CELEBRATING CELEBRATING 2TWENTY0 YEARS OF18 INVESTMENT 2TWENTY0 YEARS OF18 INVESTMENT 2018 ANNUAL REPORT Contents OVERVIEW 3 About us 6 Chairman’s message 8 20 years of investing 10 2017/18 results highlights BUSINESS REVIEW 12 Financial summary 14 Business approach 16 Managing Director’s report 20 Outlook 22 Our property portfolio 27 Sustainability GOVERNANCE 28 Corporate governance 29 Board of Directors FINANCIAL REPORT 31 Financial statements INVESTOR INFORMATION 58 Investor information 59 Directory Important Notice This report contains statements regarding statements and assumptions involve known BWP TRUST the future (“forward looking statements”) and unknown risks, uncertainties and ARSN 088 581 097 and statements of belief or opinion other factors, many of which are beyond (“assumptions”). Words such as “believe”, the control of the responsible entity and RESPONSIBLE ENTITY “consider”, “could”, “expect”, “estimate”, which may cause actual performance and BWP Management Limited “likely”, “may”, ”objective”, “should”, “plan”, outcomes to differ materially from those ABN 26 082 856 424 “target”, and other similar expressions expressed or implied by the statements. AUSTRALIAN FINANCIAL are intended to identify forward-looking Before making an investment decision or SERVICES LICENCE statements or assumptions. While due acting on the information in this report, you No. 247830 care and attention has been used in should make your own enquiries and seek preparing this report and the information it your own professional advice as to the bwptrust.com.au contains, forward-looking statements and application of the information provided in this assumptions are not guarantees of future report to your particular investment needs, performance or outcomes. Forward-looking objectives and financial circumstances. 2 BWP Trust Annual Report 2018 Overview About us Established and listed on the Australian Securities Exchange (“ASX”) in 1998, BWP Trust (“BWP” or “the Trust”) is a real estate investment trust investing in and managing commercial properties throughout Australia. The majority of the Trust’s The Trust is managed by an Both Bunnings and the ABOUT THIS REPORT properties are well located external responsible entity, responsible entity are This annual report is a large format retailing BWP Management Limited wholly-owned subsidiaries summary of the Trust’s properties, in particular, (“the responsible entity”) of Wesfarmers Limited operations, activities, and Bunnings Warehouses, leased which is appointed under (“Wesfarmers”), one of financial position as at 30 June to Bunnings Group Limited the Trust’s constitution and Australia’s largest listed 2018. Readers should refer to (“Bunnings”). Bunnings is operates under an Australian companies. Wesfarmers, the details provided throughout the leading retailer of home Financial Services Licence. through one of its subsidiaries, this Annual Report and on the improvement and outdoor The responsible entity is solely also owns approximately Trust’s website for additional living products in Australia committed to managing the 24.75 per cent of the issued information. and New Zealand, and a major Trust and is paid a quarterly units in the Trust. supplier to project builders, fee based on the gross assets commercial trades people, of the Trust. and the housing industry. BWP Trust Annual Report 2018 3 4 BWP Trust Annual Report 2018 LARGE FORMAT CENTRE Coburg, VIC BWP Trust Annual Report 2018 5 Overview Chairman’s On behalf of the Board of directors message of BWP Management Limited, the responsible entity for BWP Trust, it is my pleasure to present the Trust’s annual report for the financial year ended 30 June 2018. This is the Trust’s 20th year of operation and a lot Index.1 The performance graphs on pages 8 and has happened during the 20 years that I believe 9 of this report demonstrate how our unitholders we can be proud of. have benefited from the Trust’s successes during this past 20 years. Looking back to our beginning, the Trust was established in 1998 as the Bunnings Warehouse The underlying exposure to the Bunnings Property Trust. Its focus was to acquire business model, long duration of occupancy by warehouse retailing properties and in particular Bunnings, as well as having a disciplined approach Bunnings Warehouses leased to Bunnings. to growing the portfolio in terms of the initial yield, This was at a time when the value of this class the lease terms and the location of individual of assets was not fully appreciated by the properties, are all factors that have contributed to investment market. the sustained performance of the Trust. The Trust began with 20 properties. Fourteen For the year ended 30 June 2018, the of these were already established