Investments

OVERVIEW
Rural Funds Group (ASX: RFF) is Australia’s first ASX listed diversified agricultural Real Estate Investment Trust (REIT). RFF is included in the S&P/ASX 300 index.
RFM is the manager and responsible entity of RFF. RFF owns a diversified portfolio of Australian agricultural assets in five core sectors which are predominantly leased to corporate agricultural operators. RFM seeks to generate earnings and income growth through productivity improvements and conversion of assets to higher and better use. Distribution growth of 4% per annum is targeted.
RFF is a stapled security, incorporating Rural Funds Trust (ARSN 112 951 578) and RF Active (ARSN 168 740 805).
Key metrics
FY24f revenue by sector5

- Assets adjusted for the independent valuation of water entitlements which are recognised at the lower of cost or fair value on balance sheet.
- Weighted average lease expiry, calculated as the FY24 forecast rent and the year of lease expiry (excludes J&F Australia guarantee fee, income from annual water allocation sales, operating income from owner occupied properties and other income).
- Gearing calculated as external borrowings/adjusted total assets.
- Calculated forecast FY24 distribution of 11.73 cpu divided by the closing price of $1.95 (23 August 2023).
- Figures subject to rounding. Includes AFFO contribution from farming operations from owner-occupied properties including Swan Ridge, Moore Park, Beerwah and Bauple – macadamias; unleased Maryborough properties – sugar cane; Baamba Plains – cropping; Yarra, Cerberus and Kaiuroo – cattle.
STRATEGY
RFF targets distribution growth of 4% per annum. Income growth is achieved through lease indexation, productivity improvements and conversion of assets to higher and better use.
RFF owns a diversified portfolio of agricultural assets predominantly leased to corporate operators. Historically RFF assets have been acquired in sectors where Australia has a comparative advantage and RFM has operational experience.
Information on three key elements of RFF’s strategy including lessee selection, diversification and acquisitions and developments is included below.
Lessees
RFF lessees predominantly consist of corporate entities, representing 79% of FY24 forecast income. Several of these entities are also listed on domestic or international securities exchanges, either directly or via their parent entity.
Other lease categories include RFM farming, private farming businesses and direct farming operations. RFM leasing arrangements provide operating experience which can benefit RFF’s asset and sector due diligence, identifying and executing development opportunities and lessee selection and management.
Corporate lessees by sector 1

- Queensland Cotton (Queensland Cotton Corporation Pty Ltd) forms 50% of the lessee Cotton JV, with RFM forming the other 50%. TRG macadamia lease is to a company managed by TRG on behalf of a joint venture between TRG and a global institutional investor.
Diversification
RFM seeks to achieve multiple layers of diversification within RFF, including by:
- Asset type: this incorporates diversification across both infrastructure predominant and natural resource predominant assets. More information included under ‘Acquisitions and developments’.
- Climatic zone: climatic diversification moderates the likelihood of multiple lessees being exposed to adverse weather events at any one point in time (see ASX: RFF Climatic Diversification discussion paper 20 June 2016).
- Lessees: diversification of counterpart risk. More information under 'Lessees'.
Climatic diversification map1

Note:
- Shaded areas denote climatic zones differentiated by rainfall seasonality (source: Bureau of Meteorology); see Climatic Diversification discussion paper dated 20 June 2016. Numbers in the circles/boxes on map show number of assets. Blue square boxes denote cattle feedlots.
Acquisitions and developments
RFF will pursue the acquisition of additional assets that grow the quantum and diversity of RFF’s earnings. The investment strategy is to invest across the full range of the asset continuum shown to the right, with the objective of ensuring the asset mix can continue to fund distributions.
Within various agricultural sectors, RFF is pursuing investment opportunities which may provide productivity gains or conversion to higher and better use.
Both strategies aim to lift the value and income earning potential of an asset. The productivity strategy achieves this objective by enhancing a property’s ability to produce a given commodity. Whereas the higher and better use strategy aims to transform the use of an asset to a different, more profitable commodity. Put simply, increased productivity or production of a more valuable commodity enhances the ability of the operator to generate higher profits, leading to a higher valuation and enabling the landlord to charge more rent thus supporting RFF’s distribution growth target of 4% per annum.
Spectrum of investment opportunities1

Note:
- The income and growth figures presented have been provided to differentiate the profile of income and growth that can be derived from different assets. They are based on RFM’s experience and observations of agricultural lease transactions and historical rates of growth. They are neither forecasts nor projections of future returns. Past performance is not a guide to future performance.
Manager
RFM has a depth of experience accumulated over 26 years acquiring, developing and operating Australian farmland, agricultural infrastructure and other assets. Sector experience includes almonds, poultry, macadamias, cattle, cropping, viticulture and water.
RFM employs over 220 staff and seeks to maximise returns through its experienced management team including specialist fund managers, finance professionals, horticulturists, agronomists and other agricultural managers. RFM’s key responsibilities in the management of RFF include:
- compliance to financial, farming and reporting requirements of leases,
- water asset management including obtaining approvals and engagement with government,
- management of infrastructure e.g. ongoing and development capital expenditure,
- coordination of regular independent valuations,
- facilitating acquisitions, and
- managing lessee/customer relationships.
Under the RFF constitution RFM is entitled to the following remuneration:
- management fee of 0.6% pa of adjusted total assets, and
- asset management fee of 0.45% pa of adjusted total assets.

Sustainability
Learn about RFM’s incorporation of sustainability considerations in the management of agricultural assets.