Property

RFM outlays $28m on Central QLD beef and cotton properties

Jon Condon, August 28, 2018

RFM outlaid $10 million for well improved Marlborough district backgrounding and finishing property Cerberus this week.

 

INVESTMENT fund manager Rural Funds Group has continued its recent expansion phase, purchasing two choice Central Queensland grazing and cotton properties for a combined $28 million.

RFM has outlaid $10 million bare of stock, to purchase choice 8280ha Marlborough district backgrounding and finishing property Cerberus, about 140km northwest of Rockhampton.

The property will be leased for ten years to Katena Pty Ltd, trading as Bryant Beef – representing a substantial existing family-owned cattle operator who does not currently have exposure to country in the local area. RFM will also provide the lessee with a $1.6m cattle finance facility.

The company said it plans a stage-one development program, forecast to cost $2.5 million, aiming to increase carrying capacity on the property by 28pc and improve infrastructure. Establishing leucaena may be part of that development process, in addition to further waters and fencing.

Cerberus was placed on the market in February as part of a much larger Marlborough property aggregation, totalling 55,400ha of premium buffel grass finishing country, which carried sale price expectations around $70 million. Cerberus was listed earlier with Ruralco, with an asking price of $11 million bare. Vendors were Ron and Lorna Bahnisch, who plan to retire.

Ruralco Rockhampton’s Bill Hamilton said discussions were continuing with parties interested in the remaining properties offered in the broader Central Queensland aggregation.

Records show Cerberus has consistently grown and fattened 2600 dry cattle on average each year producing 600,000 kg of beef per annum based on the owner’s records for the past fifteen to twenty years.

About half of the property is developed brigalow and softwood scrub country, sown to buffel, green panic, Rhodes grass, butterfly pea and stylos. While the country is currently dry (picture published here was taken earlier), it is in a lot better shape than many other parts of Queensland and NSW, season wise.

The country is subdivided into twenty paddocks, securely fenced with three barb, complemented by 15km of laneway servicing two sets of yards. The main yards are timber construction with vet crush and scales, with a second set of steel and timber trucking yards with attached coolers, located next to the highway.

A centrally-located bore equipped with electric submersible pump to mains power, services eleven tanks and 22 troughs. A second bore is equipped with mono pump, three dams, permanent and semi-permanent holes in creeks.

A comfortable four-bedroom homestead nestled against the range commands spectacular views across the property. Other infrastructure includes a 150sq machinery shed, hay shed and storage shed.

$18m for Rolleston cotton operation

In a separate property deal announced yesterday, RFM has outlaid $18 million for 2942 ha Rolleston district cotton farm Mayneland, located 25km north of Lynora Downs, another cotton property owned by RFM in Central Queensland.

The property includes 531ha of irrigated area and 1757 ha of dryland farming. Included with the purchase is 11,234 ML of water entitlements, of which a significant portion is unutilised.

A stage one development of an additional 579 ha of irrigated area and a 2500 ML water storage is expected. RFM will operate the property until the completion of the current cotton crop, before coming to terms with a lessee for the FY20 cotton season. See more detail on the Mayneland cotton farm purchase in this Grain Central article published today.

Settlement on both properties purchased this week is expected in September.

Beef investments started in 2016

After earlier focusing on the cotton, tree crops and other commodities, RFM made its first big investment in the beef industry in July 2016, outlaying $50 million on three large scale grazing properties plus cattle in Central and Northwest Queensland.

Included were Rewan, near Rolleston in the Arcadia Valley; and Oakland Park and Mutton Hole, two gulf district breeding properties east of Normanton. The three holdings combined cover some 242,000ha. At the time, Rural Funds said the move was part of its plan to expand its portfolio of cattle assets in northern Australia. Click here to view Beef Central’s earlier report.

Since then, the company has been involved in a large sale and leaseback agreement for the Natal Downs aggregation in Central and North Queensland with the Camm family, and a similar arrangement for Comanche, a Central Queensland holding near Morinish.

In July this year, RFM and beef processor JBS Australia announced a sale and leaseback deal where RFM bought JBS’s five feedlots, and the cattle inventory they contained, for around $300 million. JBS holds an option to repurchase the feedlots at any time after year five.

RFM said both properties purchased this week were consistent with RFF’s strategy to acquire assets which may benefit from productivity improvements, add to the frequency of rent reviews, are in sectors in which RFM has experience and expertise, and enhance diversification by sector, climatic zone and lessee.

About Rural Funds Group

Rural Funds Management Limited (RFM) is one of the oldest and most experienced agricultural fund managers in Australia.

Established in 1997, RFM is the responsible entity for six agricultural investment funds and as at June 2018 had approximately $848m of assets under management across New South Wales, Queensland, South Australia and Victoria.

RFM’s largest fund under management, the Rural Funds Group (RFF) is an ASX-listed real estate investment trust. RFF currently owns a portfolio of diversified agricultural assets including almond and macadamia orchards, commercial-scale poultry farms, vineyards, water entitlements, cattle and cotton assets, all of which are leased to quality tenants.

Financial year results

Rural Funds Group recently announced its 2018 financial results, including earnings of $44 million, up 29pc on the previous year, and adjusted funds from operations (AFFO) per unit of 12.7c.

Contributing to the 29pc increase in earnings for the period was lease income from the Natal cattle property aggregation acquired in December 2017 as well as valuation increases on property assets in the cattle, cotton, almond, macadamia and water sectors.

During July 2018 RFF conducted a $149.5 million entitlement offer to fund the acquisitions of cattle industry assets generating additional fixed income.

In an investor presentation accompanying the results, RFM outlined itsclimatic diversification strategy and significant holding of high security water that underpins the reliability of lessees operations in southern Australia.

“RFM continues to pursue opportunities to expand the fund, with additional natural resource assets in the cattle and cotton sectors,” it told shareholders. “Assets such as these offer growth potential relating to improvements in productivity and value, and complement infrastructure predominant assets such as recently acquired cattle feedlots.”

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