December 6, 2018

Melbourne-based Warakirri Asset Management announced it is launching a new agriculture investment fund with a goal of raising $100 by the end of Q1 2019, and a longer term target of $300 million.

Headed by Adrian Goonan, chief executive of Warakirri’s cropping and diversified agriculture funds management, along with an expanded dedicated team, the new investment vehicle will focus its capital on five high-value agricultural sectors: fruits; nuts; water entitlements; intensive livestock such as poultry, and agricultural infrastructure.

“We are unlikely to be buying broadacre cropping, mixed farming, grazing or dairy farms,” Goonan told AFR. “We will focus on the higher value such as nuts, fruit, vineyards, agricultural infrastructure such as logistics and processing assets, as well as water and poultry.”

To mitigate volatility in the portfolio, Warakirri plans to acquire assets and then lease them out to experienced tenants, and is targeting a return of 12 percent, of which 7 percent is expected to be generated from income, and the remaining 5 percent from capital growth.

With more than 22 years experience in agricultural investing in Australia and approximately $2.1 billion in both funds under management and commitments, Warakirri states that one factor behind the launch has been an increase in investor interest in the asset class.

“We are already managing significant discrete agricultural investments for super funds, but this new fund is being set up in response to demand for a different segment of investors – the private family offices, high-net-worth and not-for-profit community,” said Goonan.

Party of Two

This is the second significant ag investment fund with a lease-to-own model launched within recent months.

In June of this year Australian agricultural asset manager Growth Farms Australia (GFA) announced the launch of a new 10-year, A$140 million (US$103 million) fund designed to acquire farmland which will then be leased to primary producers.

The Australian Agricultural Lease Fund plans to target self-managed super funds, high-net wealth individual investors, and family offices for investment, and was launched with backing from its cornerstone investor, Sydney-based Providence Wealth.

Looking to gain returns generated through the dual channels of leasing agreements and the appreciated value of farmland, GFA managing director David Sackett told The Australian that the fund aims to acquire between 20 and 25 farms valued between $4 million and $6 million each, stating that the smaller asset size will pay off in greater ability to diversify across geographies and crops, while being able to offer nearby farmers parcels to lease that would be welcome additions to their existing operations.

Targeting net returns of between 10 and 12 percent including a 4.5 percent return generated from its leasing model, 80 percent of the fund’s holdings will be in farmland with the remaining 20 percent being water entitlements. All leases will have an initial term of three years, with optional three-year terms to follow.

Both Growth Farms and Warakirri have set minimum investment size at $100,000, however, Warakirri sees that as an indication of the number of investment opportunities in the space.

“Australia is a big place with plenty of value opportunities, but no doubt there is still competition,” said Goonan.

Lynda Kiernan