Australian FarmLand Investment Fund (The Fund)
Structure of the Fund
The Fund is an unlisted, open-ended Unit trust. The Fund will only be offered to investors who are “wholesale clients” as defined by the Corporations Act and thus there is no requirement for the Fund to be registered as a managed investment scheme with the Australian Securities and Investments Commission (ASIC). The assets of the Fund will be held by a custodian, CIPN, on behalf of FarmInvest Australia. FarmInvest Australia will issue Units as trustee of the Fund and as an authorised representative under CIPL’s AFSL.
Opportunity to Invest in Agricultural Land
The long-term objective of the Australian Farmland Investment Fund is to build a portfolio of diversified agricultural land assets which delivers optimal exposure to capital growth and ongoing revenue to investors whilst limiting direct exposure to commodity cycles and operational risk. FarmInvest Australia believes there is an evolving structural shift in the ownership and management of productive land in Australia, largely driven by the need to achieve economies of scale and production efficiencies. The speed of this shift is being enhanced by a generational change to facilitate an emerging professional farming segment while allowing an ageing farmer population to retire.
According to the Food and Agriculture Organisation:
- By 2050 there will be a global population of more than 9 billion people. Effectively, there will be 70 million additional people for agriculture to feed each year.
- Over the next 30 years, hundreds of millions of people will rise to join the middle class in developing countries. Increased prosperity will stimulate a change in dietary needs, generally comprising a rise in calorie consumption per capita and an increase in higher protein diets. Both increased calories and more protein require more resource intense production. This will, in turn, drive both carbohydrate and protein markets.
At the same time it is widely acknowledged that increased urbanisation and climate change are likely to reduce the availability of arable land and increase pressures on water resources.
While the investment varies between regions and enterprise type, good quality farmland can be purchased for $1,000 per tonne of wheat produced, compared to regions in Europe where this cost may be up to three times greater . In FarmInvest Australia’s view, Australian rural land in comparison with other regions of the world presents a compelling value proposition.
FarmInvest Australia believes that Australian agricultural land ownership structures will follow the United States and European trend where a greater proportion of land is leased to lessee farmers (see Figure 18). This creates a prime opportunity for new investment into Australian agriculture to complement capital needs to facilitate this trend in land ownership.
The Fund’s investment objective is to create a diversified low risk portfolio of rural property that targets a long-term net return derived from capital appreciation and income.
FarmInvest Australia intends to achieve this objective through:
- Acquiring a diversified portfolio of assets that include properties that can grow grain, wool, meat, horticulture and other agricultural commodities across a range of geographical locations.
- Applying selection methodology tools that balance income yield through historical capital growth with lease returns. (See Figures 5-11)
- Undertaking a thorough lessee selection process focussed on financial capacity, proven track record and property maintenance philosophy.
- Being focussed on efficient management and administration to control fee structures and management costs.