Primewest lease backs uncork farmer capital for growth

Instead, Primewest buys properties and leases them to farmers like orchardists, the Montague family, or horticulturalists, Lamattina & Sons.

It yields 6-7.5 per cent rental returns plus capital growth. A portfolio of properties then sit in a trust generating returns for Primewest's wholesale investors.

Its first trust is already fully subscribed with $100 million in funds and the second was launched in July with the $53.9m purchase of Moora Almond Orchard at Hillston in the NSW Riverina.

Of that $53.9m, Primewest plans to raise $34m from investors.

The Moora transaction provides a 12-year, triple-net lease, which means the tenant is responsible for ongoing expenses like insurance, and maintenance, in addition to paying rent and running costs.

Primewest's agricultural leases average 10-year terms and investment trusts run for an initial eight years that can be extended.

It's a buffer designed to give investors certainty, Primewest agricultural transactions manager Andrew Tout said.

He's responsible for sourcing and overseeing the two unlisted funds and their six properties. In addition to the Moora Almond Orchard, they include:

Averaging $23.5m an asset, the focus is not on the largest-scale properties.

At the top of Mr Tout's shopping list are attractive geographic locations, good soils and access to water that provide drought resilience.

Important too, he said, was the skill of the operators and industry growth potential.

"The big opportunity I'm seeing is to partner with people who want to expand, people who are good at what they do, but also people who have unique produce and a little bit more control over their supply chain," Mr Tout said.

"For the typical wheat farm back in the 1980s, you took your wheat to the silo for whatever the price was on the day, that was it, you had no control over it.

"I think the big opportunity for us and for Australian agriculture is to really hone in on our ability to produce really high-quality produce, and just go that one step further up the supply chain."

While all the farms acquired to date hosted plant-based agriculture, Mr Tout said Primewest wasn't actively avoiding livestock.

"We're looking at a lot of livestock deals but, typically, broadacre sheep and cattle farms are giving a lower return to investors so ... we have looked at some intensive livestock opportunities out there," he said.

While tales of predatory corporate behaviour abound, Primewest investment was a boon for farmers, he said.

"It can help with succession, it can allow them to expand by monetising their balance sheet for expansion, there's a raft of reasons that someone might choose to enter into a sale and leaseback with us," Mr Tout said.

"Generally, it's not something we seek out, it's something that has been the decision of the vendor."

About half of the deals orchestrated by the trust are sale-leaseback arrangements and the other half are straightforward sales.

When, for example, the Montague family wanted to diversify its apple and stone fruit business into citrus, it approached a Mildura farmer in tandem with Primewest.

The investment firm bought the property for Montague to lease, which has in turn kept the original management team.

READ MORE: Montague moves into citrus

While Primewest looks for farms with an established track record of skilled management, its interaction style with the farmers is very much hands-off.

There is annual reporting but the rental fee is a straight, flat rental, with no special incentives.

"The farmer does what the farmer does," Mr Tout said.

"It's a tenant landlord relationship so we don't have any involvement with the farm day to day."

Primewest was acquired in April by the ASX-listed Centuria Capital Group, which is known for its office, industrial, and healthcare investments.

Love agricultural news? Sign up to our free daily newsletter and start your day with all the latest in ag.