BWP Trust Earnings: Rising Interest Expenses Offset Solid Rental Growth

We maintain our AUD 3.60 per unit fair value estimate for narrow-moat BWP Trust. First-half fiscal 2024 distributable income of AUD 57.9 million was flat on the previous corresponding period with rent increases, mainly from the Consumer Price Index indexation, offset by higher interest costs. Market rent reviews over the half were favorable, with five reviewed properties recording an average rent increase of 4.2%. However, we think outcomes like this are unlikely to persist—around 80% of the trust’s leases will expire in the next five years, and as key tenant Bunnings moves to bigger sites, we expect rising vacancies will dampen rent growth.