Rural Funds Group (ASX:RFF) portfolio and acquisitions update


by Jessica Amir

Rural Funds Group Limited (ASX:RFF) acquires new properties and undertakes transaction with JBS Australia.

We saw it was important to provide our investors an update, with respect to the drought. In October, we provided a presentation to the ASX addressing this point. We included a slide, which had a map of Australia and the 12-month average rainfall, compared to the long-term average. And what that demonstrated was that assets in Northern Australia had received average, or slightly below average seasons. However, noting that those farms are in high rainfall zones. In the southern parts of Australia, where the drought is most pronounced, the majority of those assets are underpinned by high security water tops. So for all of our lessees, it remains business as usual.

In August and September, Rural Funds Management announced the acquisition of three additional properties. Two cattle properties, totalling approximately 10,000 hectares and an additional cotton property, which is in close proximity to the existing cotton property, Lynora Downs, within the Rural Funds Group. All of these properties have the potential to benefit from productivity development. And this is consistent with our strategy of acquiring farms, which have the potential for this development, which can improve asset values and consequently rental income, to the portfolio.

Gearing following the JBS transaction on a pro forma basis was 25 per cent. And after the acquisition of these three properties I’ve just described, for approximately $44 million, pro forma gearing is 29 per cent. Compared to our target gearing, the Rural Funds Group retains additional balance sheet capacity, for future acquisitions.

The transaction with JBS Australia has two components. First is a sale and leaseback of their five feedlots. Since the transaction was announced, FIRB so Foreign Investment Review Board approval, has been received for the leases to commence with JBS. As a consequence, three of the feedlots have settled and are leased to JBS. And the two remaining feedlots are still subject to subdivision approvals, with local government bodies.

The second component of the transaction is a guarantee to an external entity, which funds the acquisition of cattle, which are placed in those feedlots. Unitholder approval was required for that component of the transaction to proceed. And we’re pleased to report that in August unitholder approval was received, with over 99 per cent voting for the resolution to commence that guarantee. As a consequence, income from that guarantee was commenced later that month.


Jessica Amir

Finance News Network
Jessica joined FNN in January 2017 after having worked in financial advising for seven years and in TV journalism for seven years, specialising in finance, equities and analysis. She has interviewed former Prime Ministers of Australia, Tony Abbott, Julia Gillard and Kevin Rudd and ex Treasurer Jo Hockey. Jessica has worked as a journalist with Sky News Business, ABC 1, ABC's The Business, ABC24 and has also been a regional Channel 7 and 9 TV reporter with Prime7 and Win News.