Rural Funds Group (RFF) Earnings Call Transcript & Summary

Thank you for holding, and welcome to the Rural Funds Group financial results presentation for the half year ending 31st December 2021. [Operator Instructions] I would now like to introduce your host for today, James Powell. Please go ahead, James.

Thank you, operator. Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rural Funds Group results presentation for the half year ended 31 December 2021. My name is James Powell. Also joining me today is David Bryant, Managing Director; Tim Sheridan, Chief Operating Officer; and Daniel Yap, Chief Financial Officer. [Operator Instructions] Please also be advised, the webinar, including Q&A, will be recorded. I'll now hand over to our first speaker, Tim Sheridan.

Thanks, James, and good morning, everybody, and thanks for your attendance. Welcome to today's presentation with [ Rural Funds ] half year '22 financial results. Firstly, a quick recap on the activities undertaken during the period. In August 2021, RFM completed an entitlement offer, which raised $100 million to fund the first stage, being 1,000 hectares of macadamia developments as well as the acquisition of water entitlements and to provide balance sheet capacity for the acquisition of cattle and cropping properties. In November, RFM announced the acquisition of 3 cattle and cropping properties as well as 2 mature macadamia orchards. Following these, AFFO guidance was increased to $0.118 per unit. Updates on the development and leasing of these assets will be provided later in the presentation. Finally, in February, RFF unitholders approved a further increase to the guarantee, which is associated with the JBS-operated feedlots, which resulted in another increase to AFFO guidance of $0.119 per unit. Looking now at the adjusted property asset movements. The graph on the right-hand side of this page details how movements grew by agricultural sector. The group started the period with $1.1 billion of adjusted property assets. Acquisitions during the half year included various properties and water entitlements in cropping, cattle and macadamia sectors, as shown by the sector-colored bars on the chart. Looking at revaluations. Investors may recall in the previous year, approximately 3/4 of the portfolio was independently revalued. RFM has a policy of arranging valuations every 2 years. And as a result, during the period, only a small number of assets were revalued. These assets were mainly in the cattle sector and included Rewan, which received a $12 million uplift, taking the current valuation to $62 million, an increase of over 100% on the $30 million purchase price. The notes on this page provide full details of the various accounting adjustments to reconcile to the total adjusted property assets as at 31 December 2021 of $1.3 billion. The next page of this session details the income, earnings and balance sheet metrics for the group at the end of December 31. Firstly, income and earnings metrics, as presented in the table on the top left-hand side of this page. RFF recorded a modest increase in property income in half year '22 compared to half year '21. The increase is being driven by an increase to the J&F Guarantee, acquisitions, development capital expenditure and lease indexation. Additionally, $2.9 million of the lease income generated by the Mooral almond orchard was received in the prior corresponding period but not in half year '22, meaning property revenue increased by $3.8 million or 12% on a like-for-like basis. Contributing to the total comprehensive income were positive independent valuations for the Queensland cattle properties Rewan and Yarra and Western Australian cattle properties Petro, High Hill and Willara. Looking at adjusted funds from operations, abbreviated to AFFO or net cash, the group generated $0.058 per unit with distributions of $0.0587 per unit. We note the AFFO per unit is forecast to be higher in the second half of this year, and this is due to the contribution of the recent acquisitions and increases to the J&F Guarantee. RFM is pleased to confirm the full year AFFO and distribution forecasts. In addition, RFM has today announced FY '23 forecast distributions of $0.122 per unit, inclusive of franking credit, an increase of 4%, in line with RFF's distribution growth targets. Next, I'll look at the balance sheet metrics as presented in the table on the bottom right-hand side of this slide. Adjusted total assets of the Rural Funds Group are now $1.3 billion following acquisitions and revaluations described in the prior slide. As a reminder, the adjustment relates to the recognition of water entitlements at their independent valuations. External borrowings are $439 million, reflecting a gearing ratio of 33%, which is within the target gearing range of 30% to 35%. Finally, the adjusted net asset value per unit has increased by 3% to $2.24 per unit. Additional information on the financial results are contained on Pages 22 to 26 of the presentation for those seeking further details. I'll now talk to the capital management of RFF. During the period, $100 million of new equity was raised by an entitlement offer. The offer was conducted at a price of $2.47 per unit and was taken up by approximately half of existing investors. The chart at the bottom of the page shows the total return for RFF investors from July 2014 to present and the price at which RFF investors have been able to previously take up their entitlements. The issue of new capital has also necessitated an expanded debt facility, in which during the half was increased to $520 million. RFM expects to have the margin refinance of $110 million of this amount with a third lender arranged by the end of this month. The table on the next page considers the debt facility and interest rate hedges in greater detail. During the period, $140 million of new forward dated interest rate hedges were entered into. The chart on the bottom left of this page shows the decrease of future weighted average hedge rates. The chart on the right-hand side shows the current debt facility limits, noting the majority of the facility does not expire until FY '25. I'll now hand over to David to provide a portfolio and strategy update. Thank you.

