Standard & Poor’s (S&P’s) Global Ratings announced on 28 March that it has affirmed an 'A-' long-term rating on Australian industrial REIT, BWP Trust.
The outlook on the rating remains stable, said the agency, which has similarly issued an ‘A-’ rating on the REIT’s debt.
"We affirmed the ratings because we consider BWP would benefit from its main tenant Bunnings Group Ltd's strategic equity stake [of 24.75%]via Wesfarmers Ltd in BWP Trust, and the trust's strong market position as the only rated Australian REIT having exposure exclusively to Bunnings stores in attractive locations," said S&P Global Ratings credit analyst Craig Parker.
S&P also opined that Wesfarmer’s ownership of BWP is not likely to change over the next two or three years.
“Nevertheless, BWP's WALE [weighted average lease expiry] for its portfolio has reduced to 5.5 years as of 31 December 2016, from 5.9 years as of 30 June 2016, given that 20% of the portfolio expiries will occur over the next three years, including some stores vacated due to the closure of Masters.
However while the REIT’s WALE is weakening, S&P believes that Bunnings’ tenancies will stabilise BWP's cash flows, supported by high occupancy levels.
S&P has added that it may lower the ratings if Bunnings’ operating performance materially weakens, or if the REIT’s WALE falls below 5.0 years.
BWP Trust finished the trading day about 1% higher from its previous close on the Australian Stock Exchange to end at AUD2.88.