ONE of the major investors in listed
rural land company PrimeAg Australia has
warned that without more offshore
investment in Australian farmland, debt
levels across the sector could rise and
property values could slide.
Laguna Bay Pastoral chief executive Tim
McGavin, who oversaw the purchase of 11
per cent of PrimeAg before it sold 60
per cent of its land portfolio to US
fund manager TIAA-CREF last week, said
prices could "fall considerably" without
the support of such foreign corporates.
"I would say to anyone who is anti-
corporate or anti-foreign investment,
that they had best be careful what they
wish for because if the corporate bid is
removed then, given the levels of debt
saturation, prices will fall
considerably and many farmers will have
negative equity," Mr McGavin said.
As revealed by The Australian Financial
Review on Friday, TIAA-CREF, which
already has more than $300 million worth
of rural property in Australia, will
take out about 60 per cent of PrimeAg's
portfolio at a slight discount to book
value.
Mr McGavin's view is backed up by
PrimeAg chairman Roger Corbett. "What we
desperately need is major unlisted funds
to invest in water and rural land assets
in Australia," Mr Corbett told the AFR.
"They will eventually be the most
valuable assets in the world and if we
want to maintain these assets we need
unlisted funds to invest in them."
Many in the rural market think the
investment by the unlisted TIAA-CREF
heralds a shift in the way investors
approach rural assets, where land values
are usually steady but earnings can be
volatile.
Landmark NSW state manager Phil Rourke
said the deal with TIAA-CREF was
unlikely to trigger any boom in rural
land prices and that there was probably
some negative sentiment still attached
to the fact that PrimeAg had decided to
sell out its portfolio.
"On the other hand, this is significant
for the market because it is such a big
lick of country sold in one deal," Mr
Rourke said.
The sale of $125 million worth of
PrimeAg's top cropping property included
Milchengowrie, Mullala, MacIntyre Downs
and Crooble in northern NSW.
Last May, TIAA-CREF snapped up $37
million worth of PrimeAg property, which
included Colonsay, St Ruth and Prentices
on the Darling Downs as well as
Burradoo, Ivanhoe and Wilga Warrina in
northern NSW.
TIAA-CREF managing director Jose Minaya
told the AFR the recent deal was a
strong fit with the fund manager's
existing portfolio.
"We believe high-quality, well-
diversified properties in major grain-
exporting regions of the world offer
attractive opportunities for long-term
growth," he said. "These properties
feature these characteristics and add
geographic diversification, making them
excellent additions to our portfolio."
While the sale is a good sign in a weak
rural land market, where many debt-laden
farmers face softening commodity prices,
there are only a handful of unlisted
rural land funds buying property.
Macquarie Group's Lawson Grains and the
Chinese/Japanese joint venture Shandong
Ruyi, which bought cotton farm Cubbie
Station last year, are among the few
actively seeking cropping property.
rural land company PrimeAg Australia has
warned that without more offshore
investment in Australian farmland, debt
levels across the sector could rise and
property values could slide.
Laguna Bay Pastoral chief executive Tim
McGavin, who oversaw the purchase of 11
per cent of PrimeAg before it sold 60
per cent of its land portfolio to US
fund manager TIAA-CREF last week, said
prices could "fall considerably" without
the support of such foreign corporates.
"I would say to anyone who is anti-
corporate or anti-foreign investment,
that they had best be careful what they
wish for because if the corporate bid is
removed then, given the levels of debt
saturation, prices will fall
considerably and many farmers will have
negative equity," Mr McGavin said.
As revealed by The Australian Financial
Review on Friday, TIAA-CREF, which
already has more than $300 million worth
of rural property in Australia, will
take out about 60 per cent of PrimeAg's
portfolio at a slight discount to book
value.
Mr McGavin's view is backed up by
PrimeAg chairman Roger Corbett. "What we
desperately need is major unlisted funds
to invest in water and rural land assets
in Australia," Mr Corbett told the AFR.
"They will eventually be the most
valuable assets in the world and if we
want to maintain these assets we need
unlisted funds to invest in them."
Many in the rural market think the
investment by the unlisted TIAA-CREF
heralds a shift in the way investors
approach rural assets, where land values
are usually steady but earnings can be
volatile.
Landmark NSW state manager Phil Rourke
said the deal with TIAA-CREF was
unlikely to trigger any boom in rural
land prices and that there was probably
some negative sentiment still attached
to the fact that PrimeAg had decided to
sell out its portfolio.
"On the other hand, this is significant
for the market because it is such a big
lick of country sold in one deal," Mr
Rourke said.
The sale of $125 million worth of
PrimeAg's top cropping property included
Milchengowrie, Mullala, MacIntyre Downs
and Crooble in northern NSW.
Last May, TIAA-CREF snapped up $37
million worth of PrimeAg property, which
included Colonsay, St Ruth and Prentices
on the Darling Downs as well as
Burradoo, Ivanhoe and Wilga Warrina in
northern NSW.
TIAA-CREF managing director Jose Minaya
told the AFR the recent deal was a
strong fit with the fund manager's
existing portfolio.
"We believe high-quality, well-
diversified properties in major grain-
exporting regions of the world offer
attractive opportunities for long-term
growth," he said. "These properties
feature these characteristics and add
geographic diversification, making them
excellent additions to our portfolio."
While the sale is a good sign in a weak
rural land market, where many debt-laden
farmers face softening commodity prices,
there are only a handful of unlisted
rural land funds buying property.
Macquarie Group's Lawson Grains and the
Chinese/Japanese joint venture Shandong
Ruyi, which bought cotton farm Cubbie
Station last year, are among the few
actively seeking cropping property.
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