Australian asset manager Kilter Rural has held a first close on A$15 million ($10 million; €9 million) for its open-end Kilter Agriculture Fund, a vehicle with a long-term fundraising target of A$500 million.
Agri Investor understands the close was held at the end of May as planned following the fund’s launch. Kilter Rural expects to have raised approximately A$20 million by the end of June.
The firm also has a strong fundraising pipeline with a view to completing its planned initial fundraise of A$65 million by the end of September 2023.
A spokesman for Kilter Rural confirmed that the capital raised during the first close has been used to purchase the fund’s first asset, part of an aggregation of assets and water entitlements that together are valued at approximately A$65 million – the acquisition will be funded by the fund’s total initial raise.
The aggregation is located in the Southern Riverina region of New South Wales, covering approximately 7,000 ha across three stations. It also has access to 3,500ML of groundwater.
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 Rural 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 to 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.
At the time of the fund’s launch, Kilter Rural CEO Cullen Gunn told Agri Investor: “We have been very conservative around the carbon and biodiversity base case, but we definitely think there is an upside potential to that [in our financial return]. We wanted to make this an open-end fund so that we can influence as much Australian land as possible over a long period of time.”
Kilter Rural is 61.49 percent-owned by Australian Securities Exchange-listed fund manager Regal Partners and has around A$270 million in assets under management.