News & Analysis

Laguna Bay clinches debut deal for Agri Fund I

The Australian fund manager, fresh from a A$280m first close for its co-mingled fund, has bought Banongill Station, a 17,000 acre property in Victoria’s Western District.

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Eating cow in paddock.

Australian agri-focused fund manager Laguna Bay Pastoral has clinched its first deal from its Laguna Bay Agricultural Fund I with the acquisition of a 17,000 acre property in Victoria’s Western District for an undisclosed amount.

Banongill Station, which the fund manager called “one of the Western District’s flagship cropping and livestock properties”, was bought from private owners Steward and Sue Gull, with real estate services firm Colliers International facilitating the off-market sale.

The property “was purchased on a walk-in, walk-out basis” and includes 30,000 sheep, 2,400 Angus cattle, a full complement of plant and equipment and 3,700 acres of winter cereal cropping. Over the last decade, the Gulls have made significant additions to the property, including the installation of laneways, renewing the stockyard facilities, upgrading water systems and pasture, building dams and installing silos, bores and outbuildings, Laguna Bay said in a statement.

Laguna Bay chief executive Tim McGavin told Agri Investor there was plenty of upside to the deal, with scope for converting more of the land to cropping and via innovative cropping systems and intensive pasture management. He added these changes would not be capex intensive and that he expected the property to generate a cash yield of some 5 percent plus capital gains.

While McGavin would not disclose Banongill’s acquisition price, he pointed out that the fund manager planned to do between eight and 12 acquisitions from its first co-mingled fund, which reached a A$280 million ($214 million; €190 million) first close in early June. The vehicle is targeting a A$750 million final close, with a A$1 billion hard-cap, in the first half of 2017. He added that Laguna Bay could use up to 35 percent leverage on the assets it acquires, without disclosing whether it had done so for Banongill.

The sale of Banongill has been approved by the Foreign Investment Review Board.

In addition to the 10-year Laguna Bay Agricultural Fund I – which is backed by domestic and overseas investors, including North American pensions and endowments – the firm manages what McGavin previously called a A$130 million “direct deal, discretionary vehicle”, investing in Australian permanent crops.