BUNNF (BUNNF) Q4 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for holding, and welcome to the BWP Full Year Results Investor Briefing. [Operator Instructions] I would now like to hand the call over to the Managing Director of BWP, Mr. Mark Scatena. Please go ahead.

Thank you. Good morning, everyone. Thanks so much for joining us and we appreciate that many of you have had a really busy morning, particularly given the volume of reporting. So thank you for joining. My name is Mark Scatena. I'm the Managing Director of BWP Group and I'm joining you from Perth. With me today is Andrew Ross, BWP's Head of Property; and David Hawkins, BWP's Chief Financial Officer. Today, we're very pleased to announce BWP's results for the full year ending 30 June 2026. Turning to Slide 2. To commence today, we acknowledge the Traditional Owners of Country throughout Australia and their continuing connection to lands and waterways upon which we depend. We pay our respects to their Elders, past and present. Turning to Slide 4 and the FY '26 overview. The year was an important one for BWP with delivery across a number of key reset activities that have strengthened income security and provided a platform for income and capital growth over the long term. During the year, BWP completed the internalization transaction and continue to advance the transition to an internalized model, which included 62 Bunnings leases being reset and extended, store expansion capital expenditure for Bunnings portfolio of $56 million of development capital and Bunnings store upgrade support with BWP committed to funding $15 million of network upgrades. Operationally, during the year, large format retail or LFR, made an increased contribution with positive leasing spreads achieved, portfolio renewal was completed through divestment activity and major repurposing projects were advanced. Turning to Slide 5 and an overview of financial and capital management. The result for the 2026 financial year reflects earnings growth supported by rental growth, positive LFR leasing outcomes, lower cost of doing business post internalization, portfolio valuation growth, including the benefits of an increased weighted average lease expiry post the internalization and lease reset and a balance sheet reset to support BWP's development and growth pipeline. Funds from operations or FFO, were $140.9 million, up 4.5% on FY '25, supported by a lower management expense ratio, reflecting the benefits of the internalized management structure reduced to 0.34% from 0.66% in FY '25 and increased rental income, which more than offset an increase in borrowing costs. BWP's portfolio value increased $257 million during the year with a weighted average capitalization rate firming 15 basis points to 5.25% and NTA increased 3.3% or $0.13 to $4.11 per security at 30 June 2026. The balance sheet reset was also an important focus during the year and this included the $300 million 5-year bond issuance completed in October 2025 and the $228 million fully underwritten entitlement offer completed in May 2026. These reset activities have strengthened financial flexibility and provided capacity to fund BWP's development and growth pipeline. Gearing at 30 June 2026 was 18.5% compared with 21.6% at 30 June 2025. Turning to Slide 6 and operational execution. Income security was strengthened through the Bunnings lease reset and extension with portfolio occupancy remaining very high and portfolio WALE increasing to 7.3 years. Income growth was supported by like-for-like rental growth of 3%, positive LFR leasing spread outcomes and the addition of Home Centre Morayfield during the year. Portfolio renewal continued with the completed divestments of Chadstone, Port Kennedy and Morley, generating cumulative gross proceeds 18.6% above pre-divestment valuations. Major repurposing and development activity also continued across portfolio assets, including Fountain Gate, Noarlunga, Midland and Broadmeadows, with the completion of these projects expected in FY '27. Turning now to Slides 8 through 10. Slide 8 details BWP's refreshed strategy and how the group aims to deliver returns to security holders to execute its objective of providing security holders with a secure and growing income stream and capital growth over the long term. Slide 9 illustrates the important reset period of reset across calendar years 2024 to 2026 and the activities completed to improve recurring income, secure the Bunnings covenant, lower the cost structure, improve alignment with security holders and reset the balance sheet to enable a platform for growth. And as shown on Slide 10, this reset period has been characterized by portfolio growth, increased net asset backing, growth capital expenditure deployment and increased contribution from LFR, reduced balance sheet leverage and growth in both FFO and distributions. Turning to Slide 12 and tenant income mix and lease expiry. PWP's covenant mix remains strong with approximately 96% of income derived from Wesfarmers and national retailers. The Bunnings lease reset has materially extended portfolio WALE to 7.3 years. Occupancy was 98.4% at 30 June 2026, with a decrease largely reflecting assets being redeveloped, including Fountain Gate and Noarlunga. Importantly, nondevelopment assets were 100% occupied. Turning to Slide 13 and rental income growth and tenant composition. Like-for-like rental growth for the year was 3.0%, reflecting the balanced structure of the lease portfolio with income reviewed across CPI-linked leases, fixed reviews and market rent reviews. For FY '26, CPI reviews applied to 43% of the portfolio income and delivered an average increase of 3.1% across all leases. Fixed reviews applied to 52% of portfolio income and delivered an average increase of 3.0% Market rent reviews applied to 5% of the portfolio income with an average increase of 1.8% across all leases. The large format retail component is an increasingly important contributor to portfolio rent with LFR market rent reviews for lease options commencing in the financial year resolved in an average increase of 9.3%. In relation to Bunnings, 4 market rent reviews were finalized during the year with a variance surpassing rent negative of 0.7%. Maitland in South Australia remains