PRDnationwide Rural & Agribusiness Q3 2010

Rural & AgribusinessAUSTRALIA

Prepared by Colliers International ResearchFor further details contact Katy DeanTel 08 8305 8806www.colliers.com.auPRDnationwide is a Colliers International companyUse with written permission only. All other responsibilities disclaimed. Copyright ©2010

Quarter 3 | 2010

MAJOR FORESTRY PLANTATIONS

RURAL & AGRIBUSINESSNATIONAL RESEARCH REPORT

www.prdnationwide.com.au

Q3 2010 | RURAL & AGRIBUSINESS

Mountain Valley Station, Northern Territory

• Overall sentiment is improving with rural confidencenowatatwoandhalfyearhigh.

• Thenumberofoffshoreinvestorslookingat agricultural property opportunities is rising.

• Distressedassetsalesaredecreasingand values are beginning to stabilise across most segments of agricultural property.

KEY HIGHLIGHTS

Optimism Returns, Market Begins to Recover

The rural and agribusiness sector has had a challenging 12 months as represented by the high number of forced sales across the country, as well as the increasing number of major corporate and institutions now in receivership. While the trend was more prominent during 2009,2010hasseenlessofthisactivitywithvendorsandfinanciers’holdingbackthesaleofsomeassetsuntilthereisanimprovementinoverallmarketconditions.Thatsaid,ofthesectors hit the hardest, the wine industry and forestry have been prominent, with few major forestryMIS’snowremaining.Theperformanceoftherestofthemarketisreliantonanimprovement in the traditional rural indicators, including the Australian dollar, commodity prices and general seasonal conditions. While some stability has returned to asset and landvalues,theyhavestilldroppedsignificantlyduringthelast12-18months.

According to theRabobankRuralConfidence survey for the June toSeptember 2010quarter,Australianfarmersareincreasinglyoptimisticabouttheoutlookforagriculturewithwinterrainfallandfirmcommoditypricesfuellingsentiment.Australianruralconfidenceisnow at a two and a half year high.

Thisincreasinglyoptimisticoutlookhasalsoreceivedaboostfollowingfavourableseasonalconditions, in particular winter rains, which have been consistent in a number of areas of regional Australia. This should see good improvement over the short term as water storage levels improve dramatically. Those areas which have had good rainfall are performing better overall and over the short term should see greater increases in productivity and output.

While thegeneralsentimentacross thesector is thatconfidencehas improved,marketactivity has yet to lift in response. There are major buying opportunities across most segmentsoftheruralmarketwhichhaveattractedinterestfrombothdomesticbuyersandoffshoreinvestors,whorecognisethevalueinbuyinginthismarket.Overalltheoutlookisimproving, with stabilisation beginning to return.

1. Western Australia2. Northern Territory3. Green Triangle4. North Queensland5. Northern Tablelands6. Murray Valley7. Central Gippsland8. Tasmania

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Land Use and Agricultural Activity

GROSS VALUE OF AGRICULTURAL COMMODITIESAccording to the ABS, in 2008/09 the value of agricultural commodities produced was approximately $41.1 billion. This value is down 5.1 per cent on 2007/08 but up on 2006/07 by approximately 13 per cent. The report by the ABS highlights that reduced prices for major crops and livestock productswere responsible for the fall in the overall value ofagricultural production.

Source: ABS 7121.0 / Colliers international Research

Source: ABS / Colliers international Research

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CHANGE IN PROPORTION OF LAND USED FOR AGRICULTURAL ACTIVITY

GROSSVALUEOFAGRICULTURALCOMMODITIESBYSTATEANDTERRITORY2007-08VS2008-09

LAND USEThe proportion of land used for agricultural activity continues to decrease, with the latest data for2008-09fromtheABS,showingafurtherdeclineof2.0percentonthepreviousyear.According to the ABS, approximately 409 million hectares of Australian land was being used foragriculturalactivity.Thisaccountedforapproximately53percentofAustralia’stotallandarea. At the same time, there were 135,996 agricultural businesses in Australia; a decline of 3.0 per cent on the previous year.

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RESEARch REpoRT | Q3 2010 | RURAL & AGRIBUSINESS | NATIONAL

PRDnationwide

Poultry

CONSUMPTION AND PRODUCTIONProductionofchickenmeatcontinuestoexpandandlastyearinresponsetothechangingeconomic climate, consumers considered chickenmeat as one of themost affordableoptions. This upward demand drove annual production levels to the highest ever seen in thesector,reachingapeakof831,273tonnes,seasonallyadjusted,inthe12monthstoSeptember2009.ByDecember,productionofchickenmeatforthe12monthswas828,472tonnes, seasonally adjusted, an increase of 2.8 per cent on the previous year. Over the last 10 years Australian production levels have grown by approximately 34 per cent and since 2007 have averaged more than 200,000 tonnes a month.

