Read Bayleys' statement below:
Two multi-million dollar Hawke’s Bay farms which sold under the auctioneer’s hammer within an hour of each other have redefined rural land values for the region.
First to go under the hammer was a 530 hectare high-tech’ dairy conversion known as Willowford Dairies which sold for $6.25 million. Then the 1001 hectare Gwavas Station - which has been continually owned by the same family for some 155 years – sold for $9.2 million.
The consecutive sales were conducted by Bayleys Real Estate. Some 250 people packed Napier’s War Memorial Hall for the auctions last week.
Among the crowd were farmers from throughout the North Island, as well as scores of lawyers, land valuers and real estate salespeople from competing property agencies in the Hawke’s Bay region. Bayleys Hawke’s Bay director Glyn Rees-Jones says the two back-to-back sales set a new standard for rural price values in the district.
Bidding for Willowford Dairies opened at $3 million before selling at $6.25 million. It was bought by father and son farming partners Doug and Peter Grieve from the Hawke’s Bay. The property has 400 hectares of effective productive land – with a 320 hectare milking platform, of which 240 hectares is able to be irrigated. The farm – with a three year production average of 200,000 kilogrammes of milk solids - was sold without Fonterra shares, which, when factored in, meant the property sold for well in excess of $30 a kilogram of milk solids.
Bidding for Gwavas opened at $4 million before finally selling at $9.2 million. The property was bought by a private trust with farming experience and an existing presence in Hawke’s Bay.
“These were landmark sales for the district on a number of fronts,” Mr Rees-Jones said. “The new values set by these sales reflect the revaluation of farms from their production output levels rather than relying on any capital gains – which many in the rural sector took for granted over the past four decades.”
Mr Rees-Jones said the strong presence of representatives from across Hawke’s Bay rural economy at the auction, reflected just how importantly farmers and their support services viewed the day’s proceedings.
“If these two farms had failed to sell, it would only have instilled further despondency on a market already ‘doing it tough’. However, with bidding on both farms - and ultimately sales – the auction process showed that Hawke’s Bay farm owners and the lending institutions behind them are now seriously listening to market feedback on land values.”
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which, when factored in, meant the property sold for well in excess of $30 a kilogram of milk solids.
The farm sold for what it sold for - $31.25kg/ms based on an average production of 200,000kg/ms It is mischievious journalism to say otherwise .Up this way there is not always the share price difference in sales of farms on a per/kg basis between Fonterra and non-Fonterra farms .
Gwavas Staion was put up. The bidding reached 6.2 million. The banks then met with vendors, came back in and offered at 9.2 million. Its only and average farm with some poor boney land that in my fathers youth was covered in rabbits.The Tarawera moari trust(I believe) bid and purchased farm. Without them it would have most likely been passed. Its not indicative of land in the area, a very substantial residence and a lot of history. My agent thought it would sell around the 6.5 mark. $ years ago a farm (bare land)sold in the area for over 7k an acre this sale was 3800 an acre.
Willowford was sold, but the farmer has other assets that the bank I suspect will now pursue. I dont know enough about dairy farming but I know the milk from this property goes to Hawera. First by truck to Dannevirke and then train if possible. Thats about a 5 hour trip in a truck 10 hour round trip. That would make me think, as I believe that eventually farmers a long distance from factories will get to pay.
agree with you gareth the production level for the dairy farm 625kg/hct pretty average in fact not even average,
Bayleys are probably feeling a bit cock of the walk as land agents have been doing a starve lately.
I can remember going through that area of Gwavas i think 1999 a particularly severe drought stock loose everywhere and in rivers and seeing ewes pulling up dead grass flipping it over and eating the roots. The whole area was a wasteland.
My farm sold today 55% below gv and that was the best offer, other offers 78% below gv and 70% below gv which is pretty apalling for the area. my gv not an inflated value. So I guess that is where the value is in remote hillcountry breeding blocks and the irony is that prices for lambs best ever, go figure.
Thats relly sad Janette. If I lived closer Id buy you a beer. What did the bank sell it for per Stock unit.
Gwavas has a grass grub problem, they also said it was 13000 stk units which I struggle with a little. Stk units are used by agents with little knowledge or maybe just misleading.
Is %55 percent below Gv going to be the new norm? Im really sorry I know what a huge amount of work you put in, and as you say prices at present are fantastic as long as you are stocked up it looks Ok.
Agreed Ploughboy, Willowford should work although Andrewj makes good point on possible "distance discount". I'm looking at a dairy funding proposition which has features of an equity partnership and ordinary debt. The purchase of the going concern would require contributing at least 10% of the total enterprise value. The funding partner would bring the remaining cash in return for 25%-35% equity (not finalised yet) and a cumulative preference share carrying a return of 7.70% p.a. over a 15 year term.
E.g. Going concern total cost = $100, contribution required for around 70% of equity = $10, preference share obligation of 7.7% p.a. on the funded $90.
If a preference share payment (quarterly or annual, yet to be decided) is missed then the pref rate increases to 8.7% p.a. until the shortfall is settled but missing payments does not count as default until end of year 15. If it all goes pear-shaped in the relationship department we can call it quits but the funding partner would want to be made up based on the bank rates available - same as buying your way out of a fixed rate, could cost a little or a lot depending on where rates have gone. It makes sense to professionals I've spoken with and is intuituvely appealing to me...any thoughts?
From the States
DAIRY REVENUES IMPROVING, BUT DOESN’T NEGATE THE NEED FOR FUNDAMENTAL REFORM: (By Rob Vandenheuvel) As we sit here in the first quarter of 2011, we are clearly in the “boom” portion of this boom/bust cycle we’ve gotten so familiar with in the dairy industry. Dairy commodity values are rapidly moving up and those increases are making their way into the price dairy farmers are receiving for the milk they produce. Of course, for a variety of reasons, higher grain and feed prices are eating away a healthy chunk of that additional dairy farmer revenue (memories of 2008?), but the additional revenue for our dairies is certainly a welcome sight. At the same time, our excitement over these higher prices is tempered, as we all have the eerie feeling that we’ve seen this before. Higher prices, inevitably followed by unbridled expansion in the national milk production, followed by the ensuing collapse in commodity values, and in turn a collapse in dairy farmer revenue. In the past, some in our industry have been guilty of trying to convince themselves, “this time it’s different; $10 milk is a thing of the past.” We certainly know better than that as we sit here in 2011. With grain and hay prices escalating to record levels, the exposure to negative margins on the dairy farm is largerthan ever before. A collapse in the milk price to government-support levels represents such a high risk that dairy farmers are inevitably nervous when watching the volatile dairy commodity markets
Gareth, Pick myself up by the boot straps. Could be worse, I am not dead under a pile of rubble.Still do a lot of work helping farmers deal with their banks which is more than a full time job and all the banks have ramped things up again in terms of pressure on farmers.Thanks
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