Big in Japan
Many Australian farmland asset managers have been traveling to Japan for several years to try to secure commitments from the country’s vast pool of institutional capital, finding mixed success, with most experiencing a slow-burn process.
One asset manager’s persistence has now paid off: Development Bank of Japan has become the first Japanese LP to commit to Laguna Bay Fund 2, the second flagship agriculture fund currently being raised by Laguna Bay.
‘Natural fit’: Laguna Bay founder and managing director Tim McGavin told Agri Investor that DBJ was attracted to the firm’s investment philosophy – namely, its aim to back high-performing partners to drive quality and efficiency improvements, across a diversified range of sectors and geographies.
McGavin expressed hope that the DBJ investment could attract interest from other Japanese LPs that have been thinking about agriculture.
Halfway there: McGavin declined to comment on the size of DBJ’s commitment to the fund, but he did reveal that Fund 2 is now halfway to its A$750 million target. The only previously publicized LP in the fund is Washington State Investment Board which made a A$350 million commitment. The fund launched in 2022 and has a hard-cap of A$1 billion.
“Fundraising is never easy but we don’t want easy money,” said McGavin. “We want like-minded, educated investors who value relationships – we’re halfway to our target in that respect. The denominator effect is real and we’re seeing illiquid allocations have shrunk off the back of the selloff in liquid markets.”
Read the full story here.
They said it
“Record-setting years have a strange way of raising expectations and risks simultaneously, creating a high bar that even the best economic athletes may have difficulty clearing”
Farmer Mac chief economist Jackson Takach looks ahead at farmers’ prospects of matching the high income yields of 2022.
Farmer Mac says US farmers will fall short of 2022 incomes
Farmer Mac expects strong profitability within the US agricultural sector in the year ahead, albeit less than the “abnormal” income levels reaped in 2022.
Levelling up incomes and costs: A team lead by chief economist Jackson Takach surveys the agronomic, economic, geopolitical and policy developments shaping the outlook for US producers in the latest edition of Farmer Mac’s quarterly overview The Feed. Analysts describe ongoing adjustment to rising land and commodity prices alongside increasing input and capital costs under the subtitle Welcome to the New Level.
Farmer Mac notes that while net-cash farm income is projected to drop 21 percent this year, 2022’s abnormal conditions dictate even that adjusted profit level sits 21 percent above the previous 30-year inflation-adjusted average.
“Levelling-up incomes and costs seem almost ubiquitous in the US rural and agricultural economy,” writes Takach. “Record-setting years have a strange way of raising expectations and risks simultaneously, creating a high bar that even the best economic athletes may have difficulty clearing.”
Positioned to endure: The spring 2023 edition of The Feed includes articles on Brazilian crop conditions, US labor markets, water in the Southwest and food price inflation. Analysts also describe the impact of increasingly distributed and renewable US energy production, and a Russia/Ukraine conflict they said has limited global grain supplies and raised prices.
An overview of the ag lending sector’s health presents agricultural lenders in comparison with Silicon Valley Bank and describes important differences in their strategies before concluding the rural economy’s position is strong.
“The rising and elevated interest rate environment may continue to stretch bank liquidity and cause financial stress, but ag lenders came into 2023 in an excellent position to endure heightened volatility.”
Macquarie and Carlyle list Australian assets
Three pastoral and cropping assets owned by Macquarie Asset Management’s open-end Macquarie Pastoral Fund have been listed for sale.
The New South Wales assets are managed by Paraway Pastoral Company. The three properties comprise a total land area of 40,942 hectares.
Highly sought after assets: Agri Investor understands MAM received several unsolicited offers for the assets over the past 12 months, so Paraway Pastoral Co has decided to sell in order to realize gains for investors and reinvest the proceeds into both existing and new assets.
The Macquarie Pastoral Fund was established in 2007 as a closed-end vehicle and closed on A$700 million ($468 million; €429 million) in 2011, before restructuring in 2015 to become open-end.
A$180 million portfolio: The assets for sale are the 14,326-hectare Borambil Station, located 8km southeast of Condobolin in the Central West region, expected to fetch between A$75 million and A$80 million; Pier Pier Station, comprising the two non-contiguous properties of Pier Pier (covering 20,388 hectares) and Dynong (3,567 hectares), located in the Western Plains near Coonamble and expected to sell in the mid-A$40 million range; and the Burmah Aggregation, which covers 5,456 hectares near Graman in the North West Slopes region, which is expected to receive offers in the A$75 million-A$80 million range.
If sold together, the portfolio could be worth around A$180 million at the top end of this price guidance.
Read the full story here.
Carlyle to cash in on House of Arras
Accolade Wines, the largest private equity-backed wine producer in Australia, is planning to sell its House of Arras brand and is actively considering other asset sales, according to a report in the Australian Financial Review.
The Carlyle Group acquired Accolade Wines, the second-largest wine producer in Australia after the Australian Securities Exchange-listed Treasury Wine Estates (owner of the famous Penfolds brand), for A$1 billion in 2018 from CHAMP Private Equity.
An Accolade Wines spokeswoman told the AFR the firm was considering a sale of the premium sparkling wine brand House of Arras, as well as the Bay of Fires winery and associated vineyards in Tasmania, to allow it “to focus on other parts of the business with a closer strategic alignment to the rest of our portfolio.”