According to the Australian Bureau of Agricultural and Resource Economics (ABARE) Australian’sconsumed38.0kilograms(kg)perpersonin2009,thiswasanincreaseof1.3per cent on the previous year or an additional 500 grams per person. ABARE forecast consumption levels to continue increasing on average 2.0 per cent a year until 2015 when itisforecastAustralian’swillconsume41.7kgsofchickenmeatperperson.AccordingtoABARE,lastyearweexported33.1kilotonnes(kts)ofchickenmeat.ItisexpectedthatexportswillcontinuetorisewithABAREforecastingthatatleast36.0ktsofchickenmeatwillbeexportedin2010-11andaverage37.0ktsayearthroughto2014-15.

INVESTMENT UPDATEAustralia’s poultry sector continues to emerge as a viable rural property investmentalternative.Growth is significant and interest from private investors is also increasing.Financiers seem to support lending in this sector due to its regular and consistent income streams and ongoing demand for the product.

Last year a major South Australian broiler farm sold for $5.198 million. The facility for chicken meat production is located in Dublin, approximately 65 kilometres north ofAdelaide.Ithasacapacityofmorethan400,000birdsandiscontractedtooneofAustralia’slargestchickenprocessors.Thesalepriceequates toapproximately$12perbird.Thefarm was purchased by a Sydney investor.

In February 2010, Monarto Broiler Farm in South Australia sold for $3.75 million. The farm issituatedapproximately75kilometreseastofAdelaide.Itcomprisesatotalareaof75.58hectares and as well as poultry assets, includes a newly built home and farm improvements. The operation is contracted to a major processor and comprises seven tunnel ventilated chicken rearing facilitieswith anadvised capacity of approximately 259,000birds.Theproperty was purchased by a local syndicate of commercial investors. The sale price equates to approximately $14.70 per bird.

ChookstationsFarminLethbridge,VictoriaalsosoldinFebruary2010.Thesaleoccurredoffmarket for $2.6million and represented a return of around 10 per cent. The saleexcluded plant, equipment and shed fit-out and was sold from the Orchard FundsManagementportfolio.ChookstationsFarmwasacquiredbyanowneroccupier.

This sector is growing and interest for poultry asset investment opportunities is also mounting. The long term investment returns are extremely attractive to private and offshore investors as well as existing industry participants.

Monarto Broiler FarmSold in February 2010 for $3.75 million.


| P. 4 PRDnationwide

Wine Sector

ExPORTS, IMPORTS AND AUSTRALIAN SALES AfterAustralianwineexportspeakedat 787million litres in2006-07,2007-08saw thevolumeofexportsdropbyalmost10percent.However, in2008-09exportsreboundedwith the ABS reporting that 752 million litres were exported; an increase of 5.3 per cent on thepreviousyear.Adecadeago,in1998-98,216millionlitreswereexported,placingthecurrent figureswell aboveand in termsofgrowth,almost250per centhigher.Growthduring the late 90s was rapid and since 2005 wine exports have averaged more than 700 million litres annually.

Australia is still importing high levels of wine and in the last few years this has increased significantly.In2007-08importsincreasedapproximately56percenton2006-07andoverthe last 10 years, this has increased almost 160 per cent. However, new data released by theABSshowthatthiswasslowingwithfiguresfor2008-09onlyrepresentinganannualincrease of 17.4 per cent on the previous period: with 62 million litres imported into Australia. Imports are increasing but domestic sales of Australian wine by volume continue toslow.Followingadrop in2007-08ofaround5.0percenton2006-07, thevolumeofAustralianwinesolddomesticallyin2008-09hasimprovedonlyslightly,withyearonyeargrowth less than 1.0 per cent.

PRODUCTION AND CRUSHAccordingtotheABS,in2008-09,1.7milliontonnesofgrapeswerecrushed;adecreaseof 5.5 per cent on the previous year or around 100,000 tonnes less. The industry equilibrium isconsideredtobearound1.5milliontonnes.Whileannualcrushfigureshavebeenwellabove this for six of the last nine years, the small reduction in production numbers for the 2008-09 year is an improvement.Numbers are comingdownbecauseof a number offactorsover2008and2009,withwatershortages,hightemperaturesandbushfiresbeingmaincontributors to thedecline.2009-10shouldshow thesame trendandalthoughamajordeclineinoverallcrushisnotexpected,theyearisalsonotlikelytorecordthesamelargecrushnumberswitnessedin2007-08whenitwasabove1.8milliontonnes.Recentindustryestimatesplace2009-10figuresinthevicinityof1.5milliontonnes.

Source: ABS / Australian Wine & Brandy Corporation / Colliers international Research

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Red White Equilibrium

Industry Equilibrium

NATIONAL WINE GRAPE CRUSH (TONNES)

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PRDnationwide

Wine Sector continued

PRODUCER NUMBERS BEGIN TO STABILISEThenumberofAustralianwineproducerscontinuestorisebutoverthelastfiveyears,thelevel of growth has started to slow. On average, producer numbers have been increasing around 7.0 per cent annually, with the heaviest growth periods recorded from 1999 through to2004.Inthelastfiveyears,growthhasaveragedapproximately5.0percentannually;with the last two years in particular recording the most obvious slowdown in producer numbers.