the outstanding market rent review post the lease reset and is currently in determination. Turning to Slide 14 and large format retail leasing outcomes. LFR leasing outcomes were strong during the year with leasing spreads across the 14 LFR tenancy negotiations completed during the year, averaging an increase of 23.6%. These positive results reflect the quality of the respective locations, current market conditions and the strength of tenant demand for LFR space. Importantly, these leasing outcomes were achieved with minimal incentives with LFR renewal incentives remaining low. The LFR market remains characterized by favorable fundamentals, including strong population growth and undersupply of lettable space and continued tenant demand from national retailers and provides a favorable backdrop for further leasing activity in the near term. And as previously discussed, LFR affords BWP an attractive pathway for income growth, including the completion of repurposing activities of former Bunnings Warehouse properties, expanding lettable area on surplus land or acquiring assets that complement the existing portfolio. Turning to Slide 15 and capitalization rate movements. The portfolio weighted average capitalization rate at 30 June 2026 was 5.25%, representing a 2 basis point compression over the half and a 15 basis point compression over the 12 months to 30 June 2026. These movements reflect the longer portfolio WALE following the Bunnings lease reset, firmer market capitalization rates for market transaction activity and value creation through asset repurposing advance across the portfolio. At 30 June 2026, the 80 portfolio properties were valued at approximately $4 billion with 12 independent valuations completed in the second half and 16 independent valuations completed in the first half. The portfolio recorded a net fair value gain of $115.6 million for the second half and $271.4 million for the full 12 months. The stand-alone Bunnings Warehouse cap rate was 4.96% compared with 5.06% at 30 June 2025. Market transaction activity over the last 12 months also reflected continued investor appetite for Bunnings Warehouses. Turning to Slide 16 and the portfolio valuation uplift. The portfolio value increased to $3,961.8 million at 30 June 2026, which was $257 million above 30 June 2025. The uplift was largely driven by a combination of accretive development activity, increased income and capitalization rate compression, partly offset by net divestment activity. Importantly, on an estimate at completion basis and net of book value and development costs, the contributions from Fountain Gate, Noarlunga and Midland during the year were $28.1 million, $18.1 million and $2.9 million, respectively, demonstrating value creation and long-term portfolio growth through BWP's repurposing activities. Turning to Slide 17 and the pipeline of accretive capital commitments. BWP has a pipeline of approximately $120 million of upcoming capital commitments to be deployed across the portfolio, comprising asset repurposing, Bunnings expansions and portfolio upgrades. Specific to supporting the store network improvements in our largest tenant, Bunnings, at Pakenham in Victoria, around $8 million remains to be funded with surplus land acquired for $3.2 million and construction commenced in April 2026. This capital will be rentalized at 6.5% with a new 10-year lease on completion, which is expected in March 2027. For the Bunnings expansion included within the lease reset and internalization transaction, Maitland and Balcatta expansions are expected to commence during FY '27, subject to relevant approvals and documentation. Maitland is expected to commence in early 2027 with a 15-month program and Balcatta is expected to commence in mid-2027 with a 12-month program. Both will be rentalized at a 5-year swap plus 200 basis points. Turning to Slide 18 and the development project update. These important projects reflect the value creation opportunity from repurposing former Bunnings Warehouses into LFR centers and expanding lettable area on surplus land. At Founding Gate, we've expanded to an LFR center of 14,089 square meters with a project 100% pre-leased to tenants, including BCF, Rebel, Supercheap Auto, Macpac, Officeworks, Planet Fitness, Red Cross and Grill'd. Founding Gate's estimated fully leased post-development valuation is approximately $94 million and the estimated yield on development spend is approximately 15%. At Noarlunga, this LFR center of 11,357 square meters is 78% pre-leased to The Good Guys, BCF, Freedom and Planet Fitness. The estimated fully leased post-development valuation is approximately $57 million and the estimated yield on development spend is approximately 12%. Across these projects, including Broadmeadows and Midland, the returns remain attractive and demonstrate BWP's ability to create value through active portfolio management, repurposing capability and disciplined capital allocation. Turning to Slide 19 and portfolio renewal. BWP continued to renew the portfolio following evaluation of the highest and best use of individual assets with valuations, including the consideration of development, repurposing and divestment options and outcomes. During FY '26, 3 divestments were completed. Chadstone Homeplus Homemaker Centre in Victoria was sold in June 2026 to an unrelated third party for $86 million. The realized internal rate of return of 15.2% demonstrates the value creation above the original purchase price of $72.5 million via the NPR acquisition in 2024. Morley in Western Australia was sold on the 1st of December 2025 to an unrelated third party for $19.5 million, $12.5 million above the 30 June 2025 fair value with an investment realizing internal rate of return of 10.2%. Port Kennedy in Western Australia was sold on the 23rd of January 2026 to an unrelated third party for $14.3 million, which compares to the 30 June 2025 fair value of $10 million. The realized internal rate of return was 5.8%. Looking ahead, Bunnings has confirmed its exit from the Geraldton site with BWP evaluating a potential divestment during FY '27. Turning to Slide 20 and LFR acquisitions supporting income growth. The acquisitions of Home Centre Morayfield and Sunbury Lifestyle Centre reflect the