Morning everyone, thank you for joining us. My name is Mark Scatena, I'm Managing Director of BWP, and I'm joined on the call by David Hawkins, our Chief Financial Officer, and Andrew Ross, our Head of Property. Today we're pleased to announce an opportunity for BWP security holders to enable and support the future growth in BWP by way of a fully underwritten pro rata entitlement offer to raise approximately AUD 228 million. We'll also go through an update on BWP's capital deployment activities and the pipeline of growth opportunities ahead for the group. Turning to slide five. To commence today, we acknowledge the traditional owners of country throughout Australia and their continuing connection to lands and waterways upon which we depend. We pay our respects to their elders, past and present. Turning to slide six.
Today's announcement reflects the next step in BWP's strategy of delivering a secure and growing income stream and long-term capital growth for security holders. Over the past two years, BWP has successfully deployed capital to strengthen the business and enhance growth for security holders. This deployment included the AUD 517 million acquisition of NPR, completed in June 2024, and the AUD 143 million internalization of management and Bunnings lease reset completed in August 2025. This activity has occurred in parallel to the ongoing developments and portfolio improvements through asset repurposing, tenant-led expansions, and accretive acquisitions. In total, BWP has deployed in excess of AUD 700 million of capital and added over AUD 400 million of debt to the balance sheet, net of portfolio renewal and divestment activity.
Looking ahead, BWP has a current pipeline of capital commitments of AUD 163 million over the medium term, comprising repurposing developments, tenant-led asset expansions, and upgrades to older generation properties. As we outlined in our results presentation for the half year ending 31 December 2025, BWP is a significant owner of Australian large format retail assets with a portfolio of approximately AUD 1.2 billion as at 31 December 2025. The portfolio has grown at approximately 22% per annum since 2020, driven by income growth, yield compression, acquisitions, and asset repurposing. Leveraging the reduction in BWP's cost of capital enabled by the internalization, BWP is well-placed to continue growing the portfolio and its market position within the LFR sector.
To enhance the balance sheet and provide greater financial flexibility to support and enable that growth, BWP today announces a fully underwritten equity raising to raise approximately AUD 228 million. The raising is structured as an accelerated non-renounceable entitlement offer, providing an opportunity for all BWP security holders to participate equally. Wesfarmers, BWP's largest security holder with 23.4% of BWP securities, has committed to take up its full entitlement under the offer, representing a commitment of approximately AUD 53 million and demonstrates Wesfarmers' continued support of BWP. On a pro forma basis, BWP's gearing will reduce to approximately 17% following the equity raising, providing significant capacity to execute future capital deployment opportunities.
Assuming the full deployment of the AUD 163 million of capital commitments comprising repurposing developments and asset expansions and upgrades, pro forma gearing will increase to approximately 20.3%, which is at the low end of BWP's 20%-30% target range. Importantly, BWP today reaffirms its FY 2026 distribution guidance of AUD 0.1941 per security. Turning to slide eight. BWP has been listed for 28 years and has a demonstrated track record of strong capital stewardship. BWP has performed strongly since listing on the ASX in September 1998, delivering annualized total security holder returns of approximately 12%. With AUD 1 invested at IPO, we have AUD 22.95 today.
This performance has been delivered through measured and disciplined use of equity capital with prior raisings undertaken at key inflection points, and it has been 13 years since BWP last raised equity from the market. Today's equity raising represents the next step in its history of disciplined capital deployment to support security holder value creation. Turning to slide nine. This slide outlines the key milestones in BWP's capital deployment activity over the past two years, beginning with the AUD 517 million acquisition of NPR in 2024. This was followed by the announcement of an AUD 143 million internalization, the Bunnings lease reset, and the AUD 71 million of associated capital expenditure commitments in June 2025.
More recently, BWP acquired HomeCentre Morayfield in Queensland for AUD 48 million in November 2025 and progressed approximately AUD 120 million of divestments at Port Kennedy in Morley in Western Australia and Chadstone in Victoria in December 2025. The entitlement offer is the next step to fund BWP's capital commitments and support future growth. Moving to slide 10 to outline the details of the upcoming capital commitments. BWP has a pipeline of approximately AUD 163 million of capital commitments across developments, asset repurposing, asset expansions, and portfolio upgrades. There are a number of projects already underway, namely the LFR developments at Fountain Gate in Victoria and Noarlunga in South Australia, the Carco showroom expansion at Midland in Western Australia, and shortly we're expecting to commence construction on the expansion of Broadmeadows.
