Danny Thomas, Rawdon Briggs: Why institutions are primed to snap up Aussie farmland

A favourable exchange rate and less demand in the market is fuelling institutional buyers’ desire to acquire more Australian hectares.

Tallis Miles

@tallis_miles

4 min read

November 2, 2023 - 5:00AM

The Weekly Times

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Flattened rural property prices in Australia have placed institutional buyers in prime position as the farmer-to-farmer market grinds to a halt.

A sharp decline across livestock commodity markets, the increasing cost of borrowing money and less favourable forecasted seasonal conditions in the past 12 months has taken the wind out of the sails of many Australian farming families who were willing to pay record prices for farmland during the recent rural property boom. With more measured demand, institutional investors are lining up to add Australian farmland to their growing portfolios.

“The market is relatively firm where assets are more than $50 million, which is where the institutions tend to play,” LAWD senior director Danny Thomas says.

“The broader market has stratified and you’re seeing differences depending on commodity and geography.”

Foreign interests now represent 12.3 per cent of all agricultural land ownership, the lowest rate in the past seven years. More than 47 million hectares of Australian farmland is in overseas hands with China owning the most hectares, while the Netherlands and the US have greater freehold ownership, each with more than 1.6 million hectares, according to the latest Foreign Investment Review Board data. However, FIRB data also shows Canada was the only nation to increase landholdings in 2021-22, a sign of what was to come this year.

Thomas says Australia’s relatively low exchange rate with other global currencies, including a rate of less than 65 cents to the US dollar, is incentivising foreign investors to buy this year. “At the moment they are paying pennies on the dollar, especially those North American pension funds or even someone with British pounds. There is a real acceleration to deploy capital in Australia,” Thomas says.

“We saw them become more active in the marketplace early this year and then it really ramped up in the second half of this year with a tailwind heading into 2024.

“They are mostly looking for those assets that are ready to go and have scale. They might have a little bit of development potential from dryland to irrigation for permanent horticulture for example.”

Dutch agricultural investors Optifarm sold the 13,498ha Jemalong Station to Lawson Grains earlier this year.

So far this year Lawson Grains, backed by Sydney-based global forestry investment manager New Forests and Canada’s Alberta Investment Management Corporation, purchased the 13,498 hectare Jemalong Station from Dutch agricultural investors Optifarm, near Forbes in Central West NSW, paying $85 million in August.

This followed its $39 million acquisition of the MacNeil family’s 2860-hectare Green Park aggregation, located in the NSW Riverina near Rand.

Meanwhile one of the nation’s biggest agricultural companies, Australian Food and Agriculture, and its 222,000-hectare NSW portfolio including historic sheep stations Wanganella and Boonoke has been listed for sale by stockbroking brothers Andrew and Lewis Bell from the ASX-listed Bell Financial Group, Bell Financial Group managing director Alastair Provan and US billionaire hedge fund manager Ray Dalio following the death of fellow founding partner Colin Bell.

The AFA portfolio could be worth north of $650 million, with properties at Deniliquin, Coonamble and the Burrabogie and Mulberrygong stations at Hay.

The Burrabogie homestead is part of the AFA portfolio offering.

The portfolio comprises more than 54,000 megalitres, 186,500 hectares of native grazing pastures, 23,700 hectares of dryland cropping and 11,500 hectares of irrigation layouts in Deniliquin and Hay.

Also in October Italian food giant Ferrero, the maker of famous treats Nutella and Ferrero Rocher, unveiled plans to sell its 2665-hectare NSW Riverina two-farm aggregation and a massive water portfolio via its Australian arms for more than $80 million. Five years after planting its millionth hazelnut tree the company, considered the world’s third-largest chocolate and confectionery company, is exiting the Australian agricultural industry after forming the Dellapool aggregation and amassing a 11,361-megalitre water entitlements portfolio Colliers head of agribusiness and transaction services Rawdon Briggs says the nation’s rural property market is “fluid” as this year comes to a close.

“The domestic institutional buyers are rising in balance sheet and awareness of the important part agribusiness assets can add to a natural capital portfolio to achieve the 2030 emission targets,” he says.

“The international institutional buyers are far more aware of the positions already taken by other international natural resources investors seeking to balance their global portfolios.

“The contraction (in the farmer-to-farmer market) in some commodity prices in combination with negative near-term climate data is providing some caution given lending costs of debt have also risen over three-fold in 12 months interest charges on variable facilities.”