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Agri-Industry Summit 2017Thank you to our sponsors
10th and 11Th August 2017
Principle Sponsor
Gala Dinner Welcome Drinks
Coffee Cart
Artisan Showcase
Sponsors
Key Considerations in Attracting and Managing Investment in Agri Assets
InvestorsSyndexSyndicatesSyndicators
The opportunity for New Zealand agriculture
NZ Government set an aspirational goal in 2012 to double primary industry exports in real terms from $32 billion in June 2012 to $64 billion by 2025.
To achieve this, New Zealand's primary industries would have to grow at a rate of 5.5% a year through to 2025.
It was estimated at the time that our exporting businesses would need an extra $160 to $200 billion of new productive capital to reach this goal.
Major challenge….
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Primary Industry Exports Target(billions)
Target Actual Required Actual Trend
Growth required in subsequent years to reach the $64b target is 6.3% YoY
Source: MPI Situation and Outlook for Primary Industries March 2017
Major challenge….
“Farmers face significant challenges in raising sufficient capital to fund growth and support farm turnover.
Farm debt levels are already high and limited external sources ofequity capital are available to farmers….
New structures for owning and operating farms need to be encouraged to attract investment from domestic and foreign investors and capital markets.
These structures might include rapidly evolving equity partnerships, modern variants of share farming and use of off‐take agreements...”
ANZ Greener Pastures 2012
“Investment is vital for fuelling growth…
Higher rates of business investment can help drive productivity improvements and help our firms to grow and export….
While our rate of business investment is comparable to the OECD median, we need to lift it significantly if we are to improve productivity, grow our businesses and reach
our overall target of increasing exports to 40% of GDP.”
MBIE ‐ Business Growth Agenda | TOWARDS 2025
Major challenge….
Publically vs privately traded assets
Public MarketsCentralised, consolidated, regulatedHigh number of participantsInformation symmetry – continuous disclosure, transparencyPrice discoveryHomogenous (to a large extent within asset classes)High number of trades concluded very quicklyRelatively efficient
Private MarketsDecentralised, fragmented, unregulatedReasonable number of participantsInformation asymmetry ‐ limited disclosure, opaqueVery limited or no price discoveryHeterogeneousThinly traded market with trades conducted infrequentlyInefficient
What's the difference from a capital raising & trading perspective?
Growth in private markets
$3.6 $8.1 $21.6
$45.9 $68.8
$103.2
$154.8
$232.2
$348.2
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Total Funds Raised via Crowdfunding(NZ$ billions)
Actual ForecastSource: Massolutions 2015CF The Crowdfunding Industry Report
Investors typically interested in agri assets…
Sophisticated and Institutional Investors, both domestic & international
• Superannuation/sovereign funds• Fund managers• Private Equity Funds• Family offices• High net worth Individuals• Private groups or syndicates• Iwi
Seeking “legacy” investments, access to returns from the “food story”, access to food supply, exposure to land
Investment in real agri assets
Agriculture
ArablePastoral HybridForestry Horticulture
Investment Universe
Traditional Investments
Cash & Equivalents
Bonds
Equities
Hedge Funds & Liquid Alternatives
Currencies
Private Equity & Venture Capital
Public Real Estate
Alternative Investments
Real Estate
Infrastructure
Energy
Metals & Mining
Real AssetsFinancial Assets
Futures & Derivatives
ETFs
Investment categories
AgriInvestment Universe
Private MarketAgri Land
Private MarketAgri Business
Private Market Agri Tech
Financial Assets Real Assets
Public Market Agri Equities & Futures
Private MarketAgri Infrastructure
Public Market
Agri Exchange Traded Funds
Private MarketHybrid
Investment in real agri assets
Exposure can be through:
• Farm land
• The farm business, and
• A combination of the two more commonly know as an owner‐operator or hybrid model
Investment in real agri assets – Farm land only
• Investment benefits:
• Access to a yield via the ongoing rental income
• Access to capital growth on the land
• Investment risk
• Can be volatile
• Illiquidity risk
• Farming practices that jeopardise quality of the land
• Climate change
• Force majeure
Investment in real agri assets – Farm land only
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REINZ Farm Price Index
Farm Price Index Dairy Farm Price Index Trendline Trendline
Investment in real agri assets – Farm business only
• Investment benefits:
• Less capital intensive since the land is leased as opposed to owned
• Capitalise on efficiencies and productivity benefits
• Access to operating profits that are determined by commodity prices, production levels & operating expenses
• Investment risk
• Highly correlated with commodity prices so could be volatile – cyclical (futures could help in volatile periods)
• Illiquidity risk
• Weather, disease, climate change
• Force majeure
Investment in real agri assets
Some considerations:
• There is a strong case to keep the land and the farm business separate since they are quite different assets
• Land provides :
• Yield and capital growth
• Farm business provides :
• Profits from operating efficiencies and improvements in production
Structuring agri assets for external investment capital
Key considerations:
• Appropriate structure that provides for:
• The proportional ownership of the asset (shares or units)
• The transfer of ownership
• The introduction of new shareholders
• The separation of ownership and operation
• The need for liquidity to enable succession, sell‐down of equity or exit for share‐or‐unit‐holders
What are investors looking for …
Strong well articulatedClear Purpose
• Investors invest in the future• Need to be confident in ability of people to execute plan
Top PerformerOperational Excellence
• “Best in Class” on farm OR strategy to be the best• Demonstrated ability to get the most out of resource
Structure, management, operational staff have division of dutiesGovernance
• Structure, management, operational staff have division of duties
• High quality internal and external reporting (including audited financials)
Investors want to maximise certainty of the future
Transparent Credible
Projections• Ability to demonstrate how/why projection is achievable• Track record of accurate projections including differentiation between Opex and Capex
Track record of creating value for shareholdersValue Creation
& Performance
• Above market returns• Yield and capital • Benchmark and comparative measures
Need to be able to demonstrate a path to exitLiquidity
• Liquidity attracts a wider investor base• Liquidity reduces investors required returns through reduce the illiquidity risk
Agri-Industry Summit 2017Thank you to our sponsors
10th and 11Th August 2017
Principle Sponsor
Gala Dinner Welcome Drinks
Coffee Cart
Artisan Showcase
Sponsors
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