November 10, 2020

By Lynda Kiernan, Global AgInvesting Media

Global alternative asset manager Macquarie Infrastructure and Real Assets (MIRA) announced that one of its managed agricultural funds has proffered a cash offer of A$300 million for Australian REIT Vitalharvest Freehold Trust (VTF).

This offer comes less than six months after property fund manager Primewest acquired an 11.8 percent stake in Vitalharvest, and a first right of refusal over another 6.2 percent when it agreed to acquire GoFARM Asset Management Pty Ltd – the manager of Vitalharvest Freehold Trust – in a A$10 million (US$11.27 million) deal. 

VFT is an externally managed real estate investment trust (REIT) that holds a portfolio of properties valued at $275 million with a market capitalization of approximately $143 million (as of June 2020). It is the owner of the largest berry and citrus farm aggregation in Australia, which is leased to Costa Group, one of the country’s largest horticultural companies.

VTF focuses on investment-grade, mature, operating agricultural assets in Australia and New Zealand. Its portfolio is structured as seven farms, although there exists more than 130 property titles, of which some are aggregations of non-contiguous properties, according to the company’s website. 

The seven farms include:

~ Corindi: a 927-hectare berry farm in New South Wales growing blueberries and raspberries.
~ Tumbarumba: a 71-hectare berry farm in New South Wales growing blueberries.
~9 Mile: a 103-hectare berry farm in Tasmania growing blueberries and raspberries.
~Dunloran: a 94-hectare berries farm in Tasmania growing blackberries.
~Solora: a 582-hectare citrus farm in South Australia growing grapefruit and oranges.
~Kangara: s 962-hectare farm in South Australia growing oranges, lemons, avocados, and persimmons.
~And Yandilla: a 1,003-hectare farm in South Australia growing oranges, grapefruit, lemons, avocados, and wine grapes. 

Collectively, these assets contain a mix of both mature and new fruit trees and bushes, and hold 13,531.7 mega liters of water rights.

The Offer

The offer is laying two all-cash options on the table. The first proposal is a scheme to acquire 100 percent of the units in the trust at A$1 each, reflecting a total valuation of Vitalharvest of A$300 million.  This option represents a 27.4 percent premium on Vitalharvest’s closing unit price of $.785 on November 6, and gives unitholders a certainty of realizing the cash value of their units.

The second option is for the outright purchase of the portfolio at a value of A$300 million, representing a 7 percent premium to the fair market valuation of the assets as of June 30, 2020 – and giving Vitalharvest net proceeds that it can offer as distribution to its unitholders or reinvest into compelling alternative assets.

“MIRA strongly believes the all-cash transaction is highly compelling and in the best interests of Vitalharvest unitholders and expects the transaction will be well received by the responsible entity,” stated MIRA in a release.

Costa 

An interesting side-liner to this proposal is Australian fruit and vegetable giant Costa Group, the leaseholder of the Vitalharvest portfolio of farms, which it views as legacy agreements. Costa’s business includes the growing, packing, and marketing of tomatoes, citrus fruit, avocados, berries, and mushrooms. The company’s operations span 4,700 planted hectares, three mushroom growing facilities, and glasshouses totaling an area of 30 hectares. It also is engaged as a majority stakeholder in joint ventures in six blueberry farms in Morocco and four berry farms in China.

Costa has come out and said that it would support any deal that would ensure the continuation certainty for its leasing arrangements currently in place.

However, Costa and MIRA are no strangers. Costa has existing relationships with MIRA via its leasing of multiple avocado farms from the manager, structured as fixed rental agreements over a 20-year time period. 

“In the event that MIRA was successful in its offer and given the terms of our current leases with MIRA, Costa would be confident that the existing Vitalharvest leases could be restructured, with the aim that they convert to a fixed rental arrangement that reflects terms consistent with market conditions and that would be value accretive over the medium to longer term,” Costa expressed in a released statement. 

– 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.