When you land at Sydney’s Kingsford Smith International Airport, you’re using a facility owned by Macquarie Group, the Australian behemoth whose diversified holdings include toll roads, banks and big-city real estate.
Up next: the outback. These days a lot of Aussie steaks and lamb chops come from Macquarie-owned farms. Macquarie, owner of about $185 billion in global infrastructure holdings, is moving into the sheep and cattle business. It is seeking more than $1 billion from Australian and international institutional investors for a new fund to buy a swath of farmland across the country’s northern end and along its eastern seaboard. It has raised $600 million and invested about $93 million of that so far. The move comes largely in response to demographic changes in Asia and the accompanying demand for more high-protein foods.
Tim Hornibrook, who directs the fund — known as Macquarie Pastoral Services — expects it eventually to buy several dozen properties and run some 300,000 head of cattle and sheep. That would rank Macquarie among the biggest farming conglomerates in the country. (The leader is the publicly traded Australian Agricultural Co., which runs 550,000 head of cattle on about 25,000 square miles, an area roughly the size of West Virginia.) Hornibrook says the idea is to take advantage of a boom in soft commodities. “We started to look at opportunities: tropical fruits, dairy, nuts, grapes and aquaculture,” Hornibrook explains. “Livestock was the most attractive industry on a risk-adjusted basis.” The overriding reason, he says, is rapidly increasing demand from Asia’s growing middle class.
He notes that this is also a good time to buy property in Australia, because many family-owned farms face a generational change. Fueling the shift is a drought that is in its fifth year.
Macquarie isn’t the only big player moving into this space. In December, Peter Corish, a former chief of Australia’s National Farmers’ Federation, formed PrimeAg, which raised about $280 million in an initial public offering. PrimeAg is focused on grains.
Hornibrook estimates that the top-performing quarter of Australian cattle farms with more than 1,200 head have had annual returns of 14.8 percent over the past 25 years, and that similarly ranked sheep ranches with more than 20,000 animals have delivered 12.5 percent. Macquarie Pastoral fees are similar to the ones the parent company imposes on its other special funds (like Macquarie Airports, owner of the Sydney airport, and Macquarie Infrastructure Group, owner of the Chicago Skyway), taking an annual management cut of 1.25 percent and a performance fee of 20 percent on returns above 8 percent.
