Institutional investor appetite in Australian agriculture is ‘very firm at the moment,’ according to market observers.
One of them is Danny Thomas, regional director at CBRE. “Assets that have a present use for irrigated cotton and other irrigated crops, as well as the capacity to grow permanent plantings, particularly almonds, but also other edible nuts, citrus and avocados, are very appealing,” he told Agri Investor. “That’s what all the institutions are looking for.”
A case in point is Gundaline Station, which covers almost 15,000 hectares of rural land fronting the Murrumbidgee River in New South Wales. CBRE and Kidder Williams were recently selected to oversee the sale of the property.
“We ran a process earlier this year for a smaller shareholding in Gundaline and we received a number of unsolicited bids for the entire property,” Thomas said. “That’s what drove the vendor to place the whole property up for sale now.”
Initially acquired in 2014 by Southern Agricultural Resources – an investment and farm management company headquartered in London but focused exclusively on Australia – and a consortium of institutional investors, the property sold for a reported A$25 million ($19.6 million; €16.7 million).
Three years later, the sale of Gundaline Station is expected to bring in more than A$65 million, according to Thomas. Water is a major component in justifying the steep increase in value.
“Back then, groundwater traded at about A$1,000 per megaliter. Today, groundwater trades around A$2,200 per megaliter,” he explained. In addition, Gundaline’s current owners have invested heavily in the property, more than doubling the land area under irrigation – 3,500 ha of irrigated land were added to the existing 3,000 ha – and completely refurbished the water storage and irrigation infrastructure that already existed.
Despite the capital invested, Southern Ag is open to selling only the land or only the water rights, as well as offering investors the option to buy on a walk-in/walk-out basis or to acquire 100 percent of shares in Gundaline Proprietary, the company that owns the property.
“If someone were to buy the land alone, they could just go back into the water market and buy or lease water or buy it annually in the spot market, rather than having, let’s say, A$30 million or A$35 million of capital tied up in the water resource,” Thomas remarked. “We have such a dynamic water market here that people can buy just one component or the other, if they want to.”
According to him, there have been 10 or more North American and European institutional investors who are considering investing in the Murrumbidgee Valley, part of the southern Riverina Region, where Gundaline is located. With its climate of hot summers, cool evenings and mild winters, the Riverina, commonly referred to as Australia’s ‘food bowl,’ is well-suited to the production of high-yielding summer crops, such as cotton, maize and sorghum as well as semi-irrigated winter crops, including wheat, barley, canola and pulses. The region’s climatic conditions are also suited to permanent plantings.
There is already an Australian institutional investor developing one of the world’s largest almond orchards on the nearby Kerabury property. Kerabury, which was principally a cotton-growing property, was acquired by Rural Funds Management, the largest listed agricultural property fund in Australia, in October 2015. The property area totals 7,756 ha, 2,500 of which have been leased to Chinese agribusiness Olam for almond orchards.
In June, AlmondCo, one of Australia’s largest almond processors, opened a A$25 million shelling and hulling plant in the region. Other agricultural enterprises in the area include three cotton gins and several grain storage facilities.
“The reason they’re drawn to this part of Australia is we’ve got a really good titling system, which in my opinion is superior to the Central Valley in California,” Thomas commented. “The groundwater resource in Australia is highly regulated, a bit like a property title. That’s why in Australia land and water can sell separately.”