addressable market opportunity in large format retail. It is a material market with strong rates of asset churn or transaction activity and an undersupply of lettable area. Homemakers -- sorry, Home Centre Morayfield in Queensland was acquired in November 2025 from an unrelated third party. The purchase price was $48 million plus costs, representing a cap rate of 5.75%. The center has 12,086 square meters of lettable area and is 100% leased to tenants, including Amart, Nick Scali, Super Cheap Auto, Salvation Army, Pillow Talk and Sydney Tools. Home Centre Morayfield is expected to benefit from income growth prospects over time and the identification of incremental income opportunities that optimize asset performance and site utilization. Sunbury Lifestyle Centre in Victoria was acquired in August 2026 from an unrelated third party at a purchase price of $25.2 million plus costs, representing a cap rate of 6%. The center has 5,554 square meters of lettable area and is 100% leased, including The Good Guys, Repco, Total Tools and Petstock. Our focus for Sunbury will be on near-term income growth and tenant mix opportunities. These acquisitions are consistent with BWP's disciplined approach to growth. They complement the existing portfolio of Bunnings Warehouses and LFR assets and provide exposure to income growth opportunities over time. Turning to Slide 12 and sustainability -- turning to Slide 21 and sustainability. BWP's sustainability focus during FY '26 included preparation for mandatory climate-related disclosures from FY '27 and progressing practical decarbonization initiatives across our portfolio. Gross Scope 2 market-based emissions reduced by 19.6% from 148 tonnes of carbon dioxide equivalent in FY '25 to 119 tonnes in FY '26. BWP achieved a net Scope 2 market-based emissions position of 0 through the surrender of 149 Australian carbon credit units. Estimated emissions avoided through on-site solar generation increased by 19.2% from 1,381 tonnes of carbon dioxide equivalent in FY '25 to 1,645 tonnes in FY '26. Solar power installations are now in place at 69% of sites owned at 30 June 2026 compared with 61% in FY '25. Rainwater recycling is in place at 90% of all sites compared with 89% in FY '25. LED lighting has been installed at 100% of sites in at least 1 car park, nursery trading area, canopy trading area or the main store. The focus remains on practical initiatives that are relevant to BWP's portfolio while continuing to prepare for the commencement of mandatory climate-related reporting. Turning to Slide 22 and capital management. Average borrowings for the period were $940.7 million, up 17.6% on the prior corresponding period, largely due to debt drawn to fund the management internalization. The weighted average cost of debt for FY '26 was 4.6% compared with 4.4% in FY '25 and borrowing costs for the period were $42.7 million, up 22.0%. At 30 June 2026, BWP had an A- stable rating from S&P and an A3 stable rating from Moody's. Hedging cover was 59.3% with a weighted average rate of 4.01%, including margins and a weighted average term to maturity of 3.5 years for these hedging instruments. Interest cover was 4.2x compared with 4.8x in FY '25 and gearing was lower at 18.5% compared with 21.6% in FY '25. Debt covenants remain well covered. Current available debt capacity is approximately $450 million. The balance sheet reset has included both debt diversification and equity raising activities, comprising the $300 million fixed bond completed in October 2025 at a fixed rate of 4.55% and also the $328 million fully underwritten entitlement offer completed in May 2026, both of which increased capacity to fund BWP development and growth pipeline. Turning to Slide 24 and the FY '27 outlook. Operational execution remains a key focus. In FY '27, BWP will seek further positive leasing spread outcomes within the LFR portfolio, continue to focus on optimizing the cost of capital and further advance the operational elements of the management internalization, including information technology and human resources. In FY '27, leases subject to market rent review represent only 4% of base rent with CPI reviews to apply to approximately 45% of base rent and the balance of 51% to be reviewed to fixed increases of 2% to 4%. Effective capital deployment remains a key focus, including the completion of the repurposing projects at Fountain Gate and Noarlunga, expansion projects at Midland and Broadmeadows and progressing expansions to support Bunnings at Pakenham, Midland and Balcatta. BWP will also continue to seek acquisitions that complement the portfolio, including Bunnings Warehouses and LFR assets. Elevated levels of capital expenditure are expected to continue in FY '27, reflecting the significant repurposing and expansion activity with capital expenditure expected to be between $55 million and $65 million, excluding divestment proceeds. BWP provides distribution guidance for FY '27 of $0.200 per security, representing approximately 3% growth on FY '26. FFO in FY '27 will be improved by like-for-like rental growth, leasing spreads, contributions from repurposing activities and acquisitions and reduced interest expense post the May 2026 equity raising. This improvement will be moderated by reduced income from recent property divestments. The FFO guidance reflects an expected payout ratio of approximately 104% of FFO within BWP's target distribution payout ratio of 90% to 110% of FFO. Distributions are expected to utilize recent profits on sale of investment properties to offset reductions in rent resulting from recent divestments with approximately $57 million of capital profits on sale recorded over the 3 years to 30 June 2026. As always, guidance is subject to no major disruption to the Australian economy or material change in market conditions. Overall, FY '27 will see BWP leverage the reset of recent years, focusing on the completion of major repurposing projects, progressing Bunnings expansions, leveraging the lower cost structure post internalization and maintaining balance sheet flexibility to support future growth. And that concludes my prepared remarks and I'll now hand back to the moderator to facilitate any questions where Andrew, David and I are available. Thank you.

