BWP offer the ‘best result’ for Newmark REIT investors: fund manager

“These exercises were not undertaken on a desktop basis. We were in the market with numerous parties and in due diligence on assets. We also met with investors to consider de-listing. We carefully considered all options,” he said, as NPR reported a statutory loss of $25 million and further asset write-downs over the six months to December.

Mr Langford said offers for assets were opportunistic and on unfavourable terms and there were limited portfolio buyers in the case of a wind-up.

“These options and scenarios looked good at first blush but did not hold up. We are pleased we did not sell at first jump.”

He said BWP Trust’s offer was the best outcome for unitholders – in the absence of a superior one – and he urged them to accept it.

Under BWP’s all-scrip offer, NPR security holders will receive 0.4 BWP units for every NPR unit they own. This implies a price of $1.39 per unit, 17 per cent below NPR’s net tangible assets, which slipped to $1.68 per unit following fresh write-downs and 26 per cent lower than NPR’s IPO price of $1.89. NPR stock closed 3.8 per cent higher at $1.36 on Wednesday.

The offer opens on Thursday and closes on March 21. BWP needs the support of 50.1 per cent of NPR shareholders to seal the deal.

Under fire

Speaking to analysts on a results call, Mr Langford defended the $22.5 million payment NPR’s manager will receive from BWP’s Wesfarmers-owned manager. He called the payment “fair” and said it was not a factor in a decision by Newmark’s independent directors to recommend shareholders accept the offer.

The payout was criticised by Charlie Kingston – son of activist investor David Kingston – who called it “very wrong” given the outcome delivered to investors since floating, Mr Kingston urged Newmark to consider sharing the payment with shareholders, a suggestion rejected by Mr Langford.

Another strong critic of the deal, property funds manager veteran Winston Sammut, who holds about a 3 per cent stake in NPR, told The Australian Financial Review he had obtained a copy of the trust’s share register and would write to shareholders in the hope of getting enough support to call an extraordinary general meeting.

Mr Sammut said he would push for a sweeter offer from BWP or for the ousting of Newmark as the trust’s manager. He argued an orderly sale of assets would have brought gearing down and could have turned the NPR share price around. “The reality is that NPR is a dud because of the management of the trust,” he said.

The latest half-year update from NPR delivered another 4 per cent write-down in asset values, reducing its portfolio value to $572 million or $1.68 per unit on a net tangible basis.

Mr Langford said acceptance of the BWP Trust offer did not crystallise losses for investors, but was at an “unprecedented” 43 per cent premium to NPR’s January 23 closing price.

“NPR investors are getting scrip in BWP, which, we believe, is very well positioned for growth in its portfolio [and which] has a track record of trading well over a long period of time.”

Mr Langford told the Financial Review feedback anecdotally from investors was “very positive and very encouraging”.

NPR’s suitor, BWP Trust – which also reported half-year results on Wednesday – delivered interim distributable profit in line with guidance as values across its portfolio of mostly Bunnings warehouses held firm over the six months to December.

BWP will lift its portfolio value from $3 billion to around $3.6 billion should it win approval from NPR’s unitholders for its takeover bid.

The deal would mark the first large acquisition by BWP in a decade and be a major feather in the cap of managing director Mark Scatena who was appointed to the role last year.

Mr Scatena said the NPR deal would provide a “platform for growth”, a view shared by the market as BWP units closed 4 per cent up on Wednesday at $3.49.

“Clearly we are seeking to grow earnings over time. This acquisition is one element of that, and we hope to achieve completion [of this deal],” he said.

Over the six months to December, property values were essentially flat as BWP booked a negligible $4.2 million write-down across its $3 billion portfolio. This compared with a much sharper $130.8 million, or 4.3 per cent, fall in the second half of its 2023 financial year.

While capitalisation rates – akin to investment yields – increased by 15 basis points to 5.53 per cent over the reporting period, this was offset by a strong 4.8 per cent like-for-like growth in rental income following CPI-linked increases across 53 of the trust’s 75-odd properties.

The trust delivered distributable profit of $57.9 million for the six months to December and interim distribution of 9.02¢ per unit – in line with the previous corresponding period.