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News Originally posted at afr.com

Bunnings takes Masters sites, quits seven BWP Trust stores

August 26, 2016

Bunnings will vacate up to 7 BWP Trust-owned warehouses. Photo: Patrick Scala

Wesfarmers-owned Bunnings will vacate up to seven stores it leases from ASX-listed BWP Trust, the biggest single owner of Bunnings warehouses in Australia, to occupy former Masters sites to be acquired by the Home Consortium.

The news sent BWP Trust shares tumbling nearly 9 per cent in early morning trading to $3.25.

BWP Trust owns a portfolio of 80 Bunnings warehouse sites and one standalone showroom worth $2.2 billion. Wesfarmers is its biggest shareholder with a 24 per cent stake.

The managers of the trust said they would “review all options to optimise the value of each of the sites in the period to lease expiry including; re-leasing to other occupants, potential redevelopment to establish alternative uses, or divestment.”

Bunnings will remain responsible for the rent on each property until the expiry of the current lease term. Three of the properties have four or more years remaining to lease expiry, the balance of the leases will expire within a shorter timeframe.

“We reaffirm BWP’s previous market guidance of about three per cent distribution per unit growth for the 2016-17 financial year,” the trust said in a statement.

The trust reported a bumper $310.5 million statutory profit in FY16, up 48 per cent, courtesy of a hefty $202.6 million portfolio revaluations. Underlying profit lifted 6 per cent to $107.9 million. It flagged lower distribution growth in FY17 amid lower inflation with many of its warehouses the subject of CPI-linked rent increases.

Following the announcement on Wednesday that Home Consortium, backed by the owners of Spotlight, Chemist Warehouse Aurrum, would acquire the Masters portfolio for $725 million, Bunnings said it had reached agreement with Home Consortium to occupy 15 sites among the portfolio of 61 Masters properties and 21 development sites that will be acquired from Woolworths and its US partner Lowe’s.

These comprise six freehold trading locations and two development sites to be leased from Home Consortium, and seven leasehold trading locations, which will be reformated into Bunnings Warehouses. Four of these leasehold sites will potentially replace existing older under-scoped Bunnings locations.

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