BUNNINGS Warehouse Property Trust has continued to deliver a higher distributable profit despite current economic conditions.
For six months to December 31 2008, the trust delivered a distributable profit of $20.5 million – up 3.7% over $19.74 million in the previous corresponding period. The result was delivered on the back of a 10% increase in income to $35.1 million, due to the additional income received from investment properties acquired since December 2007 (at Blackburn, Victoria; Villawood, New South Wales; and Mt Gravatt, Queensland); improvements to the property portfolio and rent reviews.
BWP will pay a distribution of 6.70 cents per ordinary unit – up 2.3% on December 2007.
However like other property trusts, the trust’s portfolio recorded net revaluation loss of $43.9 million and capital expenditure of $37.9 million during the half-year. The write down was predominantly a result of the increase in capitalisation rates, reflecting declines in commercial property values more broadly in Australian property markets.
The trust’s weighted average capitalisation rate for the portfolio at 31 December 2008 was 7.57% (June 2008: 7.08% and December 2007: 6.58%).
BWP said finance costs have also risen significantly, up 24.7% or $10.7 million due to the average level of debt increasing to $312.8 million from $265.1 million as well higher interest rates after hedging of 6.76% compared with 6.39% in the corresponding period.
As at December 31 the trust’s total assets were $968.3 million, with unitholders’ equity of $574.8 million and total liabilities of $393.5 million.
As a result of the unrealised loss on revaluation of investment properties and a decline in the fair value of interest rate hedging derivatives, the underlying net tangible asset backing of the trust’s units decreased from $2.12 per unit at June 30 2008 to $1.88 per unit.
And gearing also rose to 35.5% from 27.2% in 2007. Interest cover ratio was 2.9 times.
Looking ahead, the trust said it will continue to primarily focus on growth, through improvements to existing properties, rent reviews and acquisitions.
BWP said current property market conditions may generate some opportunities for the trust to acquire quality, earnings accretive assets in the near term, as current owners sell assets to manage their capital requirements.
However, BWP said opportunities will be considered in the context of prudent capital management, including maintaining an appropriate gearing level, which is between 20% and 40%.
Australian Property Journal
