- The lease will go to a company managed by The Rohatyn Group
- The lease includes profit shares above certain thresholds
- Remains subject to the Foreign Investment Review Board
Rural Funds Management (RFM), as the responsible entity of the Rural Funds Group (ASX: RFF), has announced a 40-year macadamia orchards lease.
Under the agreement, up to 3,000 hectares of orchards will be leased to a company managed by The Rohatyn Group (TRG) for four decades, as part of a joint venture between TRG and a global institutional investor.
This lease will incorporate orchards in Maryborough, Bundaberg and Rockhampton.
The agreement will be for an initial 1,200 hectares, an additional 1,800 hectares in FY24, subject to Rockhampton’s orchard water supply system being completed. Orchard development and management services will be provided by RFM and its wholly owned subsidiary RFM Macadamias Pty Ltd (RMA).
Key features of the lease include rent being paid on cumulative capex deployed at a rate comparable to similar horticultural asset leases. The triple net lease will also have annual indexation between 1.5% to 2.5%, with profit share above certain thresholds.
Upon the commencement of the initial lease, a $40 million loan will be provided to RFF. An additional $60 million will be provided during the balance of the development, with the debt to be repaid with interest over seven years.
There are several lessee termination rights which include RFM ceasing to be the responsible entity, change of control in RMA without consent and the orchards failing to produce a 3.6 tonnes per hectare mature yield over a rolling five-year period.
The forecast adjusted funds from operations for FY23 is 11.3 cents per unit, assuming approval is received and the lease commences.
Given the joint venture involves overseas investors, the lease remains subject to the Foreign Investment Review Board.
