Rural Funds Management continues expansion with Queensland acquisitions

The manager of ASX-listed Rural Funds Group has bought cotton and cattle properties months after securing A$150m through an equity raise.

Rural Funds Management has acquired two properties in Queensland as it continues to expand and acquire assets.

The firm, which is the responsible entity and manager of the Australia-listed Rural Funds Group, announced to the stock exchange that it has purchased 8,280-hectare cattle farm Cerberus and 2,942-hectare cotton property Mayneland for A$10m ($7.2 million; €6.2 million) and A$18m, respectively.

Cerberus, a cattle breeding and backgrounding property, is located north-west of Rockhampton in central Queensland and will be leased back to Katena Pty, trading as Bryant Beef. That lease will run for 10 years and RFG will provide a A$1.6 million cattle finance facility.

The firm will also invest A$2.5 million in developing the property with the aim of increasing carrying capacity by 28 percent and upgrading infrastructure, with work to be carried out by the tenant.

Mayneland’s A$18 million purchase price includes plant and equipment. The farm is located 25 kilometers north of Lynora Downs, another cotton property owned by RFG in central Queensland.

The property has 531 hectares of irrigated area and 1,757 hectares of dryland , and comes with 11,234 megaliters of water entitlements. RFG said it expects to develop an additional 579 hectares of irrigated area, with capacity to store 2,500 megaliters of water.

The fund manager has yet to find a tenant to lease the property, but said that Cotton JV, a joint venture between Queensland Cotton Corporation and RFM, could be in the mix. RFM will operate the property until the completion of the current cotton crop and pay rent on terms consistent with Cotton JV’s lease of Lynora Downs, the firm said. It intends to find a tenant prior to the start of the FY20 cotton season.

Speaking to Agri Investor, RFM executive Stuart Waight said the acquisitions fit the firm’s ongoing strategy in both cattle and cotton. “We’re looking to invest in the sectors we’re currently involved in and we’re keen on central Queensland, particularly for cattle, as it’s a good value area to invest in,” he said.

“We look for properties where we can add productivity improvements, like watering points on cattle properties, or more dams on cotton properties, among other things.”

He added that the acquisition represented “more of the same” for RFM, which collected A$150 million earlier this year through an equity raising to fund the purchase of five feedlots in Queensland and NSW.

“Our key is that we’ve delivered on results,” Waight said. “Since we’ve listed, we’ve met our market guidance each year.”

ASX-listed Rural Funds Group reported earnings of A$44 million in FY18, up 29 percent on the previous year, and achieved adjusted funds for operation per unit of 12.7 cents, in line with guidance.

RFM said financial settlement on the Cerberus and Mayneland deals is expected to occur in September 2018 and will be funded by debt. Pro forma gearing was 25 percent as at June 30, 2018, with a target range of 30-35 percent.