[Operator Instructions] Your first question comes from Cody Shield from UBS.

Just first question on Noarlunga. So 78% pre-leased there unchanged from the half. How are conversations going on that one? Is that on track to be fully let by completion?

Yes, it is. And we're in very advanced negotiations for the last remaining tenancy. So that the 22% is actually only one single tenancy of about 2,000 square meters.

Okay. Got it. And then just on development projects more broadly. Look, it's been a good story for the business. You do have a number of those completing through '27 though. So how are you thinking about additional opportunities across the book into the medium term? Is there a run rate that you'd like to hit there?

Thanks, Cody. Yes, we do like these projects. And as we demonstrated, they are good deployments of capital. We don't have as many of those moving forward as you'd expect post the lease reset. So we do have some assets that we're currently expanding Broadmeadows, of course, we've called out post an acquisition of adjacent land. Northland is an asset that we have vacant at the moment, going through planning processes as it relates to that asset. So we're very focused on that. That probably is a more medium-term opportunity, Cody. And of course, deploying capital into Bunnings expansions and supporting its network expansion and optimization is a really strong focus. And of course, we called out Pakenham, Maitland, Balcatta as 3 key projects that we're very much focused on. And we hope over time, if we can be a good capital provider for those prospects that in time, we can do more of those with Bunnings.

Got it. And then maybe just the last one on the hedging level. So if you look a little bit further out, I mean, hedging is a touch light. Are you kind of taking a view on the rate trajectory there or happy to be a little bit under hedged? How are you thinking about that?

