Bunnings’ landlord has shown resilience amid the harsh retail market conditions and said its underlying tenant had a solid business model that would provide rental growth in the coming year.
The Bunnings Warehouse Property trust is the first to report for the past year and says overall net profit after tax was up 24 per cent to $210.6 million, boosted by a rise in asset valuations.
Taking out the one-off items, net profit was up 1 per cent to $117 million.
The trust owns 68 assets, of which a majority are leased to the Bunnings warehouse business. It has some mixed-use centres that have space leased to fitness centres, which were subject to COVID-19 mandatory closure by federal or state governments for some, or all, of March, April, May and June this year.
BWP’s managing director Michael Wedgwood said the continuing economic uncertainty in relation to COVID-19 may require the trust to grant further rent abatements and/or rent deferrals to those tenants affected by enforced closures.
Overall, the trust collected 98.9 per cent in rent from its tenants from March to June 2020, as Bunnings was deemed an essential business. The like-for-like rental growth was 2.4 per cent for the year to June 30.
Mr Wedgwood told analysts on a results call that while Bunnings was under pressure in Melbourne with the new stage 4 restrictions, the business was solid.
“We think the business is likely to remain stable and any change in that is more likely to be macro driven,” Mr Wedgwood said.
“We see the Bunnings business is still in pretty good shape and as a business model it is still strong.”
Mr Wedgwood said that in terms of current rent reviews he was not expecting any big swings either way.
When asked about the exit of the German Kaufland business from Australia on releasing large assets back into the market, Mr Wedgwood said the trust sold four sites to the business and expected the owners to take their time before putting them back up for sale.
Aaron Payne from Moelis Australia said in the coming financial year, the trust’s primary focus is on filling any vacancies in the portfolio, progressing store upgrades and extending existing leases with Bunnings through the exercise of options.
There will also be completion of market rent reviews, and the continued rollout of energy efficiency improvements at its properties.
UBS dealing desk manager Tim Leahy said the result highlights the resilience of the portfolio in light of COVID-19, albeit with some uncertainty about the longer-term impact of the global pandemic on the Bunnings warehouse business.
A final distribution of 9.27c per ordinary unit has been declared and will be paid on August 21. That takes the full-year payment to 18.29c, up from 18.11c per unit.
Mr Wedgwood said investors can expect a similar distribution for the 2021 year, but warned that it may be reviewed in the event the COVID-19 impacts are “more severe or prolonged than anticipated”.