Good morning, ladies and gentlemen. Before I move on to the next slide, I'll just talk to this picture that you have here, which is a picture of the Riverton macadamia development that's occurring near Rockhampton in Queensland on the Fitzroy River. So what you can see in the foreground is part of the 50 hectares that's already planted. In the background, you can see that there's land that's been prepared, and that will be planted by about May, June this year. So that will bring the Fitzroy River developments or Rockhampton developments to 200 hectares. The balance of the developments that we're doing this financial year, which is another 800, will occur at Maryborough, where land preparation was further advanced. And also, the water availability was more immediate. So here in -- at Rockhampton, there's a -- or a water supply going in from the Fitzroy. We've constructed a temporary pipeline and have a larger one going in. That's not in the picture, but it's off to the left. But in the background would be Comanche and Home Hill, which are 2 properties I'll talk to in a minute. So moving to the next slide. The map on this slide shows the current portfolio of 69 assets invested in 5 key agricultural sectors. The location of our assets are presented on a map sourced from the Bureau of Meteorology. The map shows different rainfall zones. For example, summer-predominant in the north and winter-predominant rainfall in the South rather than the usual state and territory boundaries. This map dates back to June 2016 when RFM published a discussion paper, which included a study of rainfall data from across Australia. The resulting RFF climatic diversification strategy aimed to reduce the likelihood of lessees experiencing adverse climatic conditions at the same time by acquiring assets. So the strategy evolved so that we acquired assets in climatically diverse locations. This strategy precipitated the acquisition of assets in Northern Australia. And over the subsequent 6 years, RFM has made Queensland a focal point for expansion and development. We've acquired over 700,000 hectares of properties and over 100,000 megaliters of water entitlements. These figures include the recent $126 million of acquisitions of cattle, macadamia and cropping properties in the states Central and Southeast, which we announced in November. Queensland-based assets now represent 46% of the portfolio by asset value, a number that is expected to grow as assets are developed to improve their productivity or are converted to higher and better use, such as macadamia developments. I'll now move to the next slide, which is an update on these assets and strategies. Firstly, an update on the Central Queensland and cropping -- cattle and cropping properties. RFM is pleased to announce today that Australian Agricultural Company or AACo have entered into a 10-year lease on cattle properties Comanche and Home Hill, which I mentioned when explaining the photograph earlier. Having -- and I've already -- prior in this arrangement, AACo leased another RFF property, Rewan, which Tim spoke to earlier. Comanche and Home Hill have previously generated income from various parties by both leasing and backgrounding arrangements. This latter arrangement has allowed RFM to concurrently commence productivity developments such as center pivot irrigation machines, improved pasture and forage crops. Productivity developments will continue on these properties, which will accrue additional rent. In addition, the lease with AACo includes a rent review to market at year 5. AACo was also -- they also expect to background cattle on other unleased RFF properties. In opening a replication of this strategy, that is providing RFF income whilst RFM develops initial productivity improvements prior to leasing the assets to third parties. As outlined at the start of this presentation, RFM also acquired several other cattle and cropping properties during the half. These are shown in the picture on the right-hand side of this page. Each of these properties are expected to contribute to RFF's revenue in the second half '22. RFF will operate some of these assets on behalf -- sorry, I'll start that again. RFM will operate some of these assets on behalf of RFF while developments commence. Others will produce passive income by virtue of the arrangements in place, which are listed on the page. The map on Page 14 shows the largest segment of Queensland, but only the land which has been acquired by RFF to develop the macadamia orchards over the next 5 years. Existing macadamia orchards owned by RFF are also shown. Stage 1 of the macadamia orchard developments consist of 1,000 hectares, which we expect to be materially complete by the end of the financial year. This will ensure that the full 1,000 hectares of trees will be in the ground and irrigated to allow full growing season commencing in the spring. Discussions with potential lessees have been going on throughout the past year. Once planted, orchards become more valuable and more marketable to lessees, particularly as they mature. RFF has also acquired 2 mature orchards during the half and is expected that combining these productive assets with the development assets will be attractive to some of the potential lessees. Another important milestone for the developments was establishing a supply of quality macadamia trees to support what are significant developments in the context of the world macadamia industry. RFM has expanded the capacity of a tree nursery acquired by RFF in 2020. Capacity has expanded fourfold and is recently leased to a third party with experience in nursery operations. Looking at the revenue composition of RFF. The forecast lease revenue by sector is shown on this page, adjacent to a chart setting out lease duration and noting the portfolio's weighted average lease expiry of 9.2 years. Next slide. The chart on the far left of this page shows lease revenue by counterpart type, which are mainly large corporate and listed food-producing businesses. It's worth noting that agricultural operators such as these are generally experiencing good seasons and commodity prices. In fact, Australian agriculture is on track for a fourth consecutive year of record production as a consequence of high commodity prices and increasing volume across most sectors. No rent relief has been required by lessees during -- due to COVID-19. The second chart on this page at the center presents a breakdown of our lease indexation mechanisms. The bulk of RFF's leases are at CPI indexation or at fixed indexation mechanism. A large portion, 39% of leases, also have a market rent review mechanism, which seeks to monetize the impact of changing asset values while RFM seeks to improve assets through productivity development. Leases are triple net with the leasing cost of inputs such as development CapEx are able to be passed on through to the lessees. The benefits of owning agricultural assets during periods of inflation are well known, and we believe this diverse portfolio of assets with their indexation mechanisms will provide unitholders with the right mechanisms for generating income growth. About 80% of RFF lessees are corporate and listed entities who will have environmental, social and governance systems or ESG systems. RFM also recognizes the importance of ESG and continues to develop both our ESG initiatives and a sustainability framework. During the past year, RFM has continued to expand its ESG reporting, for example, in the last RFF annual report to include various projects RFM is working on, which we seek to improve environmental outcomes. A snapshot of these are listed in the middle column of the table on this page. Today, RFM announces additional projects we will work on in the current financial year, including identifying appropriate sustainability reporting frameworks, assessing the task of emissions qualification as well as the ongoing assessment of environmental projects, some of which have been conducted in conjunction with the lessees. We look forward to providing an update to investors on these initiatives as part of our full year reporting. And in time, we look forward to announcing real projects that can occur at farm level designed to address and preferably profit from society's requirements for sustainable farming. Thank you, ladies and gentlemen. I'll now hand over to James, who will conclude today's presentation.

