May 5, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

It’s been little more than a  year since Packhorse Pastoral Company (PPCA) launched with an initial funding target of $300 million to deploy across four-to-six agricultural properties. These assets will operate mostly under a service delivery model and non-ownership of cattle – meaning, the properties will be rejuvenated and leased out to top beef producers for cattle feeding. 

Through this model the company is aiming to repair the soil with the help of cattle to restore grassland, and by doing so, is targeting an IRR of between 8-10 percent (3-4 percent from yields and 5-6 percent from appreciation).

The restoration of these assets will not only improve the carbon content of the soil, but will then enable PPCA to sell carbon credit offsets at scale in a market expected to be valued at $8.25 billion by 2027, positioning the company as the world’s leading land steward, restorer, and beef supply chain.

In July 2021, Packhorse acquired its initial property, Queensland’s Stuart’s Creek, a 8,360-hectare Hereford cattle stud  located outside of Roma in a $30 million deal, noting at the time that they were scouting potential acquisitions between Coonamble in New South Wales and Taroom, in Queensland.  Months later, in February of this year, PPCA acquired  the 8,654-hectare (21,384-acre) Ottley Station in New South Wales. 

As the process of portfolio building continues, Packhorse has announced its off-market acquisition of the Moolan Downs aggregation, a 10,000-hectare property in Southeast Queensland that brings the company’s total AUM to $104 million.

Moolan Downs comprises four properties: Moolan Downs, Cressy, Allambee, and Old Southwood, of which Moolan Downs, Cressy, and Allambee are Australian Certified Organic (ACO) and certified U.S. National Organic Program for cattle.

“We’ve purchased a magnificent turn-key operation at a great value with solid infrastructure and sixty existing paddocks allowing for rotational grazing,” said Geoff Murrell, investments managing director, Packhorse, adding, “We’re currently running 5,000 backgrounding cattle for an offtake partner, with a target to increase carrying capacity to 8,000 by 2027.”

Additionally, Murrell noted that Packhorse’s partner Carbon Link has flagged 90 percent of the Moolan Downs land as being suitable for carbon sequestration projects, something that Packhorse has woven into its management framework.

Upon PPCA’s launch, CEO Geoff Murrell commented, “Globally, there’s a recognition that our ecosystems are in trouble and that current farming practices are highly detrimental to soil health. Regenerative agricultural methods focus on achieving biodiversity above and below ground, coupled with animal impact to replenish and protect soils.”

Opening Up

Concurrent to the acquisition of Moolan Downs, Packhorse also announced the opening of its next offer to invest (open May 3 – July 29, 2022), outlining a target of $62 million that will be used to fund the acquisition of two properties in the Coonamble and Inverell regions of New South Wales.

Packhorse chair Tim Samway noted that as we experience political uncertainty, rising inflation, volatility in the markets, and climate change crises, the ability to invest in real assets connected to Packhorse’s environmental focus and unique ways of maximizing returns is an appealing option for wholesale and institutional investors.

“There has never been a more opportune time to offer investors an asset class that produces returns on so many levels while creating positive environmental impact at scale,” said Samway.

“ESG is at the top of the agenda, with investors seeking robust opportunities backed with data-driven evidence of landscape improvements and carbon capture.”

Samway continued, “All properties in Stage 1 of the company’s $300 million acquisition pipeline are expected to be registered in soil carbon sequestration projects, presenting investors with exposure to Australian Carbon Credit Units.”

To ensure investors’ delivery on this criteria, Samway noted that Packhorse’s in-house head of ESG and principal scientist, Dr. Elaine Mitchell, is working with industry peers and other experts, adding that early investors will benefit from the capital growth being seen in Australia’s rural land values.

Indeed, the Australian Farmland Values 2022 report, only recently released by Rural Bank, showed that rural land values have reached their highest level of growth in 27 years, with farmland values in the country jumping by 20 percent in only the past year. 

Last year marked the eighth year in a row that rural land values in Australia climbed, reflecting a growth of 123 percent since 2014 to reach just above $7,000 per hectare. That same year saw a record 10.8 million hectares of land change hands at a record combined value of $15.6 billion – a year-on-year increase in the number of sales of 22.5 percent.

Western Australia, Queensland, and Victoria all saw growth in their median price-per-hectare of more than 30 percent, while regions of southern Tasmania saw the largest growth of any region with median prices that increased by 50.9 percent. 

As Australian rural land continues to deliver capital growth, Packhorse said it is on track to build a portfolio of 2 million hectares of land spanning Cloncurry in Queensland to the Victoria border within the next five-10 years.

~ Lynda Kiernan-Stone is editor 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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