RURAL Funds Group (RFF) has announced a $78.6 million equity raising, which it will use to reduce gearing and facilitate a pending cattle station acquisition.
The equity raising will comprise a fully underwritten two for nine non-renounceable entitlement offer with a fixed issue price of $1.70 per unit.
The group intends to initially reduce its gearing from 42.7% to 29.5% after debt-funded acquisition of two assets over the summer totalling $60.5 million.
In December it purchased the 4,880-hectare Lynora Downs cotton site in central Queensland for $26.5 million, which the group’s manager Rural Funds Management Limited (RFM) will lease and operate in a joint venture with Queensland Cotton Corporation Pty Ltd.
Shortly afterwards the group acquire 9,549ML of Murrumbidgee River high security water entitlements for around $34 million.
The group’s target gearing range is 35%, plus or minus 5%.
It said the reduction in gearing would create balance sheet capacity to further build RFF’s portfolio of agricultural assets.
“RFM is currently undertaking due diligence on an asset within the Australian cattle sector. The asset is similar in functionality to RFF’s other cattle assets, in that it provides the potential third party lessee, with an integrated breeding and backgrounding operation.
“One of the features of natural resource assets is the higher level of capital growth they can achieve when compared to infrastructure assets which tend to deliver higher levels of income but depreciate over time,” RFF said.
The fixed issue price represents a forecast AFFO yield of 7.4% for the 2018 financial year, and distribution yield of 5.9%.
RFF’s AFFO and DPU forecast for the 2017 financial year are unchanged, at 12.42c and 9.64c respectively.
Australian Property Journal