Wesfarmers seals $143m deal with landlord BWP Trust to expand flagship stores
Wesfarmers has struck a $143m deal with the main landlord to its Bunnings chain that will help free up capital for further investment in the property footprint of the hardware giant.
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Wesfarmers will get $143m out of a recut deal with the main landlord of its Bunnings chain that will help free up funds to upgrade some of the hardware giant’s big-box stores.
Wesfarmers said the deal with BWP Trust would deliver significantly longer leases for 62 stores in the Bunnings universe while providing additional funds to selectively expand.
BWP, a separately listed company, will acquire Wesfarmers’ wholly-owned BWP Management for $142.6m, bringing the management of the properties in-house at the property trust.
Wesfarmers is the biggest shareholder in BWP, the largest owner of Bunnings Warehouse sites in Australia, with a portfolio of 68 stores.
Ten of those properties have adjacent retail showrooms that the trust owns, and are leased to other tenants. The trust also owns 11 large format retail showroom properties, two industrial properties and currently has one vacant property.
BWP said the removal of the management fees payable to Wesfarmers would lower costs and increase its competitiveness in bidding for new investments.
Bunnings Group managing director Michael Schneider said the deal was strategically important and “has secured extended tenure and more flexible lease terms at key sites.”
“This provides greater certainty and supports investment to enhance the instore customer offer and drive long-term growth,” said Mr Schneider.
The purchase price consists of $100m from an existing BWP debt facility and $42.6 million of BWP Trust scrip, or just under 10.9 million stapled securities. Wesfarmers would remain the largest BWP shareholder, with its stake increasing from 22.3 per cent to 23.5 per cent.
Under the deal, 62 Bunnings leases will be extended, increasing the average leases expiry for those stores from 4.6 years to 9.5 years.
The transaction would also commit BWP to $56m to expand five Bunnings sites including at Maitland, Balcatta, Smithfield, Nunawading and Gladstone.
Both BWP and Bunnings would also jointly invest $30m to upgrade several older warehouses extending their useful life.
BWP managing director Mark Scatena said the deal was “fair and reasonable”.
“It will result in increased income certainty through the long-term retention of secure and high-quality covenants (leases) with Bunnings, continued scale, growth through tenant expansion and upgrade commitments,” said Mr Scatena. “It is attractive to investors given the structure simplification.”
Bunnings has 513 locations includes warehouses, trade centres, Tool Kit Depot stores and Beaumont Tiles stores. Of this total number, there are 286 Bunnings warehouses and 65 small format Bunnings stores.
Bunnings increased revenue 3.2 per cent to $10.28bn in the six months to December 31, with earnings increasing 3.1 per cent to $1.32bn, despite cost of living pressures.
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Originally published as Wesfarmers seals $143m deal with landlord BWP Trust to expand flagship stores
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