Rural Funds Management, the responsible entity and manager of Australian Securities Exchange-listed Rural Funds Group, has agreed a deal to acquire 5,409 hectares of sugar cane farms in Queensland.
In an announcement to shareholders, the firm said it had agreed to purchase the properties, along with 8,060 ML of water entitlements, from MSF Sugar for A$81.1 million ($58.3 million; €49.3 million) excluding transaction costs.
MSF Sugar is a major grower, processor, marketer and exporter of raw sugar. It owns and operates four sugar mills located at Gordonvale, South Johnstone, the Atherton Tablelands and Maryborough.
The sale of farmland to RFM accounts for more than half of its approximately 9,700 ha portfolio.
RFM said it intends to progressively convert the sugar cane farms to approximately 2,200 ha of macadamia orchards, with a “substantial area” of the remainder to be used for cropping.
RFM managing director David Bryant told Agri Investor in March: “I really think our next acquisitions will be in the cattle and macadamia sectors.
“We really are excited by the opportunities for [converting properties to] higher and better use in the macadamia industry, and we continue to see lots of properties where the constrained access to capital of previous private owners, have not enabled the full utilization of the natural resource endowment that many of these properties have.”
The firm operates on a model whereby it leases out its properties and is now in discussions with potential lessees for the planned macadamia conversion.
RFM added that it intends to lease out the balance of the sugar cane farms that are currently being operated by MSF. The transaction includes a two-year offtake agreement between RFM and MSF for the sugar cane produced on those farms, or a reduction in the purchase price if not.
The transaction also includes an opportunity to purchase additional unspecified water rights.
The deal is expected to reach close in October and will be funded by an approved increase to Rural Funds Group’s debt facility.
RFM said there was no change to the business’ forecast FY21 distributions of 11.28 cents per unit.