May 13, 2020

By Lynda Kiernan

Alterra Limited, an Australian agricultural investor, developer, and manager focused on regenerative land development, announced it has agreed to sell 913-hectares (2,256-acres) of its Dambadgee Springs property to a local farmer for A$3.1 million (US$2 million). 

The company acquired Dambadgee Springs, which in-total encompasses 1,640 hectares (4,052.5 acres), in March 2017 for A$4.2 million (US$2.7 million). The portion of property retained by Alterra includes surface water resources with potential for development, areas suitable for livestock, forestry, or carbon forestry projects, and the $2.5 million of contracted income from Yandin Wind Farm.

Considered by Alterra to be a non-core asset, the partial sale of Dambadgee Springs will be conducted via two contracts: the first, valued at A$1.6 (US$1.03 million) million, is expected to close on or before July 10, 2020. The second, valued at A$1.5 million (US$.96 million), is subject to land survey and subdivision approval, and is expected to settle on or before January 20, 2021. 

Redeployment

Until 2018, Alterra’s business was to take suboptimal parcels of land and redirect them into carbon sinks formed under legacy deals that would generate income over a period of time. However, after de-merging its carbon-conscious business last year, Alterra’s strategy moving forward is to develop underutilized or undervalued farmland with reliable water supplies into investment-grade agricultural assets, and, in certain cases, to also manage operations.

The pivot is prudent. Australian farmland continues to perform, as demand for agricultural assets, strong commodity prices, and low interest rates have generated value for stakeholders. Last year, the median price per hectare increased by 13.5 percent, to A$5,271 (US$3,380.40), according to the Australian Farmland Values 2020 Report recently released by Rural Bank, marking the sixth consecutive year of growth, and bringing the 20-year CAGR to 7.5 percent. 

Alterra’s shift into agriculture has begun with a focus on avocados, with the launch of its first large-scale avocado project in Pemberton, in Western Australia. A special purpose vehicle (SPV) called Carpenters Beedelup Pty Ltd. had been established to develop the project that will operate under the name “Carpenters Project”. This SPV also has secured a 30-year lease including a 10-year plus, 10-year option on the land and water resources from Red Moon Property Holdings Pty Ltd., an entity associated with the Casotti Group, the largest privately-owned fruit grower, packer, and wholesaler in Western Australia.

The firm began laying the groundwork to support its vision for Western Australia last year, when it made inroads into the state’s high-value avocado sector, forging a local partnership agreement with French’s Group, a family-owned enterprise that established the state’s first commercial-scale avocado operation in 1986, and has 32,000 trees producing more than 5.8 million fruit per year. 

French’s Group has a significant ownership stake in Advance Packing and Marketing Services, which has the capacity to pack six million trays of avocados per year, and services more than 40 of the state’s growers.

Internally, the firm also appointed Brett Heather, a veteran agribusiness executive, as its chief operating and technical officer in July 2019, and established an exclusive technical partner agreement with Tyson Bennet, a horticultural expert who specializes in high-value tree crops, in April 2019. In addition, John Poynton, a Western Australia businessman, has been named chairman of a newly-formed advisory board created to help drive Alterra’s new direction.

To advance its avocado project, Alterra will retain A$1.3 million (US$.83 million) from its first contract, and A$0.7 million (US$.45 million) from the second contract of the Dambadgee Spring sale as working capital. 

“Alterra is prioritizing its development activities in the South West of Western Australia and the majority of capital released from this sale will be redeployed into Alterra’s avocado investment program, including the recently announced Carpenters Project in Pemberton,” said Oliver Barnes, managing director, Alterra.

Carpenters Project

Proprietary data from Alterra’s technical partner, the French’s Group (which has been confirmed by Pablo Liguori, an independent agronomist and avocado specialist consultant), shows that a mature avocado orchard of nine years of age in the Pemberton region has the potential to produce between 20 and 30 tons of avocados per hectare per year.

At prices ranging between $5.44 – $9.38 per kilogram (September 2019 – January 2020), and at 907 kilograms to the ton, and 20-30 tons per hectare, the Carpenter’s Project has the potential to bring in A$29.6 million (US$18.98 million) per season based on the most conservative numbers.

“This is the first of several planned projects for Alterra and I am pleased to say the Company’s opportunity pipeline is strong,” said Barnes in April of this year.

Strong indeed.  Alterra recently entered into a strategic agreement with advisory firm CapRaise, giving Alterra access to an extensive, pre-vetted international network of 114 large family offices that are actively seeking to diversify their investment portfolios.

“The strategic agreement with CapRaise provides Alterra, on behalf of the development projects, with the opportunity to tap into the funding required to not only begin development of the Carpenters Project, but for ongoing development capital for the company’s planned project pipeline,” said Barnes.

Alterra has already obtained exclusive rights to local avocado genetics and production data from French’s Group in support of the Carpenters Project serving as the foundation for a new business model in Western Australia.

“With approximately 2,500 hectares of current avocado production in Western Australia, this single development has the potential to represent about 10 percent of WA’s planted hectares, with positive pre-feasibility results providing Alterra with a basis to pursue development,” said Barnes.

“The Carpenters Project site is exceptional with the region highly regarded for its favorable climate, reliable rainfall, excellent soil types and quality water, which makes this site a high-value asset for Alterra. The Carpenters Project is a significant opportunity to launch Alterra’s new business model with an outstanding asset supported by quality management.”

– Lynda Kiernan is Editor with GAI Media and daily contributor to the GAI News and Agtech Intel platforms. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.