The firm confirmed to Agri Investor that A$32 million of the capital raised will be used to acquire the fund’s seed asset – the 8,360-ha aggregation Stuart’s Creek in Queensland – with the rest providing dry powder to go after further acquisitions.
Packhorse has ambitions to raise as much as A$1.5 billion in total for the open-ended fund over the next five years. The firm remains on target to hit A$300 million by the middle of 2022, deploying that initial raise by April 2023 before deploying up to A$500 million in total by mid-2025 following further raises.
Packhorse Pastoral Company chairman Tim Samway, who also chairs Australian equities fund manager Hyperion Asset Management, co-founded the firm with chief investment officer Tom Strachan, founder of labor hire company AWX Group. Packhorse already manages a portfolio of properties for Capital Airport Group, owned by Australian businessman Terry Snow and the operator of Canberra Airport. Capital Airport Group is a cornerstone investor in the firm’s new pooled fund, making a commitment of an undisclosed size.
Alongside Capital Airport Group are 41 other investors, mostly high-net-worth individuals and family offices, all from Australia. There are currently no institutional investors on board, but many have expressed interest, Samway told Agri Investor, with the firm expecting commitments in future rounds.
“We’ve got a nice spread. With institutions, there are just too many processes to go through to turn something like this around in six weeks [since the launch] – it takes longer than that for major superfunds to turn this around,” he said.
CIO Strachan said that interest had been strong from domestic players in Australia, with appetite for agricultural investments much higher than as recently as five years ago.
“The institutional investors have come an absolute mile along the track when looking at [agriculture]. We’ll see a multitude of those larger family offices, too, as they see the data we’re collecting around carbon and [improving] yields,” he said, emphasizing that the firm already has a track record in managing properties outside of the new fund.
Strachan said that Packhorse’s business model, which will see it not own cattle but rather sign three-to-five-year offtake agreements with cattle producers to provide grazing land, was also proving attractive to large investors looking for defensive characteristics.
The firm also said it will “vigorously” employ regenerative agriculture practices, with a separate plan for each property and aggregation it acquires. Improving soil carbon levels will be a major goal, with measures on this front to start immediately on Stuart’s Creek.
Packhorse has signed a memorandum of understanding with Carbon Link, an independent provider of soil carbon measurement and management services, to monitor progress.
“We don’t own the cattle – we’re a grass motel. We provide the value proposition to the supply chain, allowing them to own the cattle while we forgo some of the margin we could be getting,” Strachan said. “It really turns the asset class into a really defensive asset class, with strong growth and capital preservation that is non-correlated. The business model allows us to put the environment first as well as protecting the asset, meaning we can manage through all sorts of weather conditions to either protect the asset or maximize yields when the weather allows.”
Strachan also reiterated earlier comments made by Samway to Agri Investor in June that Packhorse intends for the fund to only target Australian investors.
“I think the concept that this is Australian soil for Australian investors is really important. We could fill this bucket incredibly quickly if we [targeted] international money. But we want to stay Australian – this is an unbelievable opportunity for Australians to have a piece of the thing that will deliver high-value protein to them, as well as the rest of the world,” he said.
Samway said that further capital raises would be conducted to fund asset purchases as they come to fruition, with further movement expected in the next few months on acquisitions. The firm will return to the market immediately to continue raising capital.
Of the initial A$300 million to be raised in the fund’s first year, around A$70 million will be debt, with Samway confirming that Packhorse will partner with National Australia Bank to provide the debt facility.