SUPPLEMENTARY PRODUCT DISCLOSURE STATEMENT - NEWMARK HARDWARE PROPERTY TRUST NO.1 ARSN 161 274 111 - Hewison ...
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SUPPLEMENTARY
PRODUCT
DISCLOSURE
STATEMENT
NEWMARK HARDWARE PROPERTY TRUST NO.1
ARSN 161 274 111
17 December 2014
C A P I T A L
AFSL 319372
CONTENTS
1 The Opportunity 5
2 Property Portfolio 10
3 Maroochydore Property - Summary
of Material Documents 12
4 Financial Information 13
5 Key Features 16
6 Investment Details 17
7 Benefits and risks 18
8 Consents 19
NEWMARK HARDWARE PROPERTY TRUST NO.1 3
IMPORTANT NOTICE
This document is a supplementary product disclosure statement issued on
17 December 2014 (Supplementary PDS) and is issued by Newmark Capital
Limited (Newmark Capital).
It updates the product disclosure statement for the Newmark Hardware
Property Trust No.1 ARSN 161 274 111 (Trust) dated 12 May 2014 (PDS) and
must be read together with it. Together they form the product disclosure
statement for the Trust.
All terms used in this Supplementary PDS have the same meaning as they are
given in the PDS unless the contrary is expressly indicated.
Except to the extent amended by this Supplementary PDS or updated on the
website at www.newmarkgroup.com.au, the PDS remains in full force.
To the extent that there is an inconsistency between this SPDS and the PDS,
this SPDS prevails.
Bunnings Maroochydore – Artists Impression
4 NEWMARK HARDWARE PROPERTY TRUST NO.1
1 The Opportunity
1 The Opportunity
As contemplated in the PDS, the Trust has:
1. acquired the recently completed Bunnings Warehouse in Launceston, Tasmania in June 2014 for $26.9
million; and
2. acquired the to-be-completed Bunnings Warehouse in Maroochydore, Queensland.
This acquisition occurs in two stages:
1) the Trust has acquired the land on 16 December 2014 for a price of $13 million. Bunnings has
commenced building (and will fund) the new warehouse and six associated shops and assume all
construction and development risk; and
2) on completion of the new Bunnings Warehouse and six associated shops, the Trust will then
make a second and final payment of $29.1 million for the finished building and all improvements.
At the same time, the lease to Bunnings will commence. This is expected to occur in or around
October 2015.
The Launceston Bunnings Warehouse has a 12-year lease, which commenced in June 2014.
The Maroochydore Bunnings Warehouse will also have a 12-year lease, which will commence on
completion of construction.
The addition of the Maroochydore Property to the Trust portfolio will provide the following benefits to new
and existing investors in the Trust:
• further strengthening of blue-chip tenant covenant with over 93% of net income sourced from
Bunnings, a Wesfarmers subsidiary;
• the WALE of the Trust inclusive of the Bunnings Maroochydore and surrounding tenancies will
remain above 11.5 years;
• geographical asset diversification in high profile retail locations with excellent access from main
traffic thoroughfares;
• strong demographic profile and brand new modern premises;
• economies of scale with the fixed costs and management expense ratio rationalised by virtue of the
increased size of the Trust; and
• increased forecast average income distribution over the life of the Trust.
On completion of the acquisition of the Maroochydore Property, the Trust will have assets valued at
approximately $69 million with net property income of approximately $5 million and income growth of 3%
per annum. It is intended that the Trust will have an LVR of approximately 45% upon settlement of the
second and final payment for the Maroochydore Property. However, the LVR on a Trust level will be higher
for a short period of time during the raising of capital in the Trust.
Newmark Capital forecasts a distribution of 7.5% for FY15 and is targeting a distribution of 7.6% for FY16.
NEWMARK HARDWARE PROPERTY TRUST NO.1 5
1 The Opportunity
Key Property Portfolio Details
Property Bunnings Launceston Bunnings Maroochydore Total Portfolio
Location Cnr Lindsay & Goderich Dalton Drive, Maroochydore, QLD
Street, Launceston, TAS
Approximately one Approximately one kilometre south
kilometre north of the of the Maroochydore CBD
Launceston CBD
Site Area 42,750m2 32,520m2 approximately
Total Lettable Area 17,858m2 15,760m2
Carparking 428 on grade car spaces 473 on grade car spaces
Bunnings Lease Term 12 Years 12 Years
Lease Options 5 options of 6 years 5 options of 6 years
Rent Reviews Fixed annual 3% during Fixed annual 3% during
each Term each Term
Starting Rent $1,950,000 $3,007,690 $4,957,690
Valuation $26,900,000 $42,125,000 $69,025,000
Maroochydore Centre - Artist Impression
6 NEWMARK HARDWARE PROPERTY TRUST NO.1
1 The Opportunity
Bunnings Maroochydore Location Plan
Bunnings Maroochydore Centre Plan
NEWMARK HARDWARE PROPERTY TRUST NO.1 7
1 The Opportunity
Bunnings Launceston
Bunnings Launceston
8 NEWMARK HARDWARE PROPERTY TRUST NO.1
Regional - circulation 19,834 (MTWTFS-)
1 The Opportunity
t Agency licensed copy
pyright.com.au) ID 00336728698 PAGE 1 of
Article source – Sunshine Coast Daily by Erle Levey – 8 November 2014 1
New retail hub on horizon
Bunnings anchors major $48m centre planned for Maroochydore
By ERLE LEVEY tion on the 14,000sq m-plus Bunnings Ware-
CBRE has been appointed by Bunnings to lease house Maroochydore had started and it was
the 2200sq m of additional retail space as part expected to be operating by late 2015.
of its $48 million development on Dalton Dr, Damien Crocetti, joint leasing agent from
Maroochydore. CBRE, said the Sunshine Coast was Queens-
Construction on the landmark site is due for land’s fourth-largest local government area
completion in late 2015. supporting a population of about 330,000 pe-
This precinct is set to thrive, with Officeworks ople and expected to grow about 2% pa.
also committed to a site just south of Bunnings “Bunnings have invested substantial capital
and roadworks set to start in 2015 through into the region and with the major infrastructure
projects such as the Sunshine Coast Public
Horton Park, which will eventually link Dalton Dr University Hospital, airport upgrade and the
to Aerodrome Rd. development of Horton Park the region is set for
The new Bunnings is 250m from Maroochy- a massive 10 years.”
dore Homemaker Centre, which is home to
❝
Harvey Norman, Domayne and many other This precinct is set
large-format retailers.
Brendan Robins, of CBRE, is leasing the
to thrive, with
buildings fronting Dalton Dr. Officeworks also
“We will have opportunities for cafes, retail
businesses, medical tenants and also space for
committed to a site
a larger format showroom,’’ he said.