“There is no certainty that the process will result in a divestment or what structure the divestment will take in terms of the assets that may be involved,” she said.
The AFR quoted sources that described Accolade as being in “fire sale” mode, with other brands, vineyards and winery assets up for sale or recently sold. The Carlyle Group did not respond to a request for comment from Agri Investor.
Climate Asset Management, PGIM and Proterra shuffle their packs
Climate Asset Management has appointed Martin Berg as chief executive officer after Christof Kutscher stepped down from the role.
Berg was most recently chief investment officer for CAM’s nature-based carbon strategy, which has a $600 million target and had raised approximately $325 million in December. He will continue to lead the firm’s carbon strategy until a new appointment.
CAM’s new CEO said of his appointment: “At Climate Asset Management we are passionate about the conservation and restoration of nature. It is testimony to the strength, diversity and experience of the team we have assembled, that we were able to announce an initial raise of $650 million across our two natural capital strategies last December.
The HSBC and Pollination JV received a $200 million mandate from Apple in April, which is held in a distinct separate fund. The vehicle will make investments aligned with the firm’s existing nature based carbon strategy and its natural capital strategy, which is led by CIO Ben O’Donnell.
Read the full story here.
Proterra expands into real estate and hires Mark O Decker
Proterra Investment Partners has hired a chief executive from New York Stock Exchange-listed REIT Centerspace to lead an expansion into real estate investment.
The Minneapolis-headquartered food and agribusiness-focused firm has hired Mark O Decker to serve as a founding partner at Proterra Real Estate Partners. Decker is based in Minnesota for the role.
The new business division will be seeded with assets into which Proterra managing partner Rich Gammill and Decker invested into personally.
“Because we’re not there [in real estate] today, we don’t have a bunch of legacy issues and challenges, but we have a lot of experience and knowledge,” said Gammill, who leads Proterra’s credit investment strategy and co-heads its food investments.
“With Mark’s expertise, I think we can offer to investors an interesting take and an opportunity to invest in a space that has some real challenges, but also real opportunities for us to pursue.”
Gammill added that the decision to expand outside of food and ag at this time does not reflect a judgment there are not attractive opportunities in the market. He said the Cargill spinout remains “bullish” on the opportunities available in its traditional investment sector.
Read the full story here.
PGIM elevates Shen to head of agriculture
PGIM Real Estate has promoted Jamie Shen to head of agriculture. Shen moves up from her role as chief investment officer and head of PGIM Real Estate’s agriculture equity business.
The firm has grown its agriculture investment platform’s AUM from $3.5 billion 10 years ago to $10.5 billion today. PGIM said that Shen, who joined the firm in 2017, has been “instrumental” to this growth.
“We have ambitious plans to grow our agriculture platform, and Jamie’s appointment is central to them,” said Bryan McDonnell, head of US debt and agriculture and chair of global debt.
“Agriculture assets tend to have stable, long-term income characteristics and can act as a strong inflation hedge. These qualities are fueling strong demand for what remains a nascent asset class, but accessing the underlying assets can be challenging.”
Prime Roots, a California-based maker of plant-based meats, raised $30 million in a Series B funding round led by True Ventures, and was joined by Pangaea Ventures, Prosus Ventures, Solasta Ventures and Top Tier Capital.
GoodLeaf Farms, a Canadian vertical-farming company backed by McCain Foods, secured debt financing worth C$78 million from Canadian bank CIBC and Farm Credit Canada.
Ecorobotix, a Swiss manufacturer of an AI powered plant-by-plant recognition and precision spraying system, raised $52 million in funding. The round was led by AQTON Private Equity and Cibus Capital, with additional investments from Swisscanto Growth Fund I, Yara Growth Ventures, Flexstone Partners as well as existing investors.
Resurrect Bio, a British agricultural biotechnology startup, raised £1.61 million ($2 million; €1.85 million) in a funding round led by SynBioVen, with participation from UKI2S, AgFunder and SHAKE Climate Change Accelerator.
Also in the news…
LACERA takes $46m secondary stake in TIAA farmland fund
The acquisition from an unidentified seller adds to more than $500 million invested by the pension across Nuveen-managed vehicles that include properties in the US, Australia, Brazil, Chile and New Zealand (Agri Investor).
Nestlé and PAI Partners’ JV tries new recipe for ‘unloved’ pizza segment
‘Frozen pizza is an attractive category,’ said PAI’s Frédéric Stévenin. ‘It’s a cheap way for people to get access to a quality meal’ (PE Hub Europe).
Impact will become part of all investing
The cast of characters at this year’s Impact Investor Global Summit tells a positive story about how institutional investors are thinking about impact (New Private Markets).
Australia to resume timber exports to China
China’s ambassador to Canberra has confirmed his country will lift its ban on Australian timber imports, in another sign trade ties with Australia are slowly normalising (ABC).
Australian Beef Seasonal Outlook 2023
A Return to ‘Normal’ Is a Good Time To Plan for the Future (Rabobank).
Today’s letter was prepared by Binyamin Ali, Chris Janiec and Daniel Kemp.