Thank you very much, David and Tim. Just before I conclude, I'll pause on this slide and point out that each of the slides have a QR code. Scanning these QR codes will take you to a brief video, and that video will actually provide you with information on either the development or the operation or some further detail on the asset that is within the picture. And I'd encourage you to take the time to have a look at those videos. Moving now to Page 19. This is a chart that has been used by RFM for some time now and shows the steady growth in the value of and the income generated by the assets of the Rural Funds Group. Since its listing in 2014, RFF's net assets have approximately doubled on a per unit basis, and this has been largely achieved through a combination of buying good assets and applying good management to improve them. The cash generated or AFFO has also increased, starting at $0.091 per unit in FY '15 and growing to $0.135 per unit in FY '20. The lower AFFO in subsequent periods is a consequence of RFM disposing 2 significant assets and using the capital realized to acquire development assets. There are a few important things to now note on this strategy. Firstly, through this process, RFM has acquired a significant development pipeline of assets, which can be developed to either higher and better use or higher production. Secondly, RFM has managed this transition whilst growing distributions at 4% per unit. And lastly, the majority of the lease income from assets that have been acquired is yet to commence. AFFO generation will increase as recent acquisition contributes to earnings and other acquisitions and developments are leased. For this reason, RFM remains optimistic about RFF's ability to continue to perform within the portfolios of our many investors as it has done over the past 8 years. In conclusion, some of the key features of RFF are included on the right-hand side of this page as well as some of the criteria that we applied in generating returns for our investors. Today's results demonstrate a focused manager actively managing a portfolio of good assets. We confirm stage 1 of the macadamia developments, remain on track to be materially complete this financial year and that several possible lessees are actively engaged in discussions. We're also pleased to advise that AACo will lease an additional 2 cattle properties from RFF, and we have arrangements in place to background cattle on other properties whilst they undergo initial developments prior to their leasing. Additionally, RFM has acquired other cropping and cattle properties funded from last year's entitlement offer, which provides further organic growth opportunities within the portfolio. Finally, these actions, in conjunction with the existing portfolio of assets and leases, support our confidence in providing FY '23 distribution forecast of $0.122 per unit, inclusive of franking. This concludes the formal component of today's presentation. We'll now take time to address any questions that we may have from participants today. Operator, if you could please introduce any callers on the line. After this, we will answer questions which have been received via the chat with moderator function, which, for those via the webinar, is in the bottom right-hand side of your screen. Thank you, operator.