“There will be over 500 car spaces on site,
with all tenancies set to benefit from tremendous
signage and exposure, as well as the increased
foot-traffic Bunnings will attract into the centre.”
Andrew Marks, from Bunnings, said construc-
at a glance
MAROOCHYDORE
Dalton Dr
What: 2200sq m of additional retail
space in Bunnings Maroochydore
development
Features: High-profile position,
opportunities for cafes, retail
businesses, medical tenants and
larger-format showroom
Price: For lease
Agents: Brendan Robins and Damien
Crocetti at CBRE Sunshine Coast
Contact: 5457 5757 or 3833 9733
Notwithstanding the reference to a $48 million centre in the article, the Maroochydore Property is being acquired for a total consideration of $42.1 million.
NEWMARK HARDWARE PROPERTY TRUST NO.1 9
2 Property Portfolio
Specific Changes to the PDS
2 Property Portfolio
This section 2 is to be read in conjunction with section 5 of the PDS.
(a) Maroochydore Property Overview
The existing section 5.10 is to be deleted and replaced with the following:
“5.10 Maroochydore Property Overview
The site for the new Bunnings Maroochydore is located on Dalton Drive, near the intersection of Dalton
Drive and Maroochy Boulevard. The site has an area of 3.252 hectares approximately, and enjoys excellent
exposure to passing traffic on the Sunshine Motorway. The site is well served to cater to the needs of the local
population. It is in a busy and highly trafficked precinct, close to other major drawcards in the Maroochydore
central activity precinct.
Bunnings currently operates out of a store in Maroochydore Road, located in the Sunshine Homemaker
Centre. Bunnings have advised of their intention to close this store when the new store is completed. The new
store will offer a significantly larger store footprint, with a greater number of car spaces available for Bunnings
customers. The new store will have a lettable area of 14,947m2.
There will be a further 2,150m2 of retail space outside of the Bunnings store, located on the corner of the site.
813m2 of this area will be leased by Bunnings for a 12-year term, while the balance will be leased to other
retailers. Bunnings will provide an 18-month rental guarantee over the other retail area (whether leased or
not). A total of 473 car spaces will be provided on site. Construction of the new store commenced in October
2014, with anticipated completion by October 2015.”
(b) Maroochydore Property Details
The table in section 5.11 is deleted and replaced with the following table:
Bunnings Maroochydore
Title Freehold
Site Area 32,520m2 approximately
Total Bunnings Lettable Area 15,760m2 (including associated retail space)
Bunnings Lease Term 12 years
Other Retail Lettable Area 1,337m2
Local Authority Maroochy Shire
Current Zoning Principal Centre Zone
Carparking 473 on grade car spaces
Estimated Construction Completion Date October 2015
(c) Maroochydore Property Key Details
A new section 5.12 is to be added and is to read as follows:
“ 5.12 Maroochydore Property Key Details
Location
• Highly visible site of 32,520m2 approximately located on the corner of Dalton Drive.
• Excellent access from the Maroochy Boulevard intersection.
• The complex will be 600m from the new Maroochy Bulky Goods Homemaker Centre, proposed new
Officeworks and several existing car dealerships.
Zoning
• The subject property has been rezoned Mixed Use to include a major homemaker centre (Bunnings) and
ancillary uses.
• The land adjoins the proposed Maroochydore Principle Activity Centre Master Plan area which will support future
demand for this locality.
10 NEWMARK HARDWARE PROPERTY TRUST NO.12 Property Portfolio
Building
• The Bunnings store will be constructed over a single podium level with a gross lettable area of 14,947m2.
• It will be constructed to the latest Bunnings design and feature all of the standard departments including
Hardware, Timber Trade sales, Nursery, Landscaping and café facilities.
• Bunnings will be easily accessed via travelators and 3 lifts with convenient pick up and loading facilities.
• Bunnings will have a 12-year lease over the main warehouse and an additional 813m2 of retail space on the
ground level totalling 15,760m2.
• Bunnings rent will be reviewed annually with fixed 3% increases.
• An additional 1,337m2 of retail shops are to be constructed on ground level allowing complimentary uses to the
Bunnings Warehouse.
Car Parking
• There will be undercroft and ongrade car parking for 473 cars providing excellent shaded parking for
customers.
• The complex will have an initial car-parking ratio of 2.77 cars per 100m2 of total gross lettable area retail with
the scope to develop additional car spaces if required.
Construction
• The construction is being undertaken by H. Troon Builders who have significant experience having constructed
numerous Bunnings stores, including the recently constructed Bunnings at Burleigh Waters.
• Bunnings Group Limited have entered into a Design and Construct building contract directly with H. Troon
for the design and construction of the complex, thereby development and construction risk remains with
Bunnings Group.
Valuation
• The Maroochydore Property has been valued by m3 Property Strategists at $13 million on a market value ‘as
is’ basis and $41,125,000 on a market value ‘as if‘ complete basis.
• The main risk associated with reliance on a market value ‘as if’ complete valuation is that the valuation may be
different to the value of the completed property. There are a variety of reasons for this difference. For example,
the assumptions on which the market value ‘as if’ complete valuation were based may be inaccurate.
• Now that the Maroochydore Property has been acquired, assets under development on an ‘as if complete’
valuation basis make up 61.0% of the portfolio of the Trust per ASIC Regulatory Guide 46 (RG46), meaning the
scheme will be considered a development scheme until the second and final payment for Maroochydore.“
(d) Maroochydore Demographic Summary
A new section 5.13 is to be added to the PDS and is to read as follows:
“Maroochydore Demographic Summary
The Sunshine Coast area has been one of the fastest growing regions in Queensland over the past 10 years,
with population growth averaging approximately 2.4% per annum over this timeframe. The population stands
at more than 330,000 people.
The Sunshine Coast supports a broad and diversified economy, with the three largest industries being
Construction, Healthcare / Social Assistance and Retail Trade, which together makes up more than 40% of the
total workforce as at June 2013.
In recent years, economic growth has been relatively subdued, and growth in jobs relatively flat. However,
there are a number of major infrastructure projects expected to occur in the coming years that should help
drive the future growth in the Sunshine Coast economy. These include:
- The expansion of the Sunshine Coast Hospital;
- The expansion of the Sunshine Coast Airport; and
- The expansion of the Maroochydore City Centre via its designation by the Queensland government as a
priority development area (PDA).
The new Bunnings store at Maroochydore is expected to cater to a trade area consisting of some 115,480
residents in the primary catchment, and 85,640 in the secondary catchment. These areas are forecast to grow
at rates in excess 2.0% over the next decade.1”
1 MacroPlan Dimasi – Bunnings Maroochydore: Trade Area and Outlook, April 2014
NEWMARK HARDWARE PROPERTY TRUST NO.1 113 Maroochydore Property - Summary of Material Documents
3 M
aroochydore Property - Summary of Material
Documents
This section 3 is to be read in conjunction with section 9.4 of the PDS.
