Queensland based Laguna Bay Pastoral Company has emerged as the agri fund manager of choice in one of the largest agricultural deals of the past year.
LBPC has announced that they have settled a $211 million sale and long term lease-back agreement with Olam International, for 12,000 hectares of planted almond groves in Victoria. The groves produce over 3% of the world’s almonds and will be owned by the Adveq Almond Trust.
The investor group includes global pension funds, international asset managers and family offices. The lead investor and co-originator along with LBPC is Swiss funds manager, Adveq Real Assets who partnered up with their co-investors to fund the deal. The co-investors include Municipal Employee Retirement System from Michigan in the US, Danica from Denmark and Wake Forest University Endowment Fund from North Carolina in the US. MERS is a public non-profit organisation serving municipalities and their employees across the state of Michigan. Its current assets under management are approximately US$8.0 billion. Danica is an the local pension authority. LBPC as principal invested 1% of the equity capital.
“Olam achieves the repatriation of their original invested capital while maintaining their high margin production, marketing and distribution exposure. It makes sense for good vertically integrated operators like Olam to get these assets off their balance sheet and for institutional money to accept a less volatile inflation protected return on the underlying tangible assets in the form of a rental income,” said LBPC’s CEO, Tim McGavin.
“Responsible and sustainable practices are a key element of our investment philosophy. We will partner with Olam, who will continue to operate the orchards, to ensure these remain at the forefront of sustainability practices in the Murray River ecosystem.” Gaia Arnaboldi, Executive Director of Adveq Real Assets said.
LBPC will act as Trustee and Manager of the assets for the next 18 years. Adveq has invested in over 400 managers mainly in the private equity sector and has been on an exhaustive three year search for the world’s best agricultural fund managers and opportunities in their Adveq Real Assets Fund and co-investment platform.
The deal follows on from LBPC’s successful former ASX listed PrimeAg investment in which LBPC made a healthy return for their investors and subsequently advised them into their successful acquisition of one of the largest Queensland irrigation farms at close to a 35% discount to book value.
This will bring the total assets managed by Laguna Bay Pastoral Company close to $250 mill making LBPC a significant Australian Agricultural funds manager.
Agriculture is not currently a mainstream asset class for pension funds. LBPC is pioneering the education and implementation of strategies aimed at delivering pension fund investment guidelines and target returns.
David Robinson, Chairman of Australian Food & Fibre Limited (AFF), AFF made an unsuccessful joint takeover offer with LBPC for Prime Ag before finally buying the rump of that company, said the “difference’ that the partners in LBPC bring to agricultural funds management is their combination of financial products knowledge and a passion for and a track record in agriculture and horticulture as well as a strong work rate and, most of all, persistence.
LBPC has various agricultural investments from passive to active. Its founders are former Credit Suisse executive Tim Biggs, a successful private resources investors and Tim McGavin who has successfully navigated agricultural investments across many sectors over the past 20 years. The pair are deep value investors with a belief that agriculture will be the biggest beneficiary from both the food scarcity and inflationary thematics.
LBPC is advised by former Uni Super Chairman and AMP CIO Merv Peacock, Caledonia Executive Chairman Mark Nelson, money manager Jim Rogers, former Harvard Professor and agricultural expert Jonathan West and former federal minister and grain farmer John Moore.
Tim McGavin said “Our philosophy is that if we get the entry price and the operator right. Then if nothing changes, our investors will have a very good experience. If the food demand and/or the inflation theme plays out then investors will be well rewarded. There are some terrific investment opportunities in Agriculture at the moment with prices back to levels that allow for a margin of safety in achieving targeted cash returns”.