Friday, March 29, 2024

Kiwifruit orchard is not a lemon

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A record price was paid at auction for a Te Puke kiwifruit orchard when strong bidding pushed the six hectare block past $6 million. The orchard on No 4 Rd, long recognised as a premium growing spot, has 5.03 canopy hectares of SunGold and sold for $6.135m at $1.18m a hectare.
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Previous high prices in the area have just touched $1m a canopy hectare.

Bayleys country agent Snow Williams described the property as a trophy orchard. 

The price is indicative of the orchard’s quality and not necessarily typical of what all properties might expect.

The north-facing block is on high quality soils and has a track record of generating 20,000 trays a hectare of high-quality fruit.

“This sale was to a local buyer who knows the orchard well, having done contract work on it. 

“We are seeing buyers in the market starting to recognise that not all orchards are created equal and that often the most expensive orchard is the cheapest in terms of operational costs and fruit output,” Williams said.

He first sold the property in 1997 when it was still part of a large lemon orchard operated by soft-drink company Oasis. That sale was $1m for 20ha. 

Tauranga valuer Dylan Barrett of Preston Rowe Paterson said while the price is high it reflects the value the buyer put on a property that is relatively low risk thanks to its ideal altitude, soils, aspect and location.

“In that sense this was a Rolls Royce property. 

“It makes more sense to pay $1.2m a hectare for an orchard that is going to consistently produce 15,000 trays a hectare plus than to pay $900,000 for a place that thanks to factors like altitude or soils will only ever deliver variable tray volumes year to year.

“This is the sort of property you could be more of a hands-off grower and still see it perform well compared to some properties in more challenging growing environments.

“An orchard in a prime growing location like this will always be more forgiving.”

He believes the market is not over-exuberant, with investors assessing value in relation to risk.  

“Gold3 orchard values can’t keep increasing at an exponential rate as they have done over recent times. At some point the return on investment becomes far too marginal and debt serviceability becomes more challenging.”

Some orchard owners have taken advantage of the strong market conditions in recent months to quit properties that have exhibited variable performance, often because of their location.

The same auction had a property of similar size to the Te Puke one pass in at $5m. It is at a higher altitude closer to Tauranga.a

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