Section 9.4(g) of the PDS is deleted and replaced with the following:
“(g) Maroochydore Property - Summary of Material Documents
Contract
Newmark Capital has entered into a contract with Bunnings Group Limited in respect of the Maroochydore Property.
The terms of the contract for the Maroochydore Property include the following:
Purchase Price: $13,000,000 for the settlement of the land and $29,125,000 for construction costs for the
Bunnings store and adjoining retail shops.
Anticipated settlement
dates: Land – settled on 16 December 2014, Construction Completion - October 2015
Site Area & Building Area: 32,520m2 approximately. Bunnings gross lettable area 15,760m2 including 813m2
(2 x 406.31m2) of other retail included within the Bunnings lease.
Lease Details
Bunnings Lease Term: 12 Years
Bunnings Options: 5 options of 6 years each
Bunnings starting rent: $2,673,640 per annum (including the 813m2 of other Bunnings leased retail area in the
lease)
Bunnings rent reviews: Fixed annual 3% increases during each term and a market review and the
commencement of each term capped and collared at 10% above and below of the rent in
the last year of the preceding term.
Bunnings rental
guarantee for other
retail space: 18 months at $334,050 net per annum
Funding allowance
Payable by Bunnings: 7.0% per annum of the land acquisition purchase price from settlement of the land until
commencement of the Bunnings Lease.
From completion of the settlement of the land on 16 December 2014 until the construction is completed and ready for
Bunnings’ occupation under the proposed lease (intended to be October 2015), the Trust will receive a monthly funding
allowance equal to 7.0% of the purchase price for the land. Bunnings is responsible for paying outgoings for the site
until completion of the construction works. The Trust is only required to pay the construction costs to Bunnings once
the construction works are completed and the Bunnings lease commences. At that point the Trust will commence
receiving rent from Bunnings. The funding allowance and Bunnings’ responsibility for outgoings costs will then cease
(other than as will be provided for in the lease).
12 NEWMARK HARDWARE PROPERTY TRUST NO.14 Financial Information
4 Financial Information
This section 4 is to be read in conjunction with section 6 of the PDS.
The PDS contained financial information relating to the Launceston Property only. The forecast financial
information in the PDS was for the period from expected settlement in late June 2014 through to 30 June 2015. The
Forecast Period (FY15) in this SPDS contains financial information, which includes the Maroochydore Property. The
forecast material changes to the financial information contained in the PDS includes:
• The purchase of the Maroochydore Property as described above;
• The procurement of a debt facility of $8.0 million (drawn to $8.0 million) to settle the land at Maroochydore
(at a current interest rate including margin of approximately 3.95% floating per annum unhedged until final
settlement). Upon final settlement of the Maroochydore Property, the Trust intends to procure a debt facility
of approximately 45% of the valuation of both the Maroochydore and Launceston properties. The current
estimate is for a total facility of $31 million secured against estimated valuations of $69 million;
• Equity inflows of $22.8 million in the Trust (including $16.6 million raised for the acquisition of Launceston)
on settlement of the land at Maroochydore. A total of approximately $41.5 million of equity (including funds
already raised) is intended to be raised by the second and final payment for the Maroochydore Property;
A funding allowance of 7% per annum of the land purchase value of $13m from the date of settlement of the
land through until the completion of construction and subsequent commencement of the Bunnings lease;
• Newmark Capital has capped Responsible Entity management fees at $130,000 during FY15; and
• An increase in the forecast FY15 distribution to 7.5% per annum.
(a) Forecast Income Statement and Distribution Statement
The following Income Statement and Distribution Statement provide the current forecast with both the Launceston
Property and Maroochydore Property and replace the tables in section 6.2 of the PDS:
Income Statement FY14 FY15
Actual1 Forecast
$ $
Net Property Income2 19,218 2,306,205
Funding Allowance3 - 491,694
Interest Income 5,702
Less: Other Expenses
Responsible Entity Fees4 - (130,000)
Administration costs - (53,800)
Finance Costs (including amortisation) (3,968) (681,422)
Profit before fair value adjustments 20,952 1,932,677
Fair value adjustments 5
(1,670,586) (1,193,276)
Net Profit / (Loss) (1,649,634) 739,401
Notes to the Income Statement
1 Income Statement for the 3 day period from settlement of 28 June 2014 to 30 June 2014
2 U
nder AASB117, rental income is measured on a straight line basis over the term of the lease. This note should be
read in conjunction with note 5 to determine actual rent to be received during the forecast period.
3 T
he 7.0% funding allowance on the purchase price for the Maroochydore Property of $13m commenced
upon settlement of the land on 16 December 2014 and will continue until the completion of construction and
subsequent commencement of the Bunnings lease.
4 Responsible Entity management fees will be capped at $130,000 for FY15.
NEWMARK HARDWARE PROPERTY TRUST NO.1 134 Financial Information
5 U
nder AASB117, the pro rata value of the future rent increases totalling $355k has been brought to account as
revenue during the FY15 year. A corresponding writedown in the fair value of the investment property has been
recorded to reflect the realisation of the benefit included in the original value of the property. This has no profit
impact and is a non-cash item. FY14 includes fair value adjustments for capitalised stamp duty and acquisition
fees. FY15 includes fair value adjustments for capitalised stamp duty and acquisition fees relating to the purchase
of the Maroochydore Property.
Forecast Distribution Statement FY15
$
Profit before fair value adjustments 1,932,677
Add back:
Straight-line rentals (354,602)
Amortisation of finance costs 32,238
Profit available for distribution 1,610,313
Distribution payable (1,610,313)
Distribution payable to Unit Holders - cents per Unit1
7.5
Notes to the Forecast Distribution Statement
1 F
orecast Units on issue at 30 June 2015 is 22,781,775. Distribution payable per Unit is calculated pro-rata for each
individual Investors ownership period.
(b) Forecast Pro-Forma Balance Sheet
The Balance Sheet provides the forecast as at 31 December 2014 for both Launceston Property and Maroochydore
Property and replaces the Balance Sheet in section 6.5.1 of the PDS:
Balance Sheet (‘$000) FY14 HY15
Actual Forecast
Cash at Bank 165 675
Launceston Property (at valuation) 26,900 26,900
Maroochydore Property (at valuation) - 13,000
Receivables & Other assets 55 -
Total Assets 27,120 40,575
Payables (85) (43)
Prepaid Income (163) (199)
Units not yet issued (120) -
Beneficiary Entitlements - (365)
Borrowings (11,992) (20,100)
Capitalised Borrowing Costs 49 87
Total Liabilities (12,311) (20,621)
Net Assets 14,809 19,954
Unit Capital 16,627 22,782
Capital Raising Costs (168) (212)
Accumulated losses (1,650) (2,604)
Net Equity 14,809 19,965
NTA 0.89 0.88
14 NEWMARK HARDWARE PROPERTY TRUST NO.14 Financial Information
(c) Net Tangible Assets
The first sentence under 6.5.2 is deleted and replaced with the following:
“Following the completion of the initial settlement on 16 December 2014 of the Maroochydore Property, the net asset
backing per Unit is approximately $0.88.”
