Dirt-cheap stations alarm farmers

20 Oct, 2014 05:00 AM
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The result has raised serious ­concern about the values and equity levels in Qld cattle stations

A MAJOR cattle station in central Queensland has sold for a 50 per cent discount to what the vendor paid for it at the top of the market.

Corfield Downs, north-west of ­Longreach, has been sold for about $7 million after having been purchased in 2008 for $13.8 million. The station was bare of cattle each time it was sold.

The 45,000-hectare property was placed in the hands of receivers PPB Advisory by National Australia Bank alongside another station, the ­31,200-hectare Strathdarr, which has also sold for a discount at about $4 million. Both properties were destocked of cattle in October last year and had been held by the Milton family.

The result has raised serious ­concern about the values and equity levels in Queensland cattle stations.

A source close to the transaction said there was going to be "carnage" in the market as graziers who have sold their cattle may not be able to cope with debt levels. The drought, a high Australian dollar and the aftermath of the live export ban have all led to a difficult period, particularly in central Queensland. Many graziers are worried about how the drop in value in nearby properties could effect their equity positions.

A grazier from southern Queensland, David Wells, saw a receivership sale near his property and it has made him worried about the effect on values.

"It's happening everywhere. It's scary and I don't think the banks want to talk about it either," Mr Wells said.

"When you hear about those ­scenarios, you have to wonder whether the banks should have been lending that sort of money," he said.

PPB Advisory's David Leigh, who was the receiver for Corfield and Strathdarr, said both properties were in the grip of drought when he was appointed.

"We immediately destocked the ­station to preserve what feed was on the ground so as to present the property to the market in good condition and that strategy was successful," he said. "They have sold at prices which are good in the current environment. By and large the banks will try and support their ­customers through the tough times but there are also a number who just can't be supported." Colliers International was marketing the property.

AFR
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READER COMMENTS

pete
20/10/2014 6:51:20 AM

This is good news, hopefully the new owners can actually make a living out of breeding and fattening cattle and not just service debt.
THE FARMER
20/10/2014 7:49:30 AM

Pete it may be good news the the buyer of a bargain , but the whole state has just been devalued 50% .That makes arguments about equity redundant when most of it's removed .This could pressure a whole lot of people .
pete
20/10/2014 11:11:37 AM

Farmer, If you can call putting 7 mil at risk a bargain, sure they did alright. Now all they need is about 4 mil to spend on cattle after it rains and they will be able to make a go of the place. For the past 10 years a blind man could have told you prices were unsustainable. It begs the question if they took the $63/acre offer, what did they turn down?
mouse
20/10/2014 2:09:41 PM

Property prices should really be in respect of what they(the property) produces as a business, unless the property is being purchased for other reasons, e.g. such things as sentiment, philanthropy, animal sanctuaries.... Otherwise - the property price bubble situation worsens.
crazy
20/10/2014 2:19:08 PM

And what return will they get ? perhaps 2% on capital invested , there are a lot of better investments around , and if the place cant return at least what fully franked dividends from bank shares which show 5-6% then why bother paying even $4m. For a long time I've marvelled at how these prices have been going up and up and up and the commodity prices have stayed pretty much the same ... no logic
Geronimo
20/10/2014 3:17:47 PM

The Farmer, is it a bargain or a more realistic price? In reference to the article, the actual "serious concern" is why someone paid so much in the first place.
Qlander
20/10/2014 4:03:33 PM

Equity without cash flow is meaningless. Property price bubbles ALWAYS burst.
Freshy
20/10/2014 8:21:19 PM

crazy....well its pretty simple, if thats all you expect for your investment in agriculture then dont bother....put your hard earned into another industry you are comfortable with and let someone else have a crack who can and does make the returns.... Must admit, if I was getting less than 20% return out of my livestock business Id be a little upset - its not agriculture as a whole that has bad returns, its poor choice of enterprise
Upsidedown
20/10/2014 8:22:53 PM

Begs belief that a receiver is patting himself on the back for their stewardship of the property and is happy with the selling price and what he considers to be market value,heaven forbid!!!!
wtf
21/10/2014 4:50:22 AM

As I see it much of this problem of asset bubbles, (be they urban real estate or farms) has been due to the expansion of credit, as a direct result of central bank monetary policy and revisions to Basel lending standards. Remove the inflation causing effect of fractional reserve banking and policies such as negative gearing and let assets realise their true earning value. Otherwise we will continue to have unnecessary heartache (as above) and wealth restricted to a generation of asset wealthy older Australians (based on their age and position on the credit expansion timeline).
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