Bunnings’ landlord fends off performance criticism and insists it’s on guidance target

The Bunnings building owner insists it is on track after a tough reception following its float.

The Newmark Property REIT is standing by it performance since floating last December and says its portfolio of Bunnings properties will deliver during uncertain times.

The company did not take questions from shareholders about its strategy on its earnings call, although Newmark joint managing director Chris Langford acknowledged the trust had been caught in the share market rout.

The former AFL star told investors that the company’s near $500m portfolio of Bunnings properties was well positioned and he defended the recent acquisition of a property in Queensland.

“In recent months, we’ve seen significant volatility in the listed markets, which has impacted the overall REIT sector, and, unfortunately, NPR has not been immune to this volatility,” Mr Langford said.

Newmark’s portfolio includes a series of buildings tenanted by Bunnings. Picture: Gaye Gerard

“However, we are confident that the strong underlying asset values and the reliable income stream that our properties receive from the likes of Bunnings, Officeworks and other national retailers, will increasingly appeal to investors.

“We believe these attributes will offer greater confidence and security to investors when faced with market uncertainty.”

Mr Langford said the trust was delivering on earnings guidance and there was very strong capital growth in the underlying portfolio. He said supply chain issues had impacted the delivery of a new building in Melbourne’s suburb of Preston but the trust was not exposed to delivery risk.

He flagged that a share buyback plan would commence after the results were delivered.

The trust reported a $51.8m profit for the past financial year with $46.5m attributable to the period since it listed last December.

Funds from operations were in line with forecasts, and distributions of 5.5c per unit for the float period were also in line.

The fund refinanced its debt facility for a three-year term through to December 2024, and the vehicle is geared at 25.5 per cent, although the property purchase will see this rise.

The trust gave distribution guidance of 8.9c to 9.1c per unit, which will include 5c per unit in this half, in line with forecasts.

Newmark Capital joint managing directors Chris Langford and Simon T. Morris.

Mr Langford defended the trust’s recent deal to acquire a property in Underwood, Queensland, saying it was quality real estate with scope for further value enhancement and income growth. “This investment will be accretive to earnings from its acquisition date,” he said.

But dissident investor David Kingston said that the company should have provided an opportunity for investors to query its strategy.

Mr Kingston last week stepped up his campaign against Newmark’s management of the trust, attacking what he said was its poor performance and alleged conflicts of interest.

Shares in the trust have jumped since his K Capital last month launched a campaign against the way the trust is being run, and the stock has lifted about 20c to $1.60. They were unchanged on Thursday.

Mr Kingston said that “concerningly” Newmark had “effectively downgraded” distribution guidance as it will pay a 5c per unit distribution in this half and but only 8.9c to 9.1c per unit for the full financial year.

K Capital chairman David Kingston.

Newmark insists it is on track to hit forecasts.

Mr Kingston has argued against the recent property acquisition, saying returns to investors will drop after multiple management fees and expenses are taken into account.

He is pushing for Newmark to engage with potential suitors who may be interested in the trust’s valuable Bunnings portfolio.

“Given the large securityholder value losses from the IPO, will Chris Langford and Newmark engage with corporates who may be prepared to offer securityholders a takeover premium?” he asked.

Newmark insists initiatives will restore value and result in the trust performing.