Do you want to take that one, Dave?

Yes, sorry. We revisit our hedging at every Board meeting. We're looking at things on a regular basis. Our aim is probably to turn some of our bank debt into MTNs and we'll probably look at doing future MTNs as part of our hedging strategy.

Your next question comes from Howard Penny from Citi.

Congrats on the results. I just -- it's a similar question just on acquisitions. I see that on the acquisition front, you've been more active on the LFR side. But if I look at the cap rates that you're buying at 5.75% and 6%, which is broadly in line with some of the deals in Bunnings Warehouses recently. My main question is what differentiates those LFR acquisitions from what you could have alternatively bought just in traditional Bunnings assets in the market?

Thanks, Howard. I'll just talk to LFR first. Yes, I think we've communicated most certainly in the half in some of the addressable market context we gave that we like the LFR market. And I think the 2 examples, the 2 acquisitions, Morayfield and Sunbury, we have called out that we think over time, there is curation, there are leasing spread opportunities. So that income growth that sits in, I suppose, that acquired portfolio is strong and would be stronger relative to a Bunnings asset, for example, where we understand the lease structures that sit and the income growth that sits within that. So we're very comfortable with the purchasing of those assets. We most certainly are active in regards to due diligence as it relates to other LFR assets across the country. And we're hopeful over time that we can convert some of those opportunities, assuming pricing is appropriate and we can get the incremental return rate that we desire. As it relates to Bunnings, we seldom see Bunnings transacted, I think, Howard, at a comparable rate to perhaps the 2 examples that we have acquired in summary. And obviously, Morayfield, that blended rate between 5.75% and 6%. I think you will see, Howard, on our Slide 15. I think you can see there where transactions have been in Bunnings stand-alone cap rates. And so I think if you just take an average really over the last 2 years, it's a number closer to 5%, Howard. So good metropolitan Bunnings, highly desirable, highly sought after. We've spoken at length that it's competitive in regards to different sources of capital for those Bunnings assets. And I think there is still very much a differential between LFR and Bunnings stand-alone warehouse cap rates.

And just my second question, post the capital raise, a lot of the discussion in the market was around what BWP is going to do with the capital and what is the -- what are the likely potential acquisitions, et cetera. And I can see, of course, the capital commitments are part of that as well as the acquisitions, but the gearing is still very low. So can we expect a lot more activity and some -- maybe some bigger deals potentially happening in the future?

Obviously, if you think about how we guided during the communication in May at the time of the raising, we guided that on a pro forma basis post essentially at the time, both underway, commenced and planned activities that we would see gearing sitting just above 20% if we deployed that $163 million of capital. I think we've given an update in this pack that we've got $120 million of that to continue to spend, not deployed. So we still see post that expansion activity, that repurposing activity and some of that upgrade work that we'll be sitting in the low end of the range, Howard. And anything over and above inorganically, for example, Sunbury, would send us a little higher end of the range. So difficult to give a guide, of course, on inorganic activity, Howard. But post the expansion deployment of capital, we'll be sitting at the low end, all things being equal and anything inorganically would set that perhaps higher, depending, of course, how we fund it, Howard.

Your next question comes from Simon Chan from Morgan Stanley.

Mark, I just wanted to get some comments from you on LFR. The leasing spreads there were obviously very good. I really just have 2 questions. One, are there some funnies in there, which has inflated the numbers? And two, can you talk a bit about the WALE of your LFR portfolio? Just interested to see if there's some upside in the near term if these -- if similar leasing spreads can be crystallized over the next year or 2?

Thanks, Simon. Yes, Yes. I think the way to answer the 23% is every asset -- every location within an asset has its own characteristics. And I think that cohort of those 14 negotiations that we called out, I think, had some favorable elements. And so I wouldn't be assuming that, that is run rate. I think we said that for those LFR leases that would commence in '26, the subset of that they were about just north of 9%. We are confident and I think we said this at the time, Simon, of one confidence that we absolutely have and Andrew and the team have evolved over many years is understanding a market rent review kind of lease reset negotiation. And I think we might have said during the internalization discussions with many on the call that we would hope to deploy some of that capability into the LFR part of the portfolio. Hopefully, that rate of spread reflects some of that capability. Yes, 23% is a strong outcome. But again, I think every asset is very different. Every asset has its own relativities. But I'll let Andrew perhaps comment on the WALE or anything else in regards to expected spreads?

