Two brothers from Northern Queensland in Australia have set up a land leasing company, National Land Lease (NLL), after selling 180,000 acres of family land to a corporate fund and leasing it back under a long-term contract.
The transaction a few years ago highlighted the potential strength of the land lease market in Australia as demand for both farming investments and land leasing grows. The brothers officially launched NLL in March this year.
There are various reasons for this increasing opportunity including falling land values since the global financial crisis which has forced many landowners to re-think their position, according to Andrew Hill, co-founder of NLL.
The generational shift appearing in the farming community is another factor promoting the trend.
“Since we launched, we have had a huge amount of interest in leasing farmland from both the farm owners and potential buyers or lessees,” said Stuart Hill, co-founder of NLL. “Some farmers do not want to sell their asset but in planning their succession, leasing out their property to a good tenant is a very real business decision for them. Other farmers want to continue to operate their farms but want to unlock capital to improve their production, or plan for retirement, and so we find them buyers under a leaseback arrangement.”
Growing Asian demand for food has also made corporate farming and land aggregation increasingly important in Australia and has helped to increase the pool of potential lessees as farmers want to produce more to feed that demand.
And NLL plans to act as intermediary matching the right buyer to seller and lessee and providing planning and negotiation services. The firm will also manage the lease throughout its term.
It is targeting large investment firms and corporations looking to invest passively into Australian farmland and is predicting lease returns of about 4-6 percent each year.
The Agricultural Investment Development Corp, a specialist investment firm, also facilitates buy-and-lease investments and has helped to sell land to European investors in the past. It only leases the land to the top 10 percent of producers in Australia. These include both listed and family run operations that are in an expansionary phase of their enterprise. It handled the A$10 million purchase of a cattle farm in Queensland by a Swiss private investor and handled the leaseback to the farmer in February.