Rural Analysis & Due Diligence

Investigations

Due Diligence – putting it into perspective

* People pay $20,000 for a 2nd hand car and willingly spend 5% of

the cars value getting the relevant checks.

* People pay $500,000 for a home and without a thought, spend 2%

of the homes value conducting a DDI, but,

* They pay $5,000,000 for the average rural property but are not

required to spend 0.1% of the properties value doing a basic check

that could save them a small fortune: Strange when you consider

they will be relying on that property for an income from the day of

purchase and likely for many years into the future.

2

Ten Basic Questions Most Landholders Cannot Answer

3

Question 1

Have I done a check of mapping and all the on-line data

bases before disturbing remnant or regrowth vegetation?

Do I really know what defines regrowth and which

legislation should I take the most notice of? The results

might surprise you.

4

Question 2

Do I need to do a WON’s survey (what is WON’s?) to make sure

LG don’t enforce a bio-security compliance order on me. Will

enacting that bio-security order from the LG put me in breach of

State and Commonwealth legislation?

In NSW, that is a possibility. How then do I stay inside the law?

5

Question 3

I have a PMAV (QLD only) so can clear any regrowth I want to?

Wrong. With some types of vegetation (i.e. TEC, MNES – what

do those letters mean) Commonwealth Legislation and even

Local Government laws can override a PMAV.

6

Question 4

Can I continue to cultivate and crop a paddock that’s obviously

an old cultivation paddock? It only has a couple of trees dotted

here and there and it was previously under cultivation, so there

won’t be a problem, right? Wrong! In QLD you will likely be OK,

but the EPBC Act might come into play. In NSW, you may be

breaching the Threatened Species Act 1995 and the EPBC Act.

7

Question 5

8

* Have I done a check for contaminated land?

* Did the previous land-owner cover over an old dump site?

* Did the property have an old dip site on it many years ago?

* Will this have implications for cropping and/or grazing?

* Will this have implications on my planned organic

certification?

Question 6

The previous landholder gave me paperwork that says I can

pump XYZ mega litres of water from the bore or river.

The paperwork is signed by the Government and says what

water I can use so it must be correct! Not necessarily.

It pays to check because the implications, if you’re wrong, can

be quite serious.

9

Question 7

10

Does the property I’m purchasing have an MDL, MT, a PL

or a NTL (what is a MDL, PL, MT or NTL?) showing on the

property search form. Does this mean someone else has

an interest in the property?

Question 8

The paperwork says my property is listed as a GHPL, GHFL, and

SL, Freehold or the rarely heard of “Fee Simple”. What do they

mean, do they have any restrictions on development and on

what I can do on the property. Is the property boundary actually

in the right place? This can be quite relevant if you property is

near an escarpment, jump-up or some hard country. What does

this mean for me?

The fence is on the other side of the creek. Does this mean all

this side of the creek is mine? No, it doesn't.

11

Question 9

Is the country I’m looking at buying or thinking about

cropping actually suited to the crops I’m familiar

with?

12

Question 10

Do those areas of dead grass, wet areas or fleshy plants have

any significance? Should I be concerned? Yes, you should.

Different species composition, decolourisation of the grasses,

the presence of fleshy plants (chenopods) indicate a possible

discharge area (salinity) or a watertable rising to the surface.

What will that mean for future cropping or grazing?

13

Every one of those 10 questions have answers that will effect that properties ability to be financially viable

14

Lawyers and Real Estate Agents have a legal and moral obligation to provide the basic information, however, the onus is on the landholder to conduct the full suite of investigations themselves.

15

Who Does DDI’s?

* A number of consultants, banks, real estates and agricultural groups

conduct DDI’s to some extent, but it would appear none have the same

capacity and in-depth knowledge CROSSROADS - Rural &

Environment Pty Ltd has.

* CROSSROADS - Rural & Environment Pty Ltd have access to

planners, ecologists, surveyors, GIS, hydrologists, soil scientists,

engineers, people with a strong rural background and access to

specialised rural industry personnel who we formed a strong

relationship with over many years. We have the capacity to cover off

on every aspect of the DDI.

16

What's involved in a DDI?

* To date, there have been over 40 issues identified that

landholders may need to consider with more being identified as

we progress.

* Some issues can be resolved by a desktop search or an

information request, but many require specialist knowledge (i.e.

recognising salinity, contaminated site from an old property

dump) and a site visit.

* The requirements for each property, location or farming

enterprise will be different based on location, farming enterprise

and each landholders plan for the property.

* Each DDI will be tailored to a properties / landholders

requirements with specialist advice on what needs to be covered

during a preliminary meeting.

17

Examples of issues covered in a DDI

18

* EPBC Search * Essential Habitat * Referable wetlands *

Salinity and erosion hazard mapping * LG Planning *

Environmental Mgt Register * CITEC searches, Register of

the National Estate * Australian Heritage Database *

Current/historic water licences * Land-use planning * State

Koala mapping * LG building searches * Contaminated land *

Local fire plans * WON’s search, Referable wetlands * soil

mapping and analysis * Water quality investigations * Weir

wall heights * Cultural Heritage provisions * Machinery

conditions report * property infrastructure condition report

If DDI’s are so important, why aren't they a mandatory requirement?

* The NSW State Government indicate it will have legislated in the

near future, that EVERY property must have a DDI conducted pre-

purchase or pre-development.

* Many of the major lending institutions are considering, or have

already implemented, a requirement that a DDI be conducted

before they lend the money.

* Some landholders have already learnt through legal action against

them that the lack of a DDI can be very expensive and should be

mandatory.

19

How will the DDI’s be structured?

* Each properties requirements will be identified by an initial

meeting between CROSSROADS - Rural & Environment Pty Ltd

and the client.

* The DDI will be tailored to each properties / landholders specific

needs.

* Provision of a fixed price quote and detailed proposal, but

dependent on the complexities of the issues encountered (may be

hourly rate)

* Provision of a comprehensive report that is colour coded green

(constraints limited or unlikely), orange (minor constraints that may

require caution or further consideration) and red (Stop – if you

proceed, there may be serious implications) and general information

containing statements of fact (i.e. details of a licence or permit).20

Who are the clients and how will they know about the service we provide?

* Rural landholders / investors

* Foreign investors

* Land developers

* Anybody investing in land, infrastructure, industry

To this end, contact has been made with FIRB, KPMG

(Chinese Business Practice), Australian / Chinese Business

Council, Banks, Juwai and Wadley Business Consulting

Shanghai/Co Ltd, Suncorp Agribusiness, Westpac, ANZ, QFF,

Agforce, Grain Growers etc.

21

Summary

* There is a large market for rural risk identification and

mitigation;

* All rural investors should conduct a DDI;

* CROSSROADS - Rural & Environment Pty Ltd can provide

the full suite of services;

* CROSSROADS - Rural & Environment Pty Ltd has the

capacity to be at the front of an emerging market when the

States makes a DDI report compulsory;

* CROSSROADS - Rural & Environment Pty Ltd has the broad

range of specialist skills and the industry contacts to deliver the

suite of Due Diligence Investigative services required;

* To the prospective clients, its all about risk control.

22

The Final Word

From a Chinese property investor:

“ Nothing in life is to be feared....... It is

only to be understood”

23

Do you know where the risks are on your property and what the implications are if

those risks are not identified?

24