Yes. Simon, we're about 20% to 25% through this program of going through the LFR portfolio and negotiating either at lease renewal or midterm market rent reviews. Most of them are lease renewal and/or options. And so it is a strong result. And as Mark said, it's site specific. And I've always said this about Bunnings Warehouse market rent reviews as well. What I would say is there's definitely been a step change in the market rental across Australia for large format retail. And it's been a function of the cost through COVID to develop new [indiscernible] where tenants have had to pay higher rentals for developers and owners like ourselves to develop new product. So moving forward, I envisage it will be -- well, I'm definitely forecasting well more than CPI increases across our existing portfolio. And our current WALE on the LFR portfolio is about 6.5 years. But we see opportunity in FY '27 and FY '28 to get some good rent reversion from those leasing spreads and at minimal incentives. So I think it's important to call out the 0.6% of 1% in terms of incentives for the existing portfolio. So you've got to look at both of them hand in hand.

I assume the 0.6% is a little bit assisted by -- they're all renewals rather than new leases. Would that be fair, Andrew?

Absolutely. They are. Well, no, they are existing properties. So it's not -- those incentives don't include the developments at Fountain Gate and Noarlunga. They sit just under 2%, but they're not like-for-like existing portfolio incentives.

Your next question comes from Richard Jones from JPMorgan.

Mark, just interested in your FY '27 guidance, you've got dividend growth of 3%, the payout ratio looks like it's going from 100% to 104%. So it implies FFO is not moving. Just wondering if you can just talk us through the main moving parts, implied guidance.

Yes. Sorry, Richard. Yes. So I think the best way of probably framing this and this is to some degree why when we gave guidance on payout in the last 12 months, we gave that range between 90% and 110% at that time, for example, we had repurposing activity and we had likely divestment activity. And I think if you essentially add back the lost income from divestments in '27, of which Chadstone is a very significant contributor there, you broadly would arrive at a normalized kind of FFO in line with distributions. So I would simply guide that some lost income is a headwind to FFO in '27.

Okay. And so just moving forward, when would you anticipate FFO and DPS will align?

Yes. I mean we -- again, probably difficult to give guidance beyond, but we expect unit FFO growth in FY '28.

Okay. The MER at 34 points annualized, is that a stabilized number?

Richard, David here. It's likely to be probably around 36 basis points going forward. There's some additional costs this year in regards to having AGMs, rem reports and adding a couple of additional team members with incentives as well.

And then just in terms of I guess, portfolio movements, you're flagging Geraldton as a potential divestment. Are there other assets on and balancing that, do you think you'd be a net buyer in '27? Or is it just a CapEx offsetting the sales essentially?

Yes, Richard, I mean, we flagged Geraldton. Clearly, we've called that out. So that will be a process we'll complete and review. And then we don't have clearly in the near-term pipeline, any other divestments at this point that we would flag. So yes, anything inorganic in terms of accretive investments would perhaps offset that divestment.

Your next question comes from Tom Bodor from Jarden.

Just one from me. You've got a payout range in that sort of 90% to 110% range. Where do you see that settling long term once we get through all these sort of moving parts around divestments and repurposing?

Yes, Tom, I suppose we've given the range, and it's something we will operate within, of course. The guidance we give is guidance ahead 12 months, but we would hope over time, Tom, that we're in the midpoint -- towards the midpoint of that range, of course.

Okay. So there's no intention to hold back any FFO through cycle to cover maintenance and leasing CapEx?

No. No.

Your next question comes from Callum Bramah from Macquarie.

I just had a couple of questions. I was just looking at Slide 27, which talks to the contracted rent escalations. I just wondered, looking at '27, you've got the 4% expiries that you flagged that are -- or no expiries, those that are exposed to market reviews. Are you able to just give me an idea of what your expectations are there or things we need to be thinking about on that? And where is that number when we look into '28 and '29?

Yes, sure. Well, obviously, that 4% is pretty much just the LFR component of the portfolio, given we've done the lease reset for all the Bunnings Warehouses. And the first lease expiry, excluding Geraldton, of course, is another 4 or 5 years away. So FY '28 is fairly consistent with that 4% of the total portfolio. And you'll actually find over the next 4 years, it's about the same each year. So 4% to 5% maximum.

