Share price in RFF listed property trust collapses, after US short-seller attack

Beef Central, 06/08/2019

RFF last year bought one of Victoria’s trophy cattle breeding properties, Cobungra Station, in the East Gippsland. The large-scale, purebred and crossbred Wagyu beef breeding enterprise, numbering more than 4000 cows plus replacements, covers 650ha freehold and 24,500ha leased grazing land west of Omeo.


THE share price for listed rural real estate property trust, Rural Funds Group plunged this morning after the company came under attack from Texas, US-based short-seller, Bonitas Research.

Bonitas is the new short selling instrument founded by Matt Wiechert, whose Glaucus Research last year exposed Blue Sky Alternative Investments, another investor in Australian agriculture.

Rural Funds shares dropped to 42 percent to $1.36 before trading was halted by the ASX this morning, pending an announcement.

RFF owns a diversified portfolio of major agricultural assets worth about $920 million, covering beef cattle, cotton poultry, vineyards and macadamias.

The cattle assets held by the company were valued in December at $269 million. They include:

  • JBS Australia’s five Australian beef feedlots, which it leases back to JBS
  • The Camm Agricultural Group properties in Central, North and southern Queensland, which are leased back by the Camm family
  • Rewan Station near Rolleston, which RFF announced last week it had leased for ten years to the Australian Agricultural Co
  • In July 2018 RFF acquired Comanche, a 7600 ha breeding and backgrounding cattle property located in Central Queensland.
  • In September 2018, RFF acquired Cerberus, an 8280ha cattle breeding and backgrounding property northwest of Rockhampton. A development program, forecast to cost $2.5m, aimed to increase carrying capacity by 28pc and improve infrastructure.
  • RFF acquired two breeding and backgrounding properties in the north east NSW region of the NSW New England in late 2018 and early 2019. They comprised Dyamberin, a 1728 ha property settled in October 2018; and Woodburn, a 1062 ha property settled in January.
  • In march RFF bought Cobungra, a 6486 ha breeding and backgrounding property located in the East Gippsland region of Victoria. The properties are leased to Stone Axe Pastoral Co, a Wagyu producer that operates other properties in NSW and in WA. The leases are for 10 years and include market rent reviews in year five.

Bonitas accused Rural Funds Group of overstating assets by 100pc and said the company’s reported profits since the 2017 financial year were either fabricated rental income or non-cash gains on “dubious fair value changes.”

“Evidence suggests that RFF’s reported profitability had included $28 million of fabricated rental income paid to RFF by its two largest third-party lessees,” a report posted to Bonitas’ website said.

The short-seller calculated that RFF had overstated its net assets by 100pc and that the company’s true net assets figure was only $268m at the end of December. According to Bonitas, that would put RFF in breach of its recently increased minimum $400 million net asset loan covenant.

According to the RFF annual report, the company completed a $149.5 million capital raising in July last year.

“RFF Management operates both RFF and RFM, yet RFF Management owns 100 per cent of RFM and owns less than five per cent of RFF’s equity,” Bonitas said.

“To us, this immediately appeared as a clear conflict of interest between the incentive structures of RFF Management versus RFF minority shareholders.”

Last year, Bonitas launched an attack on Brisbane-based Blue Sky Alternative Investments, accusing it of charging clients egregious management fees and overstating returns. Blue Sky’s shares plunged from $11 to less than $3 and then to 18.5c this year before trading was suspended and the company entered receivership.

In comments published by The Australian this afternoon, RFM managing director David Bryant rejected the claims, saying they were false, and “seemed to accuse us of fraud on a vast scale,” he said.

“We are preparing a line-by-line response to the report and aim to get that to the market as soon as possible,” Mr Bryant said. “We’re keen that our investors, and the market, receive absolutely full transparency and we are working very quickly to provide all the information that people would want,” he said.





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  1. Bevan, 08/08/2019

    Matt Weichert was spot on regarding Blue Sky, management charging dubious performance fees on overstated NAVs and profits, look where they ended up. Seems a conflict of interest here between the RFP entities and this could end badly. I have problem with shortsellers keeping companies honest it’s just a shame shareholders suffer and ASIC is too weak to chase Directors for irresponsible behaviour.

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