Towers Watson: CEE region gathers attention

The Central and Eastern European region is beginning to attract more attention from fund managers looking to offer diverse alternative investment opportunities, according to Dania Zinurova, investment consultant at Towers Watson, specialising in fund manager research.

The CEE agriculture market is a long way from realising its potential in some countries such as Romania, where it represents just 7 percent of the country’s GDP, so investors are well placed to commercialise agriculture, and take advantage of sustained low farmland prices in the region, Zinurova told Agri Investor.

Romanian farmland values have already improved considerably over the past decade ­– up some 1,817 percent between 2002 and 2010 ­-, but from a low base, she added. “Even with this significant increase in values, Romania still has some of the cheapest farmland in the EU,” said Zinurova.

A farmland investment market is also developing in the Czech Republic where fund managers are offering opportunities suiting a range of budgets. Cesky pudni fond, a Czech farmland fund which launched last year, is one of a few funds that have established themselves in the country. The open-ended fund has raised $500,000 since it launched in 2013, and is targeting $1.6 million by 2016. At that stage the management firm wants to market the fund more publicly to garner more interest. All committed investors are high net worth individuals, but the fund is also in talks with two American family offices. And Petr Vomastek, co-founder of Cesky pudni fond, is optimistic about the future.

“At the moment, farmland prices are increasing 15 percent to 20 percent in certain areas of the country. It’s an investment opportunity which is being discussed more and more, and funds are emerging out of that,” he said. “There are about four established Czech farmland funds which have been around a few months,” Vomastek told Agri Investor.

Another Czech-focused farmland fund is Český fond půdy, also open-ended and currently on €6 million ($8 million) with a €10 million a year target. Elsewhere in the CEE region Rabo Farm, the agricultural investment arm of Rabobank, the Dutch financial, launched its second fund in March this year; a 15-year private equity fund targeting €315 million to invest into farms in Poland and Romania. Trigon InvestAg, a joint venture between the large Russian agricultural firm Trigon Agri and a UK-based fund manager, started raising capital for investments into Romania at the start of the year, and Cibus Farmland Club, a consortium of Dutch agriculture professionals, has created a boutique Romanian farmland investment management firm also investing in Romania.

Property acquisition in the region can be a challenge, however, argues Zinurova.

“The majority of land is still owned by families and private investors and often they are not utilising it but just holding it in order to exit and capitalise on this,” she said. “In order to successfully source deals in this region it is important to have a local presence and to hire local people with contacts, a deep understanding of the legislative system, regulations and other risks.”

Czech natives, Cesky pudni fond, have also experienced similar challenges and use an external agent to source acquisition opportunities. “If you want to buy land at favourable prices, it can sometimes be a difficult process,” said Vomastek. “There are many people you have to speak to in order to make an acquisition.”