(d) Balance Sheet and Net Assets
The discussion in section 6.6 is deleted and replaced with the following:
“The Directors of Newmark Capital are not aware of any other material commitment or contingencies.”
(e) Debt Funding
Section 6.8 of the PDS is amended by:
(a) amending the reference to 45% in Section 6.8.1 to 55%; and
(b) adding the following words to the end of Section 6.8.7:
‘(The Trust may have a higher initial LVR on acquisition of a property of up to 55% (50.4% on initial settlement of
Maroochydore Property) on an interim basis pending the raising of further capital)’
NEWMARK HARDWARE PROPERTY TRUST NO.1 155 Key Features
5 Key Features
(a) In the ‘Details’ for ‘Investment Strategy’ in the Key Features Table on page 5 of the PDS add the following after
‘Maximum Gearing Ratio 45%’:
‘(The Trust may have a higher initial LVR on acquisition of a property of up to 55% (50.4% on initial settlement
of Maroochydore Property) on an interim basis pending the raising of further capital). The loan-to-valuation
ratio for the Maroochydore Property for the purposes of ASIC Regulatory Guide 46 (RG46) does not exceed 70%
of the ‘as is’ valuation of the Maroochydore Property and is 61.5% for the purposes of RG46.’
(b) In the ‘Details’ for ‘Gearing’ in the Key Features Table on page 6 of the PDS add the following after ‘45%’:
‘(The Trust may have a higher initial LVR on acquisition of a property of up to 55% (50.4% on initial settlement
of Maroochydore Property) on an interim basis pending the raising of further capital)’
(c) The ‘Details’ for ‘Initial NTA backing per unit’ in the Key Features table on page 6 of the PDS is deleted and
replaced with the following:
“Approximately $0.88 per Unit after the initial purchase of the Maroochydore Property”
(d) The last sentence in the Summary of Gearing Ratio in the Disclosure Principles Table on page 7 is deleted and
replaced with the following:
“Trust’s gearing ratio on a look through basis as at initial settlement of the Maroochydore Property was 50.4%
(bank covenant 55%) on an interim basis pending the raising of further capital.”
(e) The last sentence in the Summary of Interest Cover Ratio in the Disclosure Principles Table on page 7 is deleted
and replaced with the following:
“The interest cover ratio for the Trust on a look through basis is forecast to be 3.5 times (bank covenant 1.95
times) on an interim basis pending the raising of further capital.”
(f) The last sentence in the Summary of Net Tangible Assets in the Disclosure Principles Table on page 7 is deleted
and replaced with the following:
”The NTA for the Trust on the initial purchase of the Maroochydore Property is approximately $0.88 per Unit”
16 NEWMARK HARDWARE PROPERTY TRUST NO.16 Investment Details
6 Investment Details
(a) The following is to be read in conjunction with section 2.2 of the PDS.
On 27 June 2014 the Trust purchased the recently completed Launceston Property. Details for this acquisition
were disclosed in the PDS and the Trust has paid its first quarterly distribution of 1.875 cents per unit (7.5% per
annum) for the quarter ending 30 September 2014.
Further to the acquisition of the Launceston Property, the Trust is pursuing its Investment Objective and
Investment Strategy as outlined in the PDS with the purchase of the ‘to be’ constructed hardware based retail
centre at the Maroochydore Property. The acquisition of the Maroochydore Property involves the staged purchase
of the land before construction of the buildings commences, with Bunnings funding, and completing the
construction before the Trust makes the final acquisition payment at the commencement of a new 12-year lease.
Bunnings will pay a funding allowance to the Trust of 7.0% p.a. of the land purchase price from settlement of the
Maroochydore Property until construction is completed and the Bunnings lease commences.
Newmark Capital is seeking to raise a total of $41.5 million for the Trust, and requires a minimum of $22.8
million of equity (including $16.6 million raised during Launceston acquisition) to complete the acquisition of the
Maroochydore Land, with the remaining funds required for the initial settlement to be sourced from a leading
Australian bank in the form of a debt facility secured against the Maroochydore Property and the Launceston
Property.
(b) In Section 2.4 add the following words after “Maximum Debt (LVR) 45%” and after 45% where it appears in the third
paragraph:
‘(The Trust may have a higher initial LVR on acquisition of a property of up to 55% on an interim basis pending
the raising of further capital)’
(c) The third last paragraph in Section 2.6 is deleted and the following is to be added to the end of Section 2.6 of the
PDS:
Newmark Capital secured a debt facility of up to $8.0 million (drawn to $8.0 million) to acquire the Maroochydore
Property, in addition to the $12.1 million borrowed to purchase the Launceston property. The facility has common
terms and is secured by the both the Launceston Property and the Maroochydore Property. Initially borrowing up
to the total of these two amounts is above the Trust’s target gearing ratio, however the facility may be decreased
during the period from settlement of the land to final payment on the receipt of any further equity flows into the
Trust. The terms of the debt facility are summarised as follows:
Type of loan Interest only, non-recourse
Loan amount Up to $8.0 million
Security Launceston Property & Maroochydore Property
Gearing ratio (estimated maximum on initial Trust 50.4%
settlement of Maroochydore Property)
Bank Covenant 55.0%
Interest cover ratio (ICR) Trust 3.5 times (FY15)
Bank Covenant 1.95 times
Interest cost (including margin) Approximately 3.95% in total floating until final settlement
Term of loan 15 months (or until final settlement of Maroochydore). Upon
settlement of the second and final payment for Maroochydore,
a debt facility may be sourced up to 45% of the Launceston and
Maroochydore combined valuations.
Establishment fee 0.125% of the loan amount
NEWMARK HARDWARE PROPERTY TRUST NO.1 177 Benefits and risks
7 Benefits and risks
This section 7 is to be read in conjunction with section 3 of the PDS.
(a) The existing paragraph under section 3.1(a) is to be deleted and replaced with the following:
“On acquisition of the final (completed) Maroochydore Property, over 93% of the net income of the Trust will be
sourced from Bunnings Group Ltd, a wholly owned subsidiary of Wesfarmers, an ASX Top 20 company.”
