TIAA-CREF could fund more PrimeAg sales

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The Land | 18 February 2013
Other investors that have looked at the PrimeAg portfolio include Macquarie Group and the ever wily Colin Bell (above), who it is believed has backing from the world's largest hedge fund, Bridgewater Capital.

AS PrimeAg Australia's $125 million sale of rural properties to US fund manager TIAA-CREF goes through, the question now being raised by investors is what will happen to the residual portfolio.

The company still has just under 40 per cent available for sale, including Brayland formerly owned by managing director Peter Corish, reports The Australian Financial Review.

Now the confidentiality agreements have been lifted, TIAA-CREF, which is not usually an operator of these assets, is in discussions with some of the other bidders about providing the financing. It's believed the US pension fund has identified tenants for the remaining properties. It should be noted that while the Emerald and Lower Box make up most of the remainder, some of the smaller properties are likely to appeal to a next door neighbour as opposed to a corporate farmer or fund manager.

Laguna Bay Pastoral Fund is in the mix. Other investors that have looked at the PrimeAg portfolio include Macquarie Group and the ever wily Colin Bell, who it is believed has backing from the world's largest hedge fund, Bridgewater Capital. While Bell earlier denied he had looked at the entire portfolio, he never ruled out individual assets. Other groups that are likely to consider working with TIAA-CREF include Growth Farms and Australian Food & Fibre.

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Foreign funds 'crucial'

By Matthew Cranston

The Land | 18 February 2013

ONE of the major investors in listed rural land company PrimeAg Australia has warned that without more offshore investment in Australian farmland, debt levels across the sector could rise and property values could slide.

Laguna Bay Pastoral chief executive Tim McGavin, who oversaw the purchase of 11 per cent of PrimeAg before it sold 60 per cent of its land portfolio to US fund manager TIAA-CREF last week, said prices could "fall considerably" without the support of such foreign corporates.

"I would say to anyone who is anti-corporate or anti-foreign investment, that they had best be careful what they wish for because if the corporate bid is removed then, given the levels of debt saturation, prices will fall considerably and many farmers will have negative equity," Mr McGavin said.

As revealed by The Australian Financial Review on Friday, TIAA-CREF, which already has more than $300 million worth of rural property in Australia, will take out about 60 per cent of PrimeAg's portfolio at a slight discount to book value.

Mr McGavin's view is backed up by PrimeAg chairman Roger Corbett. "What we desperately need is major unlisted funds to invest in water and rural land assets in Australia," Mr Corbett told the AFR. "They will eventually be the most valuable assets in the world and if we want to maintain these assets we need unlisted funds to invest in them."

Many in the rural market think the investment by the unlisted TIAA-CREF heralds a shift in the way investors approach rural assets, where land values are usually steady but earnings can be volatile.

Landmark NSW state manager Phil Rourke said the deal with TIAA-CREF was unlikely to trigger any boom in rural land prices and that there was probably some negative sentiment still attached to the fact that PrimeAg had decided to sell out its portfolio.

"On the other hand, this is significant for the market because it is such a big lick of country sold in one deal," Mr Rourke said.

The sale of $125 million worth of PrimeAg's top cropping property included Milchengowrie, Mullala, MacIntyre Downs and Crooble in northern NSW.

Last May, TIAA-CREF snapped up $37 million worth of PrimeAg property, which included Colonsay, St Ruth and Prentices on the Darling Downs as well as Burradoo, Ivanhoe and Wilga Warrina in northern NSW.

TIAA-CREF managing director Jose Minaya told the AFR the recent deal was a strong fit with the fund manager's existing portfolio.

"We believe high-quality, well-diversified properties in major grain-exporting regions of the world offer attractive opportunities for long-term growth," he said. "These properties feature these characteristics and add geographic diversification, making them excellent additions to our portfolio."

While the sale is a good sign in a weak rural land market, where many debt-laden farmers face softening commodity prices, there are only a handful of unlisted rural land funds buying property.

Macquarie Group's Lawson Grains and the Chinese/Japanese joint venture Shandong Ruyi, which bought cotton farm Cubbie Station last year, are among the few actively seeking cropping property.
Original source: The Land
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