New Zealand Rural Land Company (NZRL) has bought two more Southland dairy farms for $29 million.And, it has gone back to its shareholders to ask them to help fund it.
Yesterday, the NZX-listed company announced to the market it had entered into an agreement to buy the 564ha Argyle Downs Farm, near Invercargill, and the 366ha Greenhill Farm, near Winton. The farms had been leased out on 10- and 11-year deals, respectively.
As well as that, NZRL also announced a $20.38 million capital raise to help pay for them. The latest acquisitions take the land company’s total dairy holdings to 11,710ha throughout the lower South Island.
In April last year, NZRL bought 14 South Canterbury and North Otago farms following the receivership of high-profile dairy group Van Leeuwen Group (VGL) for $114 million.
Then, in October last year, it bought six Central Otago dairy farms for $61.4 million.
In a statement, NZRL chairman Rob Campbell said the latest acquisitions represented a continuation of its strategy of broadening the company’s portfolio of high-quality rural assets.
The company’s capital raise would be completed in two stages.
The offer would allow existing shareholders to pick up one new share for every five held, at a price of $1.05, a 6.3% discount to Tuesday’s close of $1.12.
An institutional offer closed last evening and a retail offer would open on Monday.
Last week, NZRL revised its financial forecast saying it saw a silver lining in rising interest rates, but it would come with short-term pain for long-term gain.
It said cash earnings would be under pressure through to the 2024 financial year, with guidance for adjusted funds from operations (AFFO) revised down 23% to 5c per share (cps) for FY23, down from 6.5cps.
NZRL withdrew its forecast of 6.4cps for the 2024 year ending June, with an update expected to be made sometime later this year.
It was unable to forecast what effect rising interest rates would have on its total debt of $88.5million, with just 27% of its debt hedged.
However, the company expected rising inflation to deliver long-term gains in rents and land values.
Based on Reserve Bank inflation forecasts, it expected land rents to rise 14% in leases renewing in 2024, which accounted for 65% of its portfolio, with increases of 9% in 2025.
NZRL’s shares were put into a trading halt following yesterday’s announcement. It will resume trading tomorrow. Both of the transactions will settle next Wednesday.
