Untitled - Herron Todd White

Rural
Month in Review
June 2015
The week started with Herron Todd White Rural
co-sponsoring a “Nose to Tail” dinner which brought
340 people together on the Sunday evening to work
their way through a meal where they was not one
loin cut, but meals from other parts of the animal
(which were wonderful) while actually having a beast
being broken down on the stage and the audience
listening to what could be done with the other cuts.
This event also highlighted the global market where
international guests offered comment about the
other cuts and what they do with them. It was a
wonderful evening. The team of Scott Fuller from
Dubbo, Frank Peacocke from Darwin, Roger Hill
from Townsville, Will McLay and Michael Chaplain
from Rockhampton and Doug Knight and Stephen
Cameron from Toowoomba were all there and we
enjoyed hosting our valued clients for this event.
Then Monday the mad house started in that there
was so much to see, so many people to speak
with, the occasional function after dark and early
breakfasts to be enjoyed. The majority of banks were
there in full force with many of their teams from
around the country. It was a great show of support
for the sector under one roof and I am sure many
current and potential clients enjoyed the opportunity
to connect and meet other bank executives and talk
about the potential to do more business. From my
view point it was great to be able to catch up with or
meet new contacts across all the banks.
The agents were busy promoting the current market
opportunities, investors and fund managers were
exploring the same assets and also for some it
was about simply educating themselves about the
possibilities and the market place. The international
guests were from around the globe and I was able
to sit in a session hosted by Aux Venture to listen to
Detlef Schon from Acquila Capital talk about their
view of investment in Australia and why now and also
their insights on why they feel co-investment with
current operators is the best model for them. This
was also supported by a talk from Andrew Gatenby
from Channel Capital about some of the aspects of
getting a deal done. It sounds easy but when you do
start to really think about it, there is a lot that needs
to occur to bring a successful deal to fruition.
The key few takeaways for me from Beef were:
1.
2.
3.
4.
5.
There is a significant amount of potential capital
looking for opportunity and the beef sector as
well as agriculture broadly is well placed to be
able to benefit from this.
In a global market place, scale is significant. My
question is, do we have enough scale of what is
being sought?
With any business investment, there is the
question of who manages the investment, ie
operators of these assets, how do you find
them?
How does an aspiring younger person, family
business etc get to open the doors to some of
the opportunity as a potential partner to capital?
And finally, at my age, six days of going hard
during the day and harder at night is not
something I may be able to repeat in three years
time. I finally got my voice back the Thursday
after the event concluded.
Rural
Overview
Since the last Month in Review, the big event of Beef
Australia 2015 was held in Rockhampton and overall
it was a great event with a high calibre of speakers
and seminars, a large contingent of international
visitors and a lot of bull and beer. I joked to someone
when asked how was Beef Australia, that I saw a
lot of bull, heard a lot of bull and ate a lot of bull
(actually very nice beef cuts of all varieties), but
my major impression of the week overall was the
opportunity that is available if the industry can get
itself organised to grab it.
To bring my thoughts back to the world of rural
property and following on from last month, the
potential for new capital entering the market is
50
Month in Review
June 2015
This month the local updates are highlighting the
small but positive trend of increased sales activity
in many regions, notwithstanding some local (or
for Queensland and north-western NSW) issues of
continued poor seasons or predatory pressure.
Contact
Tim Lane – National Director, Rural (07) 3319 4400
New South Wales North Coast
WEATHER
Very good warm growing conditions have continued
into autumn.
SUGAR CANE
A relatively small cane farm in the Condong Sugar
Mill area has sold after auction with anecdotal
reports indicating a strong price. The property was
actively sought by neighbouring landholders.
MACADAMIAS
Harvest is well underway for 2015 although wet
weather during early May slowed progress.
There have been a number of sales of macadamia
plantations. Values have firmed. Three recent sales
of macadamia farms indicate values for macadamia
planted land in the range of $44,000 to $59,000 per
hectare including macadamia trees but excluding
structural improvements and ancillary land. These
sales were in sought after lifestyle localities.
SUMMER CROPPING
Alice Station, a Clarence River front property
south of Tabulam comprising about 348 hectares
with a dwelling and sheds, has reportedly sold for
$1,600,000 following an expressions of interest
campaign. This was an ex-Great Southern Managed
Investment Scheme forestry property. The property
had been cleared of the timber plantation. There
was a 208 megalitre water licence to pump from the
Clarence River.
GRAZING
Nine ex-Forest Enterprises Australia Ltd Managed
Investment Scheme forestry properties between
Tabulam and Tenterfield have been listed for sale.
