August 25, 2020

By Lynda Kiernan, Global AgInvesting Media

Rural Funds Management (RFM), manager for the ASX-listed Rural Funds Group (RFF), an owner of a diversified portfolio of high-quality Australian agricultural assets, announced it has agreed to sell its Mooral almond orchard in New South Wales for A$98 million (US$70.3 million). 

The buyer remains unidentified, however RFM stated that it is a global agriculture and timber investment manager “as nominee for a special purpose vehicle that will be owned by pension funds and institutional investors”.

The contracts for the sale are conditional upon completing due diligence within 45 days (with the possibilities of extensions), and securing approval from the Foreign Investment Review Board (FIRB), and the sale price is subject to change based on future possible adjustments and inclusions.

The decision to sell Mooral came to light in April of this year, when CBRE was appointed to market the property that totals 808 hectares of orchards, 593 of which are leased by Rural Funds Management along with RFM Almond Funds. The remaining 215 hectares are leased by Select Harvests (SHV), another almond grower. Mooral also includes 12,120 megaliters of water entitlements, and an additional 3,223 megaliters in supplemental entitlements.

“The decision to market Mooral follows recent favourable comparable sales. If Mooral is sold, proceeds are expected to be redeployed in-line with RFM’s strategy to acquire assets with higher earnings potential and that improve climatic diversification,” RFF said in April.

“The acquisitions are likely to be in northern Australia, in the macadamia and cattle sectors.”

RFF first entered the macadamia industry in 2016, managing properties ever since. A key strategic goal as part of the group’s next phase of investment activity is a concerted expansion in the macadamia sector, according to the minutes of the group’s latest earnings call.

The group acted upon this strategy only weeks ago when it announced its acquisition of 5,409  hectares (13, 366 acres) of sugar cane farms in Queensland from MSF Sugar Pty Ltd. for A$81.1 million (US$58.44 million) with the intention of converting the land by shifting production on 2.200 hectares  (5,436 acres) to macadamia orchards, with a significant portion of the balance of the land being used for cropping.

The company has stated that it has also acquired three cattle stations in Central Queensland with frontage on the Fitzroy River in FY2020, and expectations are that macadamia planting will begin on some of these assets as soon as autumn of next year.

All combined, these assets will form a foundation providing the natural resources needed to support the future development of a macadamia portfolio totaling as much as 5,000 hectares (12,355 acres), and reflecting an investment of approximately $500 million (US$358.7 million) in development over time. As this conversion to macadamias advances, the group expects to benefit from higher lease income and gains garnered as the assets are converted to a higher use. 

These expectations are not unfounded as is demonstrated by the deal for Mooral, which if completed, will generate a 25 percent gain on the current book value of the asset for the group.

“During financial year 2021, RFM will be working to redeploy capital to higher and better use developments designed to achieve greater income growth over the long term,” said the company during its latest earnings call. 

Although macadamia nuts represent a small portion of Australia’s agricultural production, macadamias are the only crop native to Australia that is produced at scale and traded on international markets – making the country a leading global producer, exporting 70 percent of its yearly crop. 

The Australian Nut Industry Council predicts that by this year approximately 24,000 hectares (59,305 acres) of macadamia orchards will be planted across the country, with production expectations of 19.500 tons valued at more than A$300 million (US$216.3 million).

The lion’s share of demand is being generated from Asia, where urban consumers in particular are more focused on healthier eating and the benefits that nuts can provide as a healthy snack in a cleaner diet.

However, Research and Markets also noted that there is growing demand being seen for organic macadamias in European markets, stating that the global macadamia market is projected to grow at a CAGR of 6.6 percent between 2019-2024. 

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.