In The Know: Quarterly Rural Real Estate with Col Medway

G'day and welcome to the in the know on the go podcast produced by humans of agriculture. Our podcast is designed to get you across the things that matter in Ozzie agribusiness in a way that's just well, bloody easy to understand. Think of me as a friend I that is learning with you as we discover and chat about the topics, from farm to fork, and even beyond. Well, it's time to get our quarterly real estate update. Me sitting down with none other than Cole midway, a senior director, la WD, a specialist in agribusiness valuations and transactions and proud partners and supporters of humans and agriculture since our very early days. Thanks, guys. This week, we're chatting about some new laws in Western Australia. Some of the areas of Australia that are running hot origin ng is snapping up farmland and have made a purchase up in the New England to jointly run a renewable energy project and agriculture production. The attraction of more corporate and international investors snapping up Ozzie farmland, and they're even having a bit more of a dabble in mixed operations and livestock is back on the agenda. So Cole, how are you getting on? Yeah, now it's been pretty busy lately. I can't recall time in my career that I've ever been busier by God not saying something. Yeah, it is. It's we've been drained from the fire hose in regard to work and has been quality work. But I'm not complaining about it. It's just there's plenty going on in this markets quite dynamic. And we've seen plenty of evidence of that. And I think there's some changes and some movement in the market, but quite an interesting environment. So last time, we checked in crazy to think that was the end of the first quarter of the calendar year. We're now in July. Last time we spoke you said that things were still keeping you guys really busy. That momentum has kept up by the sounds of it. So like, how are you guys getting on as a team? Again, really well, like the teams busy. That's what we like to be. And you sort of think that normally that the normal cycle is that you know, you get a few get into a few jobs in the autumn, it slows down in the wintertime and you ramp up for spring is the general field. We're how things work. But honestly, it's been we've had so much good work in the market over the last basically since February, that has kept us quite busy. And it's mainly been in that institutional space where all the activity has been rolling. And that's where I think this markets starting to get a little bit too paced. Last time we spoke you were literally just about to jump on a plane that was probably the last holiday you had and maybe the last one you'll have for a while and you're heading over to the global investor forum over in New York. What was the appetite and especially in that investor space? What was the chat that was happening there? I look egg in general across the world. And Australian agriculture particularly, is viewed as an A class asset. And there's a lot of institutional money looking at buying a home in that space and getting positioned. I think Australian X particularly well positioned for lots of reasons we've spoken about previously, on lots of interviews, we've done ollie, and you know, we've got rule of law, people have title, we don't have curves, the government, sovereign risk is low. And we've got good production systems will link to world markets, and all those sorts of things are viewed very favourably by institutional investors. The overlay on top of that is the continued desire of organisations to bolster their ESG credentials in regard to their responsibility to the Climate and Environment. And obviously, AG has a big role to play in that in that space. And certainly that's driving a lot of investors and new investors and private family offices that are actually looking at agriculture in Australia. You mentioned this to base market. Can you explain to me a little bit more what you mean by that? Well, at the moment, Ollie are nearly that big of a deal, the easier it is to sell. And that comes down to the fact that the institutional space is alive with capital looking to deploy. And that's been driven by this wonderful thing we have called flooding dollar at a mid 60s dollar, Australian agricultural land looks good value. And I think that's what's attracting interest, these bigger institutional investors looking at any specific types of farming enterprises. What's what's quite interesting is that there's been a bit of a shift like normally it was, they didn't want to invest in any of the heartbeat. So livestock were not on the agenda. It was all and for plenty as well. They were only passive investors. I wanted to be landlords, or they were just looking at crop row crop, irrigated row crop or dryland cropping horticulture. It's been quite we've noticed this year that there's a lot of mandates have expanded to also include livestock. And I think that comes from the fact that it is understood that mixed farming operation and livestock have a role to play in regarding sequestering carbon, a continual cropping