Rural Equities, the farming group majority-owned by the Cushing family, has agreed to sell two of its farms and continues to eye other investments outside New Zealand rural property.
The Hastings-based company, which owns 22 farms in New Zealand, said it has entered into unconditional contracts to sell Glendowns, a sheep and beef property in South Canterbury, and the northern block of Dalmuir, an arable property near Timaru, for more than $9 million, slightly above book value. The sale of the properties, which were leased, are due to settle in April.
Rural Equities, established in 1989 as New Zealand Farmlands, owns a mix of sheep and beef, dairy, deer and arable farms spread throughout New Zealand from Waikato to Southland. Its property portfolio has been shrinking as it sells down farms and the company has said it is considering new long-term investment opportunities in other asset classes and potentially other jurisdictions to provide enhanced returns and portfolio diversification.
In announcing its annual result this week, the company said that while nothing has met the directors’ investment criteria during the last financial year, the process continues.
Rural Equities reported its profit fell to $4.45 million in the year ended June 30 from $8.98 million a year earlier while operating earnings before interest and tax edged up to $5.03 million from $5 million. The company said the value of its rural property, excluding changes to the portfolio, fell by $1.51 million, compared with an increase of $4.32 million the previous year. It said the reduction was offset by a $3.09 million gain in its shareholding in ASX-listed agricultural company Webster, which has interests in Australian cotton and walnut farming and water rights.
As a result, net asset value per share lifted to $5.79 from $5.71 a year earlier, the company said.
“This is a satisfactory operating result with firm prices being achieved for milk, sheep and beef,” executive chair David Cushing said in a statement. “The rural property market was subdued with foreign investors being virtually excluded from the market and increasing environmental standards applied. In particular, the lack of foreign purchasers has resulted in very limited liquidity for large scale properties.”
Rural Equities will pay a 5 cent dividend on Nov. 7, unchanged from the past three years.
The company is offering to buy back up to 650,000 of its shares at $4.90 apiece, which is 50 cents higher than the last share buyback in 2016 and a premium to the current market price. The shares last traded at $4.75 on the USX market, having changed hands between $4.65 and $5 over the past year.
“Given that REL shares trade infrequently, directors consider the offer will provide shareholders who are contemplating exiting their investment an ability to realise their shareholding at a premium to market and without paying brokerage fees,” it said.
The offer is expected to open by Sept. 24 and close on Oct. 19.