The Sustainable Agriculture Fund, backed by some of Australia's leading superannuation funds, has struck a hurdle in selling off one of the prized gems in its rural property portfolio – the King Island Aggregation.
In March the super funds, including Australian Super, decided to sell the fund with expectations the farmland portfolio could reap more than $180 million.
So far, in a campaign run by CBRE, markets sources say the portfolio of 23,000 hectares of high quality farms from Moree in NSW to Tasmania have fielded strong interest and are likely to see deals transacted in coming months. Non-binding expressions of interest are due mid-June, according to one potential buyer who declined to be named.
However, interest outside of two wealthy investors for the fund's beef production farms on King Island, including the properties Boongara, Dinibili, Longford and Reekara Park, has gone cold.
Zip Industries' Michael Crouch, who sold his boiling water business to private equity in a deal estimated to be $300 million, has a major farming operation nearby and was rumoured to have shown interest in the fund's King Island aggregation.
Billionaire Peter Gunn, whose PGA Group also owns cattle businesses and whose wife's family also has farming interests in the area, is also meant to have been a contender to buy the King Island aggregation.
Buyers back off
Their interest, genuine or not, has frightened off other potential buyers of the aggregation. The fund's managers and the agents working on selling the portfolio refused to comment on the interest levels.
The fund bought the King Island farms in 2010 for $27 million.
Covering 6786 hectares with 5000 head of cattle, the farms are some of the best in the overall portfolio.
Documents seen by the AFR indicate that the King Island Aggregation has been a stand-out performer for the fund, delivering more than 12 per cent returns a year for the seven years it has been owned, with about half of that delivered through income returns.
The fund was expecting additional returns because of the expectation that a new abattoir was to be built on the island with plans lodged by the EAT Group.
King Island is renowned for producing high quality beef and cheese, with farming operations tightly held by a range of family farming groups. These include Waverley Station which is owned by the Crouch family and is the biggest beef cattle farmer on the island and corporates such as Nippon Meats and Kirin Holdings-owned Lion Dairy & Drinks which owns and operates dairy farms and a cheese factory on the island.