Bunnings Trust continued to deliver on its financial Warehouse properties, two were being objectives with a 1.7 per cent increase in full developed for Bunnings Warehouses and four year distributions to 17.81 cents per unit, and a other sites were earmarked for development as $69.9 million or 3.0 per cent net increase in Bunnings Warehouses. the assessed valuation of the Trust’s property investment portfolio. Today the Trust has 79 properties and it is a class of asset that is now highly sought after by The Trust is in a strong financial position at year property investors. end with a high quality core portfolio of well- located Bunnings Warehouse properties, balance From inception in 1998 the Trust has generated sheet flexibility, and good future prospects an average total unit holder return of 13.0 per cent for Trust-owned properties that Bunnings has per annum, compared to 9.1 per cent for the All vacated, or is considering vacating. Ordinaries Accumulation Index and 7.0 per cent for the S&P / ASX 200 Property Accumulation For any properties owned by the Trust that Bunnings decides to vacate, a detailed assessment is undertaken as to the best alternative use of the property, which in some cases may include divestment. During the year the Trust took advantage of favourable market conditions to enter into agreements to divest five properties that Bunnings has vacated, or is in the process of vacating. In all cases the properties have created significant value for the Trust in terms of rental income and increases in the underlying value of the land over the respective periods of ownership. A number of acquisition opportunities to grow the portfolio were reviewed during the year, however none met the Trust’s short or longer term return requirements on a risk adjusted basis, nor were they considered to be uniquely valuable from a location perspective. 6 BWP Trust Annual Report 2018 Overview BUNNINGS Greenacre, NSW Demand for Bunnings Warehouse properties is expected to remain stable, subject to any significant risk events interrupting capital flows into the Australian property sector. The Trust remains financially disciplined in terms of growing the portfolio and is focused on acquiring properties with good potential for rental per growth, valuation upside over the medium term, and longer term $ unit alternative use. Accumulated11.16 market value from $1.00 per unit For the 2019 financial year, the Trust expects further rental growth invested in 1998.1 from its core Bunnings Warehouse property portfolio, but at the same time it may be transitioning up to nine Bunnings Warehouse stores to alternative uses. This may require some rent free periods and capital expenditure to re-position the properties. % We have and will continue to focus on long-term value creation, by re-investing in, and growing the core portfolio of quality Bunnings per Warehouse properties and by maximising the alternative use potential of a number of properties in the portfolio. annum 13Total unit holder return since inception in 1998.1 In closing, I would like to express my appreciation to my fellow directors and management for their efforts during the year and thank our unitholders for their continued support of the Trust. E Fraunschiel Chairman BWP Management Limited 1 Source: IRESS BWP Trust Annual Report 2018 7 Overview 20 years of investing in Bunnings Warehouse properties PORTFOLIO GROWTH 30 99 25 20 200 15 33 150 10 44 53 5 25 Number of properties 150 0 -5 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY99 10 Equity raising (A$M) Total properties acquired Total properties divested NET TANGIBLE ASSET BACKING PER UNIT GROWTH ($ per unit) 2.85 2.74 2.56 2.24 2.24 2.12 2.07 1.88 1.90 1.93 1.79 1.85 1.67 1.54 1.34 1.10 1.14 0.98 0.98 1.02 FY14 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY15 FY16 FY17 FY18 FY99 8 BWP Trust Annual Report 2018 1 (cents perunit) DISTRIBUTION PERUNITGROWTH BWP vs.AllOrdinaries&S&P/ASX200PropertyIndex TOTAL UNITHOLDERRETURN Assumes 100% distribution reinvestment on the ex-distribution date, as at 30 June 2018. Source: IRESS. Source: June 2018. date,asat30 ontheex-distribution Assumes 100%distributionreinvestment Total unitholder return index (September 1998 = 100) 1,400 1,200 1,000 1,000 400 800 800 200 600 12 14 16 18 20 10 0 2 4 6 8 0 Total unitholderreturn Sep 1998 Jun 1999 FY99 Jun 2000 FY00 Jun 2001 FY01 Jun 2002 1 FY02 Jun 2003 FY03 All OrdinariesAccumulationIndex Operating profits FY04 Jun 2004 FY05 Jun 2005 FY06 Jun 2006 FY07 Jun 2007 FY08 Jun 2008 FY09 Jun 2009 Capital profits FY10 Jun 2010 S&P /ASX200PropertyAccumulation Index FY11 Jun 2011 FY12 Jun 2012 FY13 Jun 2013 2 T A I N R FY14 G B E Jun 2014 T L W E E FY15 C Jun 2015 N T • FY16 Y B Jun 2016 0 W Y P FY17