New Zealand Rural Land Company is actively seeking to expand its foreign investor base to facilitate growth and capacity to execute compelling opportunities ahead, chair Rob Campbell told the company’s annual meeting.
Campbell was speaking in the context of the pending purchase of 1889ha of forests on five sites near Whanganui for approximately $63 million.
After the settlement date on April 15, the 26- to 28-year-old forests will be leased back to the vendor, NZ Forest Leasing (NZFL) as tenant, for an initial annual rental of $5m.
Thereafter annual lease payments are subject to CPI-linked adjustments.
“The outlook for NZL remains very positive for future earnings and value growth,” Campbell said.
“Productive and low-carbon intensity rural land globally is an increasingly scarce resource.
“I am still surprised foreign investors seem to understand this better than many domestic investors, despite the critical role agriculture plays in our economy.”
NZL currently has 23.2% foreign shareholders and under NZX listing rules it can go as high as 49.9% foreign ownership.
NZL and NZFL have not yet disclosed where the Whanganui forests are. NZL chief executive Chris Swasbrook said they were all planted out between 1994 and 1996.
They are therefore close to logging and the tenant is responsible for all harvesting, replanting and forest maintenance.
The tenant also benefits from the carbon credits, not NZ Rural Land Company.
Swasbrook said at the annual meeting that the yield of the investment is higher than NZL’s marginal cost of borrowing and thus provides insulation from rising interest rates in the short to medium term and increases headroom on banking covenants.
Established in 2010, NZFL owns more than 60,000ha of forests and leases a further 43,000ha.
NZFL is one of the 10 largest freehold landowners in New Zealand with assets of over $3 billion.
The forests are planted on land classification 6, 7 or 8 because of a policy of not displacing high-producing pastoral farming, Swasbrook said.
He also explained at length the NZFL policies of native regeneration and active pest control.
On the June 30 balance date, NZL had a net asset value of $1.65 a share, having increased 18% during the previous year. However, NZL shares have traded in a tight band recently from $1.10 to $1.05.
