October 19, 2021

By Lynda Kiernan-Stone, Global AgInvesting Media

As the Australian ag sector continues to experience positive growing and market conditions, fund manager AAM has executed multiple deals totaling A$100 million, including the acquisition of the Mount Harden beef aggregation for A$24.8 million (US$18.6 million) and two timber businesses – N.F. McDonnell & Sons and Perma-Log Timber – for approximately A$75 million (US$56 million). 

These acquisitions raise the value of AAM’s Diversified Agricultural Fund (ADAF) by A$100 million, and its total capital commitments within the country’s agriculture sector to A$600 million (US$450 million).

The acquisition of Mount Harden will also allow AAM to retain a core, high-quality beef cattle breeding herd that includes 8,000 head of Georgina Pastoral Company Ultrablack and composite herd acquired in June 2020, while also building a large-scale sheep flock to compliment its Sunshine Farms aggregation in central-west New South Wales.

AAM Investment Group officially launched its flagship ADAF fund in January 2020, making it the fourth agricultural fund for the Brisbane-based investor, which at the time already managed: 

~ Southern Cross Poultry Fund: a holder of a large-scale poultry farming infrastructure facility in South Australia producing more than 20 million chickens per year, of which ADAF owns a 44.1 percent stake.

~ Pastoral Development Trust: holder of the 178,870-hectare Legune Station, a large-scale cattle station in the Northern Territory with carrying capacity of 33,034 head, a 35,100 megaliter dam (the largest privately-held dam in the country), and access to an additional 106,400 hectares of licensed productive land.

~And the Sustainable Softwood Trust: holder of a stand-alone softwood saw milling facility in New South Wales processing 92,000m3 of raw material per year, with development approval for 210,000m3.

AAM operates ADAF under its guiding principles of strategic investment, development, operational efficiency, and sustainability to generate stable cash distributions, development potential, and capital growth of real assets with a targeted distribution yield of between 7-8 percent, and a total return exceeding 12 percent.

Today, the fund represents a portfolio of 11 properties across four Australian states spanning poultry, grain, cotton, beef, lambs, and wool that has far exceeded expectations, posting total returns of 18.6 percent. 

Now included is the 34,005-hectare (84,028-acre) Mount Harden aggregation located in western Queensland, which includes three properties closely situated to AAM’s Terrick Terrick, Moorlands, Thornleigh, and Wooroolah assets and brings AAM total regional geographic footprint to 135,244 hectares (334,195 acres).

It also expands its softwood timber holdings with the addition of 77-year-old N.F. McDonnel & Sons, located in Mount Gambier in Australia’s “Green Triangle” region; and Perma-Log Timber, located in Narangba, in southeast Queensland.

Garry Edwards, managing director at AAM, notes that all together,  these three assets deepen ADAF’s presence in the Queensland’s livestock supply chains, and create a new value channel in the softwood timber vertical.

“We wholeheartedly believe in the inherent strength of businesses and assets, such as these new acquisitions, that are linked to essential food security and society’s ability to live safely and sustainably,” said Edwards. 

“These new assets build on that core strength by delivering further diversity, scale and growth potential to the ADAF portfolio, and we are delighted to provide the opportunity for investors to join with us in driving an approach we believe positions primary industry investment alongside mainstream investing.”

Since its launch, AAM noted that it intended to undertake further fundraising for ADAF to support the acquisition of complementary premium agricultural assets that will be a balance of income-style and strategic investments that will serve to diversify the existing portfolio.

Currently with ADAF standing at A$250 million (US$187.4 million), AAM predicts that by 2022 it will have more than A$600 million in farmland and ag supply chain assets under management.

These latest acquisitions have occurred just as AAM is launching a new round of capital raising (scheduled to close November 11) with the goal of securing another A$70 million (US$52 million) for ADAF.

Interest has been strong from varied investors looking to gain exposure to a diversified mix of ag businesses that together generate risk-mitigated income streams, and AAM’s management strategy has been well-received.

“I believe this is a unique approach which can reduce much of the risk that has typically been associated with the agriculture sector, and which will achieve returns and capital growth beyond passive increases in land values or market cycles,” said Tony Haggarty, businessman and seller of Mount Harden.

“There is significant merit in this strategy, and I am looking forward to continuing my relationship with AAM beyond the sale of Mount Harden.”

Edwards concluded, “AAM has built, and is directed by, a culture of diversified investment and an ‘all-in’ approach to active  operational management, to create broad access to agriculture as an asset class with enduring  profitability, while making a positive contribution to the prosperity of regional and rural Australia.”

“I invite existing and new investors to join with us as we strive towards this vision and, in doing so,  demonstrate agriculture and the primary industries’ increasing position as part of mainstream  investing.”

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com.