Milltrust builds dairy portfolio in New Zealand for buy-and-lease fund

Milltrust Agricultural Investments, the agri division of UK- and Singapore-based Milltrust International, has announced the acquisition of a 24.9 percent stake in Waitonui Milltrust Agricultural Holdings, owner and manager of a portfolio of dairy farms in New Zealand.

MAI made the investment via its MAI Buy & Lease (New Zealand) Fund, which was established in 2016 and has backing from UK institutional investors.

Waitonui Milltrust Agricultural Holdings is a new entity formed after the Milltrust fund built a portfolio of eight dairy farms in NZ: five on the South Island near North Otago and three near Taupo on the North Island.

Each set of properties are contiguous or located close to each other and each island’s properties is milking around 5,000 cows. The portfolio is one of the largest milk suppliers to New Zealand dairy co-operative Fonterra.

The total value of the assets held by WMAH is more than NZ$125 million ($86 million; €76 million), MAI said.

According to the New Zealand Companies Office, the other shareholders in WMAH are Gerard Donald, a local farmer and co-owner of dairy business Gardon who owns a 33.5 percent stake, and Waitonui Holdings Limited Partnership, which owns a 22.57 percent through its subsidiary Elderslie Holdings and another 19.03 percent stake through subsidiary Sunset Holdings. The ultimate ownership of Waitonui Holdings is unclear.

All the properties have been acquired on a buy-and-lease basis, with lease payments to deliver a minimum of 5.5 percent yield, MAI chief executive Griff Williams told Agri Investor.

“The strategy was to build a dairy business of scale that would allow us to have a vertically integrated, low-intensity operation. We’re not particularly interested in high stocking rates and a regime where you spend a lot of money on inputs, and [so] achieve a lot of production but end up paying for it,” he said.

Williams said that the beef business that came with having such a large-scale dairy operation was also a “nice diversifier” for the fund.

“[The scale] also enables you to have a lot more flexibility in times of climatic difficulty, not that we’ve really had that in New Zealand. It has been quite a long, hot, dry summer, so it does provide us with the ability to move stock from one island to another and enjoy the flexibility of that,” he said.

The business also grows all its own feed supplements, Williams said, giving it a buffer against feed price rises that typically go up with milk prices.

Williams described the fellow shareholders in WMAH as “some very well-known names in the New Zealand industry,” characterising them generally as “individuals or smaller entities related to the agricultural sector.” He declined to name the other investors.

“We were trying to really leverage off their experience and put together our own skill sets with theirs to establish an entity that could achieve our collective objectives,” he said.

Williams added that the New Zealand fund would target further non-dairy investments, including in permanent crops and horticulture, in a similar strategy to that which Milltrust has pursued in Australia.