These properties range in price from offers over
$450,000 to $950,000. These are listed as non core
assets. Anecdotal reports are that the purchaser
of the ex-Forest Enterprises Australia Ltd plans to
retain properties that are suitable for timber and the
balance will be cleared for cattle grazing.
Country NSW Northern Victoria
General climactic conditions in the central and
western parts of New South Wales continue to be
mixed with the north western areas around Walgett
continuing to receive below average rainfall. This has
prompted many phone calls from clients regarding
value levels within this drought affected area and any
impact that this may be having. Currently it would
appear that there has been limited negative impact
on general overall value levels within this area. Whilst
this may seem unusual considering the negative
impact on general farm cash flows there continues
to be reasonable levels of interest in properties
within this area. This corresponds to a similar period
in New South Wales in 2004 to 2007 where there
was severe drought across large areas yet values
increased quite substantially during this time.
Rural
very good and I hope that it does for the right
reasons. This may see assets of scale that are well
located become very much sought after. I just hope
that some of that capital is able to filter to the sub
corporate sector which is still under pressure. The
market place for property is made up of the big and
small and a further disconnect between the two ends
could develop if capital remains focused at the top
end. I do understand why this is so and wonder if
there is opportunity for the sub corporate sector to
get a foot in this door. That would create a significant
change in the market outlook nationally if it were to
evolve.
51
Month in Review
June 2015
Currently commodity prices across a range of sectors
are quite positive with lambs being able to achieve
$120 $140 per head, yearling steers achieving
approximately $1,000 per head and wheat achieving
between $200 and $250 per ton.
This increasing sentiment is more evident in the
Western section of New South Wales with three
major properties either being sold at auction or
going under offer in the last four weeks.
The property “Beechworth” was sold under the
hammer for $2 million. This property consisted of
approximately 66,000 ha of undulating red and
sandy loam country approximately 150 km south
west of Cobar and 175 km north of Ivanhoe. The
property was timbered with Pine Box and scattered
Kurrajong. The fencing was considered below the
strict average and had basic improvements which
included a four bedroom homestead, older shearing
shed, workmen’s donga and basic workshop. The
property was not connected to mains power. There
were numerous inspections of the holding from
prospective purchasers located from the Gold
Coast to southern Victoria. The sale equates to
approximately $30 per hectare overall which whilst
is below that of some surrounding sales is a fair
reflection of the cost to upgrade the holding to
district average level.
The two other sales under offer at present are “The
Range” which is a 27,000 ha property located 105
km north-east of White cliffs and 100 km south west
of Wanaaring. This property consisted of open red
loam to sandy loam country timbered with Mulga
and Rosewood. The property was reasonably well
watered and fenced. It included two residences
storeroom engine room machinery shed with sheep
and cattle yards in place. Whilst we are unaware of
the agreed sale price the property was listed at an
asking price of $27 per hectare and we would expect
that the sale prior price will close to or at the asking
price.
The property “Keelambara” is also under offer. This
property is a 36,800 ha holding approximately 50
km north west of Tilpa. The property consisted of
Cuttaburra and Darling River flood out areas and
was well watered and well fenced. Improved with a
four bedroom concrete brick Homestead, machinery
shed, workshop, shearing shed and well presented
shearers quarters. The asking price was $2,500,000
which equates to $67.80 per hectare. Again whilst
the exact sale figure is unknown we would expect
the final price to closely reflect the asking price.
Properties on the Cutterburra and Darling River
flood out areas attract good levels of interest due
to the considerable increase in production that can
be achieved after minor flooding events particularly
down the Cuttaburra.
Southern Queensland
Over the course of the past four to six weeks we have
seen a big turnaround in local climatic conditions
with generally good widespread rains in most of the
crop growing regions of southern Queensland and
northern New South Wales.
Rural
One commonality that we are experiencing across
all areas that we cover is the increase in the general
underlying market sentiment. We believe this is a
reflection of the positive cash flows encountered over
the last 2 to 3 years for many areas of New South
Wales. Whilst these cash flows have been utilised to
reduce general debt levels we are beginning to see
the refocusing of these cash flows into prospective
purchasers of adjoining or nearby allotments.
General discussions with bankers in the area also
indicate that there appears to be some uplift in their
client’s appetite for debt and expansion. Whilst this
has not transpired to large lifts in market activity it
does auger well for the future.
52
Month in Review
June 2015
The situation is much the same in southern
Queensland. Too much rain in the southern areas
has brought planting to a halt, however with the
right moisture through the western grain areas of
Meandarra and Tara, all crops are now in.
At the end of the day this will guarantee that the
crop will get established. Good in crop rains in mid
to late July and then again in late August or early
September should all but guarantee at least an
average crop.
