There’s more demand for really good quality orchards, producing both Hayward Green and the new SunGold fruit, than there is supply of available properties, PGG Wrightson Real Estate agent Stan Robb said.
Good quality means having consents in place for sufficient water supply and not all blocks have that.
“Every owner might think their orchard is worth $1m but that’s not the case.
“The good ones don’t come up that often.”
Te Puke-based Robb brokered the sale of the 14.29ha Paengaroa orchard to MyFarm Investments and just a couple of weeks ago booked a sale of a 5.5ha SunGold orchard and house for $6.7m.
At $1.1m/ha that set a new benchmark.
The buyer was an established grower expanding his operations.
“A lot of the activity is the bigger boys expanding and a lot of that is growers buying the neighbouring property.
“There’s a lot of consolidation of smaller blocks.”
A 14ha block is a big sale. Most are much smaller.
Expanding established growers are also the among the sellers, selling a block to finance buying SunGold licences from Zespri for other blocks they own.
The licences are in the $250,00/ha to $300,000/ha range to buy.
The wider Te Puke area is the major base for kiwifruit and Robb said the market there has been stable round the same number for many years, with about 40 to 50 properties typically changing hands.
Growers believe they have management of potential Psa infection under good control.
MyFarm now has two large kiwifruit blocks in the area and a couple of small ones, head of investment services Brian Cloughley said.
About this time last year it paid $700,000/canopy hectare for the Gold acreage of a combined Green/Gold orchard slightly larger than the latest purchase.
Both were in the early stages of production at purchase-time. Some investors are in both syndicates.
This time of year is favourable timing because the buyer gets the season’s fruit as part of the deal and most of the growing costs have been incurred, Cloughley said.
MyFarm is keen to do more but it is difficult for a syndicate investor to get access to properties on an unrestricted basis, he said.
Most top-end orchards are sold by tender and time-scales can be short.
Last year it put a syndicate together in a week and did well to get a tender in at a $1.02m/ha offer price.
“The winner was at $1.06m and we were fourth so that was a lot of time and expense for us.”
With SunGold growers clearing an orchard gate return (OGR) of between $60,000/ha and $90,000/ha after costs, they are making huge money and are in very strong positions to expand.
Prices are based on 8.5% net return to an owner-operator.
The Paengaroa orchard will be leased to experienced and large-scale operator DMS, which will pay a monthly base rental plus a share of profits.
That means investors receive monthly rental income plus an annual dividend after harvest, Cloughley said.
Investors are wary of something similar to Psa occurring and it is potentially a long way down given the current values.
“We are all going in with our eyes open and, at present, yields justify those values.”
Robb said demand for the green Hayward crop orchards is just as strong.
These are typically $400,000/ha to $500,000/ha and the OGR is similar to the sums on SunGold.
A $500,000/ha property would need to be in a very good situation, would mostly be bought by a neighbour and probably there wouldn’t be a house included.
Established growers are very strongly placed as buyers and banks are keen to lend.
Robb, who sold $100m-worth of kiwifruit properties in the 2016-17 season and $62m worth so far this season, believes the price outlook is very good for at least the next five years.
Large-scale Bay of Plenty orchardist and post-harvest group Seeka is always looking to increase its leased orchard space but is going through a quiet phase as it focuses on its avocado developments in Northland and kiwifruit expansion in Australia, chief executive Michael Franks said.
With the prices being paid for orchards, investors should make sure they are mindful of the risks.
At a post-harvest level, changes in orchard ownership do not make a big difference, he said.
“On those properties, you’ve still got the same crop to get off.”
