An unnamed European pension fund has become the cornerstone investor in the just-launched, close-ended Warakirri Farmland Fund, which aims to raise up to A$500m (€320m) in equity.

Jim McKay, managing director of Melbourne-based Warakirri Asset Management, told IPE Real Assets his firm had worked with the European institution, one of Europe’s leading pension funds, to create an entity that would meet its return criteria and ESG commitment.

“We launched a diversified agriculture fund two years ago, and off the back of that we had some inquiries out of Europe for farmland-style investment,” he said.

“It became evident that there was strong interest from Europe in Australian agriculture investment.”

McKay said the European pension fund was attracted to both the potential of exporting Australia’s green produce to Asia and Australia’s improving productivity and scale, which had been boosted partly by external capital flowing into the agriculture industry.

McKay declined to discuss the commitment from the European investor except to say it was a “substantial” amount relative to the capital raising target of A$300-A$500m.

“We have scope for between 4 and maybe 10 additional investors, depending on the scale of the investment in the fund,” he said, adding that the consultant to the European investor had indicated further investment from their clients.

The vehicle will target orchards, vineyards, cropland, water entitlements and selected irrigated row crop farmland assets.

“We will buy existing assets on a lease-back basis, and will identify partners (premier Australian agriculture producers) to work with the investor to acquire farmland,” he said. Over time, Warakirri could work with its partners to develop new farmland.

McKay said the fund was expected to acquire its first asset by the middle of the year and to receive additional capital from new investors towards the end of 2021 or early in 2022.

“The income profile of the fund is 5% to 6% and the total return would be between 9% and 12%,” he said.

Warakirri Asset Management manages assets, including separate accounts, totalling A$1.1bn in agriculture, and has commitments of A$900m to deploy.

Its pension investors include Australian industry super funds and Canada’s Public Sector Pension Investment Board, for which it manages mandates investing in dairy and broad-acre cropping.

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