Agricultural Property Asset No.23 - 1290 Ha - Sandalwood Property - Western Australia

ARK has purchased 1290 hectares of land 40 kilometres east of Narrogin in Western Australia for the purchase price of $2,229,500 (Sandalwood Property No.2).

ARK drew down on its debt facility with NAB in order to complete the purchase of Sandalwood Property No.2. The purchase was made therefore with 100% debt capital.

ARK has leased out Sandalwood Property No.2 for an initial term of 20 years. ARK incurred transaction costs of approximately 4% as a result of acquiring Sandalwood Property No.2. The rent being paid is $255,054 plus GST per annum. This equates to an income yield of 11%. The rent automatically rises each year by the greater of 2.8% or the consumer price index (CPI) for the 12 month period that has just passed. This rent increase occurs each year during this 20 year lease period.

Sandalwood Property No.2 is comprised of 11 contiguous lots on 5 certificates of title and has a fence to fence area of 1290Ha. Other pertinent points to note regarding Sandalwood Property No.2 are:

Sandalwood Property No.2 was a mixed farming property suitable for various crops (wheat, lupins, barley, canola and/or oats) and grazing purposes (i.e. sheep).
Sandalwood Property No.2 has been well cleared and developed.
There appears to be an emerging trend in the area of Sandalwood Property No.2 where some larger holdings are being split up and sold off as lifestyle holdings.
Sandalwood Property No.2 is comprised of good soil types with minimal areas of saline-affected soils.
Sandalwood Property No.2 is located east of Narrogin and all relevant data indicates that Sandalwood Property No.2 receives approximately 400mms of rainfall per year. Productivity in this particular locality is generally very reliable.
Primary improvements to Sandalwood Property No.2 include a residential dwelling, 2 machinery sheds, a general purpose shed, a workshop, silos and stock yards.
Land in the area in which Sandalwood Property No.2 is located has been tightly held for many years.

Rainfall and Climate

Sandalwood Property No.2 is located in an area with a dry warm Mediterranean climate, which typically encompasses hot dry summers and cool wet winters. The area is regarded as having a reliable annual rainfall of approximately 400mms per year. Most of the rainfall occurs between May and October although significant summer thunderstorms are not uncommon.

Suitability for Sandalwood Production

Sandalwood Property No.2 is ideal for the growing of Sandalwood (Santalum spicatum) trees and this is the permitted use to which the tenant is putting Sandalwood Property No.2. Sandalwood (Santalum spicatum) is native to Western Australia and is native to the area in which Sandalwood Property No.2 is located.

Sandalwood Property No.2 is thoroughly suitable for the growing of Sandalwood for the following reasons:

Sandalwood grows in areas that receive between 200 to 600 millimetres of annual rainfall. The rainfall at any plantation site should average more than 400 millimetres a year. Sandalwood Property No.2 has reliable annual rainfall in excess of 400mms, and has adequate soil depth, nutrient levels, drainage and site microclimate conditions.
Sandalwood Property No.2 is close enough (220Kms) to a major port (i.e. Port of Fremantle). Well established road infrastructure exists from Sandalwood Property No.2 to the Port of Fremantle.
Sandalwood Property No.2 has a normal risk exposure profile to natural catastrophe after assessing key indicators, which include historical exposure of the site to fire, wind, disease or drought.