Rabo Farm offers second agri fund

Fund II will open up investment to new parts of the Eastern European region and offer a shorter investment period.

Rabo Farm, the agriculture fund management part of Rabobank, has launched its second Eastern European Union arable farmland fund, Rabo Farm Europe Fund II, offering a different structure to its first fund that closed in 2009.

Fund II has a life of up-to 15 years, an investment period of four years and a five-year divestment period. Fund I, which raised €315 million, has a 10-year life, with a possible four-year extension, an investment period of five years and a three-year exit strategy by comparison.

Fund II aims to invest further afield than Fund I committing 30 percent to other Eastern EU countries away from Poland and Romania, the sole focus of Fund I. Investments into Poland and Romania will still account for 70 percent of Fund II’s commitments. “These new member states of the EU are in a catch-up phase where agricultural productivity can be improved to help them converge with Western EU states,” said Paul Braks, manager of corporate strategy at Rabo Farm.

Fund II also hopes to raise €315 million, including a €15 million commitment from Rabo Farm, by March 2015 and expects the first close in the third quarter of this year. After the final close the fund will focus on upgrading the farms in its portfolio.

“We believe the solution to solving the food security challenge will come from increasing productivity and this is why we focus on upgrading the farms we buy — to increase the output per hectare,” Paul Braks told Agri Investor. “These upgrades are very diverse and can include improving the PH levels of the soil, implementing a whole drainage system and removing asbestos from farm buildings.”

Fund I made its first farm acquisition in 2009 after its first and final close and is nearly fully invested, said Braks. Fund I was bought by three global pension funds and Rabo Farm officials hope to fill the second fund with a similar type of investors.
“We have some lead investors in mind but we are still very much open for discussions with investors,” said Braks.

Rabo Farm follows a few different models of investment depending on the state of the farm at acquisition. In some cases it acquires the farm and leases it back to the farmer. “Many farmers do not want to put all their capital into the assets but focus on funding the operations so we can make them the leaseholder.”

If a farm needs a lot of upgrading, Rabo Farm will operate the property itself alongside local contractors until it reaches a suitable stage to be rented out again.

Eight-five to 90 percent of the fund capital will be used to acquire the land and the remainder will be used for upgrading the farms.
The minimum investment is €50 million and the fund is only open to institutional investors.

Rabo Farm does not use a placement agent.