Okay. And I think going to Simon's question earlier, is the LFR market reviews that you achieved this period indicative of what we should expect or that is unusually high?

Look, I don't think you should expect 23% across the rest of the portfolio. But as I kind of said to Simon, we're forecasting well north of CPI and that's because we've actually seen a marked change in the market rents across our entire portfolio. So it's not site specific or sort of state specific to Queensland or New South Wales, it's across the board.

Okay. And maybe just a couple of other ones. So the CapEx, I think, this year, $55 million to $65 million, is that what we should expect on a go-forward rough run rate and the kind of yield on cost that you would expect to achieve on that CapEx spend?

Dave, do you want to take that or...

I mean this year is probably -- FY '27 is probably higher. Going forward, you'll only have what the Bunnings upgrades and redevelopments and then stay in business CapEx will probably -- which we don't get a return on, obviously, it will probably range between $8 million to $13 million going forward the year.

With regards to yield on incremental cost, I think we've guided pretty strongly on Slide 18 to that project spend portfolio. And I think if you then take Bunnings expansions, we've called out the 5-year swap plus 200 basis points. So that gives you a good guide to yield on that cost. So I'd probably kind of use those 2 elements to forecast that.

Yes. Perfect. And then just on weighted average cost of debt, I just wondered what your expectation was of where that's going in '27. I think it was 4.6% in '26. And while you're just sort of talking about that cost of debt, you alluded to, I think, maybe what form of debt you're going to seek when you have the refinancings coming up in '28, '29. Is there maybe margin saving opportunities and where you see your spot cost of debt?

Yes. So we're forecasting based on the current kind of swap rate of 4.8%. Our cost of debt for the year FY '27 is likely to be between that 5% to about 5.3%, subject to obviously any RBA decisions and movements in the swap rates. In margin compression, we've always very kind of tightly priced our margins. So there's not a large amount of wiggle room that we can see at the moment. If you take, for instance, our October '25 issue, we issued a 5-year bond at 105 basis points. And I think that's relative to where the market is at the moment.

[Operator Instructions] Your next question comes from Claire McKew from Green Street.

Just a follow-up on the dividend question. So I'm just curious, obviously, the payout ratio is around 104% of FFO. But then if we overlay your CapEx, so TI is obviously pretty modest, but then there's also some recurring maintenance CapEx that will naturally come through. So I'm just thinking about like what's the reluctance to reset your dividend, especially when your dividend yield is like a low 5, your marginal debt cost is higher. So shareholders are now funding the dividend with debt at a higher cost, so which is, in theory, all else equal, dilutive. So I'm just wondering what your -- what's the reluctance to just reset it a bit lower and to bring in that recurring CapEx profile into the equation?

Thanks, Claire. Look, I think as I kind of responded to Tom, we have an intent here to have a payout ratio range to accommodate some portfolio change as much as anything. And that repurposing activity will contribute to that this year. Clearly, we have some divestment cycling that is also a headwind in '27. So as I've mentioned to Tom, we expect FFO growth on a unit basis. And clearly, the contributions from repurposing will manifest more fully through '27 into '28. So yes, Claire I suppose we think about this over the medium term, and we don't really have any intent to reset the payout ratio. And as I said, we have a guide. And of course, we would aim over time to ensure that the dividend is covered with free funds.

Okay. And then just as you -- just on the CapEx question, I know you don't disclose AFFO, but what sort of a run rate on TIs that you kind of give a bit of color on, but just what sort of a run rate are you spending on recurring structural CapEx? So things like obviously, lease is a net lease, but it's not everything so on some of the structural repairs that you still have ownership of. What sort of a run rate is that at? I think it was $4 million or $5 million or so.

Dave, do you want to take that one or -- Claire, I'll take that. So Claire, yes, we would say kind of within that CapEx range that we'd be spending somewhere between probably $10 million to $20 million and probably around $15 million on recurrent spend.

There are no further questions at this time. I'll now hand back to Mark Scatena for any closing remarks.

Thank you very much, everyone, and I appreciate everyone joining us. We look forward to speaking to you over the coming days, seeing many of you in the week of the 7th of September and encourage anyone on the call who is in Perth to attend our first AGM for many, many years on the 29th of October, which I think is a Thursday. So we'd be delighted to welcome you to the AGM. Have a lovely day. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.