BWP Trust (BWP) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for holding, and welcome to the BWP Trust Half Year Results Briefing. Your lines will be muted during the briefing. However, you will have an opportunity to ask questions immediately afterwards. [Operator Instructions] I would now like to hand the call over to the Managing Director of BWP Trust, Mr. Mark Scatena. Please go ahead.

Thank you, and good morning, everyone, and thank you for joining us. My name is Mark Scatena. I'm the Managing Director of BWP Trust, and I'm joining you from Perth. With me today is Andrew Ross, the Trust Head of Property; and David Hawkins, the Trust Head of Finance. Today, we're pleased to announce the Trust's half year results for the period ending 31 December, 2023. The Trust has released to the ASX this morning its half year results announcement, half year report, investor briefing presentation and our bidder statement related to the proposed merger between BWP and NPR we announced on 24 January, 2024. This morning, I'll go through the presentation before taking questions. Turning to Slide 3. To start, 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 6 and highlights of the year. Whilst property acquisitions will be good potential for value creation, over a reasonable time frame remains difficult to find during the half. The Trust did see an increased number of opportunities in the market to acquire properties on yields, it considers to be more reflective of risk. To that end, the Trust completed the acquisition of 2 properties, Southport Showrooms in Queensland and Broadmeadows Homemaker Center in Victoria for $10 million and $20 million, respectively. Both properties adjoin Trust-owned Bunnings Warehouses. Reflecting its focus on portfolio renewal, the Trust also entered into agreements with unrelated third parties for the divestments of Trust-owned ex-Bunnings Warehouses at Wollongong, New South Wales and Albany, WA for $40 million and $7 million, respectively. As you're aware, on 24 January, we announced that BWP Management Limited, as a responsible entity for BWP Trust had entered into a bid implementation deed with Newmark REIT Management Limited as the responsible entity of Newmark Property REIT in relation to a proposal to merge BWP and NPR by way of an off-market takeover. The merger proposal is for an all-script transaction where NPR securityholders will receive 0.4 BWP units for every 1 NPR security held were based on BWP's closing price of $3.47 on 23 January, 2024. The merger ratio represents an implied price of $1.39 per NPR security and for NPR represents a total equity value of $346.8 million and a total enterprise value of $517.4 million. I'll make some further comments on the proposed merger at the end of the presentation. Turning to Slide 7 and the results overview. Total income for the period was $82.3 million, an increase of 4.7% over the previous corresponding period. A $3.7 million increase in rental income was due to annual rent increases and the rent contribution from properties acquired during the half. Net profit excluding unrealized gains and losses of $57.4 million for the period was consistent with the prior corresponding period. For the half year, the Trust reported a distributable amount of $57.9 million, in line with the previous corresponding period and which included a partial release of retained capital profits of $480,000, lower than the prior corresponding period. At 31 December, 2023, the Trust total assets were $3 billion, with unitholders equity of $2.4 billion and total liabilities of $596.8 million. The underlying net tangible asset backing of the Trust's units decreased marginally during the period from $3.75 per unit at 30 June, 2023 to $3.74 per unit at 31 December, 2023, reflecting a small unrealized loss on revaluation of investment properties. An interim distribution of $0.0902 per ordinary unit has been declared. This is the same as the previous corresponding period. The interim distribution will be made on 28th of February, 2024. As a result of the proposed merger with NPR and consistent with the terms of the distribution reinvestment plan, the Directors determined to suspend the DRP for the half year ending 31 December, 2023. BWP unitholders who are elected to participate in the DRP will receive payment of the distribution in the form of a direct credit into their nominated bank account on the payment date. Turning to Slide 9 and financial performance. Whilst I won't spend time on Slides 9 and 10, they provide an overview of financial performance for the half, with key metrics [ placed ] on income, expenses, portfolio valuation, distribution investments and cash generation and capital structure. And now turning to Slide 12 and market rent reviews. The market rent reviews that were due for 3 Bunnings Warehouses during the 6 months to 31 December, 2023, remained in negotiation and unresolved at the end of the period. The 5 market rent reviews completed during the half are shown in the table, recording a weighted average increase in rent of 4.2% for the 5 reviews completed. 