AccordingtotheABStherearecurrently335winemakingbusinessesinAustralia;thisisfivelessthanthepreviousyear(2007-08).The13largestwinemakerscrushedatotalof1.3 million tonnes of grapes, or 73 per cent of the total crush. These 13 businesses averaged98,000tonneseach.Conversely,the76smallestwinemakersaccountedforonly0.4percentofallgrapescrushedandaveraged96tonneseach.Athirdofallwinemakinglocations were in South Australia, accounting for 43 per cent of the national wine grape crush.According toWinebiz, the top five largest wine processing facilities inAustraliainclude Berri Estates Winery, Berri, Yenda, Buronga Hill Winery, Australian Vintage Winery and LIndemans Karadoc Winery.

INVESTMENT UPDATE

GREAT SOUTHERNThe receivers of Great Southern Vineyard Holdings Pty Ltd (In Liquation) have released a national vineyard portfolio of 12 properties. The portfolio covers approximately 2,574 hectares of land and 1,500 hectares of vineyeard area. It covers properties across some ofAustralia’smostwellknownregionallocations,including:RiverinainNSW;LanghorneCreek, theRiverland andAdelaideHills in SA; Heathcote,GreatWestern andMurrayValley in Vic; Manjimup and the Margaret River in WA. The portfolio will be offered for sale through registration of interest campaigns.

FOSTER’SWINEGROUPInApril 2009,Foster’s announcedplans to divest its non-core vineyardsandwineries,identifying 36 vineyards for sale. As at 30 June 2010, they had sold 22 of the 36 vinyeards identifiedforsale,withtotalsaleproceedsof$59.5million.Anadditionalfourvineyardsplus the Denman winery have since sold, but details regarding prices are yet to be announced.Atleastfiveoftheremainingvineyardshavenowbeenwithdrawnfromsale,representing 688 hectares of planted vineyard area. There are still plans to divest the remaining10vineyards.AccordingtotheirJune302010report, thedivestmentofnon-corevineyardsinAustraliacontributedtoa12percentreductioninin-takefromcompanyowned vineyards in the 2010 vintage.

In May 2010, they also announced plans to pursue a demerger of their Beer and Wine business, creating separately listed businesses. No decision on timing or structure of the demergerhasbeenannounced.InSeptember2010Foster’sannouncedithadreceivedanunsolicitedexpressionofinterestfromaninternationalprivateequityfirmtoacquirethewine assets of Treasury Wine Estates for a cash consideration of between $2.3 billion and $2.7 billion for 100% of the assets. The proposal was rejected.

CONSTELLATION BRANDSAfter announcing plans to divest some of their Australian vineyard and winery assets in 2008,Constellationreleased23assetstothemarket.Thecampaignsawlessthanahalfof them sell, the most recent being Amberley Estate in WA. The Margaret River based vineyard and facility has been sold to family interests associated with Stephen Tobin, a Perth based businessman. The property comprises approximately 67 hectares and has reportedly sold. In theweek following this sale,Constellation thenannouncedplans todelist from the ASx; expected to be completed by February 2011. Constellation Brands owns Hardy Wine Company, which they bought in 2003 for an estimated $1.9 billion.

prince hill Winery and VineyardPurchased by a Singapore based investor in August 2010 for $2.3 million.



Forestry

PRODUCTION, TRADE AND DEVELOPMENTIn 2008-09,Australia produced 4.73million cubicmetres of sawn timber (80 per centsoftwood and 20 per cent hardwood), 1.78 million cubic metres of wood based panel products and 3.3 million cubic metres of paper products. (See Table)

Invaluetermstherecontinuestobeasignificanttradedeficitinforestproductswiththegapincreasingalmost14percenton2007-08.In2009totalimportsofwoodproductswere$4.5billion,whileexportswere$2.3billioncreatingatradedeficitof$2.2billion.

According to the Department of Agriculture, Fisheries and Forestry, the total area of Australia’splantationestateincreased2.4percentin2009,from1.97millionto2.02millionhectares. It is comprised of approximately 0.99 million hectares (49 per cent) of hardwood species, 1.02 million hectares (51 per cent) of softwood species and a small area of mixed plantings. In 2009, 49,658 hectares of new plantations were reportedly established, 31 per centlessthanin2008.WhilethebulkofnewplantationsarebeingfundedbyMIS,thisproportion is slowing declining and in 2009 this number was approximately 71 per cent, compared to 81 per cent in 2008.

