AUSTRALIA’S largest listed agricultural property fund, Rural Funds Management Limited has exchanged contracts to purchase large Central Queensland cotton and grain growing farm Lynora Downs, near Rolleston.
The purchase price announced this morning is $26.5 million, including stamp duty, with settlement expected in late November.
Lynora Downs is a 4880 hectare irrigated and dryland cotton and grain property, situated south of Rolleston. It sits adjacent to Rewan, a cattle property acquired by Rural Funds Management earlier this year.
Parent company Rural Fund Group is a listed real estate investment trust which owns a diversified portfolio of high quality Australian agricultural assets that are leased to experienced agricultural operators. Revenues to this point have been derived from long-term lease rentals across four broad sub sectors: poultry, tree nut orchards, vineyards and cattle assets.
Lynora Downs represents the trust’s first venture into Queensland cotton and irrigated/dryland row cropping.
RFM said the acquisition would be debt-funded and an increase in its bank facility limit had been negotiated.
RFM and Queensland Cotton Corporation Pty Ltd, a subsidiary of Olam International, have established a joint venture called CotJV which will lease and operate Lynora Downs for the next five years, with an option to extend for a further five.
The property, developed by vendors, Peter and Lyn Schafferius, currently includes 780ha of developed irrigation, and substantial unutilised water entitlements.
Colliers International handled the transaction, managed through an earlier expressions of interest.
Pre-sale marketing literature suggested Lynora Downs had recorded the highest annual irrigated cotton yield in the CQ area over three seasons since 2002. It had also recorded a record CQ irrigated wheat yield for 2009 of 7.17 t/ha; and a 650ha corn irrigated in 2008 producing an average yield of more than 12.6 t/ha.
Water capacity includes 10,000 ML storage and additional water allocation to be developed. With the additional water allocation at Lynora Downs, the current irrigation can be more than doubled, incorporating a gravity-fed system, offering big operational cost savings.
Significant infrastructure to support operations includes sheds, grain handling & drying and houses.
RFM said Lynora Downs will be further developed over the next year with the construction of an additional water storage and development of irrigation area, expected to cost approximately $5.7 million. This capital expenditure will be funded by RFF and will attract rent.
RFM managing director David Bryant said the acquisition diversified RFF into a new commodity, and supported the climatic diversification strategy announced by the company earlier this year.
“Although cotton represents a new commodity for RFF, RFM has been farming cotton for almost 20 years,” he said.
Just last month, Rural Funds Group paid $34 million to acquire a 9549 ML water entitlement in one of the biggest water deals in the Murrumbidgee River irrigation area.
In combination with the high security Murrumbidgee water acquisition, the two transactions including Lynora Downs added more than 25,000 ML to RFF’s water portfolio, Mr Bryant said.
Both the water entitlements and cotton property are natural resource predominant assets, acquired with the objective of providing RFF with capital and income growth over the long term.
RFG’s current FY17 forecasts for adjusted funds from operations of 12.42c/unit and distributions of 9.64c/unit remain unchanged.
About Rural Funds Group (RFF)
RFF owns a diversified portfolio of high quality Australian agricultural assets. RFF’s investment objective is to generate a stable income stream derived from leasing its assets to suitable counterparts and capital growth through any appreciation in the value of those assets. RFF is a stapled security, incorporating Rural Funds Trust and RF Active, trading under the ASX code ‘RFF’. Rural Funds Management Ltd (RFM) is the responsible entity of RFF.