23/02/2015 - 16:42

Ag property a good buy

23/02/2015 - 16:42

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Ag property a good buy

Demand for Western Australian agricultural property assets is expected to run hot throughout 2015, with offshore buyers not expected to be deterred by new rules for foreign investment in farmland.

From next month, the Foreign Investment Review Board screening threshold for agricultural property purchases will be reduced from $252 million to $15 million, and a foreign ownership register of agricultural land will be established.

Real Estate Institute of WA rural network chairman Don Fry said most members would back the changes, but were concerned with FIRB’s capacity to deal with a heightened level of transactions.

“While there is some concern from business groups with the lowering of the threshold to $15 million, REIWA does not see this as a major threat to the incentive to invest in WA agriculture,” Mr Fry said.

“Rather, rural agents consider that it creates transparency and provides further information around foreign investment levels in our state.”

Over the past 12 months, major agribusiness deals in WA have totalled more than $300 million, although the vast majority of that has been Australia-based players buying branded food producers.

Some of the more high-profile deals include Andrew Forrest’s Minderoo picking up Harvey Beef for $40 million, and Gina Rinehart’s Hancock Prospecting securing a half stake in the Laitt family’s Liveringa and Nerrima Stations, also for $40 million.

Mrs Rinehart also bought into Bannister Downs Dairy late last year, which is planning a $20 million-plus expansion, a deal first reported by Business News.

The biggest value deal, however, was Italian dairy giant Parmalat’s $117 million purchase of Harvey Fresh.

Colliers International WA agribusiness specialist Greg O’Meara said international interest in WA assets was certainly high, even if foreign players had not yet dominated the deals.

A recent whitepaper released by Colliers and Grant Thornton found low interest rates and the weaker Australian dollar were creating optimal market conditions for offshore investment, especially for sale and lease-back deals, which would allow funds to free up capital to invest in their core businesses.

“Most of the foreign activity is people looking at the market, but it doesn’t necessarily translate into a large volume of transactions,” Mr O’Meara told Business News.

“There’s a weight of dollars trying to enter into the market and if that means buying passive investment, which is farmland as opposed to an office building, well, why not?

“Farmland is every bit a reasonable investment class or asset class to look at as anything else.”

One of the biggest assets on the market is 68,000 hectares of farmland listed by CBRE on behalf of one of the state’s largest agricultural landowners, Nicoletti Group.

CBRE has flagged a potential sale and leaseback opportunity as one of the potential options for purchasers of the land, which comprises five broadacre grain farming operations and a 13,000 tonne storage facility in Merredin.

The agent is expecting the land to fetch a sales price north of $60 million.

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