These four LFR developments represent a total of AUD 78 million of active capital commitments. In April of this year, we commenced the Bunnings expansion of Pakenham, with total works costing AUD 14 million, with Bunnings entering into a new 10-year lease on completion. We're expecting to commence works on two further Bunnings expansions at Maitland in New South Wales and Balcatta in Western Australia over the course of the second half of calendar year 2026. Planning is underway for Smithfield and Gladstone in Queensland and Nunawading in Victoria. BWP and Bunnings are continuing to advance the pipeline for network upgrade expenditure to be jointly funded by BWP and Bunnings to enhance a number of older generation properties.
Each of these projects has been assessed for value creation and is supported by either a pre-leasing outcome or an agreed rentalization rate and a long-dated lease commitment on completion. Turning to slide 11. We've provided further details on the capital deployed at Fountain Gate in Victoria and Noarlunga in South Australia. The construction has commenced at both of these locations, and we're expecting these projects to complete within the first half of FY 2027. Fountain Gate in Victoria, which was a vacant Bunnings Warehouse, is being subdivided and extended to deliver a 14,082 sq m LFR center. The project is supported by an indicative yield on development cost of approximately 15% and is 76% pre-leased to a strong lineup of national tenants, including BCF, Rebel, Supercheap Auto, Macpac, Planet Fitness, Red Cross, and Grill'd.
Based on BWP's estimated value on completion of AUD 94 million, the valuation of the asset prior to development and the development cost, the estimated value uplift is approximately AUD 32 million, which equates to an estimated NTA uplift of approximately AUD 0.04 per security. At Noarlunga in South Australia, a similar repurposing strategy is underway, with a vacant ex-Bunnings Warehouse being converted into an 11,482 sq m LFR center. The project is supported by an indicative yield on development cost of approximately 12% and is 78% pre-leased to The Good Guys, BCF, Freedom, and Planet Fitness. Based on the same factors of valuation prior to development and development cost, the estimated value on completion would deliver an estimated value uplift of approximately AUD 17 million, which equates to an estimated NTA uplift of approximately AUD 0.02 per security.
BWP is delighted in the outcomes that we're on track to deliver at both Fountain Gate and Noarlunga. Moving to slide 12. Similarly, further details on the LFR developments at Midland in Western Australia and Broadmeadows in Victoria. At Midland in Western Australia, the Carco showroom expansion is fully pre-leased, with construction commenced in February 2026, supported by a new 15-year lease and an agreed rentalization rate of 7.5%. At Broadmeadows in Victoria, the project comprises an expansion on land delivering a total of 9,222 sq m with an indicative yield on development cost of approximately 10%. The project is 88% pre-leased and, on those same assumptions, is expected to deliver a value uplift of AUD 12 million, which equates to an estimated NTA uplift of approximately AUD 0.02 per security.
Together, the four projects detailed on slides 11 and 12 represent the immediate deployment of approximately AUD 78 million of capital to optimize the existing portfolio and, based on assessed on completion values, are expected to add an estimated AUD 0.08 to NTA once complete. Turning to slide 13, which sets out the broader market context supporting BWP Trust's strategy in the LFR sector. As discussed at our half-year results, the BWP Trust portfolio is increasingly participating in the LFR sector. Australian population growth, rising residential real estate values, and low unemployment have supported large format retailer performance, with listed LFR retailers continuing to demonstrate resilient sales growth. LFR floor area remains underrepresented in Australia relative to other retail sectors. The LFR outlook is expected to remain positive, supported by low vacancy and modest new supply, which together continue to drive rental growth.
The LFR market is material in size, estimated at approximately AUD 25 billion, with strong ongoing transaction churn that supports portfolio growth through accretive acquisitions. BWP's share of the LFR market remains underrepresented relative to its share of the Bunnings Warehouse market, presenting a clear opportunity to grow the portfolio over time. BWP believes increasing its LFR market share, together with continued repurposing and tenant expansion activity, present an attractive and executable strategy to deliver further growth and value to security holders. Whilst growth through acquisitions of Bunnings Warehouse opportunities remain challenging, reflecting strong competition, it continues to be a strong focus in addition to supporting Bunnings' continued store expansion and refurbishment initiatives. Turning to slide 15, which sets out the key terms of the entitlement offer. BWP is undertaking a fully underwritten, accelerated, non-renounceable entitlement offer to raise approximately AUD 228 million.
