HAS the Australian cattle property market seen the best of the surge in investment interest from Chinese buyers?
This time last year China appeared to have an insatiable appetite for Australian cattle properties, with numerous Chinese companies buying or pledging to invest hundreds of millions of dollars in large-scale Australian beef operations.
However, the anticipated frenzy of buying activity has halted, with the last significant sale* made eight months ago, in September 2016.
Rifa Salutary, the Australian arm of China’s Zhejiang Rifa Holding Group, purchased the 8000ha neighbouring cattle breeding and finishing aggregations Middlebrook Park and Kooroon, south of Tamworth in northern New South Wales, for around $55 million.
Since then, have been no significant outright Chinese purchases*. So, is their interest in Australian cattle property assets waning?
Not according to Andrew Adcock from Elders Rural Queensland. He said there is continuing inquiry from the Chinese, but most were failing to perform.
“The issue is having the right property and the right people with the willingness to proceed. Presently, there are not many large scale operations in the market place. Last week, I had a phone call from potential buyers seeking three fully-stocked cattle stations in Central Queensland for between $10 and $40m, but I just don’t have the article,” Mr Adcock said.
Darwin-based Andy Gray from Ruralco Property Territory Rural said he was also fielding inquiry from China regularly.
“The due diligence process for overseas investors is lengthy and comprehensive. I recently spoke to a group who wanted to understand how to manage an extensive Australian cattle station, let alone where to buy one.”
Mr Gray said for the most part, the Chinese were serious buyers, but not always willing to part with the coin.
“Buying the property is easy. Running it afterwards is the challenge for some of these internationals. Imagine an Australian purchasing a property or a business in China: How do you measure the prices you’ve been given, or whether the current managers are doing the job well enough or not? I think that’s just a normal reaction to the market.”
Mr Gray said Chinese interest in Northern Territory cattle stations had not waned.
“There are current restrictions on taking capital out of China (discussed in this earlier Property Central item), but it is easier for existing businesses showing returns and cash flows.”
Mr Gray said there was both international and domestic interest evident at present.
“The current strength of the beef market is unprecedented and it’s a focal point for many people. I am currently fielding an inquiry from the United States for an NT cattle station. I don’t know whether they are a keen or committed buyer, but they are certainly making an effort to understand the industry.”
Mr Gray said foreign investment was nothing new to the Northern Territory.
“In the 1940s, the UK Vestey family owned holdings covering around 163,169 sq km; in the 1950s the Texas-based King Ranch purchased numerous properties and; one of the world’s richest men, the Sultan of Brunei, purchased Willeroo in 1981 … just to name a few.”
Mr Gray said Chinese investment was just part of the foreign investment landscape – it was not the dominant force.
“Any time the Chinese did buy something in the past two years they received an amplified amount of interest and publicity because they were new money and everybody was particularly interested.”
CBRE’s regional director of agribusiness, Danny Thomas, has only ever taken the view that China is a component of the beef property market.
“China has never been a significant part of the market. Any time they did buy something in the past two years they received an amplified amount of interest and publicity because they were new money and everybody was particularly interested.”
However, Mr Thomas conceded Chinese investors had backed-off more recently, in part due to the regulatory changes restricting capital outflows.
“Even legitimate Chinese corporations with a track record of purchasing agricultural properties in Australia are finding it difficult to mobilise capital out of mainland China. Large state-owned enterprises (SOE) must have a strong justification for taking money out of the country at present. Before the introduction of the new rules, it was a bit of a free for all,” he said.
As a result, CBRE had had two recent deals with Chinese investors fall over.
“They were for two smaller Victorian properties worth $9m and $10m. Both were selling to Chinese groups who had a track record of investing in Australia. The reason given by them for pulling out was that it was too difficult to move the money out of China,” Mr Thomas said.
Another property that failed to settle recently was the 152,500ha Woodstock Station at Richmond, in northwest Queensland. Last year it reportedly sold to a Chinese investor, who couldn’t finalise the deal.
Woodstock Station is now being marketed through Elders and Ruralco and Andrew Adcock said it was receiving good international interest.
“I had some enquiry through an Australian organisation that has a big Chinese base of clients talking the other day. Whether it is their sort of property we don’t know yet. On the other hand, domestic enquiry has been good because of the cattle numbers involved,” he said.
In the meantime, Mr Thomas cautioned vendors banking on Chinese investors to pay overly ambitious expectations.
“If a vendor is hanging out for that absolute knockout purchase price, they may be holding on to their property for a very long time. There are plenty of existing parties willing to pay full market value, particularly for properties that are a strategic fit. For a very long time, I have felt that people were walking past the logical purchases and chasing the unicorns,” he said.
Mr Thomas described Chinese investors as currently experiencing a ‘stutter step.’
“They’ll get their act together again and don’t for a minute forget the rest of Asia, North America and Europe. There is still plenty of capital pumping into Australia from all over the world. European groups, such as the French, Italians, Swiss, Austrians and Germans are dominating. There is a lot of old family money being invested in agriculture for hundreds of years.”
Mr Adcock said there will always be reasons why people can’t invest at different times.
“All investments have their peaks and troughs – when interest is high and then it wanes. When the right article comes up I am sure the Chinese will show interest again.”
* Statistic does not include Shanghai CRED’s minority stake in S. Kidman & Co, completed in December with FIRB approval, along with majority ownership by Australia’s Gina Rinehart.