Two days since announcing plans to create a new $300 million Australian neighbourhood retail property trust, property fund manager Primewest (ASX: PWG) unveiled the acquisition of GoFARM Asset Management, and by extension, real estate investment trust Vitalharvest Freehold Trust (ASX: VTH), for $10 million in cash.
Part and parcel of absorbing GoFARM is that Primewest also acquires a 11.8% strategic interest in Vitalharvest with an attached right of first refusal over a further 6.2% interest in the company.
Primewest and GoFARM personnel have already agreed to a transitional procedure to ensure business continuity with both companies saying they intend to partner on future developments and acquisition opportunities.
The intention is to establish a pipeline of investment grade assets which could be acquired by Vitalharvest “if they meet its investment criteria”, Primewest said.
More broadly, the rationale behind the deal is to create mutual benefits for investors on both sides, with Primewest stating that Vitalharvest will benefit from its market presence and thrifty $43 million post-deal cash base.
The deal will see Vitalharvest obtain continued support from GoFARM specialists and is likely to experience enhanced brand awareness courtesy of Primewest’s existing market stature and fund management platform.
Vitalharvest’s core function is providing investors with exposure to actual agricultural property assets whose earnings profile and valuation are leveraged to the global agricultural market for healthy food.
The company currently wields a $275 million investment property portfolio and is valued at around $143 million by market capitalisation.
Currently, the company owns Australia’s largest aggregation of berry and citrus farms, licensed to Australia’s largest horticultural company, Costa Group (ASX: CGC).
Meanwhile, Primewest is one of Australia’s leading real estate funds management businesses, managing more than $4 billion deployed across multiple asset classes.
The company’s portfolio spans agricultural, commercial, convenience, industrial and other sectors across Australia and the US – market segments within which GoFARM and Vitalharvest add potentially crucial synergies given its existing interests.
According to Primewest, acquiring Vitalharvest will increase its assets under management by 7% to $4.4 billion and, in tandem, will establish its listed A-REIT platform in a sector with “strong fundamentals” including low correlation to market shocks, a sticky tenant base, rapid technology advances and amiable consumer preferences.
“This transaction is an exciting step forward for Primewest and consistent with the strategy to expand our distribution capability into listed A-REITs,” said Primewest’s executive chairman John Bond.
“Importantly, Primewest will co-invest along with other Vitalharvest investors as its largest investor. We look forward to working with VTH’s existing investors in its next stage of growth,” he added.
Post-transaction, Primewest said it intends to rename Vitalharvest to “Primewest Agri-chain Fund” and pursue a growth path focused on extending the fund’s exposure to agricultural property assets and turning its attention to “agri-logistics”-related assets. The new ticker, subject to ASX approval, will be ‘PWA’.
With investor support, the new fund is expected to focus not only on production assets but also consider processing, storage and delivery of food or other products within the agricultural supply chain.
“By expanding our investment opportunities to include the broader food supply chain, we believe we can attract a broader investor universe to support the fund’s growth,” said David Schwartz, managing director of Primewest.
“We aim to create Australasia’s leading pure play agri-chain A-REIT which leverages Australia and New Zealand’s position as a leading global agricultural supplier,” he said.