OWNERSHIPPrivate investment continues todominatemarket ownershipwithapproximately65percent of all plantation estates now owned by the private sector. The proportion of plantations in Government ownership has continued to decrease over the last 60 years, with the most significantchangestoownershipstructureemerginginthelate80s/early90swhenboththe Victorian and Tasmanian governments began selling plantations to the private sector. At this time, government ownership decreased from around 70 per cent to less than 40 per cent. While the majority has been and still continues to be funded by MIS, private ownership will continue to increase and public ownership decrease. Following the recent sale of the Queensland’sGovernment ownedForestryPlantationsQueensland (FPQ) business toHancockQueenslandPlantations for$603million,governmentownershipnumbersareexpectedtodeclineevenfurther,movingfromthe2009figureofapproximately35percentto less than 25 per cent by the end of 2010.

AT A GLANCE

Forest and Timber Products (‘000 m3) 1997-98 2001-02 2008-09 % Change from

10 years ago

Logs harvested

From native forests 9,937 10,123 7,749 22%

From Coniferous (pine) plantations 11,016 13,064 12,941 17%

From Broadleaved (eucalypt) plantations 206 1,112 4,506 Very Large %

Total logs harvested 21,158 24,299 25,197 19%

Sawn timber productionConiferous (pine) 2,338 3,163 3,740 60%

Broadleaved (eucalypt) 1,513 1,339 990 35%

Total sawn timber production 3,851 4,502 4,730 23%

panel productionPlywood 170 192 118 31%

Particleboard 882 965 911 3%

Mediumdensityfibreboard 501 732 632 26%

Total panel production 1,554 1,889 1,778 14%

paper products productionNewsprint 444 395 444 0%

Printing and writing 424 624 723 71%

Household and sanitary 191 198 196 3%

Packagingandindustrial 1,483 1,679 1,949 31%

Total paper products 2,542 2,896 3,312 30%

Source: ABARE Australian forest and wood product statistics / Colliers International Research

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PRDnationwide

Forestry continued

INVESTMENT UPDATE

FORESTRY PLANTATIONS QUEENSLANDInJune lastyear theQueenslandGovernmentannounced its intentiontosellfiveof itscommercialbusinesses.Whilethedecisionwasmadeinresponsetotheglobalfinancialcrisis and impact to their state budget, a loss of $15 billion over four years, the sale of the assetsisexpectedtoraisesignificantcapitalforfutureinvestmentinpublicinfrastructure.InNovember2009theGovernmentconfirmedthattheForestryPlantationsQueensland(FPQ)businesswasonthelistandwouldbethefirstofthefiveassetstogetunderwaywithaformalsaleprocess.FPQisQueensland’slargestgrowerofplantationforesttimberand manages more than 210,000 hectares of hardwood and softwood plantations. In 2008-09morethantwomillioncubicmetresoftimberwasharvestedand$72.4millionintimber sales was recorded.

InMay2010,theQueenslandGovernmentannouncedthatthe99-yearlicenceforFPQhadbeensoldtoHancockQueenslandPlantationsfor$603million.HancockQueenslandPlantations is a companymanaged byHancockTimber ResourceGroup on behalf ofinstitutional investors, which as at 31 December 2009 had $8 billion of assets under management across the United States, Canada, Australia, New Zealand and Brazil. The sale of FPQ includes around 35,000 hectares of freehold land, which is approximately 10 per cent of the total estate. The Crown plantation land on which the majority of the FPQ business occupies will remain inGovernment ownership. To ensure theQueensland’shardwoodcommitmentsaremet,HancockQueenslandPlantationshascommittedtotheSouth-EastQueenslandForestry agreementwhichwill ensure that 20,000 hectares ofeucalypt hardwood plantations are established by 2025.

GREAT SOUTHERNIn June 2010 the Receivers of Great Southern announced they will conduct a sale process for the entire Great Southern blue gum forestry estate. Early last year Great Southern (GSL) announced that they would no longer be selling MIS products and after failing to sell down assets, approximately 23,000 hectares of forestry land across Gippsland and Tasmania went into voluntary administration. The forestry estate consists of approximately 269,000 hectares of freehold forestry land with a net productive area of approximately 167,500hectares.ThelandislocatedacrossWesternAustralia’ssouthandwestcoastsand within the Green Triangle region of Victoria and South Australia. Consisting of more than 640 individual freehold properties, the vast majority of the plantations have been established with Tasmanian blue gum. While the Receivers are currently considering options for the estate, including sale of land only, or land and trees, in November 2009 Gunns Limited put forward a proposal to take over the management of some of theplantations under MIS. In December 2009, it was announced that the proposal had been acceptedandGunnshadsecuredcontrolofeighthardwoodplantationMIS(1998-2005)fromGSL.GunnsalsobidtotakeoverGSL’s2006schemewhichwasconfirmedseparatelyfollowing a vote in January 2010. Gunns expects to increase the harvest from the estates from approximately 540,000 green metric tonnes (GMT) in 2010 to approximately 2,800,000 GMT in 2017. The schemes include hardwood plantations in Western Australia (Albany and Bunbury), South Australia (Kangaroo Island and Green Triangle), Victoria (Gippsland and Green Triangle), Tasmania, New South Wales (East Coast) and Queensland (East Coast).

