August 20, 2015

Australia’s $53 billion First State Super fund has made its maiden investment in Australian agriculture, acquiring almond orchards that span three states from listed agriculture company, Select Harvests, for $150 million.

The investment comes after increasing disquiet led by Agriculture Minister, Barnaby Joyce, over the lack of investments in the Australian agriculture sector by the country’s $2 trillion superannuation industry – stemming from a failure to strive to understand the industry.

After seeing the fallout from difficulties during the financial crisis, there had been some negative associations with investing in agriculture. How ever,Australia’s superfunds are beginning to both examine and have a deeper appreciation for the opportunities that the sector has to offer.

“Supporting Australian industry – whether that be in agriculture or venture capital – is one of the enormous advantages that Australia has as a superannuation system,” says First State Super chief investment officer, Richard Brandweiner.

This shift in perspective could be partially attributed to factors including the drought in California leading to a decline of 12% in U.S. almond supplies, creating an opportunity for Australian producers to gain market share, a tripling of almond consumption in the Middle East and Asia over the past five years, and the value of Australian almond orchard land growing three fold over the past five years from $1,600 per acre to over $5,000 per acre as Select Harvests share value has skyrocketed from $1.50 per share to almost $8 per share in the past three years.

The deal, which is structured as a purchase and leaseback, is significant for First State. Under the terms of the transaction, First State will acquire three farms including the 2,000 hectare Mendook site in the Sunraysia district of New South Wales, the 1,500 hectare Amaroo farm in South Australia, and the 350 hectare Mullroo property in Victoria. First State will then lease the properties back to Select Harvests for a period of 20 years. First State will also provide the necessary capital to expand the plantations.

First State’s foray into Australian almonds is also the largest deal in the industry since Olam International sold 18,000 hectares of almond plantations planted with 3 million almond trees, in the state of Victoria to an international investor partnership led by the Swiss fund, Adveq Real Assets, and including the U.S. Municipal Employees’ Retirement System of Michigan and the Danish Danica Pension Fund for $211 million as part of an 18-year leaseback deal.

Recent investment activity in Australia’s almond sector (second in size only to the U.S. sector) has been significant. This acquisition by First State follows closely behind Canada’s Ontario Teachers’ Pension Plan Board and California-based Renewable Resources Group purchasing the Margooya and Carnarvon almond plantations from Macquarie Group for $115 million. The deal included 2,878 hectares of land with 1,067 hectares of mature orchards, and water entitlements valued at $25 million.