4 of the 5 reviews were negotiated between the parties and were based on available market evidence. And whilst above the 3-year financial year average of 0.7%, we remain of the view that overall, the portfolio rent is broadly at market. It is consistent with market rent review outcomes in the last few reporting periods. Now turning to Slide 13 and lease covenants. The Trust lease covenant mix remained strong during the half with Wesfarmers Group covenant coverage of 83.8% at the end of the half. Turning to Slide 14, capitalization rates. Cap rates for the sale of Bunnings stores since 2013 have followed a fairly consistent trend with cap rates tightening over that time frame. One might expect some more transaction activity given the expected phase of the interest rate cycle and some narrowing of the bid and ask spread between buyers and sellers. And we continue to hear that there remains strong interest from private investors with Bunnings Warehouse properties in the event any come to market. Turning to Slide 15. During the half year, the Trust's entire investment property portfolio was revalued. Property valuations were performed by independent valuers for 11 properties. Remaining 64 properties were subject to director's revaluations. Following the revaluations, the Trust weighted average capitalization rate for the portfolio at 31 December, 2023 was 5.53%, up 15 basis points from June 2023 and up 48 basis points compared to a year ago. The value of the Trust portfolio increased by $36.1 million to $2,972.7 million during the half year following property acquisitions of $32 million and further capital expenditure of $8.4 million and less unrealized losses of $4.2 million. Turning to Slide 16 and independent valuations. The results of the independent valuations during the last 6-month period are shown on this slide, where income growth more than offset the 14 basis point capitalization rate expansion recorded across the 11 independent valuations completed. Turning to Slide 18 and the core portfolio. The core portfolio represents 66 properties with stable long-term leases in place and excludes any properties held for sale, currently being repositioned or with Bunnings has notified us of an intention to vacate. We remain pleased with the attributes of the core portfolio, which represents some 94% of the Trust's fair value. Turning to Slide 19. The weighted average lease expiry profile for the core portfolio shows that the near-term expiries are weighted to sites with less than 15 years occupancy. As we've mentioned previously, the end of an option period is not necessarily a good indicator that Bunnings intends leaving a site as finding alternative and suitable location takes time and diligent planning. Turning to Slides 20 and 21. Slides 20 and 21 present a list of core portfolio of properties reaching the end of their current lease period through to the end of calendar year 2026. Now turning to Slide 23 and value-adding acquisitions. The Trust has seen an increased number of opportunities in the market to acquire properties on yield, it considers to be more reflective of risk. Examples of this include our recently completed acquisitions of the Broadmeadows Homemaker Center in Victoria and the Southport Showrooms in Queensland with both sites adjoining BWP Trust-owned Bunnings Warehouses and acquired for $20 million and $10 million, respectively, representing a weighted average initial yield of 6.8%. These sites support potential options for Bunnings expansion over time and also expand retail envelopes and growth lettable area to enable additional income generation. Turning to Slide 24 and Scoresby. In December 2023, the Trust reached agreement with Bunnings to extend the lease at Scoresby, Victoria. The new lease will commence on the completion of works at the property with $1.4 million of stay-in-business works to be undertaken by the Trust. The parties have agreed to a new 10-year lease with 3, 5-year option exercisable by Bunnings. Importantly, the annual rents will increase by CPI with market rent reviews every 10 years with no caps or collars on CPI or market rent reviews. Turning to Slide 25 and Bunnings Warehouse upgrades. We won't spend much time on this slide, but our upgrade activity in support of our key tenant continues with construction advancing at Lismore and Dubbo and practical completion soon to be achieved at Coburg. Moving to Slide 27. The Trust continues to make progress in repurposing stores located by Bunnings. Of note here are Port Kennedy, where leasing outcomes remain challenging, Belmont North where a public sale campaign has commenced and Hervey Bay, where construction is well advanced with completion expected mid-calendar year 2024. Turning to Slide 29. Portfolio renewal to maximize value and recycle capital into growth with a focus in the half. Specific to Wollongong, we announced in October 2023, the execution of the contract of sale with an unrelated third party for the divestment of the ex-Bunnings Warehouse property at Wollongong, New South Wales for $40 million. The proposed investment is unconditional with settlement expected to occur in June 2024. The sale price of $40 million represents an 82% premium to the fair value of $22 million at 30 June, 2023, resulting in a realized internal rate of return of 12.3% since the original acquisition. The divestment supported by an independent valuation followed a detailed review of alternate uses for the property with the sale deemed to be in the best interest of unitholders and demonstrates the Trust ability to leverage its development capability and external networks to create value by progressing the site's future development for higher and better use. Turning to Slide 31. During the period, the Trust ended a $75 million 7-year institutional term loans maturing