GUNNSGunnsisoneofthelargestforestrycompaniesinAustraliaandaftersecuringGSLMIS’s,has more than 400,000 hectares under management. Their annual gross wood volume available for harvest is more than six million tonnes per annum. In July last year, they acquired a 17.9 per cent interest in the equity of Forest Enterprises Australia and in December acquired ITC Timber Pty Ltd for $88.5 million. The deal with ITC, which was originallyannouncedinAugust2009,ran intodifficultiesafter theACCCcitedconcernsover the joint venture lessening competitionwithin thehardwoodpulpmarket innorth-eastern Tasmania. Following a review by the ACCC, the acquisition was revised to exclude



ITCTimbers50per cent interest in theSmartfibrewoodchipventure. In2007,Gunnsacquired the Auspine business but a year later entered into an agreement with GMO RenewableResources, aUnitedStates investmentmanagement firm, to divest 33,000hectares of pine (softwood) plantation in the Green Triangle. The sale, which represented approximately 75 per cent of the softwood plantations formerly owned by Auspine, was for an estimated $175.2 million.

Earlier this year Gunns also announced a strategic review of the company and later initiated a formal sale process to divest 28,000 hectares of old growth forest land in Tasmania. It is one of the largest land releases seen in the region and is estimated to have abookvalueof$40million.Theland,whichhasbeenofferedasseparatelots,willbesoldwith no encumbrances to Gunns and will not include plantations. The initial offering, which included 19 lots, covered approximately 8,500 hectares and was released for auction in June. While some of these lots sold, several were passed in and negotiations are now underway for the remainder. Another 25, approximately, are being sold through expression of interest campaigns.

TIMBERCORP AND GLOBAL FOREST PARTNERSGlobal Forest Partners (GFP), a United States plantation forestry manager, signed a contracttoacquireTimbercorp’sforestryassetsinSeptember2009.Thebusiness,whichtrades under Australian Bluegum Plantations Pty Ltd (ABP), paid approximately $345 million for the bluegum plantation assets. GFP already own more than 40,000 hectares of pine plantations in southern New South Wales and the Green Triangle region. The sale agreement with Timbercorp includes 92,000 hectares of plantations, 39,000 hectares of freehold land, leasehold rights to 53,000 hectares and the business infrastructure. The plantations are in Western Australia and the Green Triangle regions of South Australia and Victoria.

PLANTATION LAND LIMITEDMore recently, it was announced that land fully leased to ABP was for sale. The land, which wasreleasedtothemarketinJune,isownedbyPlantationLandLimited(PLL).Thetreeswere owned by Timbercorp but were acquired by ABP (GFP) as part of the $345 million forestry asset sale through the liquidators of the Timbercorp group of companies in September last year. The portfolio is being sold as a whole and comprises approximately 10,850 hectares of blue gum land within the Green Triangle region of Victoria and South Australia. The lands are spread across 32 individual properties and have been in PLL ownership for up to 10 years.

FOREST ENTERPRISES AUSTRALIALast year, Forest Enterprises Australia (FEA) offered 70 plantations across Queensland, NewSouthWalesandTasmania forsaleona leasebackarrangementaspartof theirTimberland Fund. After failing to sell down assets, the company went into voluntary administration in April 2010 and Receivers were appointed. In May, the Receivers began a formal sale process for Bell Bay mill in Tasmania.

REWARDS GROUP & ARK FUND LIMITEDIn May 2010, Rewards Group Limited went into voluntary administration and Receivers were appointed. The company, which is based in Perth, manages approximately 12,000 hectares of forestry and fruit plantations across Australia. The land is leased from agriculturalproperty investmentcompany theArkFundLimited (ARK). InMarch,ARKannounced plans for a merger with Rewards Group, plans which would allow a combined recapitalisationofatleast$55milliontoretirethegroups’bankdebt.InJune,ARKwasalso placed into voluntary administration and Receivers were appointed, calling off plans for the merger.

WILLMOTT FORESTSIn September 2010, Willmott Forests was placed into voluntary administration and Receivers were appointed. Willmott Forests manages more than 50,000 hectares of radiata pine, silky oak and she-oak plantations across Victoria, New South Wales,Queensland and Northern Territory. Details regarding the sale process are yet to be announced

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PRDnationwide

Pastoral/Livestock

INVESTMENT UPDATELast year several cattle stations were offered to themarket, increasing the number ofopportunities across Australia. While this year has seen some of these opportunities carry over, there has been increase in the number of private listings currently on offer and recently some movement in the sector following several sales going through. It is estimated that since April 2010 around $120 million worth of pastoral property has changed hands. With a combination of existing industry participants, institutions and offshore investors buying in, the level of activity has certainly improved on 2009.

