Singapore based rural specialist Milltrust Agricultural Investments (MAI) plans to expand its interests in Australia – possibly by launching a $200 million listed property trust – amid renewed interest in rural properties from local and offshore institutional investors.

An arm of UK group Milltrust International, MAI recently sent representatives to Australia to sound out the market’s appetite for a real estate investment trust (REIT) based on Milltrust’s sale and leaseback model.

This entails MAI acquiring only the land and leasing it back to the existing farmers, who retain operating control as well as exposure to commodity price and other risks.

MAI is targeting land parcels of $34 to 40 million, with the aim of funding farmers to acquire more properties.

“Our model is to partner with families and help them expand their footprint,’’ said Milltrust International CEO Simon Hopkins. “The model also needs to protect investors from the vagaries of commodity prices and it needs to be a solid income-generating land-based investment.”

Having entered the local market 18 months ago MAI has assets with a book value of $80m, but a market value of more like $100m. These include Cottrell Farms, a 400 hectare plot near Mildura that grows citrus fruit, wine and table grapes and avocados.

“We are relatively new here,” Mr Hopkins said. “We need to get a few runs on the board and then seek to double in size.”

Mr Hopkins, who has a local farming background, said institutional investors remained wary about investing in agriculture, partly because of the misfortunes of managed investment schemes such as Timbercorp, Great Southern and, more recently, sandalwood grower Quintis.

“Everyone has a family member growing up on a farm and knows how tough it is,” he said.

“Now you have real insto money from US pension funds and Chinese backed investor groups. Every deal sees a huge number of interested parties circling around and interested in acquiring those assets.”

The trend is borne out in the Foreign Investment Review Board’s 2016-17 annual report, released last week, showing overseas investment in agriculture, forestry and fishing jumped 52 per cent in that year, from $4.6 billion to $7 billion.

Chinese investors accounted for $2.2b of the total, followed by investors from Canada ($1.5b) and the US ($900m).

But are some investors putting the cart before the horse?

Arrow Funds Management managing director Andrew Ashbolt said ”merchant banker” types connected to offshore entities were seeking to raise large amounts before acquiring assets.

“There are four or five people around trying to raise funds,” he said.

‘”They are raising $200m or $300m in advance and looking around for the next thing to buy. In my opinion it’s the wrong way to do it.”

With $250m of rural assets, the Melbourne based Arrow raised $17m late last year and expects to raise more from its investor base of super funds and high net worth individuals this year.

“We could buy half a billion of properties this afternoon and they might be half ok,” he said. “But we work out what we want before we raise the money.”

In a recent acquisition of note, London based private equity firm ADM Capital in January acquired a 400 hectare almonds property near Robinvale.

ADM’s head of agriculture Jason Silm previously headed Macquarie Group’s $1b agricultural funds management operation.

The purchase, for an undisclosed sum, marked the first Australian foray by ADM’s CIbus Fund, which is seeking to raise up to $US500m ($650m).

Earlier, the Ontario Teachers’ Pension Plan Board and the US-based Renewable Resources Group bought Macquarie Group’s 2900 hectares of almond properties, also near Robinvale, for $115m.

Currently the only pure-play listed farmland REIT of scale is the Rural Funds Group, which owns $687m of land producing almonds, poultry, grapes, cotton and cattle.

Milltrust’s Mr Hopkins said the fund would decide on whether to launch a REIT within the next 12 to 18 months. “We need to be able to show we are here for the long run,” he said. “No-one likes to see assets flipped.”