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Go Harvey Norman goes West

Harvey Norman co-founder, Gerry Harvey has told The Australian that he and his partners are planning to invest a further $100 million into mining accommodation, despite fears that the mining boom is over.

That follows an initial $60 million investment made through Harvey Norman Holdings (ASX: HVN), to build temporary accommodation (dongas) units to service mining companies. Now Harvey is looking at joint-venture mining accommodation investments in high growth areas of Queensland, including Gladstone and Chinchilla.

Mining accommodation builder, Fleetwood Corporation (ASX: FWD) already owns and operates a mining village, Searipple, in Karratha, Western Australia, and has won a contract to build another village at Gladstone, to cater for up to 1,000 people.

Gladstone is the major processing and export hub for a large number of sizeable and diverse resource projects in the region. More than $50 billion is being spent by major resource and energy companies on LNG, coal and aluminium related projects around Gladstone, requiring a large influx of skilled workers.

Santos Limited (ASX: STO) is in the process of building a LNG plant at Gladstone with its partners, while Origin Energy (ASX: ORG) is also developing an LNG facility on Curtis Island, just off Gladstone.

While the move by Gerry Harvey seems strange – after all, it’s a far cry from selling furniture, TVs and white goods in the suburbs — there does appear to be strong demand for temporary accommodation in these high growth areas.

At the same time, Mr Harvey said that he intended to retain Harvey Norman’s $2 billion property portfolio, despite plans by Woolworths Limited (ASX: WOW) to spin off its shopping centres into a separate listed entity. He added that he was also interested in buying quality shopping centres — some are on the market at less than replacement cost — while avoiding commercial property development. Harvey Norman has suffered losses on both of its most recent shopping centre developments.

Foolish takeaway

Harvey Norman to become the next Fleetwood? Unlikely. The next Westfield – maybe.

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Motley Fool writer/analyst Mike King owns shares in Woolworths. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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