(b) A new section 3.1 (g) is to be included in the PDS and is to read as follows:
“(g) Addition of the Maroochydore Property
The addition of the Maroochydore Property to the Trust portfolio will provide the following benefits to new and
existing investors in the Trust:
• further strengthening of blue-chip tenant covenant with over 93% of net income sourced from Bunnings, a
Wesfarmers subsidiary;
• the WALE of the Trust inclusive of the Bunnings Maroochydore and surrounding tenancies will remain above
11.5 years;
• geographical asset diversification in high profile retail locations with excellent access from main traffic
thoroughfares;
• strong demographic profile and brand new modern premises;
• economies of scale with the fixed costs and management expense ratio rationalised by virtue of the increased
size of the Trust; and
• increased forecast average income distribution over the life of the Trust.”
(c) The paragraph under Contractual Uncertainty on page 13 is to be deleted and replaced with the following:
“As at the date of this SPDS no arrangements legally binding arrangements are in place with respect to
acquiring the land that adjoins the Launceston Property.”
(d) The reference to completion of construction being expected to occur by “July 2015” for the Maroochydore Property
under item (h) Settlement Risk on page 14 of the PDS should be changed to “October 2015”.
18 NEWMARK HARDWARE PROPERTY TRUST NO.18 Consents
8 Consents
(a) Each of our directors of Newmark Capital has consented to the issue of this SPDS.
(b) All of the following entities have given their written consent to be named in this SPDS in the form and context in
which they are named, and they have not withdrawn that consent:
(i) Bunnings Group Limited
(ii) Bunnings Properties Pty Ltd
(iii) H. Troon Pty Ltd
(iv) m3 Property Strategists Pty Ltd
NEWMARK HARDWARE PROPERTY TRUST NO.1 19C A P I T A L
PRODUCT
DISCLOSURE
STATEMENT
PRODUCT DISCLOSURE STATEMENT
NEWMARK HARDWARE PROPERTY TRUST NO.1
NEWMARK HARDWARE PROPERTY TRUST NO.1
ARSN 161 274 111
ARSN 161 274 111
12 MAY 2014
Offer document to issue up to 50,000,000 Units in a Trust
12 MAY 2014
seeking to acquire two new Bunnings Warehouse stores
and adjacent retail tenancies. C A P I T A L
C A P I T A L AFSL 319372CONTENTS
1 Key Features 5
2 Investment Details 9
3 Benefits and risks 13
4 Management 15
5 Property Portfolio 17
6 Financial Information 23
7 Fees and Other Costs 29
8 Taxation Information 35
9 Other Information 37
10 Reports 43
11 Glossary 50
12 Instructions on How to Invest and Application Form 51
13 Corporate Directory 67
NEWMARK HARDWARE PROPERTY TRUST NO.1 1IMPORTANT NOTICE
Issuer
The issuer of Units in the Newmark Hardware Property Trust No.1 ARSN 161 274 111 (Trust)
is Newmark Capital Limited (ACN 126 526 690) (Newmark Capital). Newmark Capital holds
an AFS Licence (Licence No. 319372) and is the responsible entity of the Trust. Newmark
Property Funds Management Pty Ltd ACN152323629 is the manager of the Trust.
This document
This Product Disclosure Statement (PDS) is dated 12 May 2014. It relates to the Offer of
Units in the Trust.
No performance guarantee
Neither Newmark Capital, nor any of its directors or associates, guarantee the
performance or success of the Offer, the repayment of capital or any particular rate of
capital or income return.
No personal investment advice
Newmark Capital is not authorised to give any personal financial product advice. This PDS
contains important information, however it does not take into account your investment
objectives, financial situation or particular needs. Accordingly, before you invest, you
should read this PDS (and any supplementary PDS and website updates) carefully and
in its entirety having regard to your objectives, financial situation and, if you consider it
necessary or appropriate, obtain independent financial and taxation advice about whether
an investment in the Trust is suitable for you.
Information
No one is authorised to provide any information or to make any representation in
connection with the Offer, which is not contained in this PDS. No such information or
representation may be relied on as having been authorised by Newmark Capital.
Electronic PDS
An electronic version of this PDS appears at www.newmarkcapital.com.au. If you have
received this PDS electronically, then we will give you a paper copy free of charge, on
request. Please telephone Newmark Capital on (03) 9820 3344.
Availability of Offer
The Offer under this PDS is available to persons receiving the PDS within Australia.
This PDS does not constitute and should not be construed as an offer, invitation or
recommendation by Newmark Capital to apply for Units in any jurisdiction where such
offer, invitation or recommendation may not be lawfully made.
Our website
In places, this PDS indicates that certain information can be viewed on our website: www.
newmarkcapital.com.au. You can locate and view such information by going to our website.
In addition, upon request, we will provide you with a paper copy of that information, free
of charge. Where this PDS indicates certain information is available on our website, then
we recommend you view that information before making a decision whether to invest. In
addition, information contained in this PDS may change from time to time. If the change
will be materially adverse to the Offer and the Offer is still open, then in accordance with
the Act, we will issue a supplementary PDS. However, if the change will not be materially
adverse to the Offer, then we will not issue a supplementary PDS but will include
information about the change on our website.
Risks
There are risks associated with investing in the Trust. See section 3.2 for more information.
Glossary and photographs
Throughout this PDS, certain defined terms are used. Terms are defined in the Glossary
in Section 11. Photographs in this PDS are of the property in Launceston, Tasmania that
is intended to be acquired by the Trust.
2 NEWMARK HARDWARE PROPERTY TRUST NO.1Dear Investor,
We are pleased to present you with this offer to invest in the Newmark Hardware Property Trust
No.1 (Trust). The Trust’s objective is to deliver an annual target income distribution of at least
7.0% and capital growth to investors at the end of the Trust Term. The Trust has agreed terms
to acquire a quality retail property investment (newly constructed) in Invermay, Launceston
leased on a long-term basis to Bunnings Group Limited (Bunnings). The Trust may also invest
in additional properties (Additional Properties) in accordance with the Investment Objective.
An Additional Property in Maroochydore has been identified for investment and is the subject
of a non-binding Heads of Agreement with Bunnings. It is intended that the Trust will purchase
this property or another property that meets the Investment Objective during the first year of the
Trust Term. The Trust has also been structured so that Investors may invest either directly or
through their preferred Administration Service.
We believe that the Trust offers the potential for income and capital growth.
The responsible entity of the Trust and issuer of Units in the Trust is Newmark Capital Limited
(Newmark Capital). The directors and the executive team of Newmark Capital have significant
experience and capability in the property industry. Each of our executives have many years
of property and funds management experience and have detailed insights into the operation,
management and enhancement of properties throughout Australia and investments such as
the Trust.
Newmark Capital believes it may be in investors’ interest to explore opportunities to enhance the
structure and operation of the Trust in order to deliver improved returns to investors. This may
include the merging of the Trust with other similar vehicles (and assets) managed by Newmark
Capital prior to the end of the Trust Term (subject to Investor approval). If there has not been a
suitable liquidity event offered to Investors prior to the Trust Term, having regard to prevailing
market conditions, then Newmark Capital intends to sell the assets and wind up the Trust at the
end of the Trust Term (6 years).
