Equity partnership provides rare opportunity

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Equity partnership provides rare opportunity for urban investors to get into dairy

14 November 2011, Hawkes Bay. Rural equity partnerships are often like hens teeth to get into, as they very rarely come to market. Bucking this trend is Maire Hill, a Dairy conversion equity partnership currently seeking investors through agribusiness specialists, GlobalView.

Steve Goodman of GlobalView focuses on developing opportunities designed for investors in the form of equity partnerships or more commonly known as syndicates, across the sector. Professionally put together with a high level of analysis and risk management these equity partnerships provide the urban investor a chance to get a slice of a very traditional kiwi pie.

A working example in Central Hawkes Bay is the Maire Hill farm. Through the equity partnership the farm will be converted to dairy utilising the best farming practices and technologies. Ideally situated climatically in the rain belt, it has the potential to be a high producing farm. With a positive outlook in the industry and good average capital gains of over 8% over time not to mention the currently high cash yields, it is a rare opportunity.

Being a part owner of a professionally managed dairy farm also gives the purchaser rights to buy Fonterra shares, which is quite appealing for many investors who wouldn’t usually have this opportunity.
“Adding to the positive outlook there is a disconnect between current milk solid prices and land values with the cash yield over six percent. This is particularly good compared to other investment returns and combined with the projected capital gain as land values catch up,” says Steve Goodman.

“We get quite a mix of investors into these rural equity partnerships, whether they be dairy or other types of farming. Sometimes its urban investors wanting to diversity into the rural market and other times it’s retired farmers who know a good farm when they see one. They get the profit without the labour component making it an ideal retirement scenario,” Steve went onto say.

Diversifying your investment portfolio reduces your overall risk, which is an important strategy for most investors. But, the question that is often raised is ‘how to diversify’? For most urban investors this usually means some stock market investment, perhaps some rental properties either commercial or residential. It rarely means diversifying into agribusiness which has proven to be NZ’s supreme performer over time.

Why? Traditionally you needed to have enough capital to purchase a farm outright, which is out of reach for the majority of urban investors, and many don’t have the skills to know what a good purchase is, and how to effectively run a farm. In short, it is the too hard and too expensive basket.

Investing to the NZ rural sector is starting to become more common as larger commercial entities such as the NZ Superfund are getting involved, with their first farming purchase earlier this year.

“With push from international investors as well, New Zealanders are beginning to see the investment opportunity on their own doorstep. And, in this market, producing-land is a relatively safe investment,” commented Steve.

ENDS

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