Terrick purchase to provide beef foundation for AAM’s new investment fund

Jon Condon, 07/04/2020

SHOWCASE large-scale Blackall district grazing property Terrick Terrick will provide the cornerstone asset for the beef component of a new Australian investment fund’s investments in agriculture.

Confirming the purchase this week of Terrick Terrick is the AAM Investment Group’s Diversified Agriculture Fund, having completed an off-market deal with long-term Terrick owners, Russell Pearson and family, based at Bull Creek, McKinlay. No price was disclosed.

Terrick Terrick vendor, Russell Pearson

The Pearsons have employed Terrick as a growing property over the past 20 years of ownership – more recently undergoing conversion to Certified Organic beef production some years ago.

Totalling 55,000ha (138,000ac) the property is a good balance of Mitchell/Flinders grass open downs country, with some lighter buffel country and frontage.

Cattle were not included in the initial transaction.

It is estimated that Terrick will run about 10,000 backgrounder cattle in a typical year, or about 9500 Adult Equivalents.

New Diversified Agriculture Fund

Last year AAM raised $85 million as the first round of capital raising for its new Diversified Agriculture Fund, to acquire around $140 million worth of assets, of which Terrick is one of the foundation properties.

All of the capital for the new fund has come from Australian-based investors – both corporates and high net wealth individuals, and self-managed super fund type investors. the name suggests, AAM’s Diversified Fund is focused on building a diversity of assets across regions, and major commodities – beef, lamb and poultry, plus a cropping aggregation purchased earlier near Forbes in NSW.

“We had been looking around the Blackall region for at least three years, trying to find the right asset of scale to fit what we wanted to do, in our broader beef supply chain,” AAM Investment Group’s managing director Garry Edwards told Beef Central.

He said the fund had a number of other acquisitions to complete in the future to complement the Terrick purchase – including large scale breeding properties within about 1000km of Blackall, and further backgrounding country. None were currently close to being completed, Mr Edwards said.

The company may potentially also take a whole or partial investment in feedlot assets at some time, he said.

While Terrick will be used principally for backgrounding and perhaps some breeding over the next few years, if sheep prices stay where they currently are, it may also see the re-introduction of sheep at some point.

Terrick’s historic origins, certainly under CSR Pastoral’s (and prior to that, Australian Estates) ownership from the 1940s to 1980s, was in Merino fleece and stud breeding operations, as the home of the famous Terrick Merino Stud. Sheep handling infrastructure including two shearing sheds still exist on the property, but would need some upgrading.

AAMIG managing director, Garry Edwards

“Our long-run plan is to use Terrick primarily for young cattle backgrounding, but it is a versatile property, and cattle breeding and meat or fleece sheep may well play a role in the medium term,” Mr Edwards said.

In the short term, AAM will continue with the property’s Organic Certification as it assesses marketing opportunities. For at least the first six months, options are also being looked at around agistment of Organically Certified stock.

While the first round of capital raising is now complete, AAM’s target over the next three years is to make acquisitions totalling somewhere between $150m and $200m each year – again, across multiple industries and geographic locations.

“We’ll be building off the foundation assets we have already purchased, including Terrick, poultry production assets in South Australia, and the mixed cropping assets we have purchased near Forbes in NSW,” Mr Edwards said.

The plan was to ensure that no particular commodity would dominate the fund, but beef was ultimately likely to represent a 40pc allocation of all investments, he said.

Already, AAM is the second largest chicken producer in Australia, and the largest producer for Inghams, growing out around 20 million chickens each year in SA.

“We’re really focussing on the key food commodities that are in significant demand,” Mr Edwards said. “There’s a chicken thematic around low-cost protein; a beef/lamb protein thematic; and mixed farming to balance the portfolio.”

“We’re looking for quality assets that we can further invest in, over a seven to ten year period. In essence, we will be trying to increase the total size of the Diversified Agriculture Fund by four to five times what it starts off with. That would mean a total asset value of at least $600 million over the next five years,” he said.

With delivery still some months away, no Terrick management appointments have been made yet, but the overall fund is managed by Tim Gallagher, CEO of AAM’s assets and operations business. Answering to him are John Howard, former CEO of the Peanut Company of Australia, who has a substantial grains background, who operates as portfolio manager; Ben Wratten, ex Australian Agricultural Co and Minderoo, is manager of northern operations; and Nathan Morris, is general manager of southern operations.

Given that Terrick had not been actively offered to the market, Beef Central asked how the deal came about.

Mr Edwards described it as an ‘off-market’ transaction, facilitated by Geoff Warriner from JLL Agribusiness, who was engaged by AAMIG for the provision of buy-side services.

“Some of what we do is around succession planning,” Mr Edwards said. “In most cases we are contacted direct by vendors – or agents acting on behalf of vendors – to take a look at prospective assets to purchase,” he said.

“They often have particular needs, and at times those needs are not suited to a public process. In this Terrick transaction, for example, there have been a number of different components to put the deal together. That takes time, and would have been difficult under auction.”

Buyers agent Geoff Warriner said Terrick Terrick was “undeniably a name rich in Australian pastoral history.”

“Having been thoughtfully developed and managed over the past two decades as a beef producing enterprise by the Pearson Family, it will be interesting to see where the next two decades take it. I am confident AAMIG will be good stewards of this historic property, while potentially taking it in a different direction.”

“Terrick is a great asset, and we are looking forward to seizing the opportunity to do something with it, as a key part of our beef investment strategy,” Garry Edwards said.

“But at the end of the day, AAM does not necessarily have to buy all the assets it needs to build a large, efficient beef supply chain – it may be that long-term leases suit some vendors better, for the right property,” he said.

“That suits us just as well as an acquisition – we have a very open mind to the deals we do, provide they fill our long-term production requirements.”




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