[Operator Instructions] We have our first question from James Druce.

Congratulations, David, on 25 years. It's some achievement. My first question is just around the macadamia development. Can we just get an update as to the leasing and the strategy there and maybe also noting your recent acquisition of that mature orchard, whether that is certainly that might be ongoing as well?

Thanks, James. Yes, we've been -- it's probably occupied more of our time than any other task now. This is at least at the main office level, which is discussions with the entities regarding the leasing of macadamia orchards. As the orchards are being planted, though, it's becoming much more obvious to people that visit them that they're going to make money and they're closer to generating cash flows for our lessee. Interestingly, the main profile of lessee that we're encountering, or potential lessee, I should say, are institutional investors rather than people in an up trade. We're finding just both in the evolution of investment in agriculture in Australia that the pension funds have now identified it's an opportunity, particularly the North American pension funds, but there are others. And so primarily, our discussions are ongoing with that style of counterparty. And we're confident that in an appropriate amount of time, we will have announcements regarding lessees, which will enable us to continue with the full 5,000 hectares of development.

And then just on the -- my second question was just around -- just buying that mature orchard. Do you feel that you might need to continue that strategy again? Or do you think that, that's -- what you've done is sufficient?

That was in part opportunism. It was a very good asset managed by very good people. In fact, the vendors are well known to us. We could see with that asset, those 2 farms, mature farms that we bought, that there was -- with additional capital that we can make some further improvements in them. So these were assets that we knew quite well, had a lot of confidence about. And we also realized that they would actually enhance the leasing proposition with third parties. But I don't think that we would want to buy any more mature assets. They're expensive. It's -- you can get a better return by developing them. And so that's probably the way it will go now is just push on with the development and those mature orchards into the leasing part if the lessee so desires and start -- mature the assets so that they're readying for leasing.

And just one more question, if I may. You've got a number of capital rent reviews coming up over the next few years. Can we just talk to the materiality of that to AFFO growth and sort of what sort of outcomes we might be able to expect?

