The return of Chinese money to Australian farms?

The acquisition of Gundaline by a Chinese textiles firm is a sign that Chinese investors are looking Down Under again, with more ‘big deals’ possible in the next 18 months.

The sale of one of Australia’s largest cotton properties, Gundaline, for an eye-catching A$120 million ($85 million; €78 million) would make headlines whoever the buyer was.

But the fact it was purchased by Chinese textile firm Zhejiang Sunrise Garment Group is noteworthy, given the stark retreat of Chinese investors from Australian agriculture that resulted in zero investment in 2019.

It may be premature to declare this the start of a new wave of Chinese capital entering the market, but it should be recognized for what it is: a sign that tensions between the governments of Australia and China have cooled sufficiently such that it has become acceptable again to invest Down Under.

Gundaline itself is a property with a long history of private equity ownership. The seller in this transaction was Dutch-based fund Optifarm, a platform financed by high-net-worth European investors. Optifarm bought the asset in 2018 from Southern Agricultural Resources, a platform backed by now-defunct fund manager Blue Sky Alternative Investments, Dutch pension ABP and Australian asset manager Duxton Capital.

Southern Ag previously bought the property in 2014 for around A$25 million from Twynam Group, what was at the time one of Australia’s largest cotton producers. Twynam was backed by Australian agriculture tycoon John Kahlbetzer, eventually selling down all of its large-scale irrigated and dryland cropping properties in Australia by 2018.

Zhejiang Sunrise Garment Group, listed on the Shanghai Stock Exchange, is the latest in that long list of owners and is clearly in a different category from what has come before – not backed by a wealthy individual or institutional investors, it is instead a listed textiles enterprise looking to shore up security of supply.

Selling agent Danny Thomas, director at LAWD, told The Weekly Times last week that improvements in diplomatic relations between Australia and China had given investors confidence to re-engage. “We can expect some big deals over the next 18 months,” he said.

Market sources have told Agri Investor repeatedly in recent months that they expect high farmland values in Australia to remain, supported by a relatively low volume of assets coming to market and another strong harvest in many parts of the country. But growth may ease somewhat, given interest rates have risen and seasonal conditions have been less than favorable at times (with the prospect of El Niño now looming for the coming 2023-24 summer).

Local family and corporate buyers have proven to be strong contenders in many auctions recently, too, fighting off potential institutional interest in many cases.

The return of Chinese capital, even if modest at first, will present another interesting dynamic in the market for 2023 – and one that vendors will no doubt welcome, especially as many look to cash in during a seller’s market.