Your funds will bear fruit in new trust that grows profits on farms
DEMAND for food is growing as the population increases and incomes rise in poorer countries. At the same time, fires and floods are becoming more common and temperatures are rising worldwide.
Against this backdrop, good agricultural land is becoming more valuable and top farmers are in demand – those who can improve yields, use less water and show that they are environmentally aware. The Global Sustainable Farmland
Income Trust is designed to give investors access to productive farmland and pioneering farmers around the world. The first of its kind, the trust is expected to deliver total returns of 7-8 per cent a year, including dividends and capital growth.
The Trust hopes to float on the stock market at the end of February and investors can subscribe for shares until 25th of that month. Shares will be listed at $1 (77p) each and there is a minimum investment of $1,000 (£770).
The company is using dollars because much of its land will be in America and most crops are sold in the US currency. But the shares will be listed in London and dividends can be paid in sterling or dollars, as investors choose.
The Trust has been set up by a trio with decades of experience between them – Kristof Bulkai, an agricultural investment specialist, Ian Monks, a rural property expert and Sven Miserey, a financier and former banker. A portfolio of up to 30 farms has already been identified and 18 sites have been earmarked for purchase over the next six to 12 months.
To reduce dependence on any single crop or region, the farms span the world – including Tasmania, New Zealand, Portugal, France and Denmark, as well as the US. The group is steering clear of commodity produce, such as wheat and soya, focusing instead on fruit, vegetables and nuts, such as lettuce, blueberries and pistachios. There is a vineyard in the pipeline too and a couple of cattle farms, for both beef and dairy production.
Despite the variety, the farms all share certain characteristics. They are near to a long-term, reliable water source, they are environmentally sound and they are well positioned in the market. That means that surrounding infrastructure is good, they are close to end-buyers, such as supermarkets and they can deliver better than average yields.
Farming is in the throes of significant change. In past decades, the abiding belief was that yields were best improved by doing more – ploughing more, adding more fertiliser and using more pesticide. Today, technology is helping farms to do less and use less.
Sophisticated algorithms can show precisely how much fertiliser and pesticides individual crops need and there is increasing emphasis on disturbing the soil as little as possible because it captures carbon when left alone, so helping to reduce emissions.
Robots are even being developed to weed the earth and pick crops, cutting the need for extensive ploughing and large numbers of manual labourers.
Innovative farmers are adopting this so-called ‘agtech’ to boost yields, reduce costs and preserve the environment. And the Global Sustainable Farmland Income Trust intends to work with these forward thinkers across its portfolio.
Most of the farms on the Trust’s list have been in the same family for generations but they need money to grow and benefit from the latest technological advances. There are also opportunities to buy land from farmers nearing retirement age, whose children are uninterested in agriculture.
Bulkai and his colleagues make good new owners, with their focus on sustainable methods and a wealth of experience in the field. The team is hoping to raise $300 million on the stock market and early indications suggest that big institutional investors are keen to subscribe. Data on US farms going back 40 years shows that they deliver an average annual return of 12 per cent so, if the Farmland Income Trust gets it right, the rewards could be very tempting.
The Trust is targeting dividend income of around 2.5 per cent in year one, as it buys up farms. That income should rise to at least 4.25 per cent within a couple of years, based on rents from tenant farmers.
Managers are hoping to make additional annual payments too, as there will be revenue share agreements with several farms, where the Trust will be entitled to extra cash if crop yields are good. This could take dividend income up to more than 5 per cent. MIDAS VERDICT: The Global Sustainable Farmland Income Trust should deliver healthy returns and provide access to a different type of investment, with a track record of success. For long-term investors, this float merits attention. To be listed on: Main market Ticker: FARM Contact: farm-In.com or 020 7193 1645