in November 2030 to further extend and diversify the Trust sources of funding. The weighted average duration of facilities at 31 December, 2023 was 3.1 years. Finance costs of $10.5 million was 35.1% higher than the previous corresponding period, due largely to the weighted average cost of debt increasing from 3.3% to 4.2% as a result of higher interest rates. The average level of borrowings increased $28.8 million from the previous corresponding period, reflecting the acquisition of 2 properties during the period. Average utilization of debt facilities being average borrowing as a percentage of average facility limits for the period was also 2.9 percentage points higher than the previous corresponding period at 81.2%. The Trust gearing ratio at 31 December, 2023 was 17.1% and remains below the Board's preferred range of 20% to 30%, with lower gearing providing flexibility for the Trust to take advantage of investment opportunities to create long-term value when they arise. Turning to Slide 32. The Board -- it's important to call out that our bank facilities with CBA and Westpac comprising [ $245 million ] of available debt can be extended a further year -- each year subject to agreement. Now turning to Slide 34 and the outlook. Rent reviews are expected to contribute incrementally to property income for the half year to 30 June, 2024, with 59 leases to be reviewed to the CPI or by a fixed percentage increase during the second half of the 2024 financial year, which compares to 53 completed in the first half. In addition, 3 market rent reviews of Bunnings Warehouses are in the process of being negotiated. In delivering the Trust strategic agenda of portfolio optimization, profitable growth and portfolio renewal, the Trust's primary focus for the balance of the 2024 financial year remains on progressing the repurposing of ex-Bunnings properties in the portfolio, filling any vacancies, progressing and completing store upgrades, extending existing leases with Bunnings through the exercise of options, completing market rent reviews and the continued rollout of energy efficiency improvements at its properties. The Trust will also be active in assessing and actioning opportunities to grow the portfolio that will create value for the Trust. We are focused on reinvesting its core retail portfolio to support tenant optimization plans, acquiring accretively and growing the core portfolio and leveraging relationships to participate over time in adjacent addressable market growth. In renewing the portfolio, the Trust will recycle actively by divesting noncore assets where we've exhausted value-adding opportunities, reallocating capital to higher values and reinvesting in growth initiatives to complement its core portfolio, whilst maintaining a strong and flexible balance sheet. Subject to no major disruption of the Australian economy, the Trust provides distribution guidance of $0.0927 per ordinary unit for the second half of the 2024 financial year. Capital profits may be utilized to support the distribution. And turning to Slide 35 and the proposed merger with NPR. The proposed merger with NPR provides an opportunity to add 9 high-quality properties to BWP's portfolio and leverages BWP's capital structure to profitably grow the portfolio through assets with strong location attributes and tenant covenants, resulting in a combined portfolio of $3.5 billion. The NPR portfolio is expected to provide uplift to BWP's sustainable earnings via addition of a secure income stream with no near-term expiries, whilst increasing BWP's WALE from 3.6 years to 3.9 years. Synergies are available from the combination of 2 listed entities and integration of the NPR portfolio into the larger BWP portfolio as well as the opportunity in the future to refinance NPR debt. BWP's strong capital position will be maintained with pro forma gearing expected to remain at the lower end of the BWP's target range, affording continued financial flexibility. We believe that the merger proposal is in the best interest of both BWP unitholders and NPR securityholders and provides an opportunity to combine complementary portfolios of quality assets to similar tenant profiles. Importantly, the independent directors of NPR have unanimously recommended the merger proposal in the absence of a superior proposal. In addition, Newmark Group and associated entities, collectively the largest securityholder in NPR have entered into a previous acceptance agreement with BWP, providing a commitment to accept their combined 18.3% holding in NPR into their takeover offer. BWP is delighted with the support from the Newmark Group for the merger proposal. And the proposed merger provides a platform for income and capital growth, consistent with BWP's objective of providing unitholders with a secure and growing income stream and long-term capital growth. In the coming days and weeks, we look forward to engaging with investors to discuss the merger proposal further, having lodged the Bidder statement today with ASX the offer to open tomorrow. And during the offer period, welcoming NPR securityholders as BWP unitholders should the bid conditions be met. And that concludes my prepared remarks and I'll now hand back to the moderator to facilitate any questions by myself, Andrew Ross, the Trust Head of Property and David Hawkins, the Trust Head of Finance, are available. Thank you.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Lou Pirenc from Jarden.

