April 20, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

Founded in 2004 with an initial investment of $175 million from Vic Super, Kilter Rural is self-described as “a specialist manager, dedicated to investment in Australian real assets of farmland, water, and ecosystem services”.

With 30 years of experience in sustainable farmland and water management, Rural Kilter’s core investment team of 20 oversees AUD$270 million in AUM, delivering returns of 8-14 percent across mature mandates and funds.

In March of last year, the manager announced the close of its Australian Farmlands Fund with capital commitment totaling AUD$65 million (US$47.6 million). Launched by Kilter Rural in 2019 when Sydney-based Regal Funds Management reportedly acquired a stake in the farmland and water rights asset manager, the Australian Farmland Fund was established as a vehicle to invest in capital-constrained farmland assets that are underutilized or are in need of development, and water assets with access to irrigation. This strategy is directly in Kilter Rural’s wheelhouse, and one which aligns with what Cullen Gunn, CEO of Kilter Rural, called  “tectonic shifts in the way capital was being deployed…”

Kilter Rural also has two open-ended water investment funds – the Kilter Water Fund, and The Murray-Darling Basin Balanced Water Fund, which is an environmental impact investment fund managed in partnership with The Nature Conservancy.

In May of this year, Kilter is adding a new investment vehicle to its offerings – the A$500 million Kilter Agriculture Fund, providing investors with unrivaled access to an institutional scale farmland aggregation in the Southern New South Wales Riverina. 

The fund will be seeded with a unique anchor asset of 7,000 hectares across three stations along with 3,500 megaliters of groundwater. From this cornerstone, Kilter plans to build a broader A$500 million-plus perpetual agriculture fund targeting annual returns of 10-12 percent consisting of 4-5 percent yield and 6-7 percent capital growth. 

Kilter noted that the fund will immediately deploy A$65 million to three farms and water by June 2023, representing mixed farming assets with irrigated and dryland cropping along with grazing that have the potential to generate high-integrity biodiversity positive carbon credits through forest and soil management interventions. 

Having implemented a proven soil and environmental regeneration model and directly regenerating 12,000 hectares of farmland ecosystem landscapes, Kilter Rural has a track record of outperforming target returns.

With immediate institutional scale, Kilter will have the significant opportunity to raise crop yields through improved agronomy, and build value through water security via increased delivery access and modest investment in storage and irrigation infrastructure. 

Additionally, entry risk will be mitigated via leases at 4.5 percent yield into 2024, and looking ahead, Kilter noted the unrivaled aggregation pipeline in the region, reflecting a further $80 million in adjacent farmland acquisitions to June 2024.

Since 2007, Australian farmland has returned 8.5 percent compared to 4.7 percent for the ASX 200. With the benefits of low correlation to equities, REITs, and bonds; positive correlation to inflation and commodity prices; low volatility; and, considering the scale of The Kilter Agriculture Fund’s initial deployment and potential of its portfolio assets together with its experienced team, it is well-positioned to meet its goals, and more. 

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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