TWYNAM AGRICULTURAL COMPANY Twynam Agricultural Company has sold off three of their NSW stations for a reported $25 million.Twynambegandivestingassetslastyear,themostsignificantbeingthesaleoftheriver water entitlements to the Commonwealth Government for an estimated $300 million. The most recent sale includes Riverina stations Cooinbil and Mungada plus Buttabone Station in northern NSW. Macquarie Pastoral Fund, Paraway Pastoral Company acquired all three stations; an estimated 160,000 hectares of pastoral land in total. The sale also includessomelivestockplusplantandmachinery.Since2007,Parawayhasacquired17properties, aggregating these into 11 large scale pastoral businesses. In total, their land holdings now have the capacity to run up to 200,000 cattle and up to 100,000 sheep.

ARG STATIONIn July 2010 it was announced that Argadargada Station (Arg) had been sold for $5 million. Originally offered at auction, the sale was negotiated afterwards with Peter Hughes, former director of the Australian Agricultural Company (AACo). Last year Macquarie Pastoral Fund (Paraway) bought three cattle properties from AACo for $145.75 million. The sale included Davenport Downs and Armraynald Station in Qld and Walhallow Station in NT. Combined, the properties span 481,000 hectares and at the time of the sale had a carrying capacity of approximately70,000headofcattle.ArgStation is located479kilometresnortheastofAliceSpringsandcomprisesapproximately5,139squarekilometres.

MT MARGARET STATIONIn May 2010, Mt Margaret Station in Quilpie Qld sold for $12 million. One of the largest sheep stations in Australia, the 600,000 hectare (approximately) was acquired by NSW cattleproducinggroupKilburniePastoral.Theproperty,whichwasreleasedtothemarketinMay2009,wassoldbareofstockbutincludedplaneandplant.Ithasacarryingcapacityof more than 66,000 sheep and 6,000 head of cattle.

FOUR ARROWS GROUPEarlylastyearfamilycompanyFourArrowsGroupfiledforbankruptcy.ThissawtheirentireportfolioofRiverinaNSWpropertiesreleasedtothemarketwithanaskingpriceofmorethan $100 million. The portfolio covers approximately 77,000 hectares and comprises six differing properties across the Murrumbidgee River between Wagga Wagga and Hay. Since the release, two of the properties have sold, including Tubbo Station and North Tahara. TubboStationisthemostsignificantoftheportfolio,sellinginMayforcirca$40million.The3,000 hectare property has a carrying capacity of approximately 30,000 sheep and was acquired by a local farmer. In March, North Tahara sold for an estimated $10 million. It has a carrying capacity of 29,000 sheep and covers more than 4,800 hectares. The remaining propertiesarestillonthemarket.

Arg Station Sold in July 2010 for $5 million. Located 479 kilometresnorth-eastofAliceSprings.



CARRINGTON FARMS AND CLYDE AGRICULTUREThemostsignificantofferingsonthemarketatthemomentincludeClydeAgricultureandCarrington Farms; both are expected to sell for more than $300 million.

Clyde Agriculture is a 12 property amalgamation in NSW owned by UK Company Swire Group.Thegroupsolda thirteenthpropertysouth-eastofCunnamulla inQld,knownasClover Downs to Hassad Food Group in April 2010 for $18.5 million. The grazing property covering 125,300 hectares was sold bare of sheep and infrastructure but has the capacity torunupto64,000sheep.Havingdifficultysellingthe12propertiesinNSWinoneline,properties offering similar commodities are being grouped together. Since then, part of BeemeryFarm,60kilometreseastofBourkeinNSWhassoldformorethan$6milliontothe Nugent family. 11,115 hectares of developed irrigation land, predominantly for cotton production, still remains and is currently being offered for sale. In total the portfolio covers more than165,000hectaresandamixof livestock, irrigationanddryland farming.Theoveralllivestockcomponentisresponsibleforrunningapproximately18,000headofcattleand 45,000 head of sheep.

CarringtonFarmsisa16propertyamalgamationinontheNSW-QldborderGoondiwindiregion. Covering 57,370 hectares, it also has a mix of irrigation, dryland farming (cotton and grain)aswellaslivestock.Ithasanexistinggrazingcapacitywithirrigationinfrastructuretorun approximately 6,000 head of cattle or 30,000 head of sheep. It is also licenced to store 85,000 mega litres of water over 29 dams.

Both Clyde Agriculture and Carrington Farms have received local and offshore interest but thesizeoftheportfoliosandstateofthemarketiscausingsomechallengesinsecuringbuyers. Though, recently it was reported that Carrington Farms is in due diligence, suggesting that at least one major result is slowly approaching.

GREAT SOUTHERNThe receivers appointed to Great Southern are trying to sell the third cattle property offered from the group, with Moola Boola station on the NT WA border currently for sale. The 6,600 sqkmpropertyhasapproximately15,000breeders.Theotherassets,ChudleighParkandWrothamParksoldlatelastyearfor$28millionand$48millionrespectively.ThesaleofWrothamParkincluded39,000brandedcattleandassociateplant.Ithasthecapacitytorunup to 43,000 head of cattle and covers almost 600,000 hectares. It was passed in at auction inJune2009and latersold toConsolidatedPastoralHoldings.ChudleighPark soldatauction in June to a local land owner. It covers approximately 182,000 hectares and is capable of running 14,000 breeders and followers.

