Case Study

How a Family Office achieved income and growth from Australian farm assets.

Client: High Net Worth Family Office
Country: Switzerland
Farm Location: Western District, Victoria

 

Background

In 2013 Growth Farms was approached by a Zurich based family office seeking opportunities for direct investment in Australian farmland assets.  The family office client began working with Growth Farms and subsequently acquired two properties of about 1,100 ha in total in Victoria’s Western District region that are now operated as a consolidated lamb and trade cattle operation.

With its roots in investment and traditional industrial sectors, the family office client had decided to shift its focus to Australia following extensive research into the market and careful consideration of the outlook for the next 20+ years.

Why Australian Agriculture?

Australia has long been a popular destination for overseas investment. While the COVID-19 pandemic has slowed the global economy, Australia is on track to recover better and faster than most. Following more than 18 months of research, the family office concluded that by comparison with other countries, such as South Africa, Uruguay and Argentina, the Australian market had a competitive edge, with its stable political environment and mature financial markets.

In addition, the family office’s representitive had this to say:

“Australia already has a well-developed food market, is not as dependant as other European countries on government subsidies, and in the absence of sovereign risk all come together to give entrepreneurs confidence to invest in the market.”

Their strongly held opinion is that investors would struggle to find a safer alternative asset capable of producing the operational yields of Australian agricultural properties:

“Investors can make 2-4 per cent, as well as capital gains, which gives you 10+ per cent IRR; this is much better than having money in the bank incurring charges.” 

Aside from these attractive investment numbers, Australian land is still relatively cheap and accessible. It all adds up to make a very compelling story: the price of land, location, political stability, yield, and an understanding of environmental issues that pertain to agriculture. Also making agriculture investment very attractive is the continuing advancement of AgTech and the use of market data that gives Australian producers an edge. It means agriculture is becoming more technologically advanced and sustainable so that it is more productive and there is less harm to the environment. 

According to the family office, “People that buy agricultural land today, especially in Australia, are in a very good position to receive a solid return, especially when the technological advancements that are occurring in this industry are factored in”.

Internal Rate of Return (from 2015)

The Investment Process

The Growth Farms philosophy is to help investors acquire the right property based on an evidence-based approach. When finding a property investment for the family office client, Growth Farms targeted, high rainfall and arable land, as the priority. 

The family office client worked closely with Growth Farms’ Senior Portfolio Manager, David Sackett, to identify and evaluate a number of properties before making its western districts acquisition.  

“It paid off being patient and waiting for the right property to come along”.

“When we first met David, we trusted him immediately. The whole team at Growth Farms is very down to earth with many of them having the experience of having grown up on or owning their own agriculture properties in Australia. That is exactly what you want from someone who is managing your assets”. 

Under Growth Farms management, the farming operation has seen significant development and productivity improvement which has led to improved profits and cash returns.  The farming operation is now of a scale where further expansion based on the strategic selection of farm assets and carefully executed operational implementation can be expected to create a significant up-lift in farm productivity across the aggregated operation with enhanced profitability and enterprise value following.

The family office’s representitive offered the following observations, relevant to its dealings with Growth Farms: 

GF Farm Management

“We like the fact that the management consists of very experienced farmers.  We like the authenticity of the team.  We like the down to earth culture of the Growth Farms business and its first in class on farm management skills”.

GF Planning

“As Growth Farms clients we receive a detailed budget before the start of each year and detailed quarterly performance reports which incorporate clear KPIs”.

GF Communication

“We enjoy a very friendly relationship with our portfolio manager Jon Harpley, built on mutual trust and respect. Jon, and the Growth Farms back office team have always been very responsive in addressing our questions and requests for information. We value the transparency of their approach to communication”.

GF Account Management 

“In more normal times, we would visit Australia to inspect our properties on a regular basis, however, due to government restrictions related to Covid19 this is not currently possible. As an alternative, we recently scanned our properties using drones.  This has enabled us to observe the seasonal conditions of the farm and monitor pasture growth and other important elements digitally and through available 3D models. It is our expectation that regular drone enabled scans will deliver further insights for data driven decision making”.

For further information, please contact a Growth Farms team member.

Growth Farms Australia

93 Maybe Street, Bombala, NSW, 2632
PO Box 253
T: +61 2 6458 4926
E: info@growthfarms.com.au