News

Receiver appointed for NT’s Killarney Station

Beef Central, 31/01/2013

 

Large-scale Northern Territory cattle aggregation Killarney Station has been placed into receivership. 

The live export-geared Victoria River District holding was placed into the hands of corporate recovery firm McGrathNicol late Tuesday afternoon, on the instructions of major creditor the National Australia Bank.

The 5414 square kilometre breeding operation was offered at auction in Brisbane last August but did not sell, and has since been the subject of ongoing speculation about its future.

The development comes as Australia’s northern grazing industry struggles for viability beneath the weight of high costs, eroded incomes and limited marketing options, in the wake of Indonesia's decision to halve cattle import quotas since 2011.

In June of that year the Gillard Government controversially cut off Australia's cattle trade to the country for two months on animal welfare grounds, a move that was widely seen to have severely damaged Australia's trade relationship with the major market, and is the focus of ongoing legal action by producers and businesses directly affected by the ban.  

When contacted by Beef Central on Wednesday, Jamie Harris, a partner of McGrath Nichol, confirmed Killarney had been placed into receivership on Tuesday afternoon, and said the firm was still working through the details of its position.

“We have only been in there less than a day, we’re still in information gathering phase as you would expect,” he said.

“We are just about trying to understand where management is at, where staff are at – there will be a skeleton staff there obviously – and to get an idea of cattle numbers to make sure they are being appropriately cared for as you can at this time of year, and work out the strategy to go forward.”

The holding comprises two properties, Killarney Station (2819 sq km) and Birrimba Lease (2595 sq km).

It is owned by Wallco Pastoral Co, a consortium of owners who have had a close association with the northern livestock export trade for the past 20 years.

Its shareholders include Filipino, Marco Lorenzo; Australian-based Felix Wildin; and shipping magnate Peter Vroon.

Wallco, then led by live exporter John Quintana, bought Killarney in 2001 from the late Brian Oxenford’s Western Grazing, for about $21 million – considered a high price at the time, when live cattle export into Southeast Asian was still gaining momentum.

The large-scale breeding property was initially taken up and developed by northern pastoral identity Bill Tapp in the 1960s.

The station was offered for auction in Brisbane during the Royal Queensland Show in August last year.

At the time the selling agents indicated that the Wallco partners were seeking to go their own way, leading to the decision to dissolve the partnership and market the property.

The aggregation, offered with more than 41,000 mixed Brahman-based cattle, was passed in on an auctioneer’s bid of $30 million, and failed to draw interest when subsequently offered as two separate lots.

In the month preceding the Killarney auction, other large scale and well-regarded VRD properties including Bunda Station and Riveren/Inverway also failed to attract bids at auction.

The receiver will continue the station’s operations until a decision is made on its future and whether it will be re-offered to the market for sale. 

The NT cattle industry has not seen a major sale since Tanumbirini on the western edge of the Barkly sold to Thames Pastoral Company for an undisclosed sum in excess of $30m in February last year.

More significantly, the live export focused VRD region has not seen a major sale since Inverway sold for a value equivalent to $1050/beast area (analysed bare) in June 2007, during what was the lead up to the peak of the NT property market which occurred in 2008-09.

In the absence of recent selling activity, if Killarney is now marketed it will provide a serious test for the northern property market and could lead to a readjustment of property values which would affect all landowners in the region.

As an indication of how significant a readjustment of benchmark values could be, if Killarney was to sell at $40 million –  well above the $30m price it was passed-in for at last year's auction – the value of the land and buildings, minus the 40,000 head of mixed cattle it is estimated to be carrying, could equate to a 40-50pc+ reduction in values paid per beast area when transactions were last occuring at the market's peak. 

That of course comes with a rider that every property sale is influenced by unique circumstances and individual factors, which makes generalisations about percentage changes fraught with difficulty.

Killarney adjoins Heytesbury Pastoral Co’s massive Victoria River Downs (VRD), 225km southwest of Katherine. It was originally excised off VRD, which at one time totalled more than 10,000 square miles in size.

When Ray White Rural offered Killarney last year it noted the potential for development, particularly on the 2595 sq km Birrimba lease, suggesting that additional water and fencing infrastructure could increase the potential carrying capacity from 55,000 head at present to 65,000 head.

The main set of cattle yards can handle up to 4000 head at a time, and feature a half-deck weighbridge and extensive horse facilities.

The country is a mixture of basalt plains, with alluvial plains and flood channels, creeks and river systems with flood-out areas. Average annual rainfall is around 800mm.

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