Mark Sherwood discusses iPartners Koala Farmland Fund with Ausbiz

Posted on
18th August 2021
By Shannon Turnbull

Mark Sherwood discusses iPartners Koala Farmland Fund with Ausbiz

Koala Farmland Fund (By Shannon Turnbull, 18th August 2021)

Watch the interview here:  Interview


Now for something a little different. 

You've heard that stock market valuations are extremely high. 

Cash is yielding nothing. 

So many people are looking for alternatives, and we've got one that I don't think we've ever discussed before on the channel. It's koalas. 

iPartners is teaming up with the Koala Farmland Fund to create a bit of an unusual alternative asset. 

So to find out what's behind it, Mark Sherwood of iPartners joins us now. Mark, welcome to the programme. Look, it sounds out there, but I don't think it really is because when we're talking about ESG, one of the big focal points for many organisations now and I'm talking global organisations, for the UN etc., is biodiversity. So taking it past climate change to biodiversity 

is that the thematic that you're trying to tap into? 

Yeah, that's exactly right, Nadine, and thanks for having us. 

We're really, really excited and proud to be involved in this Koala 

Farmland Fund, but your comments are exactly spot on. 

In terms of this fund, it actually targets country or farmland in Southeast Queensland, whereby it essentially targets specific land that can plant trees and create Koala habitats whereby compensation that can be paid in what we call biodiversity credits. 

So in simple form, when a developer essentially wants to do any type of development, it could be schools, it could be buildings, it could be new land, a subdivision, if they are removing trees, there is these days a biodiversity cost or compensation that has to be paid for that. 

That developer essentially has really three options. 

One they can pay that offset directly to the Queensland government. 

Two, if they've got appropriate land, they can replant the trees themselves. It has to be on a 3 to 1 basis, or thirdly, they can outsource that process to someone else. 

And that's very much what this fund takes advantage of. So this Koala Farmland Fund essentially takes that outsourcing piece away for the developers, whereby they 

target appropriate land that can be essentially creating beautiful environmental habitats that are then zoned and protected right through eternity. And then that land can also be used 

for other investment purposes as well. That is particularly lifestyle, recreational facilities. 

You're talking about other uses of the land in terms of the buildings. 

A little bit of agriculture as well, apart from the trees. But the main source of income becomes those biodiversity offsets. 

Okay, so who are you partnered with in this? Is it with the government, I'm just a bit unclear. 

Or the developers? 

Sure, we're partnered with a group called Country Asset Management, have been doing this since 2015. 

They've actually already essentially acquired eight pieces of land that have all been very, very successful in doing this exact process. Country Asset Management, or CAM essentially know the regulations, particularly the state-based regulations, the 

federal and the local. 

There is 3 stages of regulations that need to be very, very well known, you're 

talking here about a seasoned agricultural team that understand the regulation they're working in and making the most of the income generation that can be sought in combination with a really, really positive environmental impact that we're talking about. 

Now, if I'm gonna put my money into a Koala Farmland Fund, how much can I expect to get back? How liquid is it? 

What are the risks? 

Because this is not vanilla investing at all. 

No, this is completely alternative investing. But it's really out there for people who who want that combination of a positive environmental impact when they invest, but also a fair and reasonable investment outcome. So in terms of answering a question, this fund targets IRR terms or internal rate of returns of about 12% per annum over the life of the fund. 

It is an 8 to 10 year investment, so it is a longer style investing, and that's because the process does take some time. The first stage of the process is to acquire the land. 

The second process is to start that tree planting. You're talking about planting up to 8,000 to 15,000 trees on a particular piece of land and then, essentially, the fund at the end will sell these properties as lifestyle type properties with the appropriate zoning on them. 

So in terms of investor distributions, distributions start to investors in year two. 

They'll start off small during that process, so call it 2% in year two. 

But by about year three, those distributions start to really ramp up, and that's because those biodiversity offset credits are coming through, those dollars from the developers are coming through. 

And those distributions from about year three are in the vicinity of 10%. 

And that's how you get up to the IRR of 13% per annum across that 8 to 10 year life of the investment. 

Well, Mark, thanks for getting us across that. Interesting biodiversity thematic there emerging. 

Mark, thank you. 

My pleasure. Thanks very much.