June 25, 2020

By Lynda Kiernan, Global AgInvesting Media

Three EU-based pension funds have committed €12 million (US$13.5 million) to London-based Stafford Capital Partners’ Stafford Australian Agricultural Real Estate Fund (SAAF II) prior to its planned launch in September. 

Stafford Capital launched its global agriculture investment strategy in July 2015, building upon the firm’s success and expertise in timberland investing, where it grew to advise and manage assets valued at US$2.1 billion. 

“We have been following the developments in the agriculture market for some years, and have decided that now is the right time to offer institutions the opportunity to invest in a low-risk, well-diversified portfolio of agriculture assets,” stated the firm at the time. 

By September 2018 the firm had announced the appointment of Jos Boeren as head of Agriculture and Food investments – a division that covers a portfolio of assets valued at more than US$6.8 billion.

“Jos has a unique combination of substantial industry expertise, deep and broad relationships with industry leaders and operators across the entire agri-food value chain and a truly global sector perspective,” said Angus Whiteley, CEO of Stafford Capital Partners in 2018. “He has the proven ability and track-record to effectively engage with investors and agri-food operators from across the world and to deliver concrete benefits to both.”

SAAF II also follows upon the success of its predecessor fund that closed in December 2018 at A$33 million (US$22.7 million), and which deployed its total capital commitments in slightly more than a year through a buy-and-lease investment model. Based on the performance of its first fund, Stafford Capital has expectations that SAAF II (which will also employ a buy-and-lease model) will generate an internal rate of return between nine and 10 percent, according to Real Assets. 

The performance of SAAF I reflects Stafford Capitals’ belief that Australian agriculture “is a highly attractive sub-sector of Australia’s real estate market”, due to consistent climbing demand, low volatility, extremely low vacancy rates, and steady capital appreciation.

“We believe the agriculture sector offers an attractive combination of a low correlation with other asset classes and returns based on biological growth, providing income and growth to its investors,” stated Stafford Capital at the time. “Stafford’s strategy will replicate what has worked well for Stafford Timberland team’s investments over many years, with a goal of offering a globally-diversified portfolio of investments across the different forms of agriculture.”

Indeed, in 2019, the median price of Australian farmland increased by 13.5 percent, representing the sixth straight year of growth, according to Rural Bank’s Australian Farmland Values 2020 report.  Farmland values in Western Australia led the year with record growth of 28.2 percent. South Australia followed at 18.4 percent, then New South Wales at 17.2 percent, Victoria at 12.1 percent, and Tasmania at 11.1 percent. 

Even more impressive, this performance occurred in a year of significant challenges for the sector including drought, bushfires, and floods.

“We saw another year of value growth in 2019 across almost every state and territory, demonstrating not only the underlying strength of agriculture’s base asset in farmland, but of the sector overall,” said Alexandra Gartmann, CEO, Rural Bank. 

This strength is continuing through this year even in the face of COVID-19, with Australian farmland values expected to hold steady for 2020, defying global conditions that pose a serious threat to other economic asset classes. 

“And overall, the volatility and impact that COVID-19 has caused in other asset classes has also highlighted the stable and countercyclical nature of agricultural land, reinforcing its attractiveness as an investment,” said Wes Lefroy, agricultural analyst with Rabobank.

This positive trajectory is not only applying to Australian farmland values, but is also being seen in crop production. The first new crop production outlook issued by ABARES forecasts that Australia’s winter crop this season will be significantly larger – with expectations that output will reach 44.5 million tons, up from 29.1 million tons for the 2019/20 season, making it the largest winter crop since a record was set in 2016/17 at 56.7 million tons. 

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.