Rural Funds publishes property values in continuing defense of business

The embattled listed fund manager, which generates income by leasing farmland, published a farm-by-farm breakdown of property values as it tried to reassure investors in the face of a short-selling attack.

Rural Funds Management has published valuations for each of its properties in a statement to the Australian Securities Exchange, as it continues to mount a defense of its operations following criticism from overseas analysts.

Some of the valuations published by RFM this week differed from those previously published in its financial statements. The firm said this was due to “capital expenditure subsequent to the valuation, designed to improve an asset’s productivity and value and attract additional lease income.”

The firm said it had adjusted property assets of A$924.8 million ($621 million; €565 million) in total as of June 30, 2019. This figure includes a value of A$489.3 million for the properties themselves and A$172.9 million in bearer plants, alongside other intangible assets and water entitlements. Its highest-value individual property was the 2,500-hectare almond orchard Kerarbury in New South Wales, which was worth A$196.3 million.

Hong Kong analyst Bucephalus Research questioned RFM’s external asset valuations last month because they had been made “in absentia.” RFM managing director David Bryant disputed this to Agri Investor, saying it was normal practice for two valuers to sign off a report and for only one of them to have visited the property.

The firm reiterated this in a statement to shareholders this week published alongside the asset valuations, saying: “Valuation reports are prepared in accordance with international valuation standards. At least one qualified valuer physically inspects each asset when preparing the valuation. A second qualified valuer reviews the work and co-signs the completed report.”

US-based short-seller Bonitas Research, which first made accusations against Rural Funds Group and its responsible entity, RFM, had also questioned the Australian firms’ valuations as they related to the value of bearer plants and water entitlements.

RFM said in its statement: “RFM has a policy to independently value assets at least every two years and rotate valuers every three years. The firms that completed valuations are part of global real estate businesses.” It said that valuations had been completed by CBRE, Colliers International and JLL.

In addition to farmland, RFM said that it owns 116,829 megaliters of water entitlements and 21,430 megaliters of water delivery entitlements worth A$208 million, but that these were not broken out separately because they were embedded in assets and so were reflected in each property’s valuation.