WARAKIRRI Asset Management has this week announced the launch of an investment fund designed to capitalise on opportunities presented by growing global demand for food and Australia’s part in the global food supply chain.
Known as the Warakirri Farmland Fund (WFF), it has been developed for domestic and offshore institutional investors.
Warakirri said WFF has already secured significant seed funding from one of Europe’s largest pension funds, but has declined to name the fund.
Addition to ag portfolio
Warakirri already manages more than 200,000 hectares of Australian agricultural land on behalf of domestic and global clients, and is one of Australia’s largest agriculture investment managers and operators, with around $1.8 billion in funds under management.
WFF will sit in Warakirri’s agricultural portfolio alongside Daybreak Cropping, Warakirri Cropping, Aurora Dairies and the Warakirri Diversified Agriculture Fund (WDAF).
The new fund has similarities to WDAF, which was launched in 2019, and is in the process of buying and developing a diversified investment-grade properties.
As with WDAF, it will lease them to businesses which meet Warakirri’s critera for high-quality tenant partners.
Target assets include nuts, fruit, wine and table grapes, water entitlements, and row-cropping country which may include some dryland.
“Our focus in row crops will be larger-scale irrigated assets, with some scope for dryland investments where no conflicts existing with other Warakirri mandates,” a Warakirri spokesperson said.
“This fund will be seeking larger, more concentrated institutional-sized deals with high-quality best-in-class corporate tenant partners on long-term leases.”
The spokesperson said the fund will consider properties on merit in all parts of Australia.
WFF is expected to deliver a strong return, with more than half the forecast returns to be delivered through regular income payments, and the balance via long-term capital growth of underlying assets.
The fund will utilise Warakirri’s Sustainable Best Practice framework, including strategies to reduce energy use and carbon emissions, and improve water efficiency and biodiversity.
“The farmland strategy leverages our 24 years’ experience in agriculture and supports our objective of providing investors with access to strategies with low correlation to listed markets,” Warakirri managing director Jim McKay said.
“It provides an attractive option for institutional investors who are seeking greater access to alternative assets, with low volatility and the strong returns being generated from a diversified exposure to the resilient farmland sector.”
Warakirri has already bought several properties for the fund, with rental yields of a minimum 7 per cent per annum.
“The launch of this fund follows the success we have had with a similar strategy we developed for wholesale investors, including family offices, charities, and advisory groups,” WFF portfolio manager Steve Jarrott said.
“That fund has recently completed deployment of its initial capital raising, establishing a foundation portfolio that will provide secure long-term income return of 8-9pc per annum, with strong long-term capital growth potential.”
Ag stacks up
Warakirri said agriculture was supported by a strong long-term demand outlook for Australian products, and participating investors were being rewarded with top-tier investment performance over the long term, with low volatility and low-to-zero correlation to traditional asset classes.
“There is a compelling case for investors to consider agricultural exposure as part of a well-diversified investment portfolio,” Mr Jarrott said.
WFF does not have a predetermined limit on the number of units offered to investors, but is targeting a portfolio of $300 million to $500 million.
“Units in the fund will be able to be bought and sold between existing and new investors at particular liquidity windows…once the portfolio is built out,” the spokesperson said.
While there is no set lifespan for the fund, the first liquidity window will be provided on the seven-year anniversary of the acquisition of the first real property asset of the fund, and every five years thereafter.
Source: Warakirri Asset Management