Successful Sale Of Farmlands Stores Supports Growth Plan

MEDIA RELEASE: Farmlands Trading Society Limited

Successful Sale Of Six Farmlands Stores Supports Growth Plan

FOR IMMEDIATE RELEASE11 APRIL 2011

Farmlands is pleased with the auction result for six of its retail stores on a sale and leaseback basis, as part of its long term strategic growth strategy.

Six Farmlands stores from across the North Island were auctioned late last week, achieving around $11.7 million. Each of the stores sold were supported by long-term leases. Putaruru, Taihape, Opunake, Waipapa and Paeroa were sold under the hammer and the sixth store, Kaitaia, was finalised just after the auction.

Farmlands Chief Executive Officer Peter Ellis says this is a great result, in line with the rural cooperative’s expectations.

“We’re unlocking the value of our real estate holdings to re-invest in the expansion of Farmlands. The sale of the properties, with long-term leasebacks to Farmlands, is part of our current three-year growth strategy which commenced in 2008.”

“Over the last few years we’ve been investing in new branches and branch refurbishments, recently opening our 43rd store. We’ll open a further two new stores in Kamo and Helensville and relocate the stores to new premises in Matamata and Te Awamutu by the last quarter of 2011. Beyond that we are working on plans for a further two new locations and four relocations.”

Farmlands Chairman Lachie Johnstone says the sale was also a great opportunity for investors to participate in the strengthening prospects of the primary sector.

“We are currently near or at the top of a commodity cycle, whilst we understand that there may be some downward pressure on these prices over time, we believe the outlook for the sector is strong given the poor financial returns farmers have been receiving over the last three to four years. Owning a property leased long-term to a successful rural services provider is a great way for investors to be part of that.”

“Four of the six buyers are shareholders, which is a great vote of confidence in the future of Farmlands.”

Napier car dealership owners John and Diane Finlay bought the Farmlands Taihape store for $2.08 million and rental yield 7.92 per cent. The couple bought the Marton store in a similar auction in 2009, and John says they are a good investment.

‘They’re new, state-of-the-art, low maintenance buildings, with a pretty attractive leaseback offer.”

‘‘Farmlands has grown from strength to strength, and as an investor that gives me a lot of confidence in its future. It’s a strong rural-based company with a good cash flow, and farming is always going to be a major part of New Zealand’s exports.”

Farmlands sales programme strategist Pat Turley of property advisory company Turley & Co, says the auction attracted national and international interest.

“It was great to have our expectations affirmed. The support for Farmlands and the lease arrangements were excellent, and the average sale yield of 8.27 per cent for provincial location properties was an indication of the quality of the assets.”

“New buildings, leased long-term to a high calibre tenant like Farmlands are rare property investment opportunities, particularly in our smaller centres.”
SALE PRICE YIELD COMMENTS
Putaruru $2.11m 7.82%
Paeroa $2.07m 7.97%
Taihape $2.08m 7.92%
Opunake $1.80m 8.44%
Waipapa $1.75m 8.69%
Kaitaia $1.85m 8.92% Passed in at auction but later sold unconditionally

ends

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