While the rain has in places extended further west
to the grazing regions, it has not been to the same
extent. However what rain has fallen is most welcome
as it will promote some good herbage growth.
THE PROPERTY MARKET
The property market in the broader region is slowly
showing signs of an increase in activity. Previous
news Month in Reviews have noted a number of
holdings currently on the market but as yet to sell
and that is still the case with the likes of the
Charleville and Augathella cattle blocks Oak Park,
Oakwood and Yo Yo Park.
noteworthy sales in the Mackay district so far this
year.
In the past two to three weeks however we have seen
two good sales occur in and around the Condamine
and The Gums regions. The first to occur was
Deepwater, a 2,201 hectare good Brigalow scrub
farming block with approximately 2,000 hectares
of cultivation which sold to established adjoining
owners for $2,350 per hectare or $950 per acre
in the old scale. The apportioned value for the
cultivation equated to $2,200 per hectare.
Doraville, situated at Blue Mountain on the Peak
Downs Highway between Eton and Nebo, sold in
February at a price of $2.47 million including stock,
plant and equipment. This is a well improved, 1,052
hectare forest grazing property comprising two
adjoining freehold lots. It sold after an extended
marketing period. The price shows $1,968 per
hectare improved (bare farm).
The second sale to occur, again to a large established
grower in the region, was Even Downs, a 1,207
hectare mixed farming and grazing scrub block just
to the south of The Gums on the Leichhardt Highway.
It sold for $2,112 per hectare or about $855 per acre.
The sale included approximately 900 hectares of
cultivation (half back to grass) which on analysis
reflected $2,286 per hectare.
It is too early to suggest that there is a trend
beginning to occur, but there is definitely more
activity than six months ago. It will be of great
interest whether this will continue through the
winter and into the prime selling season leading into
Christmas.
Central Queensland
After a period of relative inactivity in the local
grazing property market, there have been two
A mixed 152 hectare cane and cattle property at
287 Sivyers Road, Habana (18 kilometres north of
Mackay City) sold at auction in April for $1.55 million
including stock, crop and plant equipment to show
approximately $8,600 per hectare improved (bare
farm). This property sold after good competition
from three bidders.
These sales demonstrate sound underlying local
demand which is now assisted by falling interest
rates, fairly good pasture growing seasonal
conditions in the earlier part of the year and an
optimistic outlook for the beef industry. We expect
sales activity to improve in the months ahead with
agents now reporting increased levels of enquiry.
Very dry seasonal conditions persist in the western
districts. This has resulted in good demand for the
few well grassed offerings and extremely weak
demand for droughted properties when tested in the
market.
Rural
A recent trip across the Moree Plains highlighted the
good season with large tracts of winter crop already
being planted and not on a speculative basis either.
Much of the crop growing country has a full profile
of moisture and in fact it could be argued that many
regions especially in the east of the shire have had
too much rain. The alternative however could be
much worse.
53
Month in Review
June 2015
Further to the south, Burgoyne located 10 kilometres
from Jericho sold for $3.9 million with stock and
plant. The 6,936 hectare property comprises pulled
gidyea scrub and pulled forest, reflecting a rate of
$506 per hectare or about $2,784 per AE (bare of
stock and plant.
Both sales confirm good demand for properties
which are well grassed when offered to the market.
Melbourne
The rural market on the Melbourne fringe and
surrounding areas is somewhat fragmented at
present, with differing levels of buyer activity
and confidence depending on the specific market
sector. On the back of a strengthening residential
market, the lifestyle property sector is experiencing
increased demand levels, resulting in reduced selling
periods and increasing values. This is particularly so
in the $1 million to $2.5 million price range in areas
such as the Mornington Peninsula, Yarra Valley
and the Kangaroo Ground region. This increase in
activity is heavily influenced by the continuing low
levels of interest rates and strong interest shown by
Chinese investors.
Specialised rural sectors such as poultry meat and
horticulture are also experiencing strong activity
and increasing value levels, particularly for quality
properties in well regarded locations. Recent
examples include a 125,000 bird broiler farm on
the Mornington Peninsula achieving $4.5 million
($36 per bird), and a 123 hectare ex-orchard in the
Yarra Valley which sold for $6 million ($49,000 per
hectare) to be developed for strawberries.
On the other hand, properties in low rainfall areas
such as the cropping and grazing country on
Melbourne’s western fringe are suffering from
extremely limited buyer interest. This is also the
case for properties of poorer quality, whether as a
result of poor management in recent times or dated
improvements and infrastructure.