RECENT MARKET TRANSACTION ACTIVITY

SALES ACTIVITY

Property Location Area Sale Date Sale Price Vendor Purchaser

Kalabity Station56kmsnorth-westof Olar near Vic border, SA

1,856km2 Aug-10 $5-$6,000,000 RichardCNitschke Consortium

Dry River Station Dry River Gorrie Road, Katherine, NT

1,873km² Jul-10 $5,400,000 Four Arrows Group Paspaley family

Quinyambie Station 160kmnorth-westofBrokenHill,SA

12,118 km²

Jul-10 $8-$10,000,000

S. Kidman & Co. Ltd. Mutooroo Pastoral Company

Cooinbil, Mungada and Buttabone

Riverina, NSW 160,000 ha

Jul-10 Circa $25,000,000

Twynam Agricultural Group (Kahlbetzer family)

Macquarie Pastoral Fund (Paraway Pastoral Company)

Argadargada Station

479kmsnorth-eastof Alice Springs, NT

5,139km² Jun-10 Circa $5,000,000

Broad family Peter Hughes

Mt Margaret Station Quilpie, QLD 600,533 ha

May-10 $12,000,000 Not disclosed Kilburnie Pastoral

Tubbo Station Darlington Point, NSW

28,170 ha May-10 Circa $40,000,000

Four Arrows Group Les Douglas

Clover Downs South-EastCunnamulla

125,300 ha

Apr-10 $18,500,000 Clyde Agriculture (Swire Group)

Hassad Food Group

North Tahara near Wagga Wagga, Riverina NSW

4,800 ha Mar-10 Circa $10,000,000

Four Arrows Group Melbourne based company

Source: Colliers International Research



Overseas Investors look to Australian Agriculture

Offshore investors continue to show interest towards investment opportunities within Australianagriculture,lookingatarangeofopportunitiesacrossthesectoroverthelast12months. The desire to increase the composition of their rural property portfolios has been driven by a variety of factors, including the increase in the number of major portfolio offerings, weakening US dollar and Australia’s proximity to the key export markets.Specifically interest is coming from theAsianmarkets, including Singapore, China andIndia. Investor interest from European and Middle Eastern countries have also increased.

Qatarbasedcompany,HassadFoodGroupwhichisbackedbyQatarInvestmentAuthority,purchased Kaladbro Estate in April for a reported $25 million. The 2,630 hectare property is locatedintheStrathdowniearea,25kilometresnortheastofMountGambier.Theproperty,whichhasbeenheldbytheMackinnonfamilyformorethan150years,haspotentialforarangeofagriculture,includinggrazingandlivestock.Ithas7,400megalitresirrigationwaterlicences,440hectaresofirrigationareaandlargestoragecapacity.It’sproximitytothePortofPortland,which is less than100kilometres,meant thepropertywasattractive for itsexport potential. Hassad Group has since announced that the property would be used to producelivestockforoverseasmarkets.HassadFoodGroupalsopurchasedCloverDownsin April for $18.5 million. The property, which was owned by Clyde Agriculture, was sold separate to their 12 property amalgamation offering in NSW. Primarily grazing, it covers 125,300 hectares.

Olam International is another example. In 2009 the Singaporean based group announced their agreement to acquire 8,096ha of planted almond orchards and 40,825 mega litres of permanent water rights from Timbercorp Limited and its associated entities through its liquidation process. The total investment consideration was A$128 million in cash and the acquisitionwillallowforanexpansionintoAustralia,makingOlamAustralia’slargestalmondgrower.

The most recent company to emerge is Western Gulf Advisory (WGA). The Bahrain CompanyhaskeylocationsinEurope,theFarEastandtheMiddleEast.TheyhaverecentlybegunlookingatagriculturalinvestmentopportunitiesinAustralia,includingCubbieStationinQldwhichhasbeenonthemarketsinceCubbieGroupwentintoreceivershipin2009.

It is also evident that it is not just major agricultural assets that are attracting this offshore interest with Prince Hill Winery and Vineyard in Mudgee NSW being acquired by a Singaporean based investor in August 2010 for $2.3 million. The property included the 5,000 tonne winery with cellar door and function facilities plus approximately 25 hectares of established vineyard.

They are looking at a range of investment opportunities across the rural sector, notspecificallytargetinganyspecialisationjustseekingthoseassetsofferinglongtermvalue.Both large scale assets and smaller ones are being considered with recent examples highlighting the strength behind these acquisitions. These investors clearly have a hunger for commodity based investments and agriculture in Australia not only offers this but providesgreataccesstokeyexportmarketsinAsia.TheexportpotentialfortheseinvestorsissignificantsotheopportunitiesthathavecometothemarketbecauseoftheGFChaveallowedthemtogainastrategicfootholdinAustraliaatalowerriskthaninvestmentintheUS.ThereisobviousconcernabouttheUSdollarandthesecompaniesarelookingatotherglobal investment options as a result.

