Booster Investment Management Limited (Booster) as manager of the private land and property portfolio (the wholesale fund in which PLP invests) has commissioned and received an updated independent valuation report for its viticulture related properties for Hope, Nelson. These currently represent ~16% of the total value of assets held by the fund. The properties are leased for viticultural purposes under a 20-year lease expiring in 2037.
Based on independent valuation reports, Booster adopted a valuation increase of $2.919 million, which represents an 18.8% increase in the value of the affected properties and a 2.93% change in the net asset value of PLP, increasing the most recent net asset value (the unit price at which units are issued by the manager) from $1.216 per unit to $1.251.
The increase in valuation reflects the expert’s opinion of the free market value of the property while acknowledging that the property is committed to a vineyard lease until 2037, so this value is not available before that date. Rental under the lease is reviewed every 5 years and the first review is due by August 2022 and will reflect current market rent, which will likely be determined by its current configuration as Vineyards. Although the revision of the market rent under the lease contract has not yet been agreed, we do not expect a significant increase in the current rent.
The resulting position is that the fund will adopt a value that represents its current rental potential under the terms of the lease, and a portion of the free market value that is available to the fund at the end of the lease. During this period, the fund’s returns will therefore include both rental income and an assessed portion of the free market value that may be realized in the future. Periodic appraisal reports will also reassess the open market value and any adjustments will be acknowledged as required by the appraisal evidence.
The objective of the fund and the PLP remains the securing of appropriate rental income from real estate and land investments. However, yields from the beginning have been positively affected by the redefinition of rural land values, particularly where other uses are competing for the land (either other crops or commercial or residential use). These land use valuation changes can be cyclical and are not the focus of the fund.
Booster is awaiting the valuation report of the kiwifruit property in Kerikeri (which represents ~20% of the value of the assets held by the Private Land and Property Portfolio). This should be received next week. The outcome of this remaining assessment review is not known. Kerikeri’s last assessment was completed in May 2021.
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