REAL ESTATE INVESTMENT TRUSTS & FUNDSRURAL & AGRIBUSINESS

Rural Funds selling NSW almond orchard

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ENCOURAGED by strong sales results, ASX-listed Rural Funds Group has put the Mooral almond orchard in western New South Wales to the market, and intends to use the proceeds on macadamia and cattle properties in northern Australia.

CBRE have been appointed to market Mooral, in Hillston, which has 808 hectares planted to almonds. RFM Almond Funds and RFM, RFF’s responsible entity, lease 593 hectares combined, and SHV the remainder. Groundwater entitlements total 12,120 ML.

“The decision to market Mooral follows recent favourable comparable sales. If Mooral is sold, proceeds are expected to be redeployed in-line with RFM’s strategy to acquire assets with higher earnings potential and that improve climatic diversification,” RFF said.

“The acquisitions are likely to be in northern Australia, in the macadamia and cattle sectors.”

RFF’s almond orchard portfolio also includes Hillston properties Yilgah and Tocabil, and Kerarbury in Darling Point. Earlier this year, Boston-based Hancock Agricultural Investment Group acquired the Wyadra and Cowl Cowl almond and cotton properties south west of Hillston from Harvard University’s endowment fund in. Wyadra has 604 hectares of almond trees.

RFF’s pro forma gearing is 29.3%, touching the target range of 30-35%, and the pro forma LVR is 41.0%. The covenant is 50%, not factoring in the potential sale of Mooral.

Upgraded outlook confirmed after shareholder vote

An increased forecast adjusted funds from operations of 13.5 cents per unit for FY20 was confirmed, while forecast FY20 distributions of 10.85 cpu and FY21 distributions of 11.28 cpu remain unchanged.

The trust said the upgrade followed shareholders last week approving amendments to existing agreements with J&F Australia Pty Ltd, a wholly owned subsidiary of RFM, to allow an additional $25 million guarantee to support the acquisition of cattle to stock the feedlots operated by JBS, taking the total guarantee limit amount to $100 million.

RFF cited total cost of cattle and number of head increasing at feedlots due to favourable market conditions as reason to increase the guarantee, expecting growth in international demand for JBS’s Australian beef and a shortage of grass-fed beef due to drought throughout 2020.

In August of 2018, shareholders voted in favour of the group’s $75 million guarantee to support J&F Australia’s acquisition of cattle to stock feedlots operated by JBS Australia, shortly after RFF acquired JBS Australia’s five feedlots in Queensland and New South Wales for $52.7 million.

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