Property

Speculation grows over more NT property sales

James Nason, 12/11/2013

Killarney Station.After a long period of sluggish sales activity there is increasing evidence that rural property demand in the Northern Territory has turned a corner, with two major property deals sealed last month and a third seemingly on the cusp of achieving a result.

October saw Riveren and Inverway sell to Indonesian agrifood company Japfa Comfeed for a rumoured $35m, followed within weeks by the confirmed sale of RM Williams Holdings’ Labelle and Welltree to the Australian Agricultural Company for $27m.

There are now promising signs that another four stations may be close to being sold for a speculated $65m following year-long negotiations to the Keith De Lacy-chaired Staples and Agriculture Group Beef Investment Pty Ltd (STAG Beef) group.

STAG Beef is attempting to raise $70 million via an Initial Public Offering (IPO) and is scheduled to list on the Australian Securities Exchange in early December.

The Australian newspaper has reported that the group hopes the IPO will raise enough funds to enable it to buy Killarney Station and Birrimba in the Victoria River District and Willeroo and Scott Creek Stations near Katherine.

While some recent media reports have suggested the transaction is a done deal, sources close to the group have told Beef Central that no contracts have yet been signed.

However negotiations have clearly progressed to an advanced level and there does seem to be some confidence that a confirmed sale could be announced within in coming weeks.

STAG Beef is chaired by former Queensland Government treasurer and ex-Macarthur Coal chairman Keith De Lacy. Its directors and consultants include former Deloitte partner Alain Pilla, Northern Territory Cattlemen's Association president David Warriner, former QIDC agribusiness manager Barry McNamara, and former AIA Capital executive chairman Sam Winston Smith.

A STAG beef document also lists former AA Co general manager Geoff Wagstaff, who has over 40 years experience in the northern cattle industry, as the company’s General Manager of Operations.

If the planned purchase of Killarney, Birrimba, Willeroo and Scott Creek proceeds it will give STAG Beef a starting base of around 90,000 head of cattle.

The Australian reports that STAG Beef is looking to establish itself as the second major cattle company on the Australian Securities Exchange behind AA Co, which has about 580,000 head of cattle.

The STAG Beef float is being handled by corporate advisory firm BBY.

A BBY term sheet, which details the float to prospective investors, explains that reduced northern property prices has created a strong buying opportunity.

“The company is in a unique position to exploit a low point in the Australian cattle property cycle with current average prices at 2000 levels after a high foreclosure rate, partly as a result of the adverse effects of the global financial crisis,” the term sheet states as cited by financial media outlets.

The recent release of high-volume cattle import orders from Indonesia and a much-improved demand outlook for cattle throughout South East Asia has contributed to a resurgence in northern cattle market confidence following a long period of depressed market conditions.

BBY says STAG Beef will employ a unique strategy designed to commercial beef production, which it describes as:

  • Selecting stations which have bitumen road access to markets, adequate water supply and are located in areas with reliable rainfall;
  • Purchasing at a time when property prices reflected by average price per beast area are at its lowest level since 2000;
  • Improving carrying capacity of the properties by investing in cost effective water infrastructure;
  • Removing pricing risk by entering into a 12 month contract for the purchase of live cattle at A$1.80/kg;
  • Guaranteeing the receipt of funds due under the contract by entering into an industry backed insurance policy; 
  • Narrowing the focus to breeding and rearing cattle until around the age of 18 months; 
  • Maximising stock turnover by growing cattle and selling the cattle at ~330kg after a period in which the cattle have gained the most weight (that is at around 18 months of age).

According to the Australian the board and the management will own a total of 13 per cent of the group.

The company has also indicated its intentions to continue expanding beyond its initial purchase.

BBY has forecast a dividend yield of 7 per cent and an income return on assets of more than 11 per cent.

Earlier this year Mr De Lacy told the Australian Financial Review that there were many offshore agricultural investors very keen to invest in Australia.

"But we are also hoping Australians will be interested and also attracted by the very strong returns."
 

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