In summary, there are positive signs in many of the
rural sectors around Melbourne, with an increase in
buyer activity resulting firstly in greater turnover of
properties and secondly, increasing values as supply
levels are absorbed. However, properties in inferior
localities or of poor quality have a tendency to
remain on the market for significant periods unless
very competitively priced.
Mildura/Sunraysia
Our focus this month is the Mallee region of both
Victoria and South Australia, specifically completed
sales in the cereal growing areas.
There has been a recently completed sale of a
702 hectare property located approximately 10
kilometres north-west of Pinnaroo. It contains fully
cleared arable cropping land comprising heavy red
grey loam flats with sandy loam rises and a small
area of salt bush with stock and domestic bore water.
It is a well located property and was purchased by
a potato grower. There is no irrigation bore but a
34 megaLitre ground water licence was included.
After allowance for non arable land, water licence
and improvements, the sale shows over $1,600 per
hectare for the arable cropping land, reflecting its
potential for potato production.
Irrigation in this part of South Australia and northwest Victoria is a relatively new industry that started
in the late 1990s. Most irrigators are growing
potatoes, supplying a number of larger potato
marketers who have potato washing and packaging
plants and marketing divisions. Returns, while
variable, have generally been attractive and have
contributed to greater investment from growers. The
climate in this area is suited to growing vegetable
crops in the winter months.
Rural
In this regard we note the sale of Llorac and Pastoria
at Muttaburra which was well grassed at the time of
sale and sold at auction with competition for $4.65
million. The property comprises predominantly
Mitchell grass downs broken by channels and pebbly
gidyea and reflects a rate of $224 per hectare or
$2,446 per AE.
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Month in Review
June 2015
Sunset Farms, 730 Morrisons Plain Road Cowangie
VIC is located 110 kilometres west of Ouyen, Victoria
and 60 kilometres east of Pinnaroo, South Australia.
It comprises various lots in the parishes of Duddo,
Pallarang, Walpa, Tyalla and Koonda. Land varies
from inferior heavy and stone country to better
rising red sandy loam and light sandy soils. There
are also large areas of salt swamps. Several private
and government bores supply water to all paddocks.
The holding was purchased by a near neighbour and
analysis of the sale showed from between just over
$500 per hectare for inferior arable country up to
$865 per hectare for the better sandy loam cropping
country.
Murray Riverina
Flannery Portfolio in Northern Victoria Sets
Cracking Pace.
Ruralco Cohuna auctioned a portfolio of property
on behalf of the Flannery Estate in the Cohuna/
Pyramid Hill district on Friday, 10 April with the Bower
Tavern rear room overflowing beyond capacity. The
competition for the properties of varying quality and
limited management in recent times was still fierce.
No.
Property
Area
(ha)
Price
Rate/ha
1
Greens Road
75.70
$400,000
$5,284
2
Home Farm
223.69
$700,000
$3,129
3
Home Farm
South
257.70
$385,000
$1,494
4
Bullock Creek
247.79
$240,000
$969
5
Mt Hope Hill
104.81
$150,000
$1,431
6
Flannerys
Bridge Block
108.88
$215,000
$1,975
7
L’Huillier Lane
131.43
$71,000
$540
8
Mt Hope
Central
107.17
$210,000
$1,960
9
Granite
Paddock
11.45
$50,000
$4,367
10
Greens Road
South
30.30
$25,000
$825
11
Chuggs Rd
54.79
$126,000
$2,300
The following water auction provided some
interesting results with several corporate buyers in
attendance and confirmed the red hot water market.
The auctioneering method provided some interesting
dynamics in the room as the winning bidder was
offered as much or as little of the 1,392.5 megaLitre
of High Reliability of water on offer across various
zones.
For the record, the results were as follows:
Water Results
Buyer
Price
Volume (ML)
1
$2,170
750
2
$2,050
240
3
$2,040
202.5
4
$1,990
100
5
$2,000
100
Total
1392.5 ML
Northern Territory
Following the first quarter pastoral sales activity
in the NT which included “Stapleton”, “Bunda”,
“Douglas/Douglas South” (northern NT) and “Mount
Ebenezer” (south of Alice Springs), now comes the
sale of “Moroak/Goondooloo” on the Roper River.
We are also aware of signed contracts to purchase
another two pastoral aggregations in the Alice
Rural
CA 42 Mallee Highway, Cowangie VIC is a 258
hectare property with undulating red sandy loam
soils with a small area of limestone. The property
has a history of lucerne production and comprises
approximately 245 hectares of arable cropping
land, with balance shelter scrub and salt affected.
The property has not been cropped for years and is
not suitable for a 2015 crop. Overall the arable land
shows just over $1,000 per hectare.
