Graeme Hart's Carter Holt Harvey puts 29 dairy farms up for sale for NZ$224.5 mln (Update 2)

Carter Holt Harvey, which is owned by Graeme Hart's Rank Group, is putting 29 dairy farms up for sale with a combined sale price of NZ$224.5 million, real estate agent Bayleys announced. The newly developed dairy farms were converted from forestry land around Tokoroa and currently farm almost 20,000 dairy cows.

(Update 1 includes full statement. Update 2 adds comments from Bayleys and Carter Holt Harvey)

Carter Holt Harvey is selling the farms after harvesting the trees on the land.

Initial interest

Bayleys senior country agent Mike Fraser-Jones said there had already been quite a bit of interest since they began actively marketing the 29 farms earlier this month. "There has been quite a bit of interest, but as per all transactions at the moment in the farming world, (there's) quite a lot of diligence going on. Buyers are extremely cautious and doing a lot of homework on the properties."

Fraser-Jones said there had been some offshore interest in the farms, although he personally had not had any interest from China.

"Basically it's been more English based or Australian based," he said.

"(The international interest is) more on the corporate side...but a lot of that is initial interest where we have parties coming acting on behalf of investment groups, equity funds. Pretty much a lot of due diligence will have to go on before anything occurs."

Bayleys had marketed nine of the farms last year, with one selling. The remaining farms were then taken out of the market over a period of time over the winter, Fraser-Jones said.

"During the winter it was pretty hard to get finance for rural lending," he said.

However, "the finance market's settling down a bit. Buyers know their parametres now, sellers too. Sellers have started to realise that the market has moved backwards considerably, and if they wish to sell, they gotta meet that market, so the gap has closed between buyers and sellers."

Being able to sell the 29 farms singularly freed the sale process up to a larger bunch of buyers, he said. While before-hand the farms were being sold as blocks, there is now the option to sell them as single units, and the farms should all have individual titles by June 1.

The farms

Of the 29 farms, nine began production in June 2008, eight began in January 2009, and twelve began in June 2009.

Fraser-Jones said the farms all had 50/50 sharemilkers, with some of the sharemilkers milking two or three farms. They all had standard Federated Farmers three year contracts, he said. Up to 10-15% of the farms still had rotting trees on them which were decaying, opening up more productive areas in coming years, Fraser-Jones said.

Carter Holt Harvey spokesman Ross Townsend said the 29 farms were currently operating at around 85% of their potential of around eight and a half million kgs of milk solids per year. He said there was potential for about 25,000 cows on the 29 farms.

On whether Carter Holt had a time-frame in which they wanted to sell the farms, Townsend said they were "just happy to go with the flow for a while."

There was also no need to sell, he said. "No not at all. We're just putting them out there for people to have a look at and putting up a whole selection of them. We're not even remotely close to being in distress, not even close."

Here is the full release from Bayleys:

The biggest corporate farming sell-off ever seen in New Zealand is placing 29 state-of-the art "˜designer' farms on the market "“ for a combined asking price of $224.5million. Carter Holt Harvey is selling the newly developed dairy farms which it converted from forestry land around Tokoroa after harvesting the trees. They range in size from 218 hectares to 726 hectares, and range in price from $5.1million to $10.4million. Combined, the farms are currently supporting almost 20,000 dairy cows. The farming units are being jointly marketed by Bayleys Real Estate and PGG Wrightson. Bayleys senior country agent Mike Fraser-Jones said Carter Holt Harvey is selling the farms as part of the company's planned conversion of forest land to dairy farms in order to divest assets outside Carter Holt Harvey's core business activities.

Mr Fraser-Jones said the farms had been commissioned into production on a rolling schedule since the middle of 2008. All properties were located within a 20 minute radius of Tokoroa and are sited near other existing dairy farming units. Each farm comes with a new dairy shed configured for farm size, assuming three cows per hectare. All farms have a deep bore with a pressure water system, while the dairy sheds are a mix of five herringbone and 24 rotary. "The farms represent the end process of converting forested land back into a productive state. Once the trees were harvested, Carter Holt Harvey recycled the remaining stumps and tree material into a valuable organic "˜potting mix' material, which was spread onto adjacent pasture land and further enriched with fertiliser applications to create highly productive dairy grazing land," Mr Fraser-Jones said.

"It's an economically beneficial and responsible method of regenerating the land resource," he added. "Carter Holt Harvey sold off some of its land around Tokoroa in the late 1990s, but retained 30,000 hectares with the best contour, soil type and locality to be developed as these dairy farms now being sold. "The farms are all new and no expense spared to ensure they are highly specified with the only capital expenditure to outlay being continued development of rows of decaying trees to improve the productive capability of all the farms." Mr Fraser-Jones said all the farms had been developed using high tech practices in modern dairy farm design.

Carter Holt Harvey used an advanced "˜greening' process for recycling tree material left from its harvest to create better fertility on the farms, applying lime, phosphate and chicken manure before substantial sowing of rye grass and clover "“ with all fertiliser applications managed and tracked by GPS mapping. "Each of the farms have been designed for optimum efficiency, with approximately 1500 metres being the longest walking distance for the cows, centrally located, top-of-the-line dairy sheds, and three architect-design homes located for both convenience and views," he said.

"The farm layouts were extensively mapped with global positioning satellites and computerised mapping systems to optimise the layout of fences, buildings, races, water systems, effluent systems and farm services. Steep areas, gullies and wetlands have been fenced out for aesthetic reasons, and to protect the environment. "The company took particular care to comply with environmental best practices - with a view to complying with future nutrient controls that may be applied by Environment Waikato on the Waikato River catchment from Taupo and Karapiro," Mr Fraser-Jones says.

Mr Fraser-Jones said Carter Holt was willing to talk deals with serious purchasers and acknowledged that with the sheer scale of some of the farms, that joint ventures or equity partnerships may be the way ahead. All 29 farms are being marketed with prices attached.