In case you missed it, last week Agri Investor held its inaugural Australia Forum in Melbourne, hosting nearly 200 investors, fund managers, government officials, consultants and corporates.
Yielding from various parts of Australia, Hong Kong, India, New Zealand, Singapore, Switzerland, the UK and the US, an engaged audience listened to panels and presentations discussing Australia’s place in the agri investment market, the different structures on offer, pension fund views, Australia-China links, climate risk, water and the country’s vast farmland market.
Everyone in the room had one goal in common: to help encourage further growth of the agri investment market globally. But there was plenty of discourse and debate around how best to make that happen. Here are five key takeaways:
1. Australian regulation isn’t a barrier
Regulation around foreign investment in Australia was a topic of conversation throughout the day, kicking off with a keynote by the Australian Trade Commission’s senior investment specialist, David Watson.
Watson said that updated foreign investment rules, now requiring farmland purchases of A$15 million or more to receive approval from the Foreign Investment Review Board (up from the previous A$252 million threshold), have encouraged a “narrative around Australia being a high cost destination to invest”, due to the time and financial costs involved in the review process.
But later panelists, including Macquarie Group’s head of agriculture, Elizabeth O’Leary, and Hassad Food’s John Corbett were more philosophical about the rules. Dealing with the FIRB is just a part of the job and gives the company an opportunity to prove the positive impact of their investments on local communities, said Corbett. And O’Leary argued that while the review fees are worrying, the process is an opportunity to collaborate with the government in the process. The FIRB has been very open to developing relationships with investors and understanding their needs, she said. “We have found the applications process to be very well administered and hit the target of under 30 days,” she said. “We need to respect process and invest time in it – don’t be fearful of it.”
2. Investment structures continue to evolve
The debate around the right structure for farmland investment continues. The suitability of private equity-style fees and exit pressures associated with 10-year funds were among concerns raised.
Direct investing versus fund investing was also a key talking point. Some managers acknowledged general demand among investors for more direct access to agriculture deals; for example, O’Leary noted Macquarie is exploring new products away from typical funds. But others argued strongly in favour of sticking with more traditional fund models, like Tim McGavin, chief executive of fund manager Laguna Bay. McGavin said that an increasingly competitive farmland market in Australia meant that investors needed to act more quickly than doing direct deals often allows.
3. Investors must be aligned with operators
A heavy-hitting panel of institutional investors stressed the need to be active investors – regardless of investment structure – and fully aligned with the operators of their agriculture investment to ensure not just financial success but that strong environmental, social and governance policies are adhered to. Investing in agriculture is a reputationally risky business. “You can’t hide behind ignorance,” said Neil Woods, portfolio manager, direct investments at NZ Superannuation Fund. But alignment can be tough: ensuring that the operator and investor agree on the use of leverage, reporting requirements, hurdles for reinvesting and liquidity events is not easy, they noted.
Equally operators need to be well compensated and feel valued. Fund managers speaking on a farmland-focused panel disagreed on whether operators should have “skin in the game” or just be paid reasonably high salaries for the task at hand. But all agreed operators and their families needed to be well cared for.
“People are everything,” said Edouard Peter, chairman of Duxton Asset Management.
4. More data is necessary, but how easy is it to collect?
The lack of timely and relevant land value and returns data to benchmark against was alluded to on various occasions during the day, especially on the investor panel where pension fund representatives argued it was holding some of their peers back from the marketplace.
Suggestions were made that estate agencies could start to collect data and there were suggestions that an Australia version of the NCREIF Farmland index, heavily used in the US, was in the making. Some panellists and audience members told Agri Investor that they were not convinced many farmers and investment managers would want to submit their data to such a cause. “Farmers are very private people,” someone said.
5. Our inaugural ‘Almanac’ provided key talking points
Each delegate received a copy of our very first Agri Investor Almanac, which gives an overview of some of the different geographies and channels for investment within the vast agricultural and agribusiness supply chain. Click here to read a digital version now.
PS Keep an eye out on www.agriinvestor.com for further coverage from Australia including video interviews.