Blackwall Property Trust's annual results show that it has been impacted by COVID19, however the Group firmly believes that its co-workspace business WOTSO will add value to the Trust and is progressing the stapling proposal.
BlackWall Property Trust will be maintaining its final distribution at 3.5 cents per unit. NTA per unit is $1.47 with gross assets of just under $350 million.
Blackwall have had independent valuations undertaken for the whole portfolio with an overall movement for the full year of +$19 million. The major increase has been at Pyrmont in Sydney with a $21 million movement since 2019. Varsity Lakes has also seen a $1.3 million increase from its last independent valuation in 2018. Valuers are reporting some movement in yields and rents and as a result valuations for most other assets are down around -5% compared to December half year accounts.
In addition to the valuation effect, the Trust has waived $713,000 of rent from March to June for tenants under the Code. Since June the waiver has diminished as tenants’ turnover recovers. The trust has also deferred rents of $531,000 recorded as a receivable and expected to be recovered over the term of the lease or 2 years (whichever is greater).
BWR recently announced its intention for the BWF created flexible space provider, WOTSO, to staple to BWR.
“Fortunately, we believe that BlackWall has a path to follow that we think will be relevant in any market. We see our future as being providers of flexible real estate solutions. This goes beyond our WOTSO business as a provider of flexible workspace and extends to all forms of real estate usage.” said Chairman Seph Glew.
The acquisition of the WOTSO business is to be undertaken as a scheme of arrangement, which requires both shareholder and court approval, and will likely be presented to unit holders in late 2020 with completion in early 2021.
With the business units currently separated, Blackwall directors face significant conflicts of interest as between tenant, landlord and manager and have been criticised for insufficient disclose of fees.
Key management personnel hold in excess of 50% of the units in the Trust with other related / friendly parties holding another 33%. The potential conflicts of interest and extensive management ownership leave little room for individual unit holders to be heard. The business case for stapling the two trusts together will be interesting to read (for all parties).
WOTSO is BWR’s largest tenant providing flexible office space solutions to over 3,000 members in 17 locations, 8 of which are BWR properties. To acquire the largest tenant in the portfolio, effectively turn the BWR Trust into an operating business with full exposure to the P&L of the workspace provider.
"Growing BWR as a flexible workspace provider will have its challenges. Valuers and banks have a fixation on WALE (Weighted Average Lease Expiry) but we believe there is less risk with a greater number of tenants on flexible lease terms. Importantly there is a trade-off between term, rent and amenity that BlackWall can benefit from" said Seph Glew
“With a strong balance sheet we are on the look out for acquisitions but with a lack of stock on the market at pricing that meets our investment criteria, we have focused on investing back into our current portfolio. We have also continued to buy-back our stock at significant discounts to our NTA which we think is a good use of capital in the current market,” said Jessie Glew, Joint Managing Director.
Jessie added, “The WOTSO/BWR stapling transaction will result in a ready made tenant solution for future property acquisitions and BWR securityholders will be able to participate in the higher rates achievable through providing flexible space solutions.”