Growth Farms: New agricultural investment fund will buy and lease farm land

A NEW player in farm land leasing expects to invest $100 million buying rural property in the eastern states in the next few years.

A NEW player in farm land leasing expects to invest $100 million buying rural property in the eastern states in the next few years.

Agricultural investment manager Growth Farms has launched its Australian Agricultural Lease Fund with plans to raise $100 million to buy farms throughout eastern Australia and then lease them to existing farmers.

Growth Farms currently manages a large portfolio of farms on behalf of investors.

Growth Farms managing director David Sackett said the fund would buy medium-sized farms in the $3-$8 million category which would then be offered for lease to existing farmers looking to scale up their operations.

“We’d be looking for leaseholders with proven track records in farming who are looking to take on extra land and grow their businesses,” he said.

Mr Sackett, said the advantage of leasing was it gave farmers an opportunity to expand without having to find the capital to buy more land.

“Many existing farms are subscale and capital constrained. Leasing overcomes this.”

Lease payments would be based on ruling market rates which generally are around 4-5 per cent of the land’s capital value.

The fund plans to buy dryland and irrigation farms and water rights in higher rainfall regions, including North Queensland, Northern New South Wales, the Southern Murray Darling Basin, Victoria, Tasmania and South Australia covering dairy, broadacre cropping, vineyards, horticulture and grazing.

For investors the fund provides a stable cash flow based on rental yield and avoids much of the volatility that comes with direct exposure to agricultural markets.

Their investment would have two components, the stable lease income plus capital growth of the land which over 10 years would generate annual returns of about 10-12 per cent, Mr Sackett said.

The fund is targeting wholesale investors rather than small investors with a minimum stake of $100,000.

It is a closed-end unit trust with a term of 10 years, although unit holders will have an opportunity to vote on continuing the fund or winding it up after five years.