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Six Central Otago dairy farms will be sold for $61.4 million to an NZX-listed corporate farming company.
Yesterday afternoon, New Zealand Rural Land Company (NZRL) announced to the market that it had entered into an unconditional agreement with Dairy Farms Partnership (DFP) to buy its dairy asset portfolio across 3500ha.
NZRL has signed a short-term agreement to lease the properties back to the vendor until May 31, 2022, to allow it to finish off the current dairy season.
From June 1, 2022, the properties would be leased to WHL Capital Ltd for an initial term of 10 years with two 10-year rights of renewal.
According to the Companies Office website, WHL Capital Ltd was jointly owned by Katie Williams, of Timaru, and Patrick Mason, of Pleasant Point.
NZRL said WHL Capital owned, operated or was associated with 18 farms throughout the South Island.
The six farms have averaged more than 2.4 million kilograms per year since 2017.
About 70% of the farms were covered by centre pivot irrigation with a 1,100,000cum dam.
The transaction would be financed using a combination of cash on hand and an extended debt facility.
In May 2021, NZRL established a $65million revolving credit facility with Rabobank and the bank had agreed to extend that to $88.5million for the transaction.
Settlement of the transaction would see NZRL temporarily exceed its internal debt policy of 30% of total assets.
NZRL said it was comfortable with that position in the near-term, given the immediacy of cashflows from this acquisition, NZRL’s resulting diversification of tenants and the quality large-scale assets this transaction provided.
However, NZL will comply with its loan to value ratio (LVR) covenant with Rabobank of 40%.
Yesterday's announcement was NZRL's second major purchase of South Island farms this year.
In April it bought 14 South Canterbury and North Otago farms following the receivership of high-profile dairy group Van Leeuwen Group (VGL) for $114 million.
After the latest purchase has settled NZRL will own 10,800ha of dairy farms in the South Island.
When contacted yesterday, NZRL director Christopher Swasbrook declined to give information on who the vendor was.
The transaction was an attractive purchase in a productive area, he said,
NZRL has been granted a waiver by NZ RegCo from being required to obtain shareholder approval for the transaction.
Yesterday afternoon NZRL’s share price closed at $1.12 a share.
The sale is expected to settle on November 10.