The offer is structured as a 1-for-12 entitlement with approximately 60 million new securities to be issued, equivalent to approximately 8.3% of existing BWP securities on issue. The issue price represents a 4.3% discount to the closing price yesterday or on 5th of May 2026, a 3.4% discount to the five-day volume weighted average price of AUD 3.90 per security, and a 4% discount to theoretical ex-rights price of AUD 3.93 per security. Proceeds from the entitlement offer will provide a significant balance sheet capacity to enable future capital deployment opportunities that provide growth for BWP security holders, with the proceeds initially to be used to repay debt.
Assuming the full expenditure of BWP's AUD 163 million of capital commitments, pro forma gearing at 31 December 2025 is approximately 20.3%, at the low end of BWP's target range. To highlight the considerable balance sheet capacity today's raising affords BWP, even after funding our capital commitments, BWP would have a further AUD 550 million of debt capacity available to fund growth before BWP would reach the top end of its 20%-30% gearing range. That is not to say it is our intention to move to the top end of the range, rather to illustrate the clear opportunity today's raising affords BWP when considering future growth.
New securities issued under the entitlement offer will rank equally with existing BWP securities from the date of issue, will be fully entitled to the second half FY 2026 distribution, expected to be approximately AUD 0.0983 per security. As mentioned earlier, Wesfarmers has committed to take up its full entitlement of approximately AUD 53 million. Turning to slide 16 and the indicative timetable for the offer. BWP securities are in trading halt today while the institutional entitlement offer is being conducted. The results of the institutional entitlement offer are expected to be announced tomorrow, with trading on the ASX expected to recommence on an ex-entitlement basis at the same time.
The record date for the offer is 7:00 P.M. Sydney time on Friday, the 8th of May, with a retail entitlement offer opening on Tuesday, the 12th of May, and closing at 5:00 P.M. Sydney time on Friday, the 22nd of May. Turning to slide 18. BWP has a demonstrated track record of strong capital stewardship over its 28-year listed life. The entitlement offer announced today supports BWP's objective of delivering security holders a secure and growing income stream and capital growth over the long term. For the remainder of FY26, BWP will continue to deliver on its strategic agenda. BWP today reaffirms FY 2026 distribution guidance of AUD 0.1941 per security.
As noted, new securities issued under the entitlement offer will be fully entitled to the second half FY 2026 distribution, which is expected to be AUD 0.0983 per security. Today's equity raising positions BWP strongly aligned to its investment objectives by the three pillars of portfolio optimization, profitable growth and portfolio renewal, and consistent with its objective to deliver secure and growing income and create value for security holders over the long term. That concludes our presentation, I now hand back to the moderator to facilitate any questions where myself, David Hawkins and Andrew Ross are available.
Thank you. Your first question comes from Lauren Berry with Morgan Stanley. Please go ahead.
Good morning, Mark. Thanks for the presentation. Just the raise is obviously larger than the CapEx pipeline that you've identified in the pack today. Can you just talk a little bit more about what additional opportunities you might be looking to deploy that capital with? In particular, anything in the LFR space that you're seeing at the moment?
Thanks, Lauren. Yes, maybe I'll just start with the sizing. Yes, really the sizing was clearly a function of that AUD 163 million of near-term capital commitments. The balance essentially, as we said, on a pro forma post-capital commitments basis, resets gearing at the bottom end of the range. That guides the quantum that we're seeking to raise. Clearly that positions us with opportunities to deploy. Yes, if you think through, you know, the mechanics of that LFR segment, as we discussed in February, you know, that's a AUD 24 billion market.
You know, within that, we probably think, you know, some half of that is probably accessible in regards to it may be tradable, those assets could move around. Within that, of course, there's an element of what fits our criteria, which is not not insignificant in the selection criteria we apply. To give some context, we're clearly actively looking at a number of assets as we always do, as we've always done with Bunnings Warehouses, to the extent that they're available. You know, from memory at the moment, we might have six or seven that we're in review on. They will be standard volumes of assets, Lauren, in terms of quantum of purchase price.
Of course, we have to get through all the feasibility work. It has to be tradable, and it has to be in interest of security holders. We're seeing good opportunities to discover assets. You know, Morayfield is a good example of the kind of asset that we'd like to add to the portfolio.
Okay, thanks. My other question is just on your FY 2026 guidance. You've kept the distribution guidance today despite the raise. Has there been any, you know, improvement in the underlying portfolio since you last gave an update in February? Will that additional distribution be paid out of capital profits?
Yeah, I think like in February, Lauren, I think we commented that underlying the performance was perhaps a little bit better. I think that trend broadly is consistent with where we were. Clearly, you know, we commented in February that leasing spread outcomes on LFR had been decent. We continue to try and activate that opportunity. We do have some bonds rolling off that we've guided to in April. Clearly, debt is a little bit more expensive than what it was some time ago. You know, that is in that mix evidently. No, I think momentum's broadly where it was in February, Lauren.
