 10.9 million stapled securities.
The securities will be issued to Wesfarmers at BWP’s net tangible asset per unit as at 31 December 2024 of $3.92, a 9.2% premium on the BWP unit close price on 26 June.
Wesfarmers would remain the largest BWP security holder with its holding increasing from 22.3% to 23.5%, entitling it to one board director appointment.
As a part of the transaction, the term of 62 Bunnings leases will be extended, increasing the weighted average leases expiry for those stores from 4.6 years to 9.5 years. The overall portfolio weighted average lease expiry would increase from 4.4 years to eight years.
The transaction would also commit BWP to $56 million of development expenditure to expand five Bunnings sites. Both BWP and Bunnings would also jointly invest $30 million in asset enhancements and upgrades across several older BWP assets.
The context: BWP and Wesfarmes have also entered into a cooperation and services agreement to govern the transitional relationship of a maximum of five years after the proposed transaction is implemented.
The transaction is subject to approval from BWP unitholders at an extraordinary general meeting that will be held on 28 July.
BWP Managment also flagged that an unaudited revaluation of its BWP Trust assets indicates a net gain of $45 million for the six months to 30 June 2025. Independent valuers covered 29 properties with directors’ revaluations covering the remaining 53.
It said this was driven by rental increases and the weighted average capitalisation rate for the portfolio compressing by three basis points to 5.4%. Full-year results are expected to be released on 6 August.
What they said: “The proposed transaction provides a compelling opportunity to secure continued exposure to Bunnings as BWP’s largest tenant, and to create an aligned and cost efficient internally managed real estate investment group with significant lease tenure, with the ability to continue generating attractive and predictable distributions for investors,” BWP Management chair Tony Howarth said.
