By Lynda Kiernan, Global AgInvesting Media

Australia’s Gunn Agri Partners, an agricultural asset management company operated by co-founders Bill Gunn, Alan Hoppe, Daniel Hough and Bradley Wheaton, targets investment strategies that are supported by strong economic fundamentals, such as increasing demand for beef, grains, oilseeds, and almonds, that are attractive due to the potential to improve efficiency and productivity of assets.

In April 2018 Gunn Agri announced the final close of the Gunn Agri Cattle Fund, which is managed by Gunn Agri Partners. Now fully deployed, the fund stands at a value of A$225.5 million – reflecting an increase in value of 8.6 percent for the year.

The fund has announced its unaudited results for the financial year ending June 30, 2020, reporting an EBITDA profit of A$19.7 million, and a capital gain on the portfolio since its beginning of 23 percent, after accounting for purchase price, transaction costs, and post-acquisition CAPEX. 

This growth in value and profit generation demonstrates an outperformance of the market for pastoral land, driven by Gunn Agri’s strategic development of watering points, fencing and infrastructure improvements that raise productivity, land development that improved grazing productivity, and the transitioning of pasture land to cropping on southern portfolio assets.

Bradley Wheaton, managing partner with Gunn Agri, told GAI News of these intended improvements in an interview in November 2018, saying, “We are focused on executing our asset improvement and operating plans. This includes completion of productivity enhancements, such as the addition of new solar-powered watering points, fencing to open underutilized areas, pasture renovation, and operating infrastructure improvements. This enables us to increase cash returns over the life of our investments and reach our asset value growth targets.”

By focusing on operating assets at scale, Gunn Agri has seen strong results driven by optimized productivity and operating land at its highest value.

“We have achieved a strong track record in generating asset value growth in excess of the market uplift from strategic improvements and transformation of land use in Australia,” Wheaton told GAI News in 2018. “We see a scalable opportunity with less reliance on market growth to achieve attractive risk adjusted returns.”

Geographically, the portfolio spans 1,500 kilometers stretching from north Queensland to the border of New South Wales including 1.056 million hectares (2.6 million acres) of grazing land, 6,607 hectares (16,326 acres) of cropping land, and another 67,300 hectares (166,302 acres) of grazing land that is leased or agisted.

The fund’s operating company Cunningham Cattle Co. posted a herd size of 59,120 with a value of A$67.7 million as of June 30 – a 38 percent jump year-on-year reflecting a decided increase in the cattle price index (EYCI) of 56.4 percent to end the year at 764 cents.

Driven by higher prices, cattle sales for FY20 totaled A$23.4 million – a 33 percent increase year-on-year.

Alan Hoppe. CEO of Gunn Agri Partners explained to GAI News that these results were also supported by Gunn Agri’s strategic decision to defer cattle sales from previous periods when prices were lower, into the 2020 year, allowing for greater volume in sales at higher prices.

“Sales revenue was up due to a number of factors, we deferred sales volumes from previous years to the 2020 financial year when we anticipated the market strengthening. That market has been driven by demand and supply side-factors. The structural shift in demand from several Asian markets has certainly been an underpinning feature of Australian exports in recent years,” said Hoppe.

“There are some interesting complexities in the global beef market at present due to COVID, we are seeing processing plant closures, supply chain disruptions and dampened demand for some cuts and increased demand for others. On the supply side there has been upward pressure on the market arising from restocking as producers on the East coast of Australia look to build up breeder numbers.”

A New Strategy

Currently, Gunn Agri is partnering with investors in a new strategy that will see the fleshing out of a portfolio of mixed farms.

Management of the land and its connected ecosystems will be a main focus with the goal of improving productivity via sustainable transformation of degraded or underutilized agricultural holdings.

 

“The Transforming Farming strategy acquires, transforms and operates farms in the cropping and grazing zones of Southern Australia,” Hoppe told GAI News.

“We improve the productivity of farms, operating aggregations at scale and incorporate innovations in technology that enable higher yields and lower production costs. We integrate agriculture and ecosystem management into our farming and grazing systems with the objective of improving farm productivity, natural assets and, as a consequence of both of these, land values.”

Wheaton also discussed the importance of ESG in the management of its portfolio with GAI News in a prior interview.

“After listening to investors in Australia and around the world, we are strongly of the view that sustainability of the investment strategies and a real and genuine framework for monitoring and reporting of ESG factors to stakeholders is a core requirement for our investments,” said Wheaton.

“Gunn Agri has put this into practice through incorporating ESG considerations in the design of our Cattle Fund and is the first cattle grazing business in Australia to have implemented Global GAP, the worldwide standard for good agricultural practices.”

Based on this foundation, the actively managed strategy integrates agricultural production and sustainable management  – measuring and reporting on key sustainability indicators, and reporting on performance results. 

As such, Gunn Agri will offer one of the first institutional grade investment vehicles to combine agricultural and sustainability management plans in its investment mandate, including transparency and accountability commitments to quantify and report performance.

 

– 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.