Listed Australian farmland real estate investment trust (REIT) Rural Funds Group (RFF) has entered a 22-year lease with Olam Orchards, the operations arm of the Singaporean agribusiness, to develop and operate 600 hectares of almond orchards in New South Wales.
The REIT acquired the Tocabil property near Hillston in October for A$5.2 million ($4.1 million; €3.7 million); the cotton and grazing property was the REIT’s first acquisition since listing on the Australian Stock Exchange (ASX) in February 2014. At purchase, RFF intended to convert and develop the land into almond orchards worth A$35 million, according to a report released at the time.
This conversion, which is due to start immediately, will cost nearly A$27 million and will be funded by a combination of equity, debt, and retained earnings, according to an ASX announcement.
It was unclear at the time of press whether RFF will be fronting the full cost of the development.
“This is a measured step in growing the value of RFF’s portfolio of agricultural assets,” said David Bryant, managing director of Rural Funds Management, the REIT’s manager. “The conversion of Tocabil Station from a mixed farming enterprise into a high-value almond orchard, plus the long term tenure of the lease, make this development a significant transaction for RFF.”
RFF also needs to acquire additional water entitlements before planting starts.
The first planting, of 400 hectares, is expected to be completed by the end of the year with the balance completed in 2016.
The leasing agreement is conditional on the finalisation of the initial development funding and Foreign Investment Review Board approval, according to the ASX announcement.