While the breathtaking, mining-fuelled sale of Central Queensland property Moray Downs for $110 million grabbed national media headlines recently, that outcome is just the tip of the iceberg in an emerging two-speed property market in some areas of the state.
It’s a development that carries a variety of implications, a Brisbane audience was told on Friday.
While Moray Downs owner, Acton Land and Cattle Co’s Graeme Acton denied there had been any sale of nearby sister property, Iffley, when interviewed by Beef Central last week, property title records tell a somewhat different story.
A title search clearly shows that in August last year, Macarthur Coal bought 26,000ha of country on Iffley, located southwest of Mackay, for a price of just over $38 million.
Technically, the Actons may still own ‘Iffley’, but title records show its size has now been reduced by almost two-thirds, from 41,000ha to just 15,000ha.
The Iffley deal takes the value of the Acton Land and Cattle Co’s property transactions with miners over the past six months to just short of $150 million. Although unconfirmed, there is still a rumour circulating that the Actons may have negotiated some form of royalty payment in addition to the purchase price, and five-year grazing rights, which would be a first for mining/cattle property transactions.
The recent Acton Land & Cattle Co developments serves to illustrate some of the big impacts being seen in rural property from mining expansion – particularly in Central Queensland, but with repercussions echoing across the state and even into NSW.
This was one of the messages gleaned from a rural property briefing hosted by valuers, Herron Todd White in Brisbane last week.
HTW’s Toowomba-based valuer Stephen Cameron provided an update to bankers, agents, accountants, investors and other rural property stakeholders on Friday.
One of his central themes was the influence on the rural property market from the activities of the mining sector. He suggested there was a growing population of dispossessed landowners who have been bought-out for high prices by miners, who were now looking at re-investing back into the market.
“The fact they have been paid a premium for their property means they are able to pay at least a high-value price for the right replacement,” he said.
Mr Cameron said generally, there had been very limited property activity in Queensland’s grazing/mixed cropping country in the past 12 months.
There had been a sharp decline in values since 2007-08, producing a disjoint between buyer and vendor expectations, lowering sales activity. This continued until the latter stages of 2010, when a little recovery was evident in Queensland grazing property values, but the flooding of early 2011 again took any momentum out of the market.
A little resurgence took place towards the later stages of 2011 (more from a sales turnover point of view, rather than price), due to vendor and purchaser expectations starting to better align.
Looking specifically at Central Queensland, he said prices for property in the ‘less that $2 million category’ were being propped-up in some cases by miners on high remuneration packages.
In the $2m-$8m value bracket, populated mostly by family grazing enterprises, the Central Queensland market remained very flat, with little activity evident.
Beyond $8 million, however, there had been some activity from within the corporate sector beef producers, highlighted by the sale of Central Queensland property Mt Cormley, a 23,000ha holding which sold for $27.5m last year.
Another good example of the continued strength of support at the higher quality, larger-scale end was the $27.5m purchase last June of the Comely/Mapala aggregation by Consolidated Pastoral Co. The property last changed hands in 2008 for $32.5m, with stock, worth about $28.5m bare, or a decline in value of only 4.5pc over the past three years.
The second influence in this market segment discussed by Mr Cameron was coming via buy-outs of grazing properties by the coal mining or gas companies. Many of those original landholders were now looking at re-injecting those funds back into the market – often able and prepared to pay a premium for the right property.
“This is creating something of a two-tiered economy,” he said.
“Generally those producers who have been bought-out by the mines are able to go another step further, either in price or scale when they re-invest.”
“There’s a substantial amount of money floating around in that CQ market space at present, being the proceeds of property sales to miners, and some of those former owners at least are likely to re-enter the market.”
He did not rule out the prospect of quality properties being deliberately placed on the market, being targeted squarely at this buyer group.
Inquiries through other valuer channels suggest there are about 20 such examples just in the Connors River (7) and Capella (9) districts alone. While some acquisitions have been made directly for mining, others have taken place for the development of infrastructure, such as rail freight systems.
In more southern regions of Queensland, there had also been a flurry of activity around Wandoan from mining and CSG acquisitions, Mr Cameron said.
A local property, Allawah, sold in 2008 for $1m ($2000/ha), before turning over again in 2010 for $1.8m, demonstrating the considerable premiums mining companies were willing to pay.
Xtrata and other gas companies operating around the district acquired about 14,000ha of grazing country around Wandoan last year alone, for a combined figure of about $45 million, he said.
Whether those funds were entirely re-injected back into the property market by ‘dispossessed’ landowners remained to be seen.
“But with limited numbers of properties being offered to the market, if a situation emerges where a number of landowners that have been bought-out are competing for one or two sales, it is generally going to lift those values up,” he said.
This phenomenon could also impact on a larger area than the immediate district affected by mining.
“There have been recent examples of producers who have been bought-out by mines around Wandoan relocating to Goondiwindi on the NSW border, for example.”
Mr Cameron pointed out that it was a quite high proportion of the state of Queensland that could be impacted by coal mining or gas, extending from the Galilee and Bowen basins north of Moranbah, west to Alpha, and down to Injune, Roma, Miles, Dalby and onto the doorstep of Toowoomba. Similar impacts were now starting to be seen in NSW.
He said there were in fact instances where the two industries (agriculture and mining) were assisting each other.
One example was a water reclamation project being undertaken by Queensland Gas south of Chinchilla.
With new legislation covering how miners must utilise saline water from the coal-seam wells, instead of simply being evaporated, a $350m reverse osmosis water purification plant is being developed, drawing from a 3000mL ring-tank.
Through a joint initiative with SunWater, the fresh water is piped 20km to Chinchilla weir. Landowners along that pipeline will have access to that water when it becomes available in about two months’ time, for stock or irrigation use.
“This is a relatively new development, and could see what was traditional dryland grazing country, at best, being developed with centre-pivots for irrigation and generating a higher cash flow.”
“There are obviously issues around that, from a valuers’ viewpoint, including the certainty and reliability of water, but there is no historic data to go on to draw conclusions about how this potentially changes value,” Mr Cameron said.
Adding comment during a later session on carbon offset issues, HTW’s head of rural business, Tim Lane, said the typical impact from a coal mine ‘footprint’ might include clearing 2500ha of brigalow.
“As a consequence of the mine action, that mining company would then have the obligation to go and replace that with approximately 12,500ha of brigalow country. Up to now, a lot of the mining companies/developers have just gone and bought a brigalow property, to solve the problem.
“But as those properties start to disappear out of the market, the miners are going to have to approach landholders and enter into deals where they are paid to regrow brigalow on some of their more marginal country,” Mr Lane said.
“There is certainly potential opportunity for landholders, both larger holdings and potential to rehabilitate or marginalise an area that is less productive. The other side to that, of course, is that it represents an obligation and encumbrance on title, and ongoing costs attached.”
The implication of such schemes meant that landowners should look at them carefully.
“There are opportunities, but with opportunity comes risk,” Mr Lane said. “We’re only now starting to look at how we determine the valuation impacts of such agreements,” he said.