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Craigmore Fund II secures cornerstone investor

Craigmore’s second fund has collected a number of soft commitments ahead of a first close expected shortly.

Craigmore Farming Partnership, a New Zealand investment and private equity firm, has secured a cornerstone investor and a number of soft commitments for its second fund.

Craigmore Dairy Partnership II is targeting NZ$350 million ($224 million; €197 million) to invest solely in dairy. It expects to confirm a first close shortly and is aiming for a final close as early as possible in 2016, chairman of Craigmore Sustainables Nick Tapp told sister publication Private Equity International.

Investors in the fund are from all over the world, he said, adding that the company “always welcomes local investors and our structure includes co-investment by our senior operational managers”. The company’s principals are all New Zealanders, he noted.

He emphasised that Craigmore continues to make investments in the dairy sector throughout the commodity price cycle, including during the recent fall in the price of milk.

“Farmland ownership and operation is a long term investment, and we can see that the range of opportunities vary with the much shorter commodity price cycle,” he said.  “We are not basing our decisions solely on the short-term milk price, and do what most farmers do and look at the average commodity price over the medium-term, and the longer-term issues around global supply and demand.”

In terms of competition for deals in New Zealand and Australia there is “almost nothing done”, he said, adding that agriculture and farmland deals are very difficult to execute.

“The challenge is the extraordinary varied nature [of the asset], the exposure to weather and the vagaries of commodity price movement,” Tapp said.

Each deal has to be assessed on its own merits, he explained. “Agriculture is remarkably specialist. Everyone [in Craigmore] comes from an agricultural background. You can’t jump from investment banking to running a farm straight away,” he said.

All Craigmore’s investments are in New Zealand – in sheep, red beef and horticulture as well as dairy. In terms of investment possibilities we are “always interested in what’s going on,” he said.

Foreign investment rules in most countries, such as Ukraine and China, prevent international investors from investing in farmland, he noted, citing property ownership and security issues. North America, the UK, Australia and New Zealand are exceptions. New Zealand has, however, recently turned down an attempt to buy farmland by a major Chinese private equity investor.

“The OIO [New Zealand’s Overseas Investment Office] process is transparent and recognises the value of incoming capital,” he said. “What New Zealand has is a very sensible set of rules”.

Reporting by Lucia Dore.

This article has been corrected: It incorrectly referred to Craigmore Dairy Partnership II as Craigmore Farming Partnership II.