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Besieged agricultural land owner Rural Funds (ASX: RFF) has released farm-by-farm property valuations as it seeks to put to bed concerns raised by short seller Bonitas Research and "creative accounting" investigator Bucephalus Research.
While most of the attacks rallied against RFF have focused on its structure with responsible entity Rural Funds Management (RFM) and allegations of incentives in favour of RFM over RFF shareholders, these researchers have questioned how RFF calculates the value of its properties.
Bucephalus managing partner Robert Medd highlighted the Ernst & Young (E&Y) report RFM stood behind was not actually an audit, and that E&Y did not visit RFF farms and claimed neither did many of the people undertaking the valuations.
"In a break with conventions used at most business, RFF looks to be booking assets expenses as asset improvements. These are cash costs, which most farmers would consider to be an operating expense," Bucephalus said in its report.
Meanwhile, Bonitas Research - led by Matthew Weichert of Glaucus Research fame - questioned the rapid rise in value of RFF's mature almond trees.
"New disclosure revealed that RFF Management took its independent external appraisal valuation for an entire property and, at their sole discretion, decide the fair value allocations into specific accounting classifications of investment property, bearer plants and water entitlements," Bonitas said.
Rural Funds have now come back firing, providing a breakdown of its property assets valued at $924.8 million of which almost half is for almonds and the remainder is split between properties for cattle, cotton, poultry, macadamias and vineyards, as well as water entitlements and financial leases for breeders.
"RFM has a policy to independently value assets at least every two years and rotate valuers every three years. The firms that completed valuation reports are part of global real estate businesses," RFM said, noting its valuers were CBRE, Colliers and JLL.
"Valuation reports are prepared in accordance with International Valuation Standards. At least one qualified valuer physically inspects each asset when preparing the valuation.
"A second qualified valuer reviews the work and co-signs the completed report."
RFM clarified some independent valuations differ from the value recognised in the financial statements, mainily due to capital expenditure subsequent to the valuation that is designed to improve an asset's productivity and value which "attracts additional lease income".
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