BWP’s Internalisation and Rising Debt Pose Questions for Future Stability
BWP Group has reported a 3% rise in revenue to $103.6 million for the half-year ending December 2025, driven by rental growth and strategic acquisitions. The internalisation of management has reduced fees and positioned the group for future growth.
- 3% revenue increase to $103.6 million
- Successful internalisation of management from Wesfarmers
- Property portfolio value rises to $3.9 billion
- Interim distribution up 4.1% to 9.58 cents per security
- Strong balance sheet with gearing at 24.7% and diversified debt
Half-Year Financial Performance
BWP Group has delivered a solid financial performance for the half-year ended 31 December 2025, with total income increasing by 3.0% to $103.6 million. This growth was primarily driven by rental income increases and strategic acquisitions, including the notable purchase of HomeCentre Morayfield in Queensland. Despite a 20.6% rise in finance costs due to higher borrowings linked to the internalisation transaction, the group managed to reduce other operating expenses, particularly management fees, following the internalisation of its management function.
Management Internalisation and Structural Changes
A key highlight of the period was the internalisation of management, completed on 1 August 2025. BWP Trust acquired BWP Management Limited from Wesfarmers, creating a stapled group with BWP Property Group Ltd. This move eliminated external management fees, replacing them with direct employee costs and internal administration expenses. The internalisation is expected to yield long-term cost efficiencies and greater operational control, supporting the group's strategic pillars of portfolio optimisation and profitable growth.
Portfolio Growth and Asset Management
The value of BWP's property portfolio increased by $195.9 million to $3.9 billion, reflecting unrealised gains from revaluations, acquisitions, and capital improvements. The weighted average lease expiry extended to 7.5 years, bolstered by lease resets with major tenant Bunnings. Occupancy remained strong at 96.7%, despite a slight dip due to store vacancies and repurposing projects. The group continues to focus on asset recycling and site repurposing, with developments underway at Fountain Gate and Noarlunga, and tenant-led expansions planned at Pakenham and Midland.
Capital Management and Distribution
BWP strengthened its capital position through successful debt refinancing and diversification, including a $300 million medium-term note issuance and a new $50 million facility with United Overseas Bank. The group's gearing ratio stood at a conservative 24.7%, within the board’s preferred range, and the weighted average cost of debt remained steady at 4.4%. Reflecting improved earnings, the interim distribution was increased by 4.1% to 9.58 cents per security, with the distribution reinvestment plan reinstated.
Governance and Outlook
In governance news, Chair Tony Howarth AO announced his retirement following this results announcement, with Fiona Harris AM set to succeed him. Looking ahead, BWP plans to continue executing its strategic agenda, focusing on internalisation transition, capital deployment, and growth opportunities in the large format retail sector. The group anticipates capital expenditure of $60 to $70 million for site repurposing and expansions in the coming months, supported by a favourable market environment and tenant strength.
Bottom Line?
BWP’s internalisation and portfolio strategy set the stage for sustainable growth amid evolving market conditions.
Questions in the middle?
- How will unresolved Bunnings market rent reviews impact future income?
- What are the risks and opportunities in BWP’s ongoing site repurposing projects?
- How will the internalisation affect long-term cost structures and investor returns?
