December 28, 2017

In March 2017 AgCAP, the fund manager of Australia’s Sustainable Agriculture Fund (SAF), decided to divest the portfolio when after seven years as cornerstone investors – a collection of Australian superannuation funds including AustralianSuper – made the decision to exit the fund.

The collective move placed AgCAP in the position of listing the fund’s portfolio of agricultural assets on the market with expectations of fetching A$180 million for the properties.

When listed in March, the course the sale was to take was being viewed with a flexible eye by AgCAP, which remained open to the possibility of a deal either for the entire portfolio, or various deals for certain assets.

“We understand that there will be some parties that will be interested in individual assets, while there will be others that are interested in the fund as a going concern,” said AgCAP’s General Manager, Strategy, Deo de Jesus in March.

As it turned out, there were parties that placed bids for the entire portfolio, though these were not able to compete with the combined bids for specific assets.

In September, TIAA Global Agriculture Properties acquired 10 of the 17 properties making up the SAF portfolio, totaling 16,000 hectares across New South Wales, and Victoria. Its asset manager, Westchester Agricultural Asset Management, also maneuvered to establish numerous deals with local farming businesses in regard to the operation of the properties.

This was quickly followed by an announcement in November that TRT Pastoral Co., headed by Victorian businessman Tim Roberts-Thompson, had agreed to acquire the remaining King Island Aggregation. All told, the SAF portfolio was successfully sold over the course of a 10-month process grossing more than A$180 million for investors.

“In less than ten months, we managed 100 property inspections and multiple complex negotiations, all the while overseeing 17 individual farm operations within the SAF portfolio,” said Martin Newnham, CEO, AgCAP.

Dairy Days

Now that the SAF divestment is complete, a new year means new beginnings, and AgCAP plans to open 2018 with the launch of a new fund dedicated to pasture-based Australian dairy assets.

The fund, which is targeting a value of $200 million within three years, will focus on aggregations of smaller dairy properties running between 700 and 1,000 cows, Newnham told GAI News – a structure that provides for easier management. The fund also will be looking to build relationships with processors up the value chain.

Indeed, the process has already begun, with AgCAP having already engaged in due diligence on select properties that could potentially be acquired in the first quarter of 2018.

So, why dairy?  

Newnham told GAI News that the current capital-constrained landscape in Australia’s family-run dairy sector makes it an appealing space. The nascent but enormous potential in emerging markets in Asia also makes Australia very well geographically placed. “Transparency – where their milk is produced, will be a key point in these markets,” said Newnham, “…something that Australia is good about.”

These sentiments were echoed by Newnham when speaking with the Australian Financial Review, saying, “There’s a lot of restructuring going on in dairy – there’s an ageing, capital constrained population, and we also understand that’s where the opportunity’s going to be in dairy in terms of deploying capital as well. That’s where we have deep expertise as well. What we want to bring, I guess, is all the experience from the last eight years into a dairy product.”

With the support of their investors, and potential deals in the pipeline, AgCAP is optimistic about the coming year and its pivot into dairy.

“Australian dairy farmers are globally competitive, produce high quality safe products with high brand recognition in domestic and overseas markets,” said Newnham. “We are excited by the opportunities we see in dairy, and with the support of existing AgCAP shareholders, we are currently assessing suitable structures for potential investors, having commenced work on a pipeline of pasture based dairies in south west Victoria and Tasmania.”

-Lynda Kiernan