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Property investor Primewest (ASX: PWG) believes Australian agricultural land is ripe for the picking, today announcing its entrance into the bountiful sector.
The Western Australian company's newly established trust called Primewest Agricultural Trust No 1 has acquired "Pinegatta" in the New South Wales southern Riverina region, marking the beginning of its $100 million investment plan for the sector.
The trust paid $4.8 million for the 425 hectare property, which is leased to Japanese tomato producer Kagome.
The blue chip tenant is the largest tomato producer in Australia and was acquired by its Japanese parent in 2010.
Kagome Australia has been processing and selling pastes, purees and dice to manufacturing customers across Australia since 1996. Its customers include food giants like Domino's, Latina Fresh, Leggo's, Campbells and McCain.
While Kagome itself specialises in tomatoes, the land acquired by Primewest's Agricultural Trust primarily produces carrots and potatoes, and most recently was servicing contracts to the chip manufacturer Smith Snack Food Company (owned by Pepsico).
Primewest director David Schwartz says Pinegatta was a high quality, investment grade, agricultural asset leased to a blue chip tenant and was well positioned to benefit from the anticipated improvement in the Australian agricultural sector.
The Trust now intends to take a counter-cyclical approach to investing in the agricultural sector, with plans to acquire a range of properties under the new Trust totalling up to $100 million.
"Kagome has invested around $700k on capital improvements to the property in the last 12 months that also features $1 million worth of central irrigation pivots that span 259 hectares of land," said Schwartz.
"It provides a net passing income of $300k per annum and we expect investors will receive a total return on investment of 8 per cent per annum (IRR)."
Schwartz says the Triple-Net Lease provided a WALE (by income) of 6.4 years.
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