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Aware Super to sell Kilter Rural-managed farmland assets

The A$150bn Aware Super will sell the Lake Boga portfolio, a collection of assets previously owned by VicSuper pre-merger and managed by Kilter Rural.

Aware Super is selling a portfolio of mixed farming assets and water entitlements in the Australian state of Victoria as it seeks to capitalize on strong farmland prices and redeploy capital into other private markets investments.

The superannuation fund, formed from mergers between First State Super, VicSuper and WA Super in 2020, is Australia’s second-largest fund with approximately A$150 billion ($111 billion; €94 billion) in assets under management.

The assets, known as the Lake Boga agribusiness portfolio, comprise 38 farms. They include one of Australia’s largest field tomato enterprises; a commercial Queen Garnet plum orchard; irrigated and certified organic land for producing cereals and tomatoes; a sheep grazing enterprise; and biodiversity zones that Aware Super said present “future carbon offset opportunities.”

The portfolio includes 9,004 ha of organic and conventional horticulture and broadacre cropping land, with an irrigated footprint of 3,600 ha and water entitlements of 20,000 ML.

The portfolio comprises all the farmland assets managed by Kilter Rural on behalf of what was previously VicSuper, which Aware Super inherited in the 2020 merger. Aware Super will retain a portion of the water entitlements it gained ownership of under the merger, as well as timberland assets worth around A$200 million.

Mark Hector, senior portfolio manager, infrastructure and real assets at Aware Super, told Agri Investor that he expects the portfolio to fetch upwards of A$150 million.

He said Aware Super’s usual agriculture investment strategy is to pursue “lower operational risk” investments, whereas the assets in the Lake Boga portfolio come with slightly higher levels of operational risk and do not fit with that mandate.

“It’s possible that we might sell it to a single buyer or multiple buyers, either domestic or international,” Hector said. “VicSuper had owned these assets for around 15 years and had always earmarked them for sale at a certain point once they had been transformed to a certain stage – and so it seems about the right time to continue with that mandate and divest these assets now.”

Hector said the strong growth in farmland prices would be a “nice little bonus”, allowing Aware Super to secure a “good profit” that could be redeployed into other private markets investments.

He added that the sale did not represent any shift in Aware Super’s strategy in agriculture.

“We’ve just gone through a triennial sector approval process with our investment committee and we did get approval to continue with the broad agriculture and water portfolio [alongside the traditional infrastructure portfolio],” Hector said.

“But as we also do within the infrastructure portfolio, we do sometimes strategically sell certain assets and recycle that capital into other value-add opportunities. This is more around the edges of the broader portfolio, so we’re looking forward to continue building on the broader ag portfolio and continue looking at some other opportunities predominantly within Australia.

“One of the challenges is our scale and size – we need to find some of those larger low-risk ag opportunities and they don’t come up that frequently.”

Hector said ag investments outside Australia were “possible” as part of Aware Super’s corporate plan, under which the fund will consider opening its first offices offshore in Europe and North America “in the near term.” Overseas investments have not been a strong focus to date, he added.

Kilter Rural CEO Cullen Gunn said in a statement: “Over multiple years Kilter Rural, together with VicSuper and then Aware Super has carefully put together and invested heavily in the transformation, redevelopment and regeneration of the farm and ecosystem landscape to implement a proven soil and regeneration model.

”The investment made in the portfolio to date, coupled with the quality management team, has allowed us to attract sophisticated, global customers and established long-term offtake agreements for our products, which in turn, has created a robust platform for not only substantial and sustainable production, but also long-term business viability.”

PwC and Land Agribusiness Water Development have been appointed as lead financial advisers and will conduct the sale process.

As well as the Lake Boga portfolio, Aware Super’s ag investments include a portfolio of water rights managed by Argyle Capital Partners and a portfolio of almond orchards leased to ASX-listed Select Harvests. It also owns chicken broiler business ProTen, which it acquired in 2018 for approximately A$350 million through a special-purpose vehicle called FSS Agriculture, which it wholly owns and which is managed by Sydney private equity firm Roc Partners.

It expanded ProTen in 2019 through the acquisition of 17 broiler chicken farms from Rural Funds Group for A$72 million. Aware Super also holds the 40-year concession to run Victoria’s land titles business alongside an interest in New South Wales’ land registry.

Aware Super associate portfolio manager Brent Snow last year described agriculture as a “shining light” in its real assets portfolio during the pandemic.

The fund includes agriculture investments within its infrastructure and real assets portfolio, which was around A$9.5 billion in size earlier this year.