Farmlands Property Sale An Opportunity

24 March 2011

Farmlands Property Sale An Opportunity to Benefit from Primary Industry Growth

Rural retailer Farmlands says the upcoming auction of six of its retail stores on a sale and lease back basis is a great opportunity for investors to participate in the strengthening prospects of the primary sector without having to become farmers.

Farmlands Chief Executive, Peter Ellis, says investors are looking for ways to access the excellent returns the primary sector is experiencing, but they don’t necessarily want to own farms or be farmers.

“Globally, prices for many agricultural commodities are at or near historic highs, leading to significantly improved returns. Owning a property leased long-term to a successful rural services provider is a great way for investors to be part of that.”

Farmlands is auctioning six of its retail stores early next month on a sale and lease back basis as part of the company’s growth strategy. Each of the stores - in Putaruru, Taihape, Opunake, Waipapa, Kaitaia and Paeroa - will have a minimum twelve year lease starting from settlement date.

A similar auction in late 2009 saw stores sold for between $1,250,000 - $1,600,000, at yields between 8.2% and 9.2%.

The properties are being marketed by Colliers International. The company’s Director of Research and Consulting, Alan McMahon, says the sale offers investors an attractive range of property options that offer a genuine and manageable alternative to other forms of investment in the primary sector, which is experiencing excellent returns.

“Scoured wool prices are up 50 per cent over the past six months to levels not seen in 20 years. The wool price trend points to $250 million more income for New Zealand in 2011. Sheep meat and beef prices are considerably higher. Lamb prices are up $30 to $40 on a year ago.

“Dairy farmers are also enjoying strong commodity prices, with the 2009-10 season finishing nearly 50% higher than initially forecast, followed by the 2010-11 season opening 8% higher than forecast. The 2011 payout could be the second highest on record.”

Farmlands, the North Island’s largest rural co-operative has an estimated 25% share of the North Island rural merchandise market, achieving sales revenue of $561million in 2009-10 and delivering profit distribution to its 27,000 shareholders of $36.1 million, compared to $14 million in 2003. Turnover in the current year is forecast to be close to $700 million. It was ranked 59th in the Deloitte-Management Top 200 Companies List in 2010.

It has grown from 27 stores in 2003 to 44 in 2011, with five more stores planned by the end of 2012.

“The similarities in the locations of the stores sold in 2009 and those being offered for sale this year are echoed in a similar economic climate,” says Mr McMahon. “For example, at that time, the official cash rate was 2.5%, and we had an unemployment rate of 7.2%.

Interest rates remain low and stable, and the unemployment rate was 6.8% in December 2010. A much lower Kiwi currency value is also benefitting the farming sector.”

Mr McMahon says the properties are also expected to attract significant interest, given the strength of the Farmlands brand, the quality of the assets and the success of the 2009 property sales.

The stores are being sold by auction at 2pm on 8 April at the Sebel Hotel, Tauranga.

ENDS

© Scoop Media