Valerina Changarathil, Business Reporter
Packhorse Pastoral is looking to buy more properties like Ottley Station for its regenerative agriculture.
For now, the focus is on rallying the support of high net worth and family office investors for its plan to acquire 2 million hectares of pastoral land for regenerative agriculture and potential carbon credits, chief executive Geoff Murrell said on the sidelines of presenting to potential investors at the Wilsons Sustainable Foods Conference in Brisbane.
It hopes to find a potential pool of $5bn over the next decade.
The fund, which has a business model based on supply deals with cattle producers to provide grazing land, has acquired 30,000ha in Queensland and NSW with funds under management of $100m from about 90 investors.
The first raise in July 2021 brought in $65m. Another $47m is now being targeted for two asset purchases in the NSW central west and in the state’s north.
The purchases are part of the first stage to manage $300m worth of agriculture assets with investors offered 8-10 per cent returns on a five-year term, excluding any carbon credits the fund may generate in future as a by-product of its regenerative agriculture practices.
While the carbon credit price is not factored into any modelling on returns, Mr Murrell said he expected it to be at “north of $100 in 12 months”, echoing comments made by chairman Tim Samway – also chairman of equities fund Hyperion Asset Management – one month ago.
Packhorse will not be issuing any carbon credits at least for the next five years.
The two purchases will add to the existing portfolio of assets – an aggregation of properties in Moolan Downs and Stuart’s Creek in Queensland, and the Ottley Station in NSW.
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Packhorse also needs institutional investors on board to scale up, with Mr Murrell admitting “part of the challenge is that there isn’t historically a big investment from those institutions into land assets”.
“It’s an educational process to establish regenerative practices like investments in water development, fencing and pastoral improvements to increase soil health and pasture productivity and quality,” he said.
Packhorse Pastoral’s property at Moolan Downs, Queensland.
“This production increase really underpins the capital appreciation and cash yield of the businesses, so it’s about trying to get them to understand that.”
He gave the example of one asset under management for four years, which had a 0.06kg per head per day gain on its animal performance over that period.
“It doesn’t sound like much, but it is 30kg per annum per animal, so for a business with 5000 head of cattle, it’s an increase of 150,000kg of beef per year.
“We can really provide a really safe platform for institutional investors. The biggest issue with agriculture businesses is providing liquidity that they need … so a bit of education to happen.”
Mr Murrell says the group is in conversations with super funds and the Clean Energy Finance Corporation. Packhorse has also provided dataroom access to interested foreign parties with the investment capped at 20 per cent.
“To get to scale and to be able to influence the environment to the level that we want … we are going to have some overseas institutional money,” he said.