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Weekly Property Review – Land banking provides opportunity, for some

by Property editor Linda Rowley, 31 October 2018

One of the largest individual landholdings in close proximity to Melbourne, Chintin Grange has sold to Australian-based Chinese interests for more than $10m

 

This week’s property review completes a two-part series on the land banking of grazing properties and mixed farms on the urban fringes. Click here to view last week’s first instalment.

 

CBRE Agribusiness director Danny Thomas said some farmers and graziers located on the fringes of large urban centres were making a lot of money out of land banking.

“There have been some long-time farmers, whose land was acquired by the likes of Stockland or Mirvac, who have reinvested their money in the same growth corridor, only to be bought out a second or even third time for the same purpose,” Mr Thomas said.

“As a result, these families have generated enormous wealth. Others have purchased an A-grade property that could have development potential in the next 10 to 30 years.”

Mr Thomas said while investors were looking at land banking as a great investment for the future, farmers who purchased the earmarked country would not necessarily make a strong return on their investment.

“However, their total return will be topped-up by what their capital gain is over time. The real question for the farmer is, can they afford to pay the rates and taxes to incubate the asset until such time as it is the target for an investor or a developer?”

This year, CBRE has sold two notable agricultural properties for land banking purposes:

  • August 2018 – The neighbouring property Chintin Grange (pictured above). At 742ha, the large dryland cropping and grazing enterprise runs 4000 DSE. Located 46km from Melbourne, it sold for more than $10m ($13,500/ha) to Australian-based Chinese interests. It is a land bank with the new owners leasing the property to a local grazier.
  • May 2018 – 1392ha Fairfield – The substantial grazing and dryland farming operation is one of the largest individual landholdings on Melbourne’s fringe at Darraweit Guim, 48km from the CBD. Located in one of Australia’s most historically significant agricultural regions, Fairfield was purchased for around $18.5m ($13,300/ha) by investment banker David Williams. Mr Williams is leasing Fairfield to David Blackmore, a fifth-generation farmer who pioneered the production of Fullblood Wagyu beef in Australia.

CBRE also has a number of agricultural properties for sale as land-banking opportunities:

  • Glengarry Station – (CBRE & Elders) – a 714ha grazing and dryland farming operation at Darraweit Guim, 43km from Melbourne on the fringe of the UGB. Glengarry is one of the largest individual landholdings in the Macedon Ranges Shire offering substantial land banking potential with future development upside. Its location and extensive road frontage would appeal to land bankers looking to capitalise on the rapidly expanding population of Melbourne’s northern growth corridor.
  • Woolbrook – the 1800ha historic mixed farm producing dryland crops and prime lambs is being marketed as an unprecedented land banking opportunity that adjoins the Teesdale township. It is located 38km west of Geelong and 79km from Melbourne and is being sold via an expressions of interest campaign closing on November 9.
  • Buneep Park – the 360ha highly productive cattle and sheep property, 73km from Melbourne, boasts improved pastures and an excellent fertiliser history. It is currently carrying 360 cows and 1300 ewes.
  • Quandong – the 2533ha grazing and cropping landholding features predominantly flat topography and road access to each individual lot. Just 10km from Werribee and 36km from the Melbourne CBD, it is situated within 2km of the Urban Growth Boundary and the proposed Outer Metropolitan Ring Road. Despite planning restrictions, (which means it is not capable of being developed anytime soon), Quandong is expected to attract a group of buyers willing to take a long-term view.
  • Talwood Park (CBRE & Cushman & Wakefield) – a small 68ha land banking opportunity close to the UGB and 33km from the Melbourne CBD. It is highly developed with bitumen road access throughout the site and all services connected and over 600m frontage to Grants Road.
  • Also, on the market is the 26ha Mickleham (dairy) farm, a 45min drive north of Melbourne. Held by the Troutbeck family for 83 years, the block is expected to make $50m thanks to Melbourne’s urban sprawl.

With the Melbourne CBD skyline in the distance, 714ha grazing and dryland farming operation Glengarry near Darraweit Guim is one of the largest individual landholdings in the Macedon Ranges Shire.

Land banking elsewhere

Mr Thomas said land banking in other states is dependent on the trajectory growth of an area.

“Cane farms to the north and south of Brisbane – the Sunshine Coast and the Gold Coast – were purchased for residential development. With reduced costs of friction, including an airport and new freeway, the next major development could be the corridor between Brisbane and Toowoomba,” he said.

Interestingly, the recent $17m sale of Tenterden Station, in northern New South Wales’ New England, was marketed by Andrew Starr of Ray White Rural Guyra / Armidale as a potential land banking opportunity because the 1500 hectares fronting four public roads could be easily and cost-effectively be subdivided into 200ha lots.

“If a prospective purchaser wanted a resale plan, or a get out of jail card, then the opportunity to sell off small blocks in time may well add value. However, it is a longer-term investment perspective to have,” Mr Starr said.

Despite the marketing, Tenterden Station’s highly developed arable land will continue grazing cattle under the new ownership of Surat-based Miramar and Riversleigh Trusts in Central Queensland.

Land is scarce

Frank Nagle from Biggin & Scott Land said developers have trouble sourcing appropriate properties on metropolitan fringes.

“In urban growth corridors, the biggest problem facing developers near capital cities is land size. Big companies don’t want to deal with 10 adjoining land owners trying to put a decent parcel together. They can’t justify paying some of the prices either.”

Cushman & Wakefield’s head of development transactions, Peter Sagar, said sometimes a development won’t happen unless it is held by someone who has the ability to facilitate movements in the UGB and rezoning through their political and strategic planning skills.

Savills CBD and metropolitan director, Julian Heatherich agrees.

“Under Victoria’s Urban Growth Boundary, some approved properties can be developed within a certain amount of time. However, even some of that earmarked land requires services, which means it may not be developable for two or three years.”

As mentioned last week, Savills recently sold Linden Vale, a 75ha cattle property at Gisborne, a town in the Macedon Ranges, 54km north-west of Melbourne. Surrounded by new residential estates, it was marketed as a major development opportunity and sold for $61.1m to Melbourne developer ID Land.

Mr Heatherich said the farm, which had been held by the one family for 85 years, sold for a strong price because land in the region was scarce.

Quandong, a 2533ha grazing and cropping landholding10km from Werribee and 36km from the Melbourne CBD is expected to attract buyers willing to take a long-term view.

This week, Savills is taking to the market 40 hectares of farming land in Donnybrook, 32km north of Melbourne’s CBD. The parcel, owned by the Dennis family, is being listed via an expressions of interest campaign with expectations above $28m. Eighty percent of the surrounding properties are developer-held, however the planned estates are expected to take years to roll out.

One thing is for sure, investors won’t be land banking for a future development in the middle of nowhere.

 

 



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