Yes. I could summarize it by saying very positive. I can't give you dollars and cents and percentages, but you can see that cattle are a big part of the portfolio. Bear in mind that a chunk -- a fair chunk of that is related to the JBS facility that we provide them in those feedlots, which are not subject to rent reviews or big jumps. But there is a fair portfolio of cattle assets in an industry that is really thriving and can support the land values that are increasing. They're supporting them by actually buying them and contributing to that increase, but their businesses can support increases in rent as well. And we would expect that, that would be reflected in those reviews.

Would you be able to provide some color on the timing of the next review and when you actually see the cash from that?

Yes. Go ahead, Tim.

Yes. There's a slide contained in the presentation, James, that outlines the purchase price -- date of each of the cattle properties, and the rent reviews occur 5 years after that. So the next significant rent review is in Natal aggregation, which occurs this calendar year. So it will contribute to half of next financial year's results. So that's the next significant one. And Natal, I think we spoke about in last results presentation, its valuation is up substantially. But they're all in the slide deck.

Okay. That's clear. And I'm just going to greedy, one more, if I may. There's a $4 million cropping expiry coming through this year. Can you just talk to leasing that up and what that is, et cetera?

Yes. It's Daniel Yap here. So that relates to the 2 cropping properties that the group owns. So that's the Mayneland and Lynora properties. The Lynora property is currently leased to Queensland Cotton, which is a joint venture between RFM and -- this is a joint venture between RFM and Queensland Cotton. So that is due for a lease renewal, which we are currently in discussions with a lessee on. The Mayneland property is the other property that's included as part of that, and that will -- that is a 1-year lease due to expire at the end of this financial year. And we'll be going to the market to see if we can sign up a new deal there.

Yes. I would like to introduce James Ferrier.

Can I ask first about the cattle asset values as they stand today, just your thoughts on to what degree those valuations today fully reflect the productivity improvements that RFM has undertaken and continue to undertake? Or is it a case that those productivity gains are not fully realized in asset values today?

Yes. Thanks, James. It sort of depends on which property. So we've been able to realize a lot of those productivity developments on the Comanche property through leasing it out to AACo. So those are probably not realized in the valuation but certainly are realized in the new rent that we're -- that is attributable to that property. In terms of Rewan, the valuation uplift we've seen in this half is mainly market-driven. So I believe there's still a bit to flow through on that property. But it does take time for the valuation sort of increments to flow through because when a valuer looks at the property, they look at the historical carrying capacity over a number of years, and they take essentially an average of it. So it does take a little bit of time to flow through.

Yes. That makes sense. Can you talk a bit about the franking component of the distribution? And probably not specifically in relation to FY '23, but perhaps give us a bit of color about how many years you might expect to sort of have that franking component within the distribution and contributing to a portion of the 4% growth?

Yes. So the franking credits have been built up over the years as a result of the operating activities, which are quite minor as part of the group, which have built up over the years. So we are expecting to be in a position to pay out some franking credits in FY '23. Going forward beyond that point, it would really depend on the operating income that's being earned out of the taxpaying entity as part of the group. So the forecast franking to be paid out in FY '23 should bring that franking balance down quite a bit. But going forward, there may be -- there will be potentially additional franking credits that will build up that would need to be paid out.

And I guess in a strategic sense, the ambition, I would assume, is to have all of the assets fully leased on a sort of an ongoing basis. So I would imagine it's not a strategic intent to have material operating activities on an ongoing basis, and therefore, material franking credit generation on an ongoing basis?

It's David Bryant speaking, James. That's absolutely correct. We are a property trust, and we rent farms out.

One final question, just clarifying your answer to James' -- one of James' questions in relation to the macadamia developments. Generally speaking or often, when you see institutional interest in agricultural assets, it's on the basis of an owner/operator model. So I'm curious in your thoughts on perhaps, David, in the first instance, if there's institutional interest in taking on a lease of a macadamia orchard? Is it your expectation that, that party would likely operate it themselves? Or would they contract out the operations, given their historical predominance to the owner/operators?