Woodside Ridge, Adelaide hills Great Southern Vineyard Holdings Pty Ltd (Receivers and Manager Appointed) (In Liquation) comprises a portfolio of 12 developed land holdings in regional locations. The portfolio is expected to attract interest from offshore investors.



Outlook

TheoveralloutlookfortheAustralianagriculturalpropertysectorisrelativelypositiveasthechallengesofthelast12-18monthsbegintodiminish.Thesechallengesgloballystillexistbuttherearesignsthatsomesectorsoftheagriculturalpropertymarketareslowlycoming off the bottom. The clear improvement in overall sentiment is also supported by recent industryconfidencesurveys.Therehavebeenanumberofeconomic indicatorsshowing signs of positivity in recent months, which have also assisted in this overall improvementinconfidence.Althoughtheimprovementsacrosstheeconomyhavehelpedsentiment, the improved outlook can also be attributed to a number of successful selldownsandresultingcapitalinflowswithfewervendorsnowunderpressuretoraisefunds.Whilethereareanumberofvendorswhohavewithdrawnassetsfromthemarketandanumber that are still trying to sell down assets, there is more evidence of asset movement than the previous 12 months. Moving forward this trend will continue to increase.

By sector, Forestry is still under pressure and with most major MIS companies now in receivership,theoutlookseemssomewhatuncertain.Whatiscertainhowever,isthevastopportunity toacquiresignificant landholdingsacrossmanyregionsofAustralia.Whilesome of the opportunities provide leased investment others represent the opportunity for remediationforanotheruse.We’vealreadyseenHancockQueenslandPlantationsacquirethe99-year licenceforFPQandGunnstakeover themanagementofseveralofGreatSouthern’splantationsunderMIS.GlobalForestPartners,whichtradesunderAustralianBluegum Plantations (ABP), also emerged recently after they signed a contract to acquire Timbercorp’sforestryassets.Thatsaid,thenumberofforestrycompaniesinreceivershipor voluntary administration is still significant and there remains numerous distressedassets across the country yet to be realised. Further details regarding sales are expected tobeannounced;howeveritislikelytobeanongoingprocess.

Poultry is still showing long term growth potential following a lift in opportunities and investment activity over the last 12 months. This sector has also not witnessed the drop in values seen across some of the other agricultural sectors and the higher return is appealing. Further, with increased consumer demand for poultry products, this sector will continue to see expansion.

Movementhasimprovedinthepastoral/livestock/grazingsector,withagoodnumberofproperties changing hands this year. Those properties selling this year have already seen values begin to stabilise, so this trend should continue however there are a number of significantproperties still on themarketwhichwill influence theoverall outlook for thissector. It is expected that the offshore markets will be the most interested in the bigopportunities (> $100 million), including Clyde Agriculture and Carrington Farms, both reportedlyvaluedinexcessof$300million.Though,theprocesswillbedrawnout,soit’snotlikelythemarketwillseearesultuntilwellinto2011.Thatsaid,therearemanyotheropportunities remaining, especially in Northern Australia and the recent increase in private listingsislikelytocontinue,underpinnedbytheexportdemandforredmeatandrecentimprovements in seasonal conditions.

Although the wine sector has had a tough year, sentiment has actually begun to improve and some movement is returning. Investor interest has also lifted and a number of assets arebackonthetableagain.Theoversupplysituationhasalsobeguntotaperoff,relievingsome inventory pressure, albeit only small, and over the short to medium term this should helpgetthemarketclosertothepreferredindustrycrushequilibriumofapproximately1.5milliontonnes.Thefactthatthe2009-10yearisexpectedtowithinthisreachisalreadyapositive signal that conditions are improving.

PRDnationwide Level 5, 10MarketStBrisbane, QLD, 5000TEL 08 8305 8888FAx 08 8231 7712

RESEARCHER

Katy DeanManager/ResearchColliers InternationalTEL 08 8305 8806FAx 08 8385 0206

PRDnationwide and Colliers International do not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you musttakenotethattheinformation,figuresandprojections have been provided by various sources andhavenotbeenverifiedbyus.Wehavenobeliefone way or the other in relation to the accuracy of suchinformation,figuresandprojections.

PRDnationwide and Colliers International will not be liable for any loss or damage resulting from any statement,figure,calculationoranyotherinformation that you rely upon that is contained in thematerial.COPYRIGHT-ColliersInternational2010.

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Colliers International

Prepared by Colliers International Research

www.colliers.com.au

PRDnationwide Pty Ltd


PRDnationwide is a Colliers International company

Documents

PRDnationwide Rural & Agribusiness Q3 2010