The Australian Farmlands Funds (‘the Funds’) was established in August 2018 to invest in a portfolio of irrigated farmland, water and environmental assets in the southern Murray-Darling Basin (sMDB).
The Funds represent an opportunity through which sophisticated and wholesale investors can access an agribusiness portfolio of irrigated farmland, water and environmental assets in the sMDB. Financial returns are delivered through the renewal of underutilised irrigation farming operations to deliver high value organic and conventional crops, sustained by ecosystem protection and enhancement to deliver long-term returns to investors.
As of October 2018, the Funds had received a fully subscribed Phase 1 investment of $20 million invested capital. These funds have been deployed to purchase properties and water assets in the sMDB.
The Funds comprise two open-ended Australian unregistered, unlisted unit trusts — the Australian Farmlands Fund and the Australian Farmlands Operating Fund that are ‘stapled’ in a legal relationship (refer Section 13.1 of the Information Memorandum).
Investors will access Kilter Rural’s Future Farming Landscape (FFL) model for farmland, water and ecosystem renewal.
The model has been deployed, modified and refined across 14 years in farmland mandates for an institutional investor. Investors will benefit from Kilter’s 14 years of asset management experience to extend implementation of the FFL model through an investment strategy encompassing the following features:
Target underutilised farmland: This farmland offers attractive entry value, supporting scaled aggregation of farmland with quality soils.
Target water security: Ownership of Water Entitlements and proximity to water delivery infrastructure ensures a secure water supply for on-farm crop application.
Aggregate, renew and transition: Assembling several properties into one holding and the redeployment of those properties for high-value cropping and ecosystem protection.
Manage price risks: Access to long-term product off-take agreements across conventional and organic markets reduces price volatility.
Mitigate industry and climatic risks: A geographic and industry spread within the southern Murray-Darling Basin mitigates the effects of adverse industry and climate events.
Monitor and report impact: The FFL model uses the Accounting for Nature framework developed with the Wentworth Group of Concerned Scientists to report on the environmental condition of its properties and measure progress towards targets.
Exit optionality: The Funds’ aggregation approach makes for an attractive investment option to corporate and institutional-grade investors and provides a variety of exit strategies.
The FFL investment and management model has proven over 14 years to moderate risks associated with climate change and weather events. It produces high-value agricultural commodities balanced by advances in soil and ecosystem condition to deliver sustained yield increases and improved long-term asset value.
Kilter Rural has identified an initial $100 million pipeline of landscape investments within the sMDB featuring excellent transport infrastructure and access to a well-educated workforce. Coupled with negligible sovereign risk issues, such advantages are increasingly scarce in a global sense.
In connection with this offer the Trustee has issued an Information Memorandum dated 13 March 2019.