Yes. Well, I suppose on the contrary, James, the -- if you look at the structure of sovereign wealth funds and pension funds, particularly in the forestry sector, they will pay timberland management companies to manage those assets for them. And the institutions we're talking to see it through the same lens that they can see that there's a capable company in the case of RFM. Now this is not exclusively because there are some institutions we're talking to that have their own farming capabilities, as you say. But a number of them we're talking to would look to RFM to supply management services to them rather than managing -- establishing a macadamia operations team themselves. I just might also add, James, the leasing of assets is something that they see quite clearly and simply as very similar again to timberland investments where often, assets are leased. And they just see the fact that they would have exclusive rights to the cash flows from that land for 30 years as a particularly normal transaction to enter into.

Operator, I'd just like to confirm there are no other questions on the line. And if not, we'll move into written questions that we've received.

Yes. Correct. James, there's no more audio questions, so I will close the audio Q&A and over to you to address the webcast questions.

Okay. Thank you, operator. I'll just quickly answer a question which has come in, which is, does the average lease duration include leases to internal RFM group entities? The answer is yes. The 2 lessees there are cattle JV and cotton JV. I'll hand over now to Tim to answer some other questions which have come through.

Thanks, James. We've got a question on the lease with AACo. What the yield would look like based on the purchase price and capital expenditures that we've done on that property? The yield would look very good on the purchase price. We bought Comanche very well, and it had -- it's had quite strong revaluation throughout the period. The lease rates are confidential. But what I can say with that property, the rental income in FY '22 will be about 25% higher than what is realized in the FY '21 revenue.

So there's also a question there about the 1,000 hectares of almonds that we're developing. What is the CapEx that's gone out already? We might even just give you a forecast for the financial year relating to that CapEx, and I'll leave that to Daniel Yap, who is busily looking through reams of capital expenditure charts. But the question wasn't -- is that are we receiving rent on that CapEx? At the moment, presumably not was the question, and that is correct. So -- and I'll come back to you in a moment regarding the CapEx number. In the meantime, I'll just address a couple of other questions. So there's a question about why would a massive company like JBS need a guarantee from a small business like RFF. So the term guarantee mightn't be the correct perception. What we're providing to JBS is a cattle financing facility. And rather than ourselves actually putting -- we obtain debt financing from banks and combine that with some equity. Now rather than actually putting equity out on the cattle, we actually 100% debt finance it and then provide a guarantee to the banks. The total amount -- the gross amount that we're actually financing is of the order for $400 million, and then the guarantee is $100 million that we provide to the banks. So what we're supplying to JBS is $400 million of cattle finance. Now why would they want a cattle finance facility? For the same reason as all businesses use debt because it's a cheaper cost of capital. Now even though JBS is a massive company, capital is not unlimited. Or to be more precise, capital comes at a price. And our price is lower. If JBS has $100 million or $80 million lying around, they're better off investing that in robots to save labor, where they can get 50% returns than financing cattle, which they can get very cheaply from a group like RFF. So I hope that answers that question. The next question is, have we considered carbon credit production and sale as an additional revenue stream? Yes. We have and continue to do so. What we're very interested in -- I suppose I referenced in my presentation earlier that we're really interested in looking at ways of making profits from providing sustainable [ burn ] systems, and generating carbon credits is a good part of it. The numbers have really changed because carbon credits go up in value. Now there's been some changes that are coming in the EU, which would enable them to buy Australian carbon credits. EU carbon credits trade for about AUD 150 a tonne, which are recognized as high-quality carbon credits, trade for about $55, up from $18 not that long ago. So they've increased quite a bit, but we see a lot of upside in the actual value of those carbon credits. So we're working through the processes of looking at how best we can generate carbon credits on our assets, looking at what investments we can make to generate those carbon credits, looking -- and we're also looking at -- some of the low-hanging fruit is possibly methane and nitrous oxide emissions where we can abate those because methane is, I think, 28x more potent as a greenhouse gas than carbon or CO2. And nitrous oxide, I think, is something of the order of 190x more potent. Targeting those emissions or ways of abating those emissions is something that we're also looking very closely at rather than just the simple ones of allowing trees to grow. So I'm really optimistic that there are money-making ways for RFF to assist with sustainable farming. And we're only interested in producing high-quality, reliable carbon credits. And we're doing the work on that and look forward to providing further information over the coming years because this is something that's going to play out over a period of time. But I think time is on our side as well with pricing. So a bit of a long answer, but I hope that helps. So yes, there's a question here, which I'll just hand over to James. No, we've answered that.

