David Bryant established RFM in 1997, recognising the potential to provide alternative investment opportunities in Australian agriculture. The negative correlation between traditional investment returns in the share and property markets, and the return from agricultural investments, provide portfolio diversification opportunities for investors.
The range of development and projects undertaken by RFM demonstrates a comprehensive understanding of agricultural land use, and an ability to foresee potential for long term productive development. The Company’s experience in directly operating agricultural assets allowed a depth of experience to develop and has resulted in evolution of the product offering. The early experience of operating assets directly allowed RFM’s managers to develop a sound understanding of the agricultural operations and the land and water assets they managed. Over time, RFM has developed a more diversified portfolio of assets as it has gained experience and taken advantage of opportunities. In more recent years, the restructuring of investments to remove the operational risk by establishing long term lease arrangements has resulted in stable investment opportunities for investors.
From cotton to almonds at Hillston, NSW
In 1998, RFM established Lachlan Farming Limited, acquiring land and water rights at Hillston, New South Wales (NSW), to carry-out irrigated cotton farming. Whilst a small portion of this land was already developed for irrigation, the majority was developed by RFM. By 2000, RFM had developed 6,800 hectares of land for flood, lateral and drip irrigation at Hillston. Development of water storage facilities and improvements in irrigation infrastructure allowed water use efficiency gains, which assisted in reducing water costs as a proportion of total production costs.
By 2001, the property was capable of growing over 5,000 hectares of cotton and 2,500 hectares of winter crop. Following extended periods of drought in the early 2000’s and consequent reduction in river water, the company started to explore other options for more profitable land use options.
In 2006, the RFM Almond Fund 2006 was established at Hillston, providing investors with the opportunity to grow and sell almonds for the world market. Simultaneously with the change from cotton production to almond production, the land and water assets were sold by Lachlan Farming Limited to RFM RiverBank providing investors with the opportunity to invest in the developing almond orchard.
Land use development at Hillston has shifted from grazing, to cotton and now to 1,800 hectares of almond orchards. This remarkable transformation reflects the RFM management team’s skill in adapting readily to changing regulatory, investment, climate and market conditions.
Water assets and infrastructure development
In 2005, RFM established RFM RiverBank with the aim of providing returns generated by a combination of regular lease payments for land, infrastructure and water assets and the benefit of capital growth in these assets. David Bryant has purchased over 100,000 megalitres of water entitlements, and managed the Company’s expertise in irrigation development, water storage and water use efficiency which have increased the value of assets and ensured the ability for higher value use of land. RFM’s focus has been on ensuring that assets owned by RFM managed funds have access to quality secure water entitlements. In October 2016, RFM as responsible entity for the Rural Funds Group contracted to acquire a 9,549 megalitre high security Murrumbidgee River water entitlement for approximately $34m, in one of the largest ever sales of high security Murrumbidgee River water entitlements.
Former sheep paddocks now producing Grange wines
RFM has overseen the acquisition and development of vineyards in the Barossa Valley, Adelaide Hills and Coonawarra in South Australia as well as a vineyard in Victoria, now totalling 666 hectares under vines and valued at $47.9 million.
At the time of development in 2001-2002, the 242 hectare Geier Vineyard was one of the largest single vineyards in the Barossa Valley. Over 13 years of operation, grape quality from the RFM vineyards has improved to the extent that the vineyards now supply large quantities of high grade fruit. The vineyards have been part of the supply of A grade fruit intake for Penfolds including substantial quantities of fruit for ultra-premium labels. In 2013, the RFM vineyards were leased to Treasury Wine Estates (TWE) as part of RFM’s continuing strategy to remove operating risk and lease assets out to reliable counterparties on long-term leases.
How RFM came to grow 30 million birds a year
In 2003, RFM negotiated an agreement with Bartter Enterprises in a unique arrangement which allowed investors to access competitive returns through contract chicken growing in Griffith, NSW. This transaction resulted in the establishment of the RFM Chicken Income Fund (CIF).
Following the success of this alternative investment opportunity, in 2005 RFM purchased an additional property at Griffith and constructed 24 chicken sheds. The purchase of further land at Lethbridge, Victoria in 2006 allowed development of another 20 sheds. Following this there were 154 chicken sheds producing around 30 million birds annually under long term contracts with Baiada Poultry Pty Ltd and Turi Foods. In 2013 a demerger of the CIF allowed the CIF, a wholly owned subsidiary of the Rural Funds Group, to maintain ownership of the farms and the newly formed RFM Poultry to undertake the operational activities for Baiada in Griffith and Turi Foods in Lethbridge, through until the assets sale in 2019.
Macadamias build on RFM’s tree nut expertise
On behalf of the Rural Funds Group, RFM announced in early 2016 the acquisition of three macadamia orchards. RFM’s experience in the almond sector will be utilised as the orchards enter maturity. The acquisition also represents a measured first step into an exciting new commodity and a new climatic region in southeast Queensland.
Located near Bundaberg in Queensland, the properties include 259 hectares of macadamia trees planted between 2002 and 2007. Two of the orchards, Swan Ridge and Moore Park (234 ha), are leased to a managed investment scheme. The third, Bonmac (25 ha), is leased by RFM.
Queensland properties add climatic diversification
In July 2016, RFM led the identification and acquisition of three Queensland cattle properties and approximately 11,000 head breeding herd for the Rural Funds Group. Two of the properties were breeding operations located near Normanton on the Gulf of Carpentaria and the third a finishing property located outside Rolleston in central Queensland. Together the properties form a 250,000 ha integrated cattle operation which will be operated by Cattle JV Pty Ltd, a wholly owned subsidiary of RFM, under a lease term expiring in 2026. As with the macadamia orchards, the northern cattle properties provide climatic diversification to the RFF property portfolio.
In December 2016, RFF acquired Lynora Downs, a 4,880 ha cotton property in central Queensland. This acquisition added a new commodity to the RFF portfolio, and supported RFF’s strategy of climatic diversification. While this was RFF’s first major cotton acquisition, as outlined above RFM had been growing cotton in the Riverina, New South Wales, for over twenty years.
RFF further added to its cattle assets in October 2017, contracting to acquire three, contiguous cattle properties in northern Queensland. The properties, Natal Downs, Longton and Narellan, referred to as ‘Natal’, encompass an area of 390,600 hectares and are situated 115 radial kilometres south west of Charters Towers.
Most recently, RFF acquired Comanche, a 7,600 ha breeding and backgrounding cattle property located in central Queensland. Importantly the property offers productivity development opportunities almost identical to those proven on other cattle properties owned by RFF. This will allow RFF to replicate the strategy of deploying capital expenditure with the aim of increasing property values and rental income.