AAM Investment Group has returned to market for a further A$70 million ($52 million; €45 million) for its AAM Diversified Agriculture Fund to invest in new assets.
The funds will contribute to the acquisition of two assets. The first is the 34,005-hectare Mount Harden aggregation in central western Queensland, which will be used to run beef cattle and sheep.
The aggregation comprises three properties that are located close to AAM’s assets in the region, which include the Terrick Terrick Station, Moorlands, Thornleigh and Wooroolah properties.
As part of that deal, the seller of Mount Harden, businessman Tony Haggarty, has committed to invest “significant funds” in the ADAF. The size of the investment was not disclosed.
Harden explained his thinking behind backing the fund in a statement, which said: “AAM is looking at the agriculture sector in a complete way. Rather than singling out single industries, they are developing an agricultural investment mix covering multiple commodities and region, and complementing this with a commitment to invest in people, innovation and sustainability to achieve management excellence.
“I believe this is a unique approach which can reduce much of the risk that has typically been associated with the agriculture sector, and which will achieve returns and capital growth beyond passive increases in land values or market cycles. There is significant merit in this strategy.”
As well as the Mount Harden aggregation, the ADAF will also acquire two softwood timber businesses: NF McDonnell & Sons, a business that owns and operates a sawmill near Mount Gambier in South Australia with the capacity to process up to 400,000 tonnes of log resource per year; and Perma-Log Timbers, a Queensland firm that supplies the piling, fencing, horticultural and landscaping markets via a network of timber wholesalers.
The acquisitions add to AAM’s existing softwood processing facility in Bathurst, New South Wales, which has the capacity to process up to 200,000 tonnes of softwood each year.
“AAM sees enormous value and potential in sustainable softwood as a material of the future, given its ability to contribute to key environmental outcomes, which has led to a substantial increase in its use over the last 10 years,” AAM managing director Garry Edwards said.
“It now plays an integral role in the broader AAM strategy to deliver diversity by investing in uncorrelated, income-generating primary industries. In this case, AAM has purposefully selected the small log processing, non-structural framing segment of the softwood processing industry to ensure a market exposure which is not predominantly reliant on the variable commodity-based framing sector.”
ADAF was established in January 2020 and is AAM’s flagship fund, targeting a total return of at least 12 percent per year. Since inception it has grown to hold more than A$250 million of assets across 11 sites in four Australian states, covering the poultry, grain, cotton, beef, lamb and softwood sectors.
AAM said in a statement that the ADAF achieved a total return of 18.6 percent in the most recent financial year.
The firm held a first close for the ADAF in December 2019 on an initial A$60 million, topping it up in mid-2020 to reach A$100 million before a further raise later in the year.
As well as its properties in Queensland, the ADAF owns a 44.1 percent stake in AAM’s existing Southern Cross Poultry Fund and 100 percent of the Sunshine Farms Aggregation, a portfolio of three mixed farming properties in western NSW.