Dan Purves, Citywire, 4 May 2022
The purchase brings AUM to $104m in under 12 months as the fund seeks to generate extra returns from carbon capture in the land.
The agricultural real estate investment company Packhorse has acquired the 10,029-hectare South East Queensland property, Moolan Downs Aggregation, with 90% of the land identified as suitable for soil carbon sequestration projects, which could offer a significant potential carbon credit trading income upside for investors.
Moolan Down Aggregation comprises four properties, Moolan Downs, Cressy, Allambee and Old Southwood, three of which are Australian Certified Organic (ACO) and US National Organic Program certified for cattle.
‘If you put the land first you end up with better grass cover and better management of the water cycle and better soil carbon sequestration,’ Packhorse chair Tim Samway said.
Packhorse generates returns from three sources. Firstly, from operating a ‘grass motel’ model for its farmland. What this means is that it leases out the land for cattle to graze on and moves them on before damage is done.
‘Our grass motel model allows us to prioritise the land and animal impact is a crucial factor. It’s a symbiotic relationship, we utilise the cattle we host to mow, fertilise and produce a seed bed to help embed legumes and other deep-rooted plantings in the earth to increase the microbiome, all the while growing higher yielding protein to help support and secure global food supply,’ Geoff Murrell, managing director of Packhorse said.
Secondly, returns come from the capital growth of the property as the land is regenerated and becomes better able to support farming. Currently, the Moolan property can support 5,000 cattle, but this is expected to increase to 8,000 by 2027.
Thirdly, from soil carbon sequestration. This is where carbon is captured and stored by plants in the soil. As carbon trading becomes more prevalent, this can provide an additional source of returns.
‘We have a target of a 4% yield of running the property with cattle, it’s about 6% to 7% per annum returns out of capital growth in ag-land driven by underlying demand,’ Samway said.
‘The carbon piece, depending on the right rainfall, the right soils, the right seasonal activity, and the right processes like adding legumes to get extra nitrogen into the soil, you can get somewhere between half a percent to four percent if everything aligns beautifully.’
Packhorse has opened up its next capital raise with a target of $62m to fund the purchase of two properties in New South Wales and expedite the regeneration of the landscape.
While foreign intuitional investors have been snapping up Australian farmland – Canada’s PSP Investments has become the biggest landowner by value with its Aussie portfolio of land and water assets estimated at $5bn – domestic institutional investors have been slow off the mark.
VicSuper did have an investment in regenerative farmland but following its merger to become Aware Super it is selling the Lake Boga portfolio.