Specialist agricultural asset manager, Growth Farms Australia, has launched a new investment trust, the Australian Agricultural Lease Fund, which will buy agricultural land and lease it to producers.
The firm said the advantage of such a leasing model, which was well-established in the US, was the opportunity for farmers to expand their business without having to invest to buy more land.
At the same time, from an investor’s point of view, it offered stable cash flow based on rental yields which helped avoid the volatility that was typically associated with direct exposure to agricultural markets.
The fund would be open to wholesale investors with a minimum investment of $100,000 and would be a closed unit trust with a term of 10 years, but unitholders would have an opportunity to vote whether or not to wind up the fund after five years, it said.
The new fund, which would buy farmland and water rights and lease to third-party farming businesses, said it would invest in higher rainfall regions such as North Queensland, Northern New South Wales, the Southern Murray Darling Basin, Victoria and Tasmania.
According to Growth Farms, the fund would deliver an annual gross yield of 4.5 per cent, with lease terms being struck on a three-year term initially.
Growth Farms’ managing director, David Sackett, also said the fund would have an environmental, social and governance (ESG) focus.
“We will look at a range of environmental issues, including salinity, water quality and important vegetation ecosystems. And we want tenants who are engaged with their local communities. For example, we will be looking for farmers who are prepared to take on local people for work experience,” he said.
“Over the 20 years to 2016, Australian agriculture land is negatively correlated to international equities and Australian fixed interest, and has a low correlation to Australian equities and Australian REITs.”
Growth Farms was set up in 1999 and currently invests in Australian agriculture on behalf of institutional, family office and high net worth individuals through separately managed accounts and unlisted funds and has more than $440 million of funds under management.
The fund would be expected to have a maximum size of $100 million and maximum leverage of 30 per cent, with a target size for each farm of three to eight million dollars.
