Field Notes: Folium Capital targets $500m for new fund; private debt beats a retreat; Kilter Rural eyes May first close for new open-end fund and carbon farming deals heat up in Australia

Folium Capital targets $500 million for new fund; private debt beats a retreat; Kilter Rural eyes May first close for new open-end fund and carbon farming deals heat up in Australia. Welcome to Field Notes, the start-of-the-week briefing for our valued subscribers only.

First look

Folium targets $500m for ag and timber fund
Folium Capital has launched a $500 million Regenerative Natural Resources Fund that will invest in global timberland and farmland assets.

The vehicle represents the first time the firm has combined the two asset classes into one fund and has gone a step further by adding a carbon sequestration element.

Agri and timber – common bedfellows: The forestry element of the strategy will seek to tap into the rapidly growing demand for the sustainable building materials and products that can be generated from timber, as well as the flight to higher quality carbon removals credits generated from afforestation.

The agriculture part of the strategy will invest in row and permanent crops in OECD countries, as it eyes “the growing global demand for healthy, nutritious plant foods,” the firm said in a statement. Both asset types are also widely viewed as a hedge against inflation.

Nearly 20-years in the game: “After investing together in natural resources for more than 18 years, we are proud to launch our Regenerative Natural Resources Fund and offer investors the opportunity to diversify, hedge inflation, and generate return through the assets our team knows best,” said Andy Wiltshire, managing partner of Folium Capital.

“The fund reflects our high conviction that forests and agriculture will continue to provide stable, long-term value as our changing world pursues a more sustainable, healthier future. The fund’s optionality – across forests, agriculture, and carbon – is expected to enhance liquidity with diverse revenue streams and investment maturities.”

They said it

“Within the industry, we have seen some sale processes that have slowed down or stopped because a lot of the private debt providers have pulled back”

Midwest Growth Partners managing partner and co-founder John Mickelson says the retreat from some private debt players is impacting mid-market deals.


‘Private debt has pulled back’
Some mid-market agriculture deals are already feeling the effects from the retreat of private credit providers, Midwest Growth Partners managing partner and co-founder John Mickelson told Agri Investor.

While many of the larger private debt managers are expected to benefit from the bank pullback following the failures of Silicon Valley Bank and Signature Bank, smaller private debt providers more likely to service the lower mid-market segment are likely to be hardest hit by the US Federal Reserve’s interest rate increases, as reported by affiliate title Private Debt Investor.

“Within the industry, we have seen some sale processes that have slowed down or stopped because a lot of the private debt providers have pulled back,” Mickelson said. “And so not only has the interest cost gone up for potential acquirers, but then the availability of this credit that was out there for a lot of the bigger deals has gone away as well.”

Private Debt Investor reports: “While many private debt managers should benefit from the bank pullback – especially those with fresh capital – they won’t be immune to the increased scrutiny, nor will they escape banks’ growing skittishness about extending credit to asset managers themselves.

“The well-heeled titans, including the top 10 private debt managers who control nearly one-third of the $1.2 trillion direct lending market, and the nimbler veterans who have been through a credit cycle or two, are well positioned to gain from the continued market turbulence, and to take share from banks and other competitors. Their smaller, weaker and more inexperienced brethren, however, could be in for a rather rough ride.”

Full article (registration required) by Robin Blumenthal, John Bakie and Christopher Faille.

Fund watch

Kilter eyes first close for A$500m fund
Kilter Rural is targeting a first close this month for its new open-end Kilter Agriculture Fund, which has a long-term capital raising target of A$500 million.

The fund will invest in mixed farmland assets as well as water, with up to around 25 percent of the fund deployed into the latter. A portion of that will be invested into the long-standing open-end Kilter Water Fund.

The fund has a A$65 million seed asset under contract – a NSW mixed farmland aggregation covering 7,000 hectares across three stations with access to 3,500 mega-liters of groundwater.