programme. It's difficult to sequester carbon and continue dropping bromine. And so I think that's been recognised and it's quite interesting to some people, some organisations who previously wouldn't look at livestock, and they are open to it. But it's fascinating because that seems like quite a big shift just over the last few years of where people were looking going. Holy shit, we don't want to go anywhere near that because of the potential risks, etc. Yep, yep. Well, you know, we have lost Aki deadstock So, you know, investors were particularly sensitive to that and the risks involved. And but, you know, I think all those risks are manageable. And I think it demonstrates that despite the demonising of remnants, by some sectors that I think it's done become widely accepted that they've got a role to play in the water, carbon discussion. It's interesting. We've just recently launched that carbon series, which was really just a shortcuts, simplifying it, so I can understand it, but it feels like and even just over the last few weeks, Nestle have said, Actually, we need to focus on not just buying the offsets, we need to focus on what's happening in our production systems to create our products. And that's the shift of priority for these large multinationals as well around the world. Yeah, well, I just think this trend, or as you want to call it is just, it's seeping right through the economy. And we just can't ignore it. beauty of it is and the great news for agriculture, I think, is we've got a role to play. It's 100%. And just for those institutional investors, is there any specific regions or parts of Australia that they're really quite interested in? or Now look, I think different groups sort of stick to their knitting. And so, you know, there's still plenty of interest in that northern beef. There's still plenty of interest in dryland row cropping and irrigated row cropping. And what's probably where the news face is that mixed farming, the traditional mixed farming livestock and dryland cropping is what's been opened up as another frontier for these institutional investors. It's funny, though, you know, I've always lamented that there hasn't been institutional money for livestock, particularly sheep in the woodshed build, have, you run down the east coast of Australia, and obviously similar topography and rainfall and region in the western South Australia. And I sort of wondered why that it was because it's a proven system, it's profitable, it has significant resilience to climate. And there's been reluctance, like if you think about on the institutional side, Paraguay are probably the only ones who have really taken a position in there. And they do that quite well. Most of the other large scale players in that sort of which seat belt in Zion and chic, particularly, I've been sort of more likely classify them as institutional family businesses, who've traditionally been in shape for a long time, and often generational shoot breeders. So it's gonna be interesting to see whether that becomes a water focus for some institutional investors. Now, I'm going to show my lack of understanding of what's actually happening in these bigger deals, but they're also consortiums that are coming together. So with that overseas money, but then actually on the operation. I know it was last year where there was, I think it was Iam and someone else had actually got come together, are we seeing a bit more of that happening for people who are moving into the livestock purchase for the first time? Now, it's largely institutional and family offices, who are appointing a local asset manager to bring the strategy together. So that's largely what's driving the new interest in this space. Yeah. Great. And so the other side of the market, family farms cooling off there for them? Well, it certainly has look, by no means is the inquiry dead by any stretch. But we're back to I think I mentioned before, we're back to more normal levels of inquiry. But and so if we're talking the sub $20 million range, that's largely where the farmer farmer sales generally occur. It's not to say that there's certainly plenty of farm businesses that capacity to to transact well above that, but just looking at the bulk of where the transactions would be in that range. Certainly, I think that on the expansion phase, a lot of family farming businesses and probably taking a breath, if they haven't already got themselves set with it with an acquisition in the last five years. They're probably considering probably waiting back to see what just happens in the market. I think summer. I think others are, I suppose what's impacting all that all of us that there's two things that have impacted family farming businesses appetite to expand one is obviously a balance sheet and equity and the ability to get financed for that. There's two things about that is equity and then you've also got the serviceability and they'll see these two factors impacting serviceability. One is interest rates. I think the impact in ag of interest rates like this at the moment is a little bit overblown. Like interest rates at the moment, I