February 2, 2021

By Lynda Kiernan, Global AgInvesting Media

Australian listed property fund manager Primewest has more than tripled its funding target for its newly launched Primewest Agricultural Trust No 1 to A$350 million (US$268 million), and stated it may list the fund, but did not specify a timeframe for such action. 

The move follows the launch of an A$55 million (US$41.75 million) equity raising, which was also surpassed, earning A$60 million (US$45.5 million) to be used by Primewest to fund key investments made by its unlisted agricultural trust, which is to possibly act as the starting point for Primewest’s proposed REIT, and another of its property income funds.

Primewest entered the Australian agricultural space in April of last year with the launch of its inaugural ag investment fund with an initial funding target of A$100 million (US$76 million) and its first ag acquisition. 

Already with a presence in commercial, industrial, retail, residential, and tourism, Primewest launched the Primewest Agricultural Trust No 1 to “provide Investors with an opportunity to acquire high quality agricultural investments leased to strong tenant covenants well positioned to benefit from the anticipated improvement in the Australian agricultural Industry,” according to the firm’s website. 

This newly established trust has already deployed its first capital, paying A$4.8 million (US$3.13 million) for “Pinegatta” in New South Wales. Located in the Riverina region, the 425-hectare (1050-acre) Pinegatta has been growing carrots and potatoes, supplying PepsiCo subsidiary Smith Snack Food Company. With the acquisition, Primewest has entered into a lease agreement with Kagome, the largest tomato producer in Australia.

Only two months later in June 2020, Primewest agreed to acquire GoFARM Asset Management Pty Ltd – the manager of Vitalharvest Freehold Trust in a A$10 million (US$11.27 million) deal. 

Through this deal, Primewest also acquired an 11.8 percent stake in Vitalharvest Freehold Trust (VFT), and a further first right of refusal over another 6.2 percent in the externally managed real estate investment trust (REIT) that currently holds a portfolio of properties valued at $275 million with a market capitalization of approximately $143 million. It is also, notably, the owner of the largest berry and citrus farm aggregation in Australia, which is 100 percent leased to Costa Group, one of the country’s largest horticultural companies.

However…(takes a deep breath), by November of last year global alternative asset manager Macquarie Infrastructure and Real Assets (MIRA) announced that one of its managed agricultural funds had made a cash offer of A$300 million for Australian REIT Vitalharvest Freehold Trust (VTF). 

This offer laid two all-cash options on the table. The first proposal, 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. The second is an 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.

Primewest had intended to use Vitalharvest as a platform for the launch of a Long WALE (Weighted Average Lease Expiry) diversified farmland REIT… but,  MIRA’s offer, which is on pace to be closed in the next few months, changed that.

This new unlisted, and much expanded fund, will be used by Primewest to fill the void that the sale of Vitalharvest created in its strategy. 

“We’ve identified quite a few properties that would have gone into Vitalharvest that will now go into the unlisted fund,” said David Schwartz, managing director, Primewest, who noted that the fund will have a focus on the long-term sale and lease back of intensive crop farming and horticulture operations. 

The fund has already deployed $47 million for acquisitions that include the Kagome deal mentioned earlier, and vegetable farms acquired from the Lamattina family for $42 million, structured as a sale and lease-back deal in June 2020. 

Currently, Rural Funds Group, which has stakes in almonds, cattle, wine grapes, macadamia, and water, is the only listed ag fund in Australia, but the potential listing of Primewest Agricultural Trust No 1 would give investors another channel of access to the ag investment space. 

– 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.