AUSTRALIAN FARMLAND. Have you missed the train? START. Matthieu Favas, Editor, Agri Investor

Transcription

1 AUSTRALIAN FARMLAND Have you missed the train? START Matthieu Favas, Editor, Agri Investor

2 1 2 3 THE BOOM THE THREAT THE OPPORTUNITY

3 BIG DOLLARS BUMPER YEARS FOREIGN INVESTMENT IN AUSTRALIAN AGRICULTURE BY COUNTRY Investment in Australian farmland has boomed in recent years. Can it last? $5,116M CANADA $3,228M UNITED KINGDOM UNITED ARAB EMIRATES $3,881M CHINA HONG KONG $846M $763M $5,252M UNITED STATES $1,754M SINGAPORE Source: Foreign Investment Review Board Annual Report(s) Approvals by country of investor by industry sector.

4 CHUNKY SALES TOO MANY EGGS? LARGEST ASSETS Transaction value has been buoyed by a limited number of mammoth deals 2,870 ha MT SHANCK 41,500 ha IFFLEY, DEVERIL AND TWENTY MILE 27,000 ha SUSTAINABLE AGRICULTURE FUND Source: Agri Investor 15,000 ha GUNDALINE STATION

5 THREE YEARS AGO, FOREIGN INVESTORS WERE GENERALLY HAVING CONVERSATIONS ON THEIR OWN. BUT TODAY WE RE SEEING QUITE HEATED COMPETITION FOR ASSETS IN THAT $50 MILLION TO $200 MILLION CLASS, PARTICULARLY. THERE ARE MULTIPLE BIDS ON MOST ASSETS Rawdon Briggs, Colliers International

6 STATIC SUPERS NOT IN MY BACKYARD REASONS WHY Domestic investors have not been riding that trend. Super funds, in particular, have stayed clear of agri They lag in terms of education Local consultants are not familiar with agri The talent pool is growing, but still limited They got their fingers burnt 5-6 years ago

7 THE EDUCATION AND UNDERSTANDING OF WHAT ROLE AG PLAYS WITHIN A DIVERSIFIED PORTFOLIO IS MUCH HIGHER AMONG FOREIGN INVESTORS Pat Lash, REST Super

8 OVERSEAS BUYERS GO SHOP PERIOD LARGEST OWNERS OF AUSTRALIAN FARMLAND ( 000 HA) Foreign investors have filled the void, and are fiercely competing for assets. Some, like OTPP, have launched dedicated businesses United Kingdom China USA Netherlands Canada Switzerland Singapore Philippines 2,550 2,509 2,034 1,888 1,763 1,121 9,112 9,752 Saudi Arabia 660 South Africa 648 Source: Foreign Investment Review Board Register of Foreign Ownership of Agricultural Land

9 1 2 3 THE BOOM THE THREAT THE OPPORTUNITY

10 TILTING THE BALANCE REGULATION, REGULATION The Treasury has announced a new law requiring farmland deals bringing a foreign buyer s holdings above A$15m to be advertized for a minimum of 30 days THE GOVERNMENT HAS ACTED TO ENSURE AUSTRALIANS WILL GET EVERY OPPORTUNITY TO PURCHASE AGRICULTURAL LAND HOLDINGS BY INTRODUCING TOUGH NEW RULES Scott Morrison, Australian Treasurer

11 THE HAPPY FEW A HELPING HAND? INDUSTRY SUPER FUNDS AGRICULTURAL INVESTMENT HOLDINGS AustralianSuper % The government s aim is to ensure domestic bidders and their foreign peers are on equal footing. The goal is to boost supers investments in agriculture First State Super UniSuper Retail Employees Superannuation Trust Vic Super CareSuper Mine Wealth and Wellbeing Superannuation Fund MyLifeMySuper (formerly Catholic Super) Australian Catholic Superannuation and Retirement Fund NGS Super Labour Union Co-Operative Retirement Fund BUSSQ Tasplan Superannuation Fund Christian Super % 6.5% 5.9% 4.8% 5.9% % % 7.4 4% % % % % % Asset size (A$bn) 10 year average return (%) Source: APRA Annual Fund Level Statistics Survey of major industry fund and public information on funds websites.

12 UNINTENDED CONSEQUENCES OFF TARGET Of the sizeable sample of fund managers we ve polled since both foreign and domestic nobody thought the new rules were a good idea ONE IN FIVE DEALS THAT WE KNEW OF WERE OFF-MARKET DEALS THEY WILL BE AFFECTED. THIS MAKES THE PROCESS MESSY David Sackett, Growth Farms

13 INDEX IF FOREIGN INVESTORS FOR ANY REASON AREN T WILLING TO WAIT THE 30 DAYS AND TURN THEIR NOSES UP AT AUSTRALIAN OPPORTUNITIES THEN PRICES WILL CORRECT Pat Lash, REST Super IT SEEMS LIKE THIS LEGISLATIVE CHANGE IS NOW IMPACTING THE VERY KIND OF GROUP THEY WERE INTENDING TO PROTECT Jennifer Wainwright, Aux Venture MANY LOCAL SELLERS WILL BE WORSE OFF UNDER THE NEW RULES A Sydney-based agri consultant

14 TOP OF THE CYCLE? ANNUALIZED AGRICULTURAL RETURNS (%) WHAT GOES UP Other clouds are gathering on the horizon: prices have been rising, yields are declining and a string of large-scale assets may not always be available Q Q Q Total farmland return Income return Appreciation return Source: NCREIF

15 1 2 3 THE BOOM THE THREAT THE OPPORTUNITY

16 RICH PIPELINE UNDETERRED A handful of very large assets have hit the market, providing hope that large auctions, at least, are set to continue 400,000 head of cattle, across 5.5 million hectares 22,000 ha RUSHY LAGOON 18,418 ha CLYDE 18,783 ha KIA ORA Source: Agri Investor

17 NEW DYNAMICS SALE DRIVERS The slew of big deals is underpinned by macro trends, such as Asian demand for wheat and protein, as well as dynamics more specific to Australia Aussie farmers, on average are in their 60s Productivity gains are still possible New ports, railways are catalyzing consolidation

18 A QUESTION OF INTEREST KEY VARIABLE CASH RATE The future trajectory of interest rates, and the speed of their climb, may weigh on appetite to buy and sell % Source: RBA

19 BETTING THE FARM RAISING THE STEAKS SEEDS OF GROWTH Some are not waiting to find out Macquarie is raising a diversified cropping fund, targeting A$1bn AgCap is looking to launch a dairy-focused vehicle New crops are entering the fray, while the pendulum is swinging back towards sectors that had fallen out of favor Milltrust have a buy & lease strategy that now covers both Australia and New Zealand

20 Have some comments or tips for Agri Investor team? Get in touch with Matthieu Favas, Editor. Tel: