August 20, 2019

By Lynda Kiernan

Based in Perth, Australia, Alterra is an agricultural investment company focused on capitalizing upon institutional investor interest in agricultural production in Western Australia.  

After de-merging its carbon-conscious business earlier this year, Alterra’s strategy is to develop underutilized or undervalued farmland with reliable water supplies into investment-grade agricultural assets, and, in some cases, to manage operations, according to The West. 

Oliver Barnes, managing director of Alterra, told The West that institutional investment capital in the billions could be channeled into Western Australia given the availability of suitable assets.

“By securing access to land with water allocations, Alterra can transform under-capitalised WA agricultural properties into higher-value permanent tree crops, which are in strong demand from institutional investors,” said Barnes. 

Three-Phase Model

How does Alterra plan exactly to do this?  Through its three-phase business model:

Phase 1 – Screen opportunities through research, detailed feasibility, and modeling studies. Once a certain opportunity has been found to be viable – 

Phase 2 –  Alterra invests between 5 and 25 percent of the capital needed for the development project, raising the balance from investors. During the development stage, Alterra will receive establishment and management fees, and once the asset is monetized, Alterra will receive performance fees. 

Phase 3 – (Annuity income phase) during which Alterra will charge the new owner an annual management fee with annual reviews every five years. 

Within this framework Alterra plans to complete four deals per year, with a minimum project size of about $30 million per institutional investment project.

Advancing its strategy, the firm has made inroads into Western Australia’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 has 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 will provide 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 will 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.

During the development and management stage for each asset, separate agreements will be created covering services and products provided by French’s group.

“Alterra believes that the avocado industry is entering its next wave of development with the opening up of potentially lucrative export markets and significant investment inflows being made by institutional investors,” said Barnes.

“This agreement enhances Alterra’s execution capabilities by collaborating with a team that are recognized as leaders in their industry.”

In support of achieving its goals, Alterra has also made internal moves, appointing Brett Heather, a veteran agribusiness executive, as its chief operating and technical officer in July, and establishing an exclusive technical partner agreement with Tyson Bennet, a horticultural expert who specializes in high-value tree crops, in April. 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. 

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