Australian specialist agriculture asset manager, Kilter Rural, is to launch an evergreen A$500m (€307m) fund in May.
The Kilter Agriculture Fund will be seeded with 7,000 hectares across three farms, which will come with 3,500 megalitres of groundwater.
Cullen Gunn, Kilter Rural’s chief executive officer, told IPE Real Assets: “We have been working on this aggregation for some time and we have the farms under contract.”
The properties are in the rich farming district of Southern Riverina in NSW, bordering the Murray River.
Gunn said that, unusually, the properties had access to three sources of water – surface irrigation, groundwater, and plentiful rainwater – which was critical in a country considered the “driest continent on earth”.
The farms are used for a broad rotation of crops, including barley, wheat, canola, and buckwheat.
“We will grow niche crops, like navy beans used in baked beans, to give the fund a bit of margin. We have been building up our seed resource,” he said.
Kilter Agriculture Fund plans to acquire adjoining farms, valued at A$80 million, by June next year.
“We are negotiating with the farmers for the first opportunity to buy, or to have options on the land,” Gunn said. The next rounds of acquisitions would create what would be the “biggest aggregation” (21,000 hectares) in the region.
Kilter Rural is majority-owned by Regal Partners, which manages more than A$5bn in assets. Kilter Rural was recently awarded a US$50m mandate from a large US financial institution to invest in Australian agriculture.
Under new international regulations, larger institutional investors were going to face much more stringent disclosure on risk management and compliance requirements around addressing the impact they were having on climate change, Gunn added.
“We are producing sustainable food and fibre, we are delivering large-scale biodiversity protection, and, on the back of that, we are delivering carbon sequestration services and climate change mitigation services,” he said.
And, he added this asset class offered inflation-protected real asset-backed returns. The fund aims to deliver annual average returns of 10% to 12%, comprised of 4% to 5% yield and 6% to 7% capital growth.
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