Expressions of interest close tomorrow on Chinese-owned Hollymount & Mount Driven, a 61,000ha aggregation near St George in southwestern Queensland

A STRUGGLING Chinese economy and punitive land taxes being imposed on offshore-based landowners in Queensland have been identified as two important factors in a recent trend where offshore owners have liquidated Australian farmland assets – or are preparing to do so.

There have been a string of foreign-owned Australian farming/grazing assets being sold or listed this year (some examples listed below), some of which have evidently been impacted by one or both of these factors.

From a sovereign risk viewpoint, the land tax issue was a major concern in discouraging foreign investment in Queensland land, a prominent property marketing contact told beef Central yesterday.

He claimed state land tax in some cases was adding millions to annual costs for offshore owners holding significant farmland assets in Australia – to the point where they were now deciding to move on.

On top of that, changes are happening not only to Foreign Investment Review Board regulations, but also at the Australian Competition and Consumer Commission, where any transaction of substance (foreign or domestic) would now be automatically referred to ACCC for scrutiny.

“Last year there were 2400 mergers and acquisitions events in Australia, 850 of which were referred to ACCC. From next year, all 2400 would have to gain ACCC approval,” he said.

“It’s just adding more risk and regulatory burden on offshore owners.”

Brisbane based rural fund manager Tim McGavin has been a prominent critic of the damage being done by the Queensland Government’s land tax regime on foreign investment.

The Laguna Bay managing director and founder told the recent Global Food Forum in Brisbane that investors who would normally want to invest in Queensland were now eyeing southern states, or other targets like New Zealand.

The tax regime was hampering foreign investment, he said.

“There are generally really low margins in Australian agriculture and they (foreign investors) are pulling out of Queensland entirely because of land tax. It’s scaring capital away,” Mr McGavin said.

“These things can’t be looked at in isolation. They have to be looked at collectively. Costs are driving upwards, and the consequences are less capital wealth, which will go south.”

Queensland currently applies an additional 3pc surcharge to the 2pc land tax on freehold land owned by foreign companies and trustees of foreign trusts. While the tax was originally devised to discourage offshore investors buying residential real estate and simply locking the buildings up, it has had unintended consequences in the rural property market.

Mr McGavin said the Federal government’s ruling that foreign investment fees must be paid within 30 days of a call-in notice being given, and the withholding tax on dividend distributions to foreigners was also eroding confidence.

“It will get to the point where they will kill the golden goose,” he said.

“A lot of farms we look at have a negative real yield. And a lot has to do with government policy and changes that keep coming and coming.”

Mr McGavin said it was important to have foreign investment, but it was vital to have consistency.

“That’s why nothing is getting done. It’s short-term thinking and they’re not thinking about the consequences.”

LAWD senior partner Danny Thomas told a Global Food Forum panel discussion there were billions of dollars on the sidelines seeking the right investments, and Queensland had the best natural assets in the country – but the tax regime was weighing on foreign investment.

Whether its coincidence or not, fund manager Laguna Bay – significantly backed by the Washington State Investment Board – has recently listed its Carpendale Portfolio near Goondiwindi for sale. Offers of more than $90 million are expected for the institutional grade southern Queensland cropping portfolio covering 13,740ha across five nearby properties.

Financial difficulty in China

Another part of the recent farmland sale/listing trend by offshore owners appears to be connected with China’s economic malaise. The Chinese economy remains in considerable difficulty, with the real estate, construction and manufacturing sectors being particularly hard-hit.

After a dismal second quarter, the world’s second-largest economy lost further momentum in July, with new home prices falling at the fastest pace in nine years, industrial output slowing, export and investment growth dipping and youth unemployment rising to 17.1pc.

An Australian property contact suggested that the need for cash at home had been a factor in some recent (and pending) sales of Chinese-owned Australian farm sector assets, designed to raise cash to prop-up ailing businesses at home.

The contact believes that perhaps a dozen other Chinese-owned large Australian farm assets may come to market for the same reason.

Another property contact suggested that the net sell-down of Chinese-owned farm assets in Australia had been occurring for a couple of years, but may have gathered pace in 2024 due to economic pressures at home.

Here’s a list of recent Australian farm asset sales or listings where the state of the Chinese economy and the need to raise cash is believed to be a factor:

Van Dairy Ltd (VDL) Portfolio, Tasmania – being progressively sold by Chinese businessman Xianfeng Lu, who has sold the properties’ dairy herd already. In the latest part of the breakup of VDL, a 700ha portion in Tasmania’s fertile northwest was sold in March for $15m to a Melbourne-based asset fund, expanding its dairy footprint. In 2022, Mr Lu sold 6000ha of country, originally part of the Woolnorth aggregation to family-owned TRT Pastoral Group for $120 million.

Argyle Portfolio, Kimberly WA – In November Hui Wing Mau, founder of Hong Kong property developer Shimao Group Shimao Group, sold the 2.9 million hectare aggregation made up of Yougawalla Pastoral Co and Argyle Cattle Co for $325m. Buyer was Canada’s Alberta Investment Management Corporation (AIMCo) and New Agriculture, which earlier this month secured the Kimberley Meat Co and Yeeda Pastoal assets formerly part-owned by Hong Kong-based equity fund Asia Debt Management Capital.

Liverpool Plains – Its strongly rumoured that Aohai Australia, a subsidiary of China-based Hunan Aohai Development Co will sell its large Liverpool Plains aggregation covering some 13,000ha around Goolhi and Binnaway, west of Gunnedah on the Liverpool Plains. The most recent acquisition made in 2020 was 5300ha McEvers Park. In total Aohai spent around $18 million buying assets in the district.

Undabri and Yamocully, QLD – While recently removed from the market, Shanghai’s Orient Agriculture (Union Agriculture) was attempting to sell its 13,920ha Undabri and Yambocully aggregation, 15km northwest of Goondiwindi in Queensland’s sought-after Border Rivers region, about a decade after it acquired the first portion of the aggregation. Originally said to be fielding offers around $100 million, including a substantial water portfolio.

Kernot Dairy Farm, VIC – Ningbo Dairy Group, through Chinese subsidiary Zhejiang Nanyuan Holding Group, set up Australian Yoyou Dairy in 2012, to buy and run five Gippsland dairy farms. The company bought three farms in the Tenby Point area near Corinella, and two adjacent farms at Kernot which included 520 milking cows. Reports suggest part of the business has been sold to a Melbourne high net wealth investor for $7 million.

While not necessarily related to the foreign land tax issue or the need for capital bought on by tight economic conditions in China, there’s been a sequence of other recent foreign-owned land transactions, or assets being brought to market (click on links to access):

• Vietnamese-owned Vermelha Station in the NT could make +$40m
• Chinese retail giant offloads Monaro holding for $18m-plus
• Filipino Romeo Roxas lists NT cattle station
• Chinese to offload Qld aggregation
• Liverpool Plains country makes $17m+