The Launceston Property will have a weighted average lease expiry (WALE) profile of
approximately 12 years at settlement and offers the potential for income and capital growth.
The Trust has a conservative gearing policy (maximum 45%) while the Launceston Property
offers an attractive forecast initial yield of approximately 7.1% in the first year and in our opinion,
is an excellent cornerstone asset for the Trust.
Of course, there are risks associated with investing in the Trust which are outlined in Section 3.2
of this PDS.
Newmark Capital is seeking to raise up to $50,000,000 in equity under this Offer.
We encourage you to review this PDS and discuss the opportunity with your relevant adviser/s.
Christopher Langford Simon T. Morris
Joint Managing Director Joint Managing Director
Newmark Capital Limited Newmark Capital Limited
NEWMARK HARDWARE PROPERTY TRUST NO.1 34 NEWMARK HARDWARE PROPERTY TRUST NO.1
1 Key Features
1 Key Features
The table below sets out the key features of the Trust.
However, potential investors should read this PDS in its entirety before making a decision to invest in the Trust.
Further information
Key Feature Details
see section
Trust name Newmark Hardware Property Trust No.1 ARSN 161 274 111
Responsible Entity Newmark Capital Limited ACN 126 526 690; AFSL 319372 4
Manager Newmark Property Funds Management Pty Ltd 9.4
ACN 152 323 629 (Manager).
Investment Objective The Trust’s objective is to deliver an annual target income 2.1
distribution of at least 7.0% and capital growth to investors
at the end of the term.
Investment Strategy Newmark Capital intends to purchase the newly 2.1, 2.4
constructed Launceston Property. The contract of sale is in
an agreed form and is expected to be executed shortly.
The Trust may also acquire other properties that meet
the Investment Objective. As at the date of this PDS the
Manager has identified opportunities to purchase:
• another similar newly constructed property, located in
Australia and leased or pre-leased to Bunnings for a
term of ten years or more; and/or
• other land that adjoins Bunnings stores acquired by the
Trust, provided the land (and improvements) comprise
good quality, newly constructed or to be constructed
buildings (less than 3 years old), and are predominantly
leased or pre-leased to, or have income guarantees from,
quality multi-store tenants.
The following additional investment criteria will apply to
any further acquisition:
- Minimum Trust Income to be sourced from Bunnings 70%
- Maximum Gearing Ratio 45%
- Minimum Lease Term - Bunnings 10 years, Other 7 years.
Asset allocation (Indicative) 90-100% Direct property
0-10% Cash
Issue Price $1.00 per Unit
Trust Term 6 years from the date of settlement of the Launceston 2.5
Property (expected to be 20 June 2014) subject to other
liquidity events.
Offer opens 12 May 2014 2.8
Initial issue of Units Expected to be 20 June 2014 2.8
Offer closes When the maximum subscription of 50,000,000 Units is 2.8
achieved (or otherwise as determined by Newmark Capital
in its absolute discretion).
Units on offer A minimum of 16,811,000 and a maximum of 50,000,000
units (the maximum number of Units is subject to variation
by Newmark Capital).
Units will be issued in order of receipt of fully completed
applications, including application money. Accordingly, if an
additional property is not identified and under contract by
30 September 2014 then application monies not allocated
to the acquisition of the Launceston Property (and adjoining
property if applicable) will be returned to Investors together
with any interest earned on application money.
NEWMARK HARDWARE PROPERTY TRUST NO.1 51 Key Features
1 Key Features cont.
Further information
Key Feature Details
see section
Minimum subscription The Trust is seeking to raise a minimum of $16,811,000. 2.8
Should the minimum amount not be raised then all
application monies will be returned to Investors together
with any interest earned on application money.
Minimum investment Investors must make an initial investment in the Trust of at
amounts least $10,000 with additional investments of at least $1,000.
Frequency of the The first issue of Units under this PDS is expected to occur
issue of Units on 20 June 2014 for settlement of the Launceston Property.
Thereafter, Newmark Capital intends to issue Units at $1.00
per Unit on the first Business Day of the month following
the date it enters into a binding agreement to purchase
another property (by 30 September 2014) and thereafter on
the first Business Day of each month until the maximum
subscription has been achieved or as otherwise determined
by Newmark Capital.
Withdrawal rights As the Trust will be primarily invested in direct property, any
investment in the Trust will be illiquid and Investors will not
have a right to withdraw their investment during the Trust Term
except where Newmark Capital makes a withdrawal offer. A
withdrawal offer is unlikely to occur during the Trust Term.
Fees and other costs Newmark Capital is entitled to charge: 7
An upfront fee of 1.50% of the property purchase price,
excluding acquisition costs;
An on-going management fee of 0.6% per annum of the
total property portfolio value, payable monthly in arrears
(waived in FY14 and capped at $130,000 in FY15);
A debt facility procurement fee of 0.2% of the total senior
debt facility procured; and,
A performance fee equal to 15% of the amount by which the
Internal Rate of Return (IRR) achieved during the Trust Term
exceeds a threshold of 10%.
All the above fees except for the first $100,000 of the
management fee per annum will be passed on to the
Manager.
In addition to these fees Newmark Capital is entitled to be
reimbursed for all Trust expenses and liabilities properly
incurred. Investors should refer to the explanation of the
fees and costs in Section 7 of this PDS.
Key benefits The payment of regular income distributions the Trust 3.1
receives on its investments in properties occupied primarily
by Bunnings and the potential for capital growth.
Key risks All investments carry risk, including the risk that the value 3.2
of the Trust assets decreases. The Trust also has risks that
include contractual risk, settlement risk and construction risk.
Gearing The gearing ratio (on an individual credit facility level and a 2.6
Trust level) is not expected to exceed 45%.
Initial NTA backing per unit Estimated to be $0.89 per Unit (after the purchase of the 6.5.2
Launceston Property).
Note: The above only represent a summary of the Offer. Applicants who wish to participate in the Offer should read the PDS
in its entirety.
6 NEWMARK HARDWARE PROPERTY TRUST NO.11 Key Features
ASIC Disclosure Principles
ASIC has eight disclosure principles for unlisted property trusts that are intended to help investors analyse and
understand the risks associated with investing in unlisted property schemes and decide whether such investments
are suitable for them. Responsible entities of registered unlisted property schemes are required to apply these
disclosure principles in their product disclosure statements and in other information they provide to their investors on
an ongoing basis (through websites and other forms of communication with investors).
The table below contains a brief explanation of each ASIC disclosure principle, together with a reference to the section
of this PDS where more information (if applicable) can be found relevant to that disclosure principle.
