Property

Weekly property review: The changing face of the extensive northern property market

Property editor Linda Rowley, 03/08/2016

WIDESPREAD rain, an exceptionally strong cattle market and good dry-season conditions across northern Australia’s extensive beef producing areas have sown the seeds for rising values for cattle property.

According to leading valuer Peter Honnef, seasonal conditions, plus changes in a number of demand fundamentals, are impacting the property market in the Northern Territory and Kimberley regions at present.

Peter Honnef 2

Peter Honnef

Mr Honnef, agribusiness director with CBRE, pointed to changed processing capacity in the region as one of the drivers of property value.

The Australian Agricultural Co’s meatworks built near Darwin in 2014-15 is now processing up to 500 head per day, while Yeeda’s Kimberley Meat Co abattoir, located between Broome and Derby, is in pre-production trial phase, but expects to be processing up to 300 a day by October.

Mr Honnef said this new infrastructure was changing the relativity of where northern cattle flow – traditionally, cows and bulls were sent to southern or eastern states processors, now some of it, at least has shifted north.

“For example, in the Kimberley, aged cows that previously just died in the paddock now have a value, and are fetching between $500 and $700 a head. This new income stream will inevitably change property values in the region,” he said.

“I think we will see beast area values of between $1000 and $1500 across the Top End over time. In fact, I wouldn’t be surprised if the price reached $2000 a beast area.”

A possible pointer to that came in the announcement this morning that Consolidated Pastoral Co has sold (and will lease-back) its 476,000ha Carlton Hill station, on the edge of the Ord River Irrigation Area, to Chinese interests. At a purchase cost of $70 million, bare (plus a value of $30m for CPC’s ten-year lease-back over the holding), it values Carlton Hill at a beast area value of $1350 – easily a record for the Kimberley region, Beef Central understands.

Mr Honnef said strong property values would continue while cattle prices remain at current levels and global demand remains strong.

Strong global demand

He said a couple of forces were coming together to create strong beef prices.

“You have demand from overseas, a favourable Australian dollar and cattle shortage caused by prolonged dry seasonal conditions. The impact of the drought has allowed cattle prices to recover to the point where graziers are now making $500-$600 for small cattle, and this is allowing them to make a profit even coming out of drought.”

“For those who have not been drought-affected and have managed to hold-on to cattle, the situation is even better as they are able to realise strong profits for the cattle they have, further strengthening interest in the property sector,” he said.

While enquiry has picked up, particularly for ‘big end’ properties in northern Australia, and demand is strong for properties around the $3m mark, Mr Honnef said those in $8m to $15m price bracket were still not that attractive to big corporate investors.

“While there has been some recent winter rain, that segment of the property market is still subdued, because the buyers are family operators. In most cases, particularly in Queensland where they are still recovering from drought, beef producers are building up their herds and getting their balance sheets in order. Once the wet season starts, the property market will turn around.”

For large-scale operations in northern Australia, Mr Honnef said enquiry is reaching unprecedented levels.

“That particularly applies for properties running sizeable herds above 8000 head. While family operators are starting to run with the ball, the real driver of current value increases is outside capital,” he said.

Other recent transactions of note across the Top End include:

  • 399,000ha North Queensland breeding property Esmeralda, including 30,000 head of cattle, sold to Gunn Agri Cattle Fund for $40m.
  • 143,000ha Gulf country cattle station Neumayer Valley, supporting 15,700 head of cattle, purchased by a Swiss investor for around $41m.
  • 451,200ha Barkly Tablelands property Benmara sold bare (with a carrying capacity of 12,000 head) to Malcolm Harris and family from Gogo Station near Fitzroy Crossing in WA for around $12m.

Mr Honnef said earlier large scale transactions, such as Gina Rinehart’s $30m purchase of Fossil Downs and the sale of the SAWA grazing aggregation for close to $100m, had boosted confidence in the Top End.

“Strong prices are being paid. We are in a rising market that is pegging itself at a minimum of a $1000 a beast area – however it doesn’t mean the market has reached that level.”

He said while inquiry was coming from a wide variety of sources, the Foreign Investment Review Board and the Kidman knockbacks had certainly taken some of the wind out of the sails of the cattle property market and as a result, investors were taking stock and investigating how best to get transactions through the system.