I guess, one bigger picture question and then one more detail. The bigger picture one is more asset recycling taking place, NPR transaction. But do you think after 4, 5 years of very little distribution growth with the medium-term outlook is going to be different? Or shouldn't we read into this that things seem to be a bit more active releasing spreads, more positive, et cetera, et cetera?

Look, in terms of again strategy, I don't think it's necessarily a -- or it's no change in our fundamental philosophy here. We are endeavoring to grow income and obviously improve the portfolio over time. So this acquisition, the recycling of capital portfolio renewal are all functions of that objective. In regards to outlook, in terms of earnings, clearly, we are seeking to grow earnings over time. That's been the objective of the Trust for an extended period of time. This acquisition is one element in that process. We hope that to extent we achieve completion, this will create another set of recurring earnings, which will support distributions over time. And one would hope that given the combined group and some of the opportunities that sit within the combination that also gives us opportunity to seek to improve returns over time to unitholders. So that's really our focus, Lou and as you'd expect, we're looking at our avenues to improve the return profile.

Great. And then a slightly more detailed question and maybe one for Andrew. Just in terms of the market reviews, the re-leasing discussions, are they getting easier with consumer momentum, sales momentum kind of holding up better in your main tenant? Or are we reading too much into the fact that market rent review seem to be more positive than the last few periods?

Lou, if it's okay, could you just say that question again. We just missed the first part of that.

Yes, sure. Just in terms of the re-leasing spreads, so the market rent reviews that clearly picked up from the last few periods. So, I was just wondering if it was getting easier to negotiate because sales momentum of the main tenant is more positive?

Yes. Lou, Andrew here. As we've kind of said to investors over the long term, that we think the portfolio is at about market, it's going to be unders and overs throughout that process. And it just so happens that these 5 assets have ended up being a weighted average increase of 4%. In previous periods, we've had some that have gone up 10% and some that have gone down slightly. So, it's just this mix of actual market reviews that's resulted in this 4% increase.

Your next question comes from Howard Penny from Citi.

Just a question around cap rates. So, we've seen quite a shift in the cap rates relative to what we're seeing in the market. What is your expectations for further cap rate shifts? And where do you -- have you noticed any kind of bid offer spread data outside of transactions that is helping to [ lease ] cap rates?

Howard, Andrew here. Look, we've based our internal valuations just independent valuations that have been done. And those independent valuations have only really had one piece of evidence being the Collingwood Bunnings Warehouse transaction as an actual transaction. But in the background, valuers are talking to agents and the understanding in off-market bids and the spread between those bids and what the vendors are seeking, so, in off-market sale campaigns and so these valuations also reflect the data from those sale campaigns. And moving forward, hopefully, there's some transactions in the next 6 months that can guide the valuers and guide us in terms of doing valuations. But at this point in time, sentiment would indicate for us that our portfolio meets to increase the cap rate slightly, which is what we've reflected in the 15 basis points across the whole portfolio.

And I know we discuss this every results. But as the large expiries in FY '26 approaches, it feels that as we're closer to that, it almost de-risks it. But have there been any signs of those expiries looking to move to new sites or any risks in that FY '26 lease expiry?

Howard, there's nothing further than what we've previously discussed at half year and annual briefings, particularly the 30, June one. What we know is on the slides in the presentation and that's the most updated information we have.

Your next question comes from Tom Bodor from UBS.

I just was interested in your comment on your acquisitions being at returns you see as being more reasonable around that 6.8% yield. Presumably, those acquisitions are going to form part of broader CapEx and enhancements to existing Bunnings assets. So, I was just interested in beyond the acquisition yield of 6.8%, how do you sort of look at the broader projects that you might do on those acquisitions and the returns? And how would that compare to some of the recent projects where the CapEx has been rentalized I think, at a 4% rate?

Sorry, I just missed the first part of the question, but I think it was in regards to upgrades, Tom or...

Yes. So, the 2 things that you bought were on a 6.8% yield, I think you said. But presumably, there's CapEx that comes with integrating them into existing Bunnings facilities. So, I was just wondering how do you sort of look at the overall returns on those acquisitions?

Tom, I think it's like an investment valuation we'll undertake. I think it's relatively simple to some degree. We have an investment cost and we model that and we look to the DPU outcome and clearly, we look to the generation of earnings and cash in that investment. So, would we assess all of those investment attributes will form a view on that activity. And clearly, to the extent that we get our [ equity ] value for unitholders over the long term, we will make investments accordingly. So that relates to inorganic activity that relates to adjacent upgrades for key tenants as well. So, we've got a relatively well-structured approach to valuation Tom, and we'll continue to follow that.