Further information
Disclosure principle Summary
see section
Gearing ratio A trust’s gearing ratio indicates the extent to which the 2.6
trust’s assets are funded by external liabilities. The Trust’s
gearing ratio on a look through basis on the assumption
the Offer is fully subscribed will be approximately 45%.
Interest cover ratio An interest cover ratio gives an indication of a trust’s ability 2.6
to meet interest payments from earnings. The interest
cover ratio for the Trust on a look through basis is expected
to be 3.0 times.
Scheme Borrowing This principle requires disclosure of information on the 2.6
Trust’s borrowing maturity and any associated risks.
Portfolio diversification This information addresses a trust’s investment practices 5, 3.2
and portfolio risk.
The Trust expects to initially invest in a single hardware
based retail property, being the Launceston Property. The
Trust may also invest in other properties provided that
they meet the Investment Objective of the Trust and the
Investment Strategy.
Related party transactions This principle requires the provision of information on a 9.3
responsible entity’s approach to related party transactions.
Newmark Capital Limited has a related party transactions
policy to ensure that any actual or potential conflicts of
interest are identified and appropriately dealt with.
Distribution practices Information on a trust’s intended distribution practices 2.7
helps investors assess matters such as the sources of
distributions. It is intended the Trust will pay distributions
quarterly. Distributions will only be paid from cash from
operations.
Withdrawal arrangements If a trust gives investors withdrawal rights, these rights
should be clearly explained. As the Trust will be primarily
invested in direct property, any investment in the Trust will
be illiquid and Investors will not have a right to withdraw
their investment during the Trust Term except where
Newmark Capital makes a withdrawal offer. Such an offer
is unlikely to be made.
Net tangible assets The responsible entity of a closed-end scheme should 6.5.2
clearly disclose the value of the net tangible assets (NTA)
of the scheme on a per unit basis in pre-tax dollars
(including the methodology for calculating NTA). The NTA
for the Trust on the purchase of the Launceston Property is
forecast to be $0.89.
Updates to the information required under the ASIC disclosure principles, from time to time, will be placed on our
website at www.newmarkcapital.com.au.
NEWMARK HARDWARE PROPERTY TRUST NO.1 71 Key Features
ASIC Benchmarks
ASIC has six benchmarks for unlisted property trusts that are intended to help investors understand various policies
and practices employed by Newmark Capital. Investors can use this information to assist in determining whether
Newmark Capital has met these benchmarks. These benchmarks are outlined on an “if not, why not” basis.
Responsible entities of unlisted property trusts are required to apply these disclosure principles in their product
disclosure statements and in other information they provide to their investors on an ongoing basis (through websites
and other forms of communication with investors).
The table below contains the ASIC benchmarks as applied to the Trust and where such information is set out in this PDS.
Further information
Benchmark Disclosure against benchmark
see section
1. Gearing policy The Trust meets the benchmark. The Trust maintains and 2.6
complies with a written policy that governs the level of
gearing at an individual credit facility level.
2. Interest cover policy The Trust meets the benchmark. The Trust maintains and 2.6
complies with a written policy that governs the level of
interest cover at an individual credit facility level.
3. Interest capitalisation The Trust meets the benchmark. The Trust will not 2.6
capitalise interest payments. Interest payments will be
made monthly to the Trust’s lenders.
4. Valuation policy The Trust meets the benchmark. The Trust maintains and 9.2
complies with a written valuation policy.
5. Related party The Trust meets the benchmark. The Trust maintains 9.3
transactions and complies with a written policy on related party
transactions, including the assessment and approval
process for such transactions and arrangements to
manage conflicts of interest.
6. Distribution practices The Trust meets the benchmark. All distributions are 2.7
to be paid only from cash from operations (excluding
borrowings).
8 NEWMARK HARDWARE PROPERTY TRUST NO.12 Investment Details
2 Investment details
2.1 Investment Objective
The Trust’s objective is to deliver an annual target income distribution of at least 7.0% and capital growth to investors
at the end of the Trust Term.
2.2 The opportunity
Newmark Capital is pleased to present an opportunity to participate in the proposed acquisition of a newly completed
hardware based retail centre in Launceston, Tasmania. Newmark Capital has agreed the final terms of the contract
of sale for the Launceston Property which is expected to be executed shortly. Settlement of the purchase of the
Launceston Property is expected to occur on 20 June 2014. Additional properties may be acquired if following due
diligence it is determined that the returns from these additional properties fit within the Trust’s Investment Objective
and Investment Strategy.
The responsible entity for the Trust is Newmark Capital, which holds Australian Financial Services Licence 319372.
Newmark Capital is authorised to operate the Trust.
Newmark Capital was established in 2011 and is a wholly owned subsidiary of the Newmark Property Group Pty Ltd.
The company currently has in excess of $140 million in assets under management. Newmark’s office is based in
Melbourne, Victoria.
The Launceston Property will, on expected completion in June 2014, consist of a 4.275 hectare site within two
kilometres of the Launceston CBD with a total gross lettable area of approximately 17,858m2. The Launceston
Property will be leased to Bunnings Group Limited, a subsidiary of Wesfarmers Limited, for approximately 12 years
from the date of settlement.
The Manager is currently undertaking due diligence on another Bunnings project in Maroochydore, Queensland.
This property is subject to a non-binding Heads of Agreement with Bunnings. The property is intended to comprise
3.7 hectares of land and house a 14,950m2 Bunnings Warehouse, with 2,150m2 of other retail tenancies, along with
parking for 467 cars.
It is proposed that the acquisition of the Maroochydore Property would be staged, whereby the Trust would acquire
the land before construction commencement (thereby benefiting from stamp duty savings) with Bunnings (as
developer) funding the construction and the Trust then making the final acquisition payment upon completion of
construction and at commencement of a new 12 year lease. It is proposed that Bunnings Properties Pty Ltd would pay
a funding allowance to the Trust equal to an annualised rate of 7.0% of the purchase price of the land until the project
is completed and the lease to Bunnings Group Limited commences. It is intended that the Trust will pay for the
construction on completion, which is expected in June 2015. There are risks associated with this acquisition, including
completion risk. Please see Section 3.2 for more information.
If the Manager is unable to finalise terms for the acquisition of the Maroochydore property, it intends to pursue
the acquisition of another Bunnings leased property, consistent with the Trust’s Investment Objective and
Investment Strategy.
The Manager is also investigating the possibility of the Trust acquiring an additional parcel of land adjacent to the
Launceston Property, subject to suitability and the financial terms being consistent with the Trust’s Investment
Objective and Investment Strategy.
If the Manager is not able to successfully enter into a binding contract to purchase an additional Bunnings property
by 30 September 2014, then Newmark Capital may apply the funds raised to acquire the parcel of land adjacent to the
Launceston Property and/or return any surplus capital raised to Investors.
