April 8, 2020

photo credit: Alterra

By Lynda Kiernan

Alterra Limited, an agricultural investor, developer, and manager focused on “land use change”, announced the launch of its first large-scale avocado project, based in Pemberton, in Western Australia.

After de-merging its carbon-conscious business last year, Alterra’s strategy moving forward is to develop underutilized or undervalued farmland with reliable water supplies into investment-grade agricultural assets, and, in certain cases such as this, to manage operations.

“Alterra operates in an asset class known to hedge inflation with limited correlation to economic cycles that typically impact other asset classes. There has been strong demand at an institutional level, with billions of dollars invested into Australian agricultural assets over the past 12 months,” said Oliver Barnes, managing director, Alterra.

A special purpose vehicle (SPV) called Carpenters Beedelup Pty Ltd. had been established to develop the project that will operate under the name “Carpenters Project”. This SPV also has secured a 30-year lease including a 10-year plus, 10-year option on the land and water resources from Red Moon Property Holdings Pty Ltd., an entity associated with the Casotti Group, the largest privately-owned fruit grower, packer, and wholesaler in Western Australia.

Under the terms of this agreement, Red Moon has agreed to provide the project with 500 megaliters of water per year from their adjoining property Casuarina until the completion of construction of a dam which is expected to hold approximately 3.0 gigaliters of water. 

“My family has been landowners and orchard operators in Pemberton for decades. Carpenters adjoins our renowned “Casuarina” property and is a large contiguous development site, in a premium growing region, with access to significant high quality water and nutrient rich Karri soils perfect for avocado production. We are pleased to work with Alterra to realize our dream of developing Carpenters and are confident in Alterra’s capacity as project developer and manager to successfully deliver this unique opportunity” said Mario Casotti, director and general manager, Casotti Group.

The SPV will act as the holding company for Carpenters Project, and with the lease agreement in place, will move forward on a feasibility study and its plans to source development capital in FY 2021 from specialty industry investors and family offices.

Subject to the project attracting the necessary funding, Alterra will enter into an agreement to act as the asset manager to oversee the day-to-day management of the operation for which it will be paid a per-hectare management fee in addition to a yearly crop performance fee, and an investment performance fee, effective from the commencement of the development.

“Over the coming months, we will conduct detailed engineering studies, soil testing and financial due diligence, in combination with arranging the development capital required to bring the full project to fruition,” said Barnes.

Groundwork

Alterra began laying the groundwork to support its vision for Western Australia last year, when it made inroads into the state’s high-value avocado sector, forging a local partnership agreement with French’s Group, a family-owned enterprise that established the state’s first commercial-scale avocado operation in 1986, and has 32,000 trees producing more than 5.8 million fruit per year. 

The company also secured a significant ownership stake in Advance Packing and Marketing Services, which has the capacity to pack six million trays of avocados per year, and services more than 40 of the state’s growers.

Under the terms of the agreement, French’s Group provides Alterra with local representation, assistance with origination and due diligence on investment opportunities, and localized production and technical support for a three-year period across the Peel, South West, and Great Southern regions of Western Australia.

In turn, Alterra agreed to issue two million performance rights to French’s – the first one million rights will vest upon the finalization of a binding term sheet for the development or purchase of 50 hectares of avocados. The second million will vest upon the execution of a binding term sheet for the development or purchase of an additional 150 hectares of avocados.

Internally, the firm also appointed Brett Heather, a veteran agribusiness executive, as its chief operating and technical officer in July 2019, and established an exclusive technical partner agreement with Tyson Bennet, a horticultural expert who specializes in high-value tree crops, in April 2019. In addition, John Poynton, a Western Australia businessman, has been named chairman of a newly-formed advisory board created to help drive Alterra’s new direction.

Seeing Green

Australian avocado operations have gained recent attention by both industry insiders and investors looking to capitalize upon their growing popularity among health-conscious consumers.

Proprietary data from Alterra’s technical partner, the French’s Group (which has been confirmed by Pablo Liguori, an independent agronomist and avocado specialist consultant), shows that a mature avocado orchard of nine years of age in the Pemberton region has the potential to produce between 20 and 30 tons of avocados per hectare per year.

At prices ranging between $5.44 – $9.38 per kilogram (September 2019 – January 2020), and at 907 kilograms to the ton, and 20-30 tons per hectare, the Carpenter’s Project has the potential to bring in A$29.6 million per season based on the most conservative numbers.

“This is the first of several planned projects for Alterra and I am pleased to say the Company’s opportunity pipeline is strong,” said Barnes.

“The Australian market for developed assets of this quality is currently dominated by international funds but we believe that they will see a strong increase in competition from Australian funds, including industry super funds.”

Alterra has already obtained exclusive rights to local avocado genetics and production data from French’s Group in support of the Carpenter’s Project serving as the foundation for a new business model in Western Australia.

“With approximately 2,500 hectares of current avocado production in Western Australia, this single development has the potential to represent about 10 percent of WA’s planted hectares, with positive pre-feasibility results providing Alterra with a basis to pursue development,” said Barnes.

“The Carpenters Project site is exceptional with the region highly regarded for its favorable climate, reliable rainfall, excellent soil types and quality water, which makes this site a high-value asset for Alterra. The Carpenters Project is a significant opportunity to launch Alterra’s new business model with an outstanding asset supported by quality management.”

– Lynda Kiernan is Editor with GAI Media and daily contributor to the GAI News and Agtech Intel platforms. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.