Property merger wave sweeps up Newmark trust as Bunnings landlord expands

The takeover will create a fund that owns $3.5bn of property, with a focus on Bunnings Warehouses.

The corporate activity sweeping the listed real estate investment trust sector is picking up pace, with the country’s largest owner of Bunnings warehouses striking a deal to take over the Newmark Property REIT.

In the latest play in the area, the BWP Trust, has made a near $247m scrip bid for the Newmark fund, which would end a tough three-year run for the smaller trust that also owns Bunnings properties.

A day earlier, accommodation specialist Aspen kicked off the year with a bid for affordable retirement group Eureka that would create a $500m company, and more deals are expected.

While traditional sectors like offices are in the doldrums and debt is hard to obtain, a cleanup of smaller listed trusts trading at well below the value of their assets is expected to see more companies succumb to takeovers.

The Newmark trust, floated in late 2021, is run by a funds business owned by former AFL star Chris Langford and business partner Simon T. Morris, but struggled to gain traction on the listed market.

The trust was subject to a campaign by activist investor David Kingston and had been in the cross hairs of potential acquirers after a share price slump.

The deal will see the $2.2bn BWP Trust snap up the smaller fund, which owns Bunnings warehouses along the eastern seaboard. It has been backed by the Newmark trust’s independent directors in the absence of a superior proposal.

Under the scrip transaction, Newmark trust securityholders will receive 0.4 BWP Trust units for each security, showing an implied price of $1.39 per share. The deal values the Newmark trust’s equity at $246.8m and gives it a total portfolio value of $517.4m.

The merger price is a 43.1 per cent premium to the Newmark trust’s closing price of 97c on Tuesday but below the latest portfolio valuation.

The deal is billed as an opportunity to combine two complementary portfolios of quality assets and similar tenant profiles. It creates a combined portfolio of $3.5bn and sets up the Bunnings owning trust for long-term capital growth.

Newmark's entities have struck up a pre-bid acceptance agreement with BWP Trust, committing an 18.3 per cent holding in the target into the offer.

Newmark’s independent board committee, advised by Morgan Stanley, said it had considered continuing as a stand-alone entity, or the sale of all properties and winding-up of the trusts. But it said the scrip consideration would provide the opportunity to participate in the merged group and was a highly attractive proposition.

The new group will have a combined portfolio size of about $3.5bn and better growth prospects than the Newmark fund remaining on its own.

Newmark trust chairman Michael Doble supported the deal. “The consideration reflects a material premium to NPR’s trading price and provides an opportunity to participate in a larger merged group with lower gearing, which is particularly compelling given the ongoing elevated interest rate environment and market uncertainty,” he said.