That's a follow-up question, David, to an earlier one. So if we were to exclude the RFM leases, what would the weighted average lease expiry be? So the RFM leases are on average lower than the weighted average lease expiry. So the weighted average lease expiry would increase.

Okay. And there's a question here. Now I think it might have crossed in the ether, which was, can I explain how the JBS guarantee works and how it generates income? It's a debt facility. We're providing finance for $400 million of livestock or cattle to JBS. We own them, and we have security on them. We get interest on the finance facility. So it's a very remunerative investment for our fund. So -- and then there's a question. Are Australian superfunds and local institutions showing interest in macadamia? Some are, but most of the interest is from overseas institutions. I would attribute that to the structure of our superannuation funds. And that is, is that most of them are accumulation funds with portability. So members could move from one fund to the next. So those funds are less likely to make very long-term direct commitments. Whereas if you look at defined benefit funds or sovereign wealth funds, they can have much longer time investment horizons. And so they've been more active and now are more organized in structuring management teams and people to analyze investment opportunities in direct assets, ranging from whether it's infrastructure or forestry. But now agriculture is certainly enjoying its time in the sun. And Daniel, I think, is going to come back to us with the CapEx for the almonds.

So I'm presuming it's 1,000 hectares in macadamias in Queensland. And how much CapEx have we spent there to date? So the current book value for the macadamia development properties that we have at 31 December is approximately $55 million. And of that, approximately half of that relates to the capital expenditure.

Yes. So I'll just add to that. When we go and lease out the first 1,000 hectares, what we will have to lease is about $35 million in land and water for the macadamias. Then we have about $14 million of pipes and trees and costs that have occurred in the planting year. So that will all be leased out year 1, and then the remainder of the capital expenditure up to $100,000 per hectare will be leased out over the next 4 years.

All right. So one last question. It seems that, that was a question regarding Bonitas, which was the so-called short selling report. So has it finished? And did they pay? First of all, I just explained that the court case that RFM ran, it did so at its own expense. So the RFF unitholders did not incur any expense in that. So did then RFM pursue Bonitas in the Texas law courts for the money that we were awarded in the New South Wales Supreme Court? The answer is no, probably because I'm not sure if Bonitas still exists or would exist if we did so. The point -- the reason why RFM at its own expense funded the litigation was to make it clear that the report was false and misleading, and that is what the finding was. So to my mind, it was money well spent for the benefit of RFF unitholders.

Operator, if you could please confirm there are no further questions on the line. We have no more questions via the chat.

I can reopen the audio Q&A and see if there's any opportunity to ask another question. [Operator Instructions]

And whilst we'll just allow -- the people in the line will have heard some of the questioners congratulate RFM for 25 years of managing good assets with good people, and that's something which we've noted in the presentation today. Operator, if there are no further questions, we'll draw a conclusion to this morning's presentation and thank everyone that has taken the time to dial into this morning's webinar. And of course, if you do have any further questions about your investment, please don't hesitate to contact our long-standing Investor Services team. Thanks, everyone.

Thank you so much, James, and no more questions. That now concludes the Rural Funds Group financial results presentation. Again, we thank you for attending, and enjoy the rest of your day. You may now disconnect.