Rural Funds Management buys first cattle property in Victoria

Rural Funds Management has acquired its first cattle property in Victoria, hot on the heels of three purchases in September 2018.

RFM, the responsible entity and manager of the ASX-listed Rural Funds Group, will pay A$35 million ($24.8 million; €21.9 million) for the 6,486-hectare Cobrunga property, with the transaction due to settle in March 2019.

The firm bought a cattle property and a cotton property in Queensland last year for a combined value of A$28 million and another cattle property in New South Wales for A$13.4 million. The purchase of Cobrunga takes the value of its cattle portfolio to around A$250 million.

RFM has signed a 10-year lease with Stone Axe Pastoral Company at Cobrunga with a rent review in year five, on terms that it described as “consistent with existing Rural Funds Group cattle property leases.” This is the fourth lease agreement RFM has secured with Stone Axe, a wagyu beef producer that counts First State Super and the GO NSW Equity Fund among its investors.

Speaking to Agri Investor, RFM chief operating officer Tim Sheridan said Cobrunga had been on the market for some time before Stone Axe approached RFM to suggest it make a bid to acquire it.

“We will be able to improve productivity on the property though improving pastures and fencing, and other things,” Sheridan said.

“Our strategy is always to take on properties where can make develop the land and make improvements. Cobrunga is a similar acquisition [to others made in September 2018] – they are located in areas of above average rainfall.”

Sheridan added that the relationship with Stone Axe was going “very well.”

The purchase will be funded through Rural Funds Group’s debt facility, as all three of the properties purchased in September 2018 were. The firm raised A$108 million through an entitlement offer that closed in August 2018, giving it the ability to subsequently make debt-funded acquisitions.

James Powell, RFM’s general manager – investor relations, said that RFM was likely to make fewer acquisitions in the coming months now, but it was still assessing opportunities as they arose.

“Cobrunga is an extension of our strategy to target properties where we can lift production,” he said. “We then seek 10-year leases with the rent review in year five so that uplift in the property’s valuation can be reflected the rent.”