Packhorse Pastoral Co lists portfolio for sale following death of Tom Strachan

Chair Tim Samway tells Agri Investor the fund manager was ‘unable to continue’ in its previous form, with all options on the table for how to proceed.

Packhorse Pastoral Company has listed its portfolio of three Australian cattle stations for sale following the death of co-founder and executive director Tom Strachan earlier in 2022.

The firm acquired the three properties over the last three years, as part of a strategy to eventually grow its assets under management to as much as A$1.5 billion ($0.96 billion; €0.98 billion).

The portfolio spans a total of 27,124 hectares, comprising the 8,344ha Stuart’s Creek Station near Roma in Queensland, the 10,029ha Moolan Downs Station, also near Roma, and the 8,371ha Ottley Station, near Inverell in New South Wales.

All three properties are currently being used for cattle grazing under a ‘grass motel’ agistment agreement with a large Australian cattle producer. Alongside PPC, the fund that owned the assets, sits Packhorse Investments, the investment management company.

Speaking to Agri Investor, Packhorse Pastoral Company chairman Tim Samway said that, following the death of Strachan in August this year, the fund manager “was really unable to continue,” and that PPC had taken on some of the functions that were previously being carried out by the investment manager – including fundraising itself.

“This has always been a focus on getting scale – the business currently needs to be larger to justify that, so we were left with a decision: get bigger, or get out. So we’ve charged CBRE with finding a solution, which could entail someone coming in with a big chunk of capital to add to the existing capital, or making an offer for the shares in the fund, or indeed, buying the properties,” he said.

“We’re not predisposed to any option. We think that local landholders could be very keen to participate in what we’re doing. We’ve got all the people, expertise and intellectual property in place, so it’s a pretty exciting opportunity.”

All options are on the table, whether it be a sale of the portfolio in one line, a break-up to local buyers, or even a potential cash injection from an outside third party that could see Packhorse continue to function alongside a new equity partner. Should all the assets be sold, a decision about whether to return cash to investors and wind up the fund would rest solely in the hands of the fund’s unitholders, Samway said.

“We really are very keen on regenerative farming and the opportunity here, and we would be keen to see it to go to those who are the keenest to keep that going, and that will probably be recognized in the price,” he said.

The firm has already begun carbon farming on its properties and the currently registered schemes are set to produce approximately 28,000 Australian Carbon Credit Units per year within five years. This is estimated to provide additional potential revenue of A$840,000-A$1.12 million per year to purchasers under current ACCU prices.

‘Tinged with sadness’

The firm launched with a splash in mid-2021 with a promise of creating a large-scale investment vehicle offering exposure to “Australian land for Australian investors.”

Samway and Strachan together believed their strategy would offer a long-term return opportunity for investors with significant potential upside from the generation of carbon credits. It hoped to eventually raise A$1.5 billion over five years.

But Strachan’s tragic death has derailed the firm’s plans, with Samway acknowledging that the sale process launched now is “tinged with sadness.”

“Tom Strachan was a big personality with lots of positivity and a real desire to change the way that land was managed in Australia. [His death is] absolutely devastating and I don’t think many of us will recover from that for a long time as he was more than just a colleague, he was a close mate. And it’s [also] sad because I felt we were on the verge of great success,” Samway says.

“Had we been able to continue in the format we had, we would have got to scale and led the charge in giving Australian landholders an extra arrow to their quiver in terms of earning income through soil organic carbon by driving the cost down and improving the technology. I’m still hopeful we can do that through this process, but at the end of the day I’m still committed to it and will continue pushing down this path, either with Packhorse or with some other entity thereafter.

“I did this because I actually believed in it and I think I owe it to Tom’s legacy to keep pushing hard.”

Packhorse has retained CBRE’s David Goodfellow and James Auty to oversee the sale process.

In a statement, Goodfellow said: “This is a strategic portfolio of properties with very responsible and experienced management in place, which is designed to maximize the use of the expansive grasslands in a reliable rainfall area while capitalizing on numerous opportunities for improved carbon sequestration.

“Packhorse is a recognized leader in carbon farming initiatives and the environmental initiatives at these stations are well ahead of industry norms, with clearly established carbon baselines and management practices.”

Expressions of interest in the properties are invited by December 15.