Okay, great. Thank you.
Thank you. Your next question comes from Andrew Dodds with Jefferies. Please go ahead.
Good morning, guys. Thanks for taking my questions. Just firstly, I'd just like to kind of better understand the rationale behind the capital raising. I mean, if you look at sort of across the sector, you already had one of the lowest leverage ratios. And then just, you know, secondly, comparing your cost of equity to your cost of debt back at December, your equity is actually kind of more expensive today. I'd just kind of like to better understand why you've gone down this path today, and particularly raising below NTA.
Thanks, Andrew. I think we have said many times that we continue to look at the balance sheet and the capital structure of the business. You know, optimizing the cost of capital is always a focus, the internalization being one of those steps, this clearly being another step in that journey. I think, you know, when we look at, you know, the cost of equity today, we think that's attractive relative to a marginal cost of debt, just given where the BBSY and the swap environment is sitting at the moment. No, we're very comfortable with deploying this capital into the capital structure. We think it's priced attractively for security holders.
Clearly we give considered thought to our overall cost. We think this provides all security holders a very attractive opportunity to increase their participation and support our growth profile. Yeah, we're very confident, Andrew.
Okay. Thank you. Just picking up some of the comments from the half year results, and just expectations for 2026 to be a peak year of the earnings impact from Bunnings vacancies. Could you just comment on the progress you've made? I think two of the assets were Rocklea, and also Geraldton. You're expecting Bunnings to vacate that one too.
Yeah. Thanks. So Rocklea, we will have that tenanted very soon. We will have that income reflowing, so that lease is executed, so we're pleased with that. Geraldton, yes, Bunnings clearly has guided that they will exit. We're just in a negotiation at the moment as to the timing of that. Of course, we have a lease conclusion at the back end of this year. Like any exit of an asset, sometimes, you know, the party that's exiting, its alternative might not line up exactly with the lease expiry. That's a discussion that we're in situ with at the moment with Bunnings. That asset we've looked at, just for context, redevelopment opportunities.
We can't see a higher and better use there. It is very likely that asset will be divested at some point.
Okay, great. Thank you very much.
Thank you. The next question comes from Tom Bodor with Jarden. Please go ahead.
Morning, Mark. Just a quick one from me. I'd just be interested in how you think about the returns you require for, say, acquiring a large format retail asset versus a Bunnings asset versus deploying into development. Where do you sort of see the spread of returns in terms of your sort of how do you think about hurdle rates and the like?
Yeah. Thanks, Tom. I think we've said in terms of hierarchy and clearly some of these development yield costs that we've shown today for the four asset repurposings, you know, they are an attractive deployment of capital and you can see where some of those yields are often above double-digit on incremental cost. We are confident in deploying capital that way, of course. I think, you know, we've given some very strong information there in regards to rentalization rates of those expansions and repurposings.
Of course, from an LFR perspective, I think, again, probably Morayfield is a case in point and, kind of yielding in the mid-to-high fives, and that's something we like. Of course, there is internal rate of return as well, opportunity in those assets giving, given some leasing curation opportunity to go and prosecute, which, that's an important part of that investment thesis. With Bunnings, from an expansion perspective, we're clearly very delighted to expand with Bunnings, and I think that was reflected in the lease reset and the expansions that we announced late last financial year and which we've again guided to in the pack today.
Those expansions, you know, are a premium to the swap and we think they're accretive expansions, which we're very keen to continue to support Bunnings in deploying that capital into their refurbishment and expansion activity. Of course, we then have, you know, Bunnings Warehouse acquisitions, and, you know, that is, as we again said today, in the scripting, you know, that is a tight market. Those opportunities, whilst they exist, they're competitively priced. We would be delighted to bring some Bunnings portfolios into the portfolio, Bunnings Warehouses, sorry, into the portfolio at the right time. It just has to be at the right price, Tom.
Where would you see sort of a hurdle rate or competitive bidding from yourselves in terms of buying Bunnings? I think you said mid to high fives for large format retail. Would you assume sort of 25 basis points tighter or 50 basis points tighter for a Bunnings asset?
Something like that, Tom. That range probably feels about right. You know, I think you'd seen, you know, the graphing that we do at the half and full year results and you can see, you know, essentially where our underlying warehouse cap rate is and where transactions have positioned. Yes, that 50 basis points spread to LFR, Morayfield as an example, that probably is reflective of where pricing could broadly be. Again, asset specific, of course.
