Property

Weekly property review: Are premiums likely for land with wind-farm potential?

Property editor Linda Rowley, 23/02/2022

Wind turbines are providing some beef producer land-owners with a steady income stream, but with few transactions yet taking place, their impact on property values is still difficult to determine.

This week’s property review examines three points of view on the potential for prospective wind-farm projects to enhance property value – from a valuer, a vendor and a rural property specialist.

The valuer

Scott Fuller is the New South Wales and ACT rural director at Herron Todd White.

He said wind turbines and towers were becoming recognised as a potentially valuable income source for a property, but they are still causing divisions in the community.

“Some landholders, adjacent to wind farms and who don’t generate income from them, have been paid compensation for the visual amenity impact of the towers on their properties,” he said.

Mr Fuller said properties with wind turbines attracted more per hectare because they come with an income stream.

“Incoming purchasers are happy to pay more for a property with ten wind towers, making a guaranteed income of $150,000 a year, running the same number of stock prior to the installations.”

However he said properties with wind towers rarely came to the market.

“Why would you offload an asset that is making a reasonable return? A producer can work less by winding back carrying capacity and still make more money due to the passive income of wind towers.”

When it comes to actual price premiums, Mr Fuller said vendors and purchasers had different perspectives.

“For example, a vendor in the Monaro region of New South Wales said he achieved $100,000 per tower (over a number of years) on top of land value, but the purchaser claimed he paid $70,000 per tower. So, somewhere in between is the truth.”

Potential

Mr Fuller said properties identified as potential wind turbine sites are in future likely to achieve premiums.

“It would certainly make a property more saleable and it would be remiss of an agent not to use that information to lift a buyer’s expectations,” he said.

“However, from a valuer’s perspective, that is ‘selling the sizzle,’ and it doesn’t cut the mustard. Valuers want definition. They want to know what you can do, not what could happen.”

Mr Fuller explained that alternative energy companies only invested tens of millions after completing lengthy, comprehensive studies on wind measurement.

“Potential purchasers should consider a number of factors when it comes to a property’s potential for future income from renewable energies, including how far down the track the development is, and how it would impact the property.”

He said it was like a western NSW property advertised as perfect for Dorper production, however, this would only be the case after the purchaser had spent $300,000 upgrading the fencing.

“In the same way, producers may think their property is suitable for wind towers, but may need to outlay $150,000 on a wind study and then spend three years convincing an industry participant to build the turbines.”

Mr Fuller said the percentage of asset growth depends on property size and the number of towers.

“The value is usually a catalyst for a sale rather than an immediate bottom-line addition. A completed wind study indicating interest in building wind towers is more likely to see a price uplift.”

He said the attractiveness of wind turbines and the income they generated has been overshadowed by the strong market for all property.

“I believe more producers will show increased interest in renewable energies once interest rates start to rise and the market settles.”

The vendor

Angus and Eunice Vivers recently relisted their 575ha grazing block Timber Downs, halfway between Inverell and Glen Innes on the tightly held Kings Plains plateau in northern New South Wales.

COVID-19 may have disrupted their initial sale plans, but it was certainly to their advantage with the New South Wales government announcing plans to erect hundreds of wind towers in the New England region.

Timber Downs has been earmarked as a potential site. It is close to Transgrid transmission powerlines and is neighboured by wind turbines.

Prior to COVID, selling agent Bob Jamieson from Bob Jamieson Agencies anticipated Timber Downs would make around $5700/ha.

He now says future earning opportunities and the recent sale of the nearby Paradise Creek Station, which was a major value-defining step up for the region, could see Timber Downs achieve a 15 to 20 percent premium.

“The uncertainty surrounding wind turbines is changing, and as a result, there is more interest. The producers who have them have a distinct advantage in adding to their agricultural enterprises with the additional income streams,” Mr Jamieson said.

That explains why the property is now being offered for sale via an expressions of interest campaign.

Vendor Angus Vivers believes wind towers are an opportunity for the incoming purchaser.

“There is a 50 percent possibility that Timber Downs will become a wind farm, however it is not guaranteed, and the process will be long – at least five years to get up and running,” he said.

The Vivers, who were always planning on selling Timber Downs to set themselves for retirement, have also been investigating smarter and more lucrative ways to farm by enhancing soil carbon levels on their home block, Jindalee.

Eunice Vivers said the couple has been talking with agronomists and soil carbon experts.

“We are planning to fertilise and improve pastures to enhance carbon levels. At the end of the day if we tick all the appropriate boxes, we will achieve our goal of increasing production and making money from carbon credits.”

The agent

Despite being in the rural property game for more than 20 years, rural property specialist Bob Jamieson hasn’t yet sold any properties with wind turbine or carbon contracts in place.

“It could be an indication that local producers have been able to use cash flow from wind turbines to financially get through the recent, very tough drought,” he said.