So, your funding rate on future CapEx, those should be in excess of the 4% you've achieved on the Lismore, Coburg, Dubbo projects?

Yes, that's right, Tom.

Also, I just wanted to pick up on -- there was a new lease there -- there were no CPI caps referenced, but we had a few in the last period. Do you anticipate more leases with CPI caps in the future? Or do you think that's less likely going forward?

Tom, Andrew here. I'll answer that one. Generally, what we try and do is we try and adopt the same CPI -- or sorry, same annual rent review in the existing lease. And in this one here, we spent some stay-in-business capital on the car park and negotiated a new lease with Bunnings and just adopted the same uncapped CPI structure in that lease.

So on future leases, it's less likely we'll see more caps coming into the portfolio?

No, no. Look, I think each property is going to be specific and what we negotiate will be appropriate at the time that we negotiate it. So I think I don't see caps on CPIs moving forward in our lease negotiations.

And then just a final one on hedging, currently [ 51.5% ], do you expect to top that up? And obviously, with the potential gearing going up as part of a new market as well, how do you sort of see hedging in the next 12 to 18 months?

Tom, it's David. We always continue reviewing our hedging policy and whether to put an appropriate hedges in place at a later date, if we complete the offer with Newmark. When we look to refinance, we'll probably look at doing longer-term [indiscernible] which we fixed, which also probably increase the hedging that way as well. It's represented every Board meeting.

Your next question comes from Adam West from JPMorgan.

Just 2 quick questions from me today. I was just wondering if you could talk through the expected synergies from the NPR transaction, in particular, do you expect the NPR cost to debt to reduce?

Adam, there are a few buckets here. I think it's important to perhaps just identify those. So, some of those friction costs, for example, of administering essentially 2 listed trust. So, to the extent we achieve completion and we go to compulsory acquisition, which is most certainly the ambition. Then there are some friction fees that come out. One would hope and clearly, we're thinking about that at the moment to the extent again, we achieve the commissions that the scale benefits, some of the fractionalization will flow through and that will ultimately go to debt. So, we have some common lenders here that you would expect that we're having some discussions with. And as we ordinarily do in any of our refinancing thoughts, we'll be thinking about rate versus tenor and trying to get the balance right between both of those, and then it's moved out, obviously, the future profile. So yes, there would be hopefully some benefits over time, but we'll have to value those as it relates to [indiscernible] as well. So, we have options, but we'll work through those.

And just one more one. Just on the Port Kennedy and Hervey Bay, construction that you're doing there or looking at the CapEx spend, has there been any change because it doesn't look like there's been any progress on the comments in the past 12 months? And when should we expect to see some concrete activity?

Look, Hervey Bay is under construction now and we expect it to be completed midyear, and it's tracking in line with our budget estimates and Board approval amounts. Port Kennedy, we're just -- we haven't got enough leasing commitment on that one to press the green light on moving forward with the construction of that project. So, until we get that full leasing exposure that we need, commitment that we need, we won't be moving forward with that project.

I'm sorry, instead of Hervey Bay, I meant, Belmont North.

Belmont North, look, we've been looking at various different options on that property. And last year, we did a leasing campaign and leases, and we didn't get a sufficient offer that we were comfortable moving forward with. And what we've done now is we've put the property on the market for sale that went on the market this week actually.

Your next question comes from David Kingston from K Capital.

Look, the NPR acquisition is interesting in that they've reduced their NTA to 168, which clearly is still misleading because the bid value is around about 139. So clearly, the directors of NPR don't seem to believe their own reduced valuation. Certainly, the Chadstone Property that until the revaluation today was in the books at $82 million, the market knew that was misleading because it went to market and the best bid they could get was in the high-60s. They've reduced it this morning to $72 million, which is still over the odds. So my first question is, are you going to further reduce the excessively valued NPR valuations?

Mark here, look, I can't comment on the valuation process undertaken by NPR. But I can absolutely confirm we have a very well [ steeped ] valuation process. We undertake within the portfolio, Andrew has articulated some of that today, the debt clearly explains the combination of independent and director revaluations and the process. We go to in regards to that. And as part of any portfolio combination to the extent again, we achieve completion, we'll be undertaking valuations as we do with any acquired properties, whether they be NPR properties or any other properties that come into the portfolio. So that methodology won't change.

