Gunn Agri Partners to use climate data to target properties for A$350m cropland fund

The Sydney-based manager is leaning on climate-change research to pick properties and is ‘confident’ returns will beat more passive strategies.

Gunn Agri Partners has launched fundraising for its second fund, a vehicle that will target cropping properties in areas likely to be less affected by climate change.

The Sydney-headquartered manager launched the Sustainable Cropland Transformation Strategy to investors late last year and is targeting between A$250 million ($179 million; €157 million) and A$350 million with a first close expected in mid-2019.

The fund will last for an initial term of five years, with options for investors to extend three more times on five-year terms, up to a combined total of 20 years. “This enables investors to have exposure to a shorter period of higher returns and then an exit, or to roll on their investment in a portfolio they know and understand over a longer term,” Gunn Agri Partners managing partner Bradley Wheaton told Agri Investor.

Wheaton said the strategy would generate returns from ownership of cropland and by transforming pasture land into cropland that will produce grains, oilseeds and pulses for the human and animal feed markets.

In what it says is a point of difference, the firm is using proprietary research to target areas where there is a lower risk of negative impacts from climate change. It will also pursue a property aggregation strategy that will allow low-productivity areas of properties to be designated as conservation areas, offering both financial and sustainability benchmarking benefits, Wheaton said.

“In addition to agronomic and climatic selection criteria we’re using data and research that indicate areas where there may be a lower risk of climate change impacts to build out a pipeline of assets,” he added.

Gunn Agri is targeting that 50 percent or more of the allocated capital will be used to purchase existing arable cropland, up to 45 percent will be used to purchase pasture land that will be transformed into cropland, and around 5-10 percent will be land transformed into conservation areas.

The strategy will seek to establish a diversified portfolio of properties, with southern, central and northern hubs in eastern Australia and potential additional hubs in southern Western Australia where properties are in areas of reliable winter rainfall.

Wheaton would not be drawn on specific target returns, but was bullish about the fund’s prospects. “Given the uplift in value we expect to get from the change in land use and productivity improvements, we’re targeting returns above that of passive strategies. We have a track record in delivering on this approach and are confident the higher returns are there,” he said.

Wheaton also declined to give a current fundraising figure, but said: “We’ve had traction with LPs in Europe and North America particularly, who are interested in our ability to benchmark sustainability performance and provide measurable data on it, especially around things like soil carbon and biodiversity outcomes, alongside the usual agricultural and financial performance markers.”

The strategy will see conservation farming practices adopted on the properties it acquires to improve use of rainfall, improve soil fertility, and increase yields overall. Gunn Agri will also look to optimize equipment operations and use new technology to improve efficiency.

After this fundraising is complete, Gunn Agri will turn its attention to the third plank of its three-pronged strategy: permanent crops.

“The intention is absolutely to keep building out the Gunn Agri platform after the Sustainable Cropland Transformation Strategy with a permanent crop and water opportunity currently being progressed,” Wheaton added.

Gunn Agri’s Cattle Fund reached A$200 million in assets under management with the October 2018 acquisition of the 484,000-hectare Abingdon Downs property in Queensland, with the fund nearing full deployment at that time. It held a final close in April 2018.