really back to neutral settings. So if you make business plans that couldn't withstand a neutral settings on interest rates, we'll probably need to go and look in the mirror at the problem not going blind, the Reserve Bank Governor putting interest rates up, that's just part of life. But on the flip side of that what impact serviceability is income, and there's no doubt in livestock markets at the moment, we've seen sheep and lamb prices come off their 90 due to noise in decibels and then dropped by by you could probably say 30% or something like that. Obviously, that has an impact on serviceability and but on the same token, if you're looking at a new acquisition, you did your budgets at last prices remaining in the 90s. So I think you probably again, need to give yourself an Africa but obviously, you know, you need to look at more. We're a cycle. We're in a commodity cycle, we produce commodity so this shouldn't On three news to anyone who's been in the game any more than five minutes? Yeah, well, if you're doing your numbers at that you're probably doing a uni assignment not a business plan. It always looks good in the spreadsheet, Ali. Oh, God have a look in the mirror after this as well got one thing which has popped up literally only has just rolled over as of the first of July but started to get a little bit of talk to the back half of I guess we'll back out for June especially but Western Australia new laws coming in regarding indigenous heritage laws. Has that started any conversation? Will it have an impact? Or is it too early to tell? Oh, look, anything like this creates uncertainty is not good for any market. And I suppose, you know, there's certainly there's a blog out there about the Chicken Little the world falling in because of this the scarf warning, I should say. But yeah, let's see what the reality is. I think it's a bit early to say you can see why these legislation probably come into play because then, you know, not a great event with Rio Tinto and but then you look at the maybe the unintended consequences of some legislation in regard to the land sizes that it had comes down and has an impact on residential backyards and things like that. No doubt. Yeah, those sorts of things will get sorted out in time. So little bit early to say yet only, I think, and back on to you guys, then closer to home any feature listings I know, I've seen over the last few months, you had the I think it was a Western Australian Victorian aggregation. Just this week, a cheeky dairy farm has hit the market. But anything that you're working on that has is close to your heart or something that you're really excited by? Oh, well, look, we've It's been phenomenal. What you know, there's been, we've probably transacted $115 million, with a rural property in the Lachlan valley between Baltimore and Dublin. In the last four weeks, Jeff along towards an iconic pastoral holding, we've got that dual away in the mid 80s 80 million range. Another phenomenal result has been morani. Phenomenal, which was a grazing property 90 kilometres from Armidale for Lord Michael haensi. So who's been an Australian Expat lives in the UK, and they've been a colossal investor in Australian AG. Over the last decade, that property was interesting. Again, you're looking at these renewable energy markets in agricultural land getting entwined with each other. This is a prime example of that. So we thought the grazing value of that property was somewhere around mid 30s 30 million range early. Well, it's made high 40s Because basically, a couple of energy companies got after it. And they're very bad. It's been reported now that the buyer is origin energy, not that we reported, but it was reported that in life, it's out there, now. It's out there. So they are very committed that they'll probably overlay a renewable wind development there on that property, but that very community at maintaining the agricultural capacity of that asset. So that's the sort of thing that we're starting to see these parties invest in. So they weren't even on our radar with regard to who we thought the buyer may be when we come in sec campaign. So it's interesting how and different new parties are entering the entering the space? Yeah, absolutely. This is another one off topic. But over in the US, it was like PepsiCo dropped 215 million US into farmland for Regenerative ag projects to improve their supply chain. Yeah, no one's gonna stand it in front of the steamroller volley is keeps getting as serious momentum. And I think it needs to be part of the conversation, when we're thinking about assets, we take a market, I don't think it necessarily needs to, fundamentally a farm has to produce product, that and how much product it produces on a consistent basis underpins its value, that will always be the driver. But these are the carbon opportunities, whether that be also environmental offset opportunities, they're just part of the conversation that we need to consider when we're looking at an asset and who might be the best fit in regard to buying it. So one final question, the crystal ball, we love that it's kind of the