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Month in Review
June 2015
For one of the Alice Springs stations above, the
competition was reportedly very healthy and the
property sold within six weeks. Potential buyers
came from South Australia, Queensland, Western
Australia and locally. This resulted in a “strong sale”
according to the marketing agent - a direct result of
competitive tension between vying parties.
The sale of “Moroak” appears to be in line with
market expectations for a cattle station in the (Roper
River) locality and is reflective of the some of the
main drivers of pastoral land values at present. These
being road train access, distance from port, quality of
country/productive capacity and economies of scale.
As we have mentioned in previous MIRs recently, $/
Adult Equivalent (or Beast Area Values) appear to
have come back to around 2005/06 levels and the
sale of “Moroak” tends to confirm this opinion.
To put the mounting sales activity into perspective,
in the NT around $127.5 million worth of pastoral
leasehold real estate (excluding cattle) has changed
hands since the market bottomed circa October
2013 (that’s about 20 months ago when “Riveren/
Inverway” was one of the first to sell). Compare this
with the dearth of sales activity over the same period
prior (Feb 2012 to October 2013) with total sales of
only $31.5 million.
It is this valuer’s expectation that with strong live
export prices; increasing demand from Indonesia as
well as rapidly growing alternative markets such as
Vietnam (where heavy steers 450kg+ are currently
making $2.50/kg ex Darwin) and with a potential
new market through the Livingston abattoir; the low
Australian dollar; significant Federal Government
funding for beef roads over the next few years;
forecast ongoing high beef prices; and wider
opportunity to develop pastoral leasehold land for
alternative uses (under new NT Pastoral Land Act
Diversification Permit laws) there will be a few more
sales occur before the year is through. And with
competition building (particularly for “A” quality
properties) it is possible that we might see a gradual
increase in value levels across the NT and Kimberley
(WA) pastoral estates.
With reference to the Kimberley, the IM for wellregarded “Fossil Downs” is now out and heralds the
first coming to market of a blue ribbon Kimberley
pastoral lease for some time. The property has been
owned by same family for 133 years and therefore
should have an extensive production history record.
It will be very interesting to see how the market
reacts to having the luxury of digesting such an
extended production history. It should leave less
doubt about what the property can actually produce
(given adequate management). It is our experience
that the current buyer profile is leaving less to
chance. They are doing their due diligence and (in
most cases) aren’t paying for blue sky. So in the case
of “Fossil Downs” will good transparency equate to
higher value? I am confident that the market will give
us the answer.
South West WA
Many of the Western Australian wheatbelt farmers
will be smiling as cold fronts recently crossed many
cropping regions providing well needed rain events
to enable the continuation of seeding programs
and triggering crops into germination. A good start
is likely to continue to lift spirits and confidence
and should good finishing rains follow, the demand
in the rural property market is likely to increase
significantly in high and medium rainfall areas on the
back of three good years.
Unfortunately, sheep and goat pastoralists in the
north are not smiling and have not been for the past
five plus years. Droughts and wild dogs have been
plaguing many West Australian pastoral properties
and have reportedly had a severe impact on sheep
and goat properties throughout the Gasgoyne,
Midwest and Goldfields pastoral regions. Having
recently been in one of these regions and looking at
the market activity, the impact that drought and wild
Rural
Springs district as well as two more northern cattle
stations that are in advanced stages of negotiation
to buy from a range of domestic and international
parties. This level of activity speaks volumes for the
resurgence of confidence now well entrenched in the
NT pastoral market.
56
Month in Review
June 2015
dogs are having on properties and families is evident.
Sale activity over the past three years has been
limited as a result of vendors having unrealistic
expectations and purchasers being few and
far between. The majority of purchasers have
alternative income and target properties with good
infrastructure.
would be a shame to see these properties continue
to decline however if the wild dog problem is not
solved then it is more than likely that more and more
pastoral properties could be a thing of the past.
There is a proposal to build a dog fence in the
region which would help to control the dogs but this
comes at a cost when government funding is tight
following the downturn in the resources sector. Some
pastoralists have turned to cattle, but not all the
country and stations are suitable for viable cattle
enterprises and investment in fencing, water points
and yards can prove to be difficult for many to justify
and finance.
For two hundred years the commonly used phrase
of Australia riding on the sheep’s back has been
evidenced by these pastoral properties having
grand homesteads and significant infrastructure. It
Rural
The ageing population of pastoralists has resulted
in many properties being de-stocked due to drought
and wild dog problems and infrastructure not being
maintained to an operating standard resulting in
purchasers heavily discounting to allow them to bring
properties up to standard. Overall the regions are
facing difficult times and unlike the northern beef
focused pastoral regions, values are in decline.
57