Well, I think it's a work in progress because the fact that they have recommended a bid at well under their today revised NTA, I think says a lot about revaluations. So that's a work in progress. My second question is on management fees. Round numbers with your 55 bps that's around about 10% of the average cap rates you're running at. It's certainly higher than internally managed companies like Region, which is running at around about 32 bps. But specifically, with NPR, you may well end up in a situation where there are double management fees because NPR is the manager, which your management company is buying -- is charging a fairly high management fee. Now particularly, if that remains listed and only partially controlled by you, that management fee will still be in place. But in addition, because you are issuing new shares to NPR shareholders who accept the GAV will go up, and so there will be another 55 bps on the extra GAV to your management company. So, my first question on that is, are you going to keep imposing a double management fee there? Or is there going to be a waiver one of the 2 management fees in the NPR acquisition?

That occasion won't transpire -- there won't be double management fee, David. The way this transaction will work is to the extent that we go unconditional. Then at that point, control of the RE will change. And at that point, we'll unwind the arrangements and will place obviously, those assets under management, a jurisdiction of existing RE and there will be no doubling up of management fees.

And that will apply even if you only get to 50% or 60%. Is that right?

Correct.

[Operator Instructions] Your next question comes from [ Charles Kingston ], private investor.

Just a question again on the NPR transaction, just the contract, as we all know, sort of touched upon that BWP hasn't grown distributions for quite some years, supplemented by returns of capital. I suppose I don't think aside from the recent small acquisitions you bought an asset in 5 or 6 years, which is great in that you had a very solid balance sheet, still do, even post the NPR acquisition. But as you said many times today, your focus is on growing earnings per share. And I don't think -- you said that this transaction, the NPR transaction will be accretive on that basis, definitely accretive on NTA, but it won't improve the earnings of BWP. So, just given that context with 5 or 6 years of very little, very, very solid balance sheet, it seems like there's a big -- still a big buyer, seller spread out there. So, a great time to be in the position that you were with very low gearing. I'd just like to hear some further logic behind why you have done this acquisition, given there is no accretion. Understood that the WALE will go up slightly and potentially those assets have better growth going forward. But does the same after 5 or 6 years, I would have thought there'd be something a lot more accretive that you would finally deploy the balance sheet strength towards.

Look, in terms of history, I think our objective as a Trust has remained unchanged for a long duration. And so I think you can be comfortable that the management team has worked incredibly hard to look for accretive acquisition opportunities or neutral acquisition opportunities for many years and to leverage the balance sheet, as you say, the well-founded strong capital structure that the team has deployed for many years. So, I don't think it's -- 5 years is just a term. I think within that 5 years, clearly, there was a lot of activity that was underway that was discovering many opportunities that couldn't achieve in the interest of the unitholders. If you think about this moving forward, there are a number of elements that we think are in the unitholder interest. Clearly, this does provide some growth and a platform for growth. And it absolutely provides incremental recurring income, which we are pleased with. And clearly, that set of earnings is important in terms of distributions moving forward. In terms of the tenant exposure, it is difficult to find portfolios with tenant exposures that are complementary and high conviction, high quality. And we think this portfolio is absolutely that most certainly is consistent with the core portfolio that we talked about earlier today that represents at the moment, 94% of our fair value. In terms of diversification, clearly, this gives us more geographic diversity. It gives us WALE as you say, and that's important from a number of perspectives as it relates to funding and other opportunities. And clearly, the capital structure has been there to deploy, as you've called out, to gearing, and we've called out today has been below the Board's target range. This allows us to move within the range. And we think over time, as I mentioned to an earlier question that we'll realize some synergies over time. So, we very much think this is in the unitholder interest and relative to other opportunities that the team and we have assessed over many years, we think this is very much in the unitholder interest.

But just for the next few years, it doesn't feel like there will be any uplift in the distribution as a result of this transaction. Is that fair without sort of providing guidance out that far?

Yes, I mean, we haven't given guidance out that far and we're not inclined to do so. But I think my -- the answering of the question where we are clearly seeking to leverage opportunities in the merger to the extent we get to completion, we have to go and execute those. We've got some time and we've got some more work to do to the extent we get to completion, but we're confident that over time, we can realize the benefits that I've spoken to.

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

Thank you, everyone, for joining today. We appreciate your attendance and we look forward to meeting many of you and speaking to you over the next week to 2 weeks. So, thanks very much for participating, and have a great day.

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