Mr Jamieson also explained that these returns, combined with the extreme post drought livestock values, may have helped producers maintain livestock numbers and expand operations.

Currently, Mr Jamieson is working with the Vivers family to market Timber Downs’ potential as a wind turbine venue, as well as to formalise its carbon farming possibilities.

He is employing local professionals to commence the carbon baselining process.

“The renewable energy potential factors will combine with a vendor leaseback offer to encourage new, perhaps non-farming investors to the region.”

Mr Jamieson said Timber Downs will be offered to the market with multiple income streams.

“The family is working with a major international turbine company and local carbon farming experts to determine the property’s opportunities including, wind turbines and carbon.”

Mr Jamieson said it was a commonsense marketing move that will be carried out on all properties brought to the market by his business.

“An enterprise with an effective off-farm income stream is certainly more attractive to potential purchasers and investors who have little knowledge of agriculture,” he said.

As part of a non-compulsory biodiversity project (a CMA carbon offset / Infrastructure project), the vendors of Timber Downs have fenced a 120ha timber paddock and kept it free of livestock.

Additionally, the Vivers have offered to lease back Timber Downs for a minimum of three years at four percent of the agreed purchase price (not including stamp duty).

The purchaser would retain any carbon biodiversity advantage for the 120ha already identified and locked up. Additionally, the purchasers would be invited to examine the turbine and carbon farming opportunities by meeting with the professionals engaged by the Vivers family.

Mr Jamieson said at the end of the day, the incoming purchaser may or may not choose to pursue the wind, biodiversity, carbon or leasing options.

“It is our job to point out the opportunities and economically, I cannot think of a better time to run a couple of hundred cows on the picturesque Kings Plain pastures than right now.”

 

  • See earlier report on the wind turbine project unfolding on the Wambo wind farm project on Queensland’s western Darling Downs, which will see up to 110 turbines generating about 500MW of renewable energy…

 

 

 

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Comments

  1. Andrew Critchley Dunlop, 25/02/2022

    I have a property with a number of wind towers paying a steady income stream. The income is indexed to CPI and increases annually on that basis with between 50 and 75 years on most contracts. (In my case 25 year leases with options for further periods). My simple valuation would be that the towers ad 20 times their annual earnings to property value so that wind towers delivering 100k in annual income would ad $2 million to the value of the property. This is a price earnings ration of 20 to one or to put it another way, an investment that delivers a constant 5% yield. Some will say there is no guarantee that leases will be renewed, however, the cost of exiting and returning the land to its original condition is prohibitive and nowhere are windfarms being torn down and abandoned, they are continuing to develop and find new sites. In addition, as technology in this field develops, higher yielding towers will be installed and lease payments increased in line with capacity increases.
    There are some infrastructure funding groups who are offering to buy the rights to future income with an up front cash payment. This I compare with a loan repaid from the future income and in the cases I have seen, the effective interest rate they are charging is in the range of 5-6% pa. I have not accepted any of these offers as I value the indexed regular income more that the cash up front.

  2. John Edward Carter, 24/02/2022

    The first windfarm in Eastern Australia.,Crookwell 1 ,was ,after 20 years operation ,sold for 40% less than similar country in the area. The noise, the interference with management by operators, the potential demolition costs after 20 odd years plus the huge Transgrid connection lines with their effect on humans and livestock are a disaster waiting to happen.

  3. Michael Katz, 24/02/2022

    Renewable energy in the form of wind power is unlikely to be a long term solution. The towers are subject to mechanical problems which are not easy to fix. In addition they leave huge concrete blocks all through the landscape. While they are still erect they are unpleasant to live with. We have 100s in our region.

    The other part of the problem is the impact of new transmission lines required to transfer power from the wind farm to the city where it is required. These blot the landscape for the duration of their life and are compensated with a single one off payment. They are a terrible addition to our landscape and also create a bush fire hazard.

    The solution is to push for windfarms offshore from Sydney Wollongong and Newcastle.

  4. Jack Cleary, 23/02/2022

    The Government Federal and NSW have been passing off their poor land management and resultant loss of australian flora and fauna onto ordinary landowners. Truly massive costs can be involved. Their carbon and bidiversity ‘credit’ scheme are both duds ina very profound risk to those who sign up…after paying maybe $100,00 or so for an ‘application’ with no certainty of success. In the case of wind generators…certainly when I, an electrical engineer, enquired the land owner looking at having a wind farm had to pay for all the(truly massive) transmission costs to ‘the grid’…It’s not just a matter of ‘set and forget’ but may benefit personal use. The investment to get $150k return would be massive…unless very close to a suitable network. If putting it to a windfarm organisation it would be foolhardy to pay for assessment. If you think you have a case…require them to do the assessment…it’s a tax-off for them but not for you. Look deeply into the pool before diving-in.

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