“Just because you are an overseas investor with cash doesn’t mean you can run a cattle property. Those offshore investors with cash need people on the ground running the enterprise. There are a number of scenarios evolving where they are seeking out good local operators with management expertise and ‘skin- in-the-game’ who might have three or four stations of their own to throw into a joint venture deal. I think that joint ventures will be formula going forward for big overseas investment in northern grazing assets,” he said.

Two tiered market in the Top End

Frank Peacocke

Frank Peacocke

Director of Herron Todd White’s Darwin office, Frank Peacocke, said the Top End property market was currently divided into two tiers – for larger and smaller scale properties.

“The gap was more evident 12 to 18 months ago, because the smaller properties weren’t selling. Now they have come back into the market and are selling within six months – if they are priced adequately,” Mr Peacocke said.

“The most noticeable strengthening has been in smaller scale properties that carry less than 7000 to 8000 head. A number of those smaller properties around the Roper River region and the Sturt Plateau which had been difficult to shift, have now sold.”

Here’s some recent examples:

  • In March, the 72,300ha Lonesome Dove Station on the Roper River, east of Katherine, with 3000 head of cattle was sold by Elders for around $6m.
  • In April, the 1090sq km property Victoria River District breeding property Humbert River (one of the smaller cattle stations in the region), south-west of Katherine was purchased by Heytesbury Cattle Co for an undisclosed sum.
  • In May, the 1110sq km Hodgson River Station, in the Roper Gulf Region, 300 km south-east of Katherine, was purchased by North Star Pastoral for an undisclosed walk-in walk-out price for more than $6.5m.
  • The 3443ha export cattle depot operation Phoenix Park (which can hold 30,000 head, but is currently licensed for 20,000 head) was sold this week by Elders to Gina Rinehart’s Hancock Prospecting for an undisclosed sum.
  • And the 42,896ha Wyworrie Station, 170km south of Katherine on the Sturt Plateau, is currently under private contract for $4m-$4.5m.

Mr Peacocke said each of the properties had sold to locals looking to expand their existing holdings.

“We have quite a bit of enquiry coming through for large scale, highly-valued properties, but when it comes down to the crunch and people need to outlay money for due diligence, interest thins out.

“Agents are telling me they are getting good quality, potential purchasers, but the best quality ones are coming from overseas investment funds – and not necessarily from Asia. Larger scale properties are attracting interest from investment fund money. Prices are not rocketing away, but they are healthy,” he said.

Examples of recent strong larger-scale sales in northern Australia are:

  • In April, the SAWA Aggregation comprising four highly-regarded Kimberley grazing properties totalling close to one million hectares sold to the Adelaide-based advisory firm Agrify for a reported $100m.
  • In July, the 5550sq km Riveren and Inverway, in the southern Victoria River District, west of Katherine, sold to mining magnate Gina Rinehart’s Hancock Prospecting for an undisclosed sum.
  • Currently, there is good interest in the 3760sq km Barkly Tablelands property Kalala Station, 280km south of Katherine.

Mr Peacocke said the sale of Kalala (expressions of interest closed last Friday) would be an acid-test for large scale, fully-stocked northern cattle holdings.

“It has been actively marketed, is a dedicated livestock export property and is strategically located with frontage to both the Stuart and Carpentaria Highways,” he said.

Confidence in the northern property market could be verging on over-confidence at present.

“I think some vendors are getting a bit too excited. Some of the values, some of the prices they are asking, are double the current market expectation. Buyers need to be realistic to secure a sale.”

Mr Peacocke’s prediction for next six months is for a steady price increase for northern beef cattle holdings.

“There is a fair bit of investment fund money looking for a home. That should underpin values in the 20,000 head plus property market and if the live export market remains strong, there should be continued steady growth in the medium to small scale property market as well,” he said.

 

 

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  1. Peter Leutenegger, 05/08/2016

    As an ‘ex’ resident of the Kimberley for 35 years and station owner/ manger for 23 years, and with all due respect, I believe I am qualified to comment on Mr. Honnef’s remarks. quote…” in the Kimberley, previously aged cows that previously died in the paddock….”. .
    In this day and age, any manager of a Kimberley cattle property, particularly in the West Kimberley, that let aged cows, just die in the paddock, should have a good hard look at him/her self, even without Jacks new meatworks. I have read this comment previously made by someone else. It is simply wrong. There has been a strong market for Kimberley cows for years provided they are presented correctly.

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