one looking ahead, what does the second half of 2023 look like for you guys have any other songs or indicators of things that might happen? Well, the market has influences outside of that. Probably a little bit unknown, I think the forecast and the bomb, but if you listen to the bomb you Sleater is at the moment, and I get it there. There's sections on the East Coast in northern New South Wales, Northwest New South Wales, where a lot of guys didn't get the crop in and understand that discipline over that southern New South Wales and downstream Victoria into Southeast Australia. My understanding is it's a colossal season, we're certainly where I am. And yes, we will probably as well set up as we've been for a number of years. And we've had, it's back to back to back to back phenomenal seasonal conditions at the moment. So you know, look, you can only play the cards are in front of you in regard to seasonal conditions, I think. So whether that cuts out as the spring develops, will that will be interesting to see. And that may will have an impact on sentiment. I think that again, is mainly going to have an issue with regard to the farmer to farmer sales. I don't see the institutions taking a breath at all because they just have such a longer term view. Interest rates don't necessarily impact the institutions as much because they're actually deploying capital and not relying on debt. And so low stock prices, it'll be interesting to see how they start to fall out like normally, especially in the land market, you would start to see a winter premium that is not unfolding at all. And I think the markets bumbling along at the bottom. And it's gonna be interesting to see what happens when the influx of suckers and fresh lamp spring lambs come in what that's gonna do the market as well whether all these other names are out and out of the system and creating the space for the new lamps, then that'll be interesting to see how that unfolds. So I think all that is going to encompass the appetite generally, in that farm farmer market. I think there may be some crack start or pee, it just feels to me, it's got a bit of fragility about it, I'm going to stay on to develop. And I think that's going to be really important that vendors keep that in mind that they really need to be probably well advised in regards to where they set their expectations. If they really want to sell at prison. I think it's it's not a bloodbath. It won't be about properly. We've had double digit year on year rises since 2015. So all markets have to take a breath at some stage. This was gonna come at some stage, I think within here. Yeah, well, there's no shortage of factors that plays there. But hopefully for you well, In what aspect, I'm saying hopefully it slows down a little bit for you. But at the same time, too, we also have a case up so we don't have to slow down at all, Ali, but I think the issue is that in this market now. It used to be like shooting ducks on a pond when this market was rising. Anyone can sell it. I think the issue is going to be now is that who has the ability to roll the sleeves up and get a result for their client in a tough market? Yep. Now any predictions we've put out the Wallabies are about to come back in. How the Wallabies gonna go in the Bledisloe this year. Yeah, well, I'm a world and on positive Well, are we supportive since forever? And you know, and the problem I've got is that you know, I was in my 20s and 30s through the glory days of the wallabies, and we haven't been there for some time but I have hope in Lord led but I did hear him speak the other day and he said it's all based on results and when I start getting results straight up he said I know everyone's expectations are high and I'll be sending out the door if I don't produce so. Look. I think he's been wonderful for Australian Rugby in the fact that at least we're in the pavement here is a walking headline, but I also think you're seeking coach and so it's gonna be great to see you on Saturday night. Yeah, we're here the Wallabies go at altitude know that I'll be up at one o'clock watching that, don't worry. There's gonna be a lot of interesting all fingers crossed, because I remember I was the child in the glory days and I think that gave even hope to any second row could be a goalkeeper as well. And God, we know what that bread. He was a unicorn is beautiful cow. Well, as always, thanks for coming on for a chat. And if anyone wants to know more, they can head over to your website. They'll nwa.com delay. Was there for a year if someone wants to give me a call. Perfect. Well, that's it for another episode from us here at humans of agriculture. We hope you're enjoying these podcasts. And well if you're not, let us know hit us up at Hello at humans of agriculture.com. Get in touch with any guests recommendations topics, or things you'd like us to talk and get curious about. If you enjoyed this episode, please share it with a friend. Right subscribe, review it, any feedback is absolutely awesome. And we really do welcome it. So look after yourselves. Stay safe. stay sane. We'll see you next time. See ya.