RFG dives on ‘scam’ allegation

RURAL Funds Group shares plunged 42 per cent after the same short-selling group that exposed Blue Sky Alternative Investments called the agricultural real estate property group a “scam” whose shares are “ultimately worthless”.

The Texas-based Bonitas Research accused Rural Funds Management of conducting “multiple nefarious transactions” that have siphoned off $86 million in shareholder value from the property trust it manages since 2014.

Shares in Rural Funds Group, which derives revenue from leasing its portfolio of orchards, farms and vineyards and leases to tenants in eastern Australia, fell 99c to a three-year low of $1.36 before being placed in a trading halt.

Bonitas, referring to Rural Funds Group through its stock code RFF, said it became convinced that Rural Funds Management “was specifically designed to operate as a separate private entity to allow RFF Management to siphon cash into RFM”.

“RFF Management operates both RFF and RFM, yet RFF Management owns 100 per cent of RFM and owns less than 5 per cent of RFF’S equity,” it said.

“To us, this immediately appeared as a clear conflict of interest between the incentive structures of RFF Management versus RFF minority shareholders.”

Bonitas accused Rural Funds Group of fabricating $28 million in rental income paid to the trust by its two largest third-party leases. It estimated its true assets at only $268 million, which would put it in breach of loan covenants, and called the company “ultimately worthless”.

Rural Funds Management has yet to respond to the allegations.

It describes itself as “one of the oldest and most experienced agricultural fund managers in Australia” with a 22-year history and 140 staff across Canberra, Sydney, regional NSW and Queensland.