Agriculture is a fast-developing asset class among institutional investors that provides an excellent combination of security from the land, an annual cash yield and a potential upside from taking advantage of new Ag-technologies. Agriculture investors are exposed to sustained forces of development, or mega-trends, that are transformational to the world as we know it today.

Strategy

Depending on investors’ risk appetite, the asset class can be played throughout the value chain from upstream low risk real estate investments to downstream processing or infrastructure opportunities in different segments such as annual row crops, livestock or high value permanent crops. There is an endless amount of combinations, which is why it is important to focus on a specific strategy when choosing the agriculture investment manager. IWC’s strategy focuses on:

  • Farmland investments in Europe which could provide attractive additional return to investors
  • Buy-and-lease segment (in some cases buy-and-operate)
  • Mainly cropland, but livestock such as pig farming, can become relevant as well
  • Commodity crops (wheat, barley etc.) and high value annual crops (vegetables, potatoes, blueberries, etc.)
  • Conventional and organic farming
  • Access to irrigation.

Services & Investment Solutions

IWC provides tailor-made agriculture services and investment solutions to maximize value for each client.

SOURCING

  • Identify assets
  • Technical Due Diligence (soil analysis, infrastructure, micro climate).

DUE DILIGENCE & ACQUISITION

  • Land title
  • Legal & tax
  • Negotiate & manage acquisition
  • Structuring.

LAND MANAGEMENT

  • Lease management (find tenant, negotiate lease terms, monitor asset, lease collection, reporting to client).

PORTFOLIO MANAGEMENT MANDATE

  • Sourcing
  • Due Diligence & Acquisition
  • Land Management.

To know more about Agriculture services and investment solutions, please contact our Agriculture Investments team. 

Why Agriculture?

With an asset class valued at USD 8.4 trillion, crop production expanding threefold over the past 50 years, and projected increase of food demand by 70% by 2050, there is a strong business case to invest in agriculture.

  • Mega-trends exposure– growing population, increasing protein consumption, decreasing farmland, water scarcity and food health and safety to play important role in the sector development
  • Structural changes in ownership– generational shift and consolidation of farms, institutionalization of the asset class and long-term investment horizon, direct exposure ensuring low cost and governance control
  • Steady income with growth potential– safe and steady income from land leases, growth potential from efficiency gains (precision farming, consolidation of land, irrigation and other efficiency gains), current commodity crop prices at a historical low level; inflation protection built into the lease contracts with upside from higher commodity prices
  • Experienced management team– on average more than 20 years of experience in farmland investment, management, due diligence and governance across Europe; strong network providing sourcing investment opportunities and access to superior tenants advantages
  • Solid portfolio attributes– strong historical return-risk characteristics, low correlation to other asset classes, access to low-cost leverage, superior asset-liability matching with bond-like attributes and capital appreciation over time, relatively liquid markets for farmland and for land lease – especially for high quality soils.

Return drivers

Annual cash-on-cash yield – a buy-and- lease strategy is expected to realize a real gross cash yield of 2-5% depending on geography. Lease contracts are typically CPI-adjusted and often include an annual upward market price clause (tied to the market wheat price).

Valuation increases – only a moderate real price appreciation is expected in Western Europe due to implementation of precision farming, genetic improvements and other efficiency gains. In Eastern Europe, IWC expects farmland value to converge towards Western European prices due to land consolidation, adaptation of better agricultural practices, equalization of EU subsidies and other efficiency gains.

Risk-return profile 1997-2016