_Farmland increasingly on the radar of private investors & family offices

Selling the biggest farm in the world takes more than an advert in the local press, so when Knight Frank was approached to help with the disposal of Australia’s Consolidated Pastoral Company (CPC), which owns a 12.75 million-acre portfolio of land in Queensland, the Northern Territories and Western Australia, a worldwide campaign was launched.

High-net-worth individuals from almost 50 countries were discretely approached. “The feedback was hugely positive,” says Knight Frank’s Head of Farm & Estate sales Clive Hopkins. “Although farmland is still considered a niche asset by those unfamiliar with its benefits, its appeal is certainly broadening.”

Unlike many other property classes, agricultural land is more than just an investment. “In certain parts of the world, for example, limited soil and water resources mean food security is a serious issue and acquiring productive farmland in other regions is a political imperative,” explains Clive.

The rapidly increasing spending power in developing countries – Asia’s consuming class is set to rise to 1.6 billion people by 2030 – is also driving demand for a diet richer in high-quality protein like beef, pork and lamb, he adds.

“All of these factors helped to generate significant interest for the CPC portfolio from private and institutional buyers, particularly from the Asia-Pacific region.”

The US is a well-established destination for institutional and private investors. “The model there is much closer to traditional commercial investments like offices,” says Andrew Shirley, Head of Rural Research.

“You buy the land and rent it out to existing farming businesses generating a straightforward yield. With good advice you don’t need to be an expert.”

Land values continue to rise in Canada, which on the surface, offers the best value arable land in the world. Foreign ownership of land though is strictly controlled. Latin America has seen significant volumes of foreign investment in the past, but the current political and economic uncertainty in the region has tempered that trend.

Africa is also an investment hotspot, although it tends to attract more experienced investors who are happy to take a hands-on approach, says Susan Turner of Knight Frank South Africa, who works across the continent. “The international funds I’m involved with are usually specialists with a deep understanding of agriculture.”

Australian agricultural businesses like CPC are well placed to benefit from changing consumption trends in Asia

Opportunities abound across Africa, but Zambia and Tanzania currently have the broadest appeal because of their political stability, access to markets and proven agronomic potential, says Susan.

“Agri-business in Zambia is exceptionally well developed and many of the livestock, dairy and cropping units that we sell are as sophisticated as you would find in places like the UK,” says Tanya Ware, who runs Knight Frank Zambia’s Farm Sales team and is currently selling productive businesses in the country and its neighbours including Mozambique.

However, new markets are developing or re-emerging, points out Susan. “The government in Malawi has started a new scheme on its side of Lake Malawi to attract more commercial investment. Until now, the lake’s potential has not really been utilised.”

Zimbabwe, formerly known as the breadbasket of Africa, is also back on the radar following the departure of long-term leader Robert Mugabe, she adds.

“People are still waiting to see how the political situation develops, but the new government has already said it is prepared to offer long leases on farmland to former farmers and other investors.”

Eastern Europe and the CIS offer an interesting mix of investments, although private investors and farming companies are the biggest players currently, says Carl Atkin of consultant Terravost.

“Because of sanctions there virtually is no inward investment from Europe or North America going into Russian agribusiness at the moment, although there is some Chinese and Middle Eastern activity and quite a lot of domestic consolidation going on.

In the Ukraine, we’re not seeing any big institutional moves, but the big agro-businesses there are generally doing well at the moment. Private capital and family offices are interested, but it’s from an operating perspective rather than as a property investment as the moratorium on private landownership is still in place, despite ongoing rumours it could be lifted relatively soon.”

Romania probably offers the most welcoming environment in the region for overseas investors at the moment, says Mr Atkin. A UAE-based group has reportedly made a $500m,150,000- acre investment in the country, with several funds also active.

“Poland is still of interest, but under the current government the climate is a bit more negative towards international investment.”

In Ireland, the farmland market rebounded by almost 4% last year after declines in 2015 and 2016, says James D Meagher, of Knight Frank Ireland.

“The investment market was particularly buoyant in 2017 with wealthy domestic private investors with long-term horizons dominating the market, although private buyers from the United States and the United Kingdom were also active.

We have seen enquiries from international institutional buyers, but they have yet to engage in a significant way.”

This article appears in 2018's The Rural Report - a unique guide to the issues that matter to landowners.

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