AAM seeks additional $70 million to grow flagship Diversified Agriculture Fund

AAM Investment Group (AAM) will tomorrow launch a capital raising of an additional $70 million for its AAM Diversified Agriculture Fund (ADAF) to broaden its reach across diversified, growth-ready farmland and primary industry assets, including the purchase of a central western Queensland livestock aggregation and two softwood timber supply chain businesses.

The strategic acquisitions will add $100 million in value to the ADAF portfolio and include the 34,005ha Mount Harden aggregation near Blackall, the multi-generational N.F. McDonnell & Sons in the ‘Green Triangle’ forest region at Mount Gambier, and Perma-Log Timber at Narangba in South East Queensland.

ADAF is AAM’s flagship fund and was established in January 2020 to offer a pathway for investors to capture the value and opportunity held by primary production. The Fund is driven by an overarching philosophy of delivering income, capital growth and consistent returns through diversification across geographic location and commodities, and active, precision management to sustainably improve assets to highest and best use. ADAF targets a total return of at least 12% per annum, and achieved a total 18.6% in the last financial year.

AAM Managing Director, Garry Edwards, said the new assets would collectively grow ADAF’s strategic presence across key livestock supply chains in Queensland’s productive central western region, while creating a new income-producing ADAF softwood timber vertical.

“We wholeheartedly believe in the inherent strength of businesses and assets, such as these new acquisitions, that are linked to essential food security and society’s ability to live safely and sustainably,” Mr Edwards said.

“These new assets build on that core strength by delivering further diversity, scale and growth potential to the ADAF portfolio, and we are delighted to provide the opportunity for investors to join with us in driving an approach we believe positions primary industry investment alongside mainstream investing.”

Since inception, ADAF has grown to hold more than $250m in real assets across 11 sites in four Australian states, producing poultry, grain, cotton, beef, lamb and wool. By 2022, AAM forecasts to have more than $600m in farmland and agricultural supply chain assets under management, building its standing as an uncorrelated and accessible agriculture investment platform of choice, with global significance.

“Our investments are purposefully divergent in their location and production systems, yet entirely aligned in meeting the most basic human requirement for high-quality food and fibre, the strength of which has been demonstrated through our delivery of both our income targets and capital growth, despite a challenging global environment over the last two years,” Mr Edwards said.

“This also speaks more broadly to the value of investment in Australian agriculture and primary industries, and the many advantages it enjoys within global food and fibre production.”

Mount Harden vendor and respected businessman, Tony Haggarty, has committed to the investment of significant funds in the ADAF, having identified the merit of AAM’s unique approach through the sales process.

“AAM is looking at the agriculture sector in a complete way. Rather than singling out industries, they are developing an agricultural investment mix covering multiple commodities and regions, and complementing this with a commitment to invest in people, innovation and sustainability to achieve management excellence,” Mr Haggarty said.

“I believe this is a unique approach which can reduce much of the risk that has typically been associated with the agriculture sector, and which will achieve returns and capital growth beyond passive increases in land values or market cycles.

“There is significant merit in this strategy, and I am looking forward to continuing my relationship with AAM beyond the sale of Mount Harden.”

The Mount Harden Aggregation comprises three properties in close proximity to AAM’s existing Central Western Queensland assets, including the iconic Terrick Terrick Station, Moorlands, Thornleigh and Wooroolah, to take AAM’s total footprint to 135,244ha in the region.

“The Mount Harden Aggregation will allow us to retain a core, high-quality beef cattle breeding herd — including the 8,000-head Georgina Pastoral Company Ultrablack and composite herd acquired in June 2020 — while building a large-scale sheep flock that will complement the Sunshine Farms Aggregation in the Central West of NSW,” Mr Edwards said.

N.F. McDonnell & Sons was founded in 1944 by Newman McDonnell and today employs around 125 people at its Suttontown Mill, which has capacity to process up to 400,000 tonnes of log resource per annum. The operation focuses primarily on the conversion of smaller diameter sawlogs into products for the pallet and outdoor landscaping market.

Like most assets in the ADAF portfolio, N.F. McDonnell & Sons is a multi-generational business, and staff and company culture will be carefully retained by AAM to continue execution of efficient operational activities and growth strategies in local communities.

Perma-Log Timbers, based in Queensland’s high-growth South Easter Corner, has been operational for more than a quarter of a century and supplies the piling, fencing, horticultural and landscape markets through an extensive network of wholesalers. All timber processed by Perma-Log is sourced from renewable resources.

AAM already manages and operates a softwood processing facility in Bathurst NSW, with capacity to process up to 200,000 tonnes of sustainable softwood each year.

“AAM sees enormous value and potential in sustainable softwood as a material of the future, given its ability to contribute to key environmental outcomes, which has led to a substantial increase in its use over the last 10 years. It now plays an integral role in the broader AAM strategy to deliver diversity by investing in uncorrelated, income-generating primary industries,” Mr Edwards said.

“In this case, AAM has purposefully selected the small log processing, non-structural framing segment of the softwood processing industry to ensure a market exposure which is not predominantly reliant on the variable commodity-based framing sector.”

“AAM has built, and is directed by, a culture of diversified investment and an ‘all-in’ approach to active operational management, to create broad access to agriculture as an asset class with enduring profitability, while making a positive contribution to the prosperity of regional and rural Australia,” Mr Edwards said.

“I invite existing and new investors to join with us as we strive towards this vision and, in doing so, demonstrate agriculture and the primary industries’ increasing position as part of mainstream investing.”