The Rural Funds Group (ASX: RFF) share price rose more than 1% in response to a number of assets being sold.
Rural Funds is the only ASX real estate investment trust (REIT) that is a pure play on owning Australian farmland and leasing it to tenants.
Asset sales
The REIT announced that contracts have been exchanged for the sale of five assets for a combined value of $255.6 million, representing an average 22.7% premium to the 31 December 2025 book values.
It sold the Rewan cattle property for estimated net sale proceeds of $106.9 million, compared to the book value of $72.8 million as of December 2025.
Rural Funds sold the Cobungra cattle property for estimated net sale proceeds of $50.3 million, compared to the book value of $52.9 million at December 2025.
It sold the Wyseby cattle property for net sale proceeds of $43.2 million, compared to the book value of $35.1 million at December 2025.
Rural Funds also sold the Cerberus cattle property for $34.1 million, which was more than the $26.2 million book value at December 2025.
Finally, it sold 2,500 ML of NSW river water entitlements for $21.1 million, compared to the prior book value of $21.3 million at December 2025.
The business noted that Foreign Investment Review Board approval is required for the purchase of Cobungra. All other asset sales are unconditional and settlements are expected to mostly occur in the first half of FY27.
Why did Rural Funds do this?
The asset sales are in line with the REIT’s stated strategy to dispose of assets to reduce gearing to within Rural Funds’ target range of between 30% to 35%.
The proceeds will initially be applied to the REIT’s core debt facility. Pro forma gearing, adjusting for estimated net sales proceeds is 31.6%, down from 39.1% at 31 December 2025.
Rural Funds noted the asset sales also satisfy the condition to increase the guarantee to J&F Australia Pty Ltd from $160 million to $200 million required by JBS. The guarantee currently remains at $160 million.
These transactions are expected to provide a net benefit to adjusted funds from operations (AFFO) – that is essentially the net rental profit. The FY26 forecast for AFFO is still $0.117 per unit.
Final thoughts on the Rural Funds share price
Rural Funds is an appealing REIT to own – I own a few units of the business myself. It’s an impressive option for distributions with how steady the income has been in recent years, despite the difficulties of higher interest rates.
These asset sales show the business was undervalued before and I think it still is now – it’s trading significantly below its adjusted net asset value (NAV). The distribution yield remains pleasing, with the yield currently being 5.9%.
Overall, I think it’s one of the best buys in the REIT sector right now and noticeably undervalued. It’s one of the most attractive ASX dividend shares, in my opinion.