Yep.
If it's a portfolio acquisition, then there'll be a spread within the assets within that portfolio or the Bunnings warehouses.
Okay, thanks.
Thank you. Your next question comes from Solomon Zhang with UBS. Please go ahead.
Morning, Mark and team. Thanks for your time. I just wanted to ask around construction cost inflation and I guess how much contingency is baked into those CapEx estimates you've provided on slide 10. If you do see a bit of a unexpected lift, do you expect to fully rentalize them if you're using a say a fixed spend to swaps or a fixed to own cost on the cost estimates that you've put in in the slide pack? Thanks.
Thanks, Solomon. Andrew might follow up, look, we're very comfortable with those development costs and, you know, much of that construction contract pricing is contract fixed priced. We have deployed that and those contracts earlier. Managing, you know, to those values is the focus. We're well down the path on Fountain Gate in terms of construction build. We're well advanced on Noarlunga. We're very confident in essentially that capital pricing for those builds. Moving forward, yes, you know, I think the expectation would be there may be some cost inflation. We of course are mindful of that in how we're thinking about leasing outcomes to fund that capital.
I think the important thing to call out as well that in Bunnings expansions, for example, they are fixed commitments. You know, Bunnings will essentially deploy that activity, and then we will fund that quantum at the conclusion of the commitment at the funding rate. They are fixed values that we fund to support those expansions.
Great. Maybe just a final one just on your lease structures on your new leases, development leases. Could you just talk to the skew of fixed versus vanilla CPI or CPI capped and collared? Obviously, there's a high inflationary environment now, probably a bit better to get CPI, but longer term might still lean fixed. Just your thoughts there.
Andrew, do you wanna? No. Thanks, Solomon. If I think about the LFR kind of leasing construct, most of, you know, the, the leasing templates that are a contemporary market are typically fixed. We would be, our lease profile would reflect that in terms of the mix between CPI and fixed. Andrew, I don't know if you wanna make any comments on that as it relates to LFR.
No, not really.
No. On that typically fixed price contracts and leases, those are fixed escalators.
Thank you. Your next question comes from Howard Penny with Citi. Please go ahead.
Thank you, Mark, for the opportunity to talk to you guys post this. For investors that follow the entitlement, they of course won't be diluted. Given the capital raising is at a slight discount to the last disclosed NTA, how would you package this for investors that don't follow the entitlement and maybe just the outlook of what their NTA post this may look like considering the growth of the business?
Thanks, Howard. I think, Howard, look, we'd be delighted if everyone follows, we're certainly encouraging all our security holders to participate in the entitlement offer. We think it's very appropriate that, you know, this is an entitlement offer, that all security holders are treated equally. We would be very keen to support both the retail and institutional shareholder bases to understand and engage and hopefully participate. That would be the first comment. I think we've guided that, you know, appendix that pro forma NTA, post 31 December 2025, is AUD 0.03 below where NTA currently sits at AUD 4.00.
I think the one thing I'd probably call out, Howard, is as we've guided in the presentation, we're very hopeful that over the near term as we complete those four repurposings and expansions, they will accrue some incremental NTA on their pro forma number of securities that are issued post-entitlement completion. We're very hopeful that we can realize that AUD 0.08 of cumulative NTA uplift, which will offset any dilution.
Great. Thank you very much. That's just the only question from me, and thanks for the opportunity.
Thank you. Your next question comes from Richard Jones with JP Morgan. Please go ahead.
Oh, good day, Mark. Just further to one of your earlier questions, just interested in the timing of the raise and, and was an equity raise considered at the time of the internalization and I guess in the period since, how long has it, I guess, been on the cards?
Thanks, Richard. We, you know, as a board, we review the capital structure, as you'd expect us to, very frequently. I think when, you know, we got through the internalization, that was a very strong focus for the team and the system. That wasn't an insignificant piece of work. We started to reflect clearly on where the development pipeline was and what that cumulative spend was, and really where the unit price or the security price, and where that cost of equity was positioned. We of course are watching that all the time and, you know, we're very confident that this is the right time to go, Richard.
You know, I think we've been looking at this for a little while, and just making sure that, you know, pricing was in the right zone for security holders and we think it very much is
Okay. Thanks, Mark. That was all from me.
Thank you. There are no further questions at this time. I'll now hand back the conference to Mr. Scatena.
Thank you everyone for joining us today at very short notice. We really appreciate your continued support of BWP, and we look forward to speaking to many of you over the coming days as part of the entitlement offer process. Thanks again and have a lovely rest of the day.