Rural Funds snaps up Queensland cattle farms in $69m deal
Rural Funds Group has boosted its exposure to the strongly performing cattle and cropping sectors are agreeing to pay almost $69 million for the 27,829 hectare Kaiuroo aggregation west of Rockhampton in Central Queensland.
The diversified agricultural property trust, managed by Rural Funds Management, acquired Kaiuroo from New York-based global asset manager The Rohatyn Group, founded by former JP Morgan senior executive Nicholas Rohatyn.
It’s the second major acquisition by RFG in less than a month, after it swooped on $110 million of macadamia orchards, cattle and cropping properties in central and south-east Queensland at the start of November.
Kaiuroo was put up for sale by TRG in June, asking more than $55 million through Tom Russo, Andrew Williams and Virgil Kenny of Elders Real Estate.
The $68.8 million purchase price highlights the current strength of the rural property market, especially demand for beef cattle mixed-use properties, amid record beef prices and as the national herd is rebuilt after the long drought.
Included in the purchase of Kaiuroo was 12,448 megalitres of water entitlements, which RFM will use to improve the productivity of the properties, including expanding irrigated cropping areas and increasing cattle carrying capacity.
RFM negotiated an extended settlement period of up to 24 months with TRG to allow it to carry out the improvements to the property and secure a tenant before settlement.
“The acquisitions are consistent with RFM’s strategy of acquiring assets with potential for productivity improvements, in agricultural sectors in which RFM has operating experience and Australia has a comparative advantage,” the fund manager, led by David Bryant said.
RFG’s full-year forecast of adjusted funds from operations of 11.8 cents per unit and distributions of 11.73 cents per unit remain unchanged.
Wilson Research analysts James Ferrier and Emma Wyndham-Smith said the acquisition of Kaiuroo was consistent with RFG’s strategy and capital deployment plans outlined in July.
“As with recent asset acquisitions in this segment, we expect productivity gains will ultimately be monetised into the asset valuation and earnings over the medium-to-long term. This represents an important driver of RFG’s ability to sustainably grow its distribution at 4 per cent (or more) per annum,” the analysts said.
However, they noted that the acquisition (at full value) would take RFGs gearing towards the top end of its target range of 30-35 per cent.
Currently, over 22,500 hectares of Kaiuroo is used for grazing, over 3000 hectares for dryland cropping and 647 hectares for irrigated organic cropping.
