Article – Foreign investment and thirst for capital drives growth in 'sale and leaseback' property deals

3 February 2015
Clint Jasper
ABC Rural
As foreign money chases prime agricultural assets in Australia, and local agribusinesses seek out capital, ‘sale and leaseback’ agreements are increasingly becoming a tool to achieve both objectives, according to property group Colliers International.
Under a sale and leaseback agreement, plant or property (or both) is sold under the agreement it will be rented back to the seller over a fixed term.
Olam Australia entered into a $200 million, 18 year sale and leaseback agreement with Adveq Almond Trust, and the private equity group TPG, which owns Inghams Enterprises generated $650 million by entering into a sale and leaseback of its properties.
More recently, the 415 hectare Qualco West Vineyard in South Australia’s Riverland was sold to Belvino Investments under a similar arrangement.
Colliers national director of agribusiness Tim Altschwager said these types of sales are more common in capital intensive agricultural businesses, like horticulture and irrigated agriculture.

Property sellers who have entered into these arrangements are looking for an alternative to traditional finding, such as taking on more debt, he said.
“They weigh it up, to see if those funds can be put into their current operations to get higher yields if they focus on the business side, rather than have all their capital tied up in land.”
While the sale and leaseback agreement is gathering popularity at the moment, Mr Altschwager said fluctuations in currency and interest rates as well as the value of Australian assets all have the potential to change the appetite for this type of investment.
Rows of wine grapes
Courtesy of ABC Rural