The upcoming revaluation cycle in June is expected to provide an immediate uplift for investors who get in during the first fundraise. Kilter is targeting a 30-40 percent increase in native forest cover to improve biodiversity and potentially generate additional financial return from offsets as well.

Carbon and biodiversity returns: The vehicle is targeting annual returns of 10-12 percent, with a yield of 4-5 percent and capital growth of 6-7 percent. Kilter expects a portion of the income to come from the generation of carbon credits but has launched with a conservative base case around carbon prices.

The firm’s base case forecasts a yield of 0.7 percent from carbon and biodiversity, compared with 4 percent from cropping and grazing income and 0.9 percent from water income. It is also targeting land capital growth of 5.4 percent and water capital growth of 2.1 percent.

After a management fee of 1.25 percent and operating and interest expenses of 1.85 percent are subtracted, a base case of 10 percent returns is achieved.

Full article.


Farming for carbon
A couple of asset purchases in Australia show just how much carbon reduction potential is playing into the minds of buyers.

First, ASX-listed Fortescue Metals Group purchased the mammoth 1 million-hectare Rawlinna Station in Western Australia. Fortescue is the iron ore miner led by billionaire Andrew Forrest, who also owns farmland via his Tattarang family office – which you might think would be the more natural buyer of a sheep station.

However, reports in Australian media indicate that Fortescue is considering using part of the property for renewable energy generation.

Sequestration: In a more direct example of backing soil carbon sequestration potential, oil giant BP’s local investment arm Low Carbon Australia has purchased Daisy Downs for a reported A$23 million. Daisy Downs is a cropping asset, but Ray White Rural agent Simon Wilding told Grain Central its non-arable area could be suitable for carbon farming.

Agtech fundraising

CarbonChain, an AI-powered carbon accounting platform, raised $10 million in a Series A co-led by Union Square Ventures and Voyager Ventures.

CropX Technologies, a digital agronomic farm management system provider, raised a $30 million Series C financing round led by Aliaxis SA with participation from Edaphon, Finistere Ventures, NTT Finance Corporation, OurCrowd, Reinke Irrigation, Yair Shamir and Victrix.

Hero Bread, a “better-for-you” bread and baked goods producer, has completed a Series B – the size of the raise was not disclosed – which brings the company’s total fundraising to $47.5 million. Cleveland Avenue, DNS Capital, Union Grove Venture Partners, Composite Ventures and GreatPoint Ventures participated., a German fungi protein startup, raised €3.2 million in seed funding. Earlybird led the round and was joined by Clear Current Capital, Grey Silo Ventures and Good Seed Ventures.

Athian, an Indiana-based livestock carbon credit marketplace, raised an undisclosed amount in funding. The round was led by DSM Venturing, and California Dairies.

British biotechnology company It’s Fresh! raised £6.7 million ($8.5 million; €7.7 million) in a Series B round led by BGF, Zintinus and Praesidium. The company’s products help extend the shelf life of fresh produce.

TastyUrban, a German startup that partners with international chefs to develop innovative food brands raised a €1.5m seed funding round.

Also in the news…

Turning whales into carbon-based assets won’t be easy
We have allowed the natural capital on which we all depend to be depreciated off the books (FT).

Indonesia rebuffs Australia, turns to Brazil for live cattle imports
Australia’s monopoly on live cattle exports to Indonesia is coming to an end, with Brazil expected to get the green light in coming months (AFR).

Nestlé opens Institute of Agricultural Sciences to advance sustainable food systems
The Institute of Agricultural Sciences will support the development of sustainable food systems by delivering science-based solutions in agriculture (Food Bev).

Promising lab results help Australia’s sheep industry edge closer to flystrike vaccine
The Australian wool industry has edged closer to a vaccine for blowfly strike in sheep, with prototype antibodies making larvae small and weak in laboratory tests (ABC).

Today’s letter was prepared by Binyamin Ali, Chris Janiec and Daniel Kemp.