There is a minimum of 16,811,000 units available for acquisition at an issue price of $1.00 per unit to acquire the
Launceston Property. It is intended that Units will continue to be issued to acquire additional properties. The number
of Units issued and the amount of equity ultimately raised will be determined by the number of properties contracted
by the Trust by 30 September 2014. The minimum investment per Investor is $10,000 (subject to variation at the
absolute discretion of Newmark Capital).
Units will be issued in order of receipt of fully completed applications, including application money. Accordingly,
if an additional property is not acquired by 30 September 2014 then application monies not allocated to the initial
settlement of the Launceston Property or any adjoining property will be returned to Investors.
It is proposed that the Trust will have an investment term of 6 years from the date of settlement of the Launceston
Property. See section 2.5 for further information.
The Trust will have an initial gearing ratio of approximately 45% and net tangible asset backing based on accounting
standards of approximately $0.89 per unit.
NEWMARK HARDWARE PROPERTY TRUST NO.1 92 Investment Details
2.3 Trust structure
The Trust is an unlisted unit trust, registered with ASIC as a managed investment scheme. Newmark Capital is the
responsible entity of the Trust.
NEWMARK CAPITAL LIMITED NEWMARK PROPERTY FUNDS
ACN 126 5206 690 MANAGEMENT PTY LTD
AFSL 319 372 ACN 152 323 629
(TRUSTEE) INVESTMENT MANAGEMENT AGREEMENT (MANAGER)
CUSTODY AGREEMENT SUB-INVESTMENT
MANAGEMENT
AGREEMENT
HOLDS MONEY
ON BEHALF OF THE TRUST COMPANY
NEWMARK INVESTORS (AUSTRALIA) LIMITED NPFM (HPT) PTY LTD
HARDWARE (CUSTODIAN) ACN 169 225 905
PROPERTY TRUST NO. 1 HOLDS THE PROPERTY ON
ARSN 161 274 111 BEHALF OF THE TRUST
LAUNCESTON PROPERTY ADDITIONAL PROPERTY
The Custodian will hold legal title to the properties held by the Trust.
2.4 The Property Investment Strategy
Newmark Capital intends to purchase the newly constructed Launceston Property. The contract of sale is in an agreed form
and is expected to be executed shortly.
Newmark Capital believes that the Launceston Property will offer a number of attractive real estate features including
the visible and accessible location, long-term lease to a leading retailer and large land holdings with some scope for
future expansion (subject to the provisions of the Bunnings lease). Newmark Capital will seek to ensure that these
features are preserved and enhanced. This may be achieved through the acquisition of adjoining land or the inclusion
of suitable additional retail uses on the subject land.
The Trust may also acquire other properties that will meet the Investment Objective. As at the date of this PDS the
Manager has identified opportunities to purchase:
• another similar newly constructed property, located in Australia and leased or pre-leased to Bunnings for a
term of ten years or more; and/or
• other land that adjoins Bunnings stores that may be acquired by the Trust, provided the land (and
improvements) comprise good quality, newly constructed (less than 3 years old) or to be constructed buildings,
and are predominantly leased or pre-leased to, or have income guarantees from, quality multi-store tenants.
The following additional investment criteria will also apply on acquisition:
- Minimum Trust Income to be sourced from Bunnings 70%
- Maximum Debt (LVR) 45%
- Minimum Lease Term - Bunnings 10 years, Other 7 years.
More detailed information about the identified properties is contained in section 5 and risks in section 3 of this PDS.
10 NEWMARK HARDWARE PROPERTY TRUST NO.12 Investment Details
2.5 Trust Term and liquidity event
The term of the Trust is 6 years from the completion of the acquisition of the Launceston Property, expected to be
20 June 2020. Investors may extend the Trust Term by ordinary resolution passed by Investors.
However, during the Trust Term Newmark Capital may seek to create a liquidity event (subject to any required Investor
approval), which may include:
• The distribution of capital following the winding up of the Trust. Under this process the properties held by the
Trust will be sold. The actual time frame in which the properties will be sold is at the discretion of Newmark
Capital acting in the best interests of investors. Following a sale of the assets of the Trust, Newmark Capital
would commence the process to wind up the Trust, repay any outstanding debt and pay any surplus to
investors in the Trust.
• The sale of one or more of the Trust’s assets to provide scope for a return of capital to investors seeking
liquidity.
• The merging of the Trust with other similar hardware based trusts to create a larger investment vehicle that
may offer various benefits including improved costs of debt, greater portfolio diversification and reduced
operating costs. This may then be structured to permit ongoing liquidity and may involve listing on the
Australian Securities Exchange (ASX).
Under the Constitution, Newmark Capital is permitted to sell all or some of the properties during the Trust Term if it
believes that it is in the best interests of Investors, for example where it receives an offer to purchase the properties
at a premium to market value. Newmark Capital may also wind up the Trust and sell the properties upon giving
Investors three months notice.
2.6 Debt
Debt policy
The prudent use of debt finance or leverage is an important component in establishing the optimal capital structure
for a fund. The extent to which a fund’s assets are financed by debt is reflected in its gearing ratio. A higher gearing
ratio means a greater reliance on debt to finance assets and increases a fund’s exposure to adverse changes in both
interest rates and finance markets.
A highly geared fund may have lower covenant head room available to rely upon in times of financial stress. Newmark
Capital has a written gearing policy for the Trust governing the level of gearing and interest cover to be applied to the
assets and the Trust on an individual debt facility basis.
Under this policy, Newmark Capital will seek to limit the Trust’s gearing ratio to no greater than 45% on a Trust level
and 55% on an individual credit facility level, and an interest coverage ratio of no less than 2.0 times. These targets
have been established with the objective of providing prudent debt facility covenant head room to reduce the likelihood
that a debt facility covenant will be breached as a result of a fall in the value the assets of the Trust or a reduction in
property income and/or increase in interest rates.
The interest cover ratio measures the ability of the scheme to service interest on debt from earnings.
Debt facility
Newmark Capital proposes to secure a debt facility of approximately $12.1 million to acquire the Launceston Property.
Newmark Capital has received indicative non-binding proposals from more than one lender for loans on terms
consistent with Newmark Capital’s gearing policy. The indicative terms can be summarised as follows:
Type of loan Interest only, non-recourse
Loan amount Approximately $12.1 million ($100,000 undrawn)
Gearing ratio 1
Trust 45.0%
Bank Covenant 55.0%
Interest cover ratio (ICR) 2
Trust 3.0 times
Bank Covenant 2.0 times
Interest cost (including 4.75% in total fixed for 3 years
margin)
Term of loan 3 years
Establishment fee Up to 0.25% of the loan amount
Security Registered first mortgage over the Launceston Property
NEWMARK HARDWARE PROPERTY TRUST NO.1 11You can also read
