루마니아 농지투자펀드 Romland Agri Fund

Romland AgriFund Ltd provides investors with access to an actively managed portfolio of assets with limited correlation to traditional asset classes such as stocks and bonds. Owning agriculture land offers a safe investment option for investors pursuing capital preservation whilst simultaneously maintaining the opportunity for strong capital appreciation due to attractive long-term fundamentals of the sector.

The main objective of the Fund's investment activity is purchase large core holdings of agricultural land, purchase of neighbouring land, consolidating this and leasing out to credible farm operators.

The Fund intends to invest in agriculture based assets such as infrastructure, storage, buildings and agriculture machinery in order to increase the attractiveness of the Fund's holdings for tenant farmers in addition to increasing the overall value upon exit.

Romania has an abundance of low price and high quality agricultural land combined with EU security and stability. The Fund's management anticipates Romanian agricultural land prices to converge with international/EU levels for areas of similar quality. Although Romania’s agricultural land area is significant in size, due to a very fragmented land reform and restitution process, legal ownership is extremely convoluted.

Identifying and securing large plots of consolidated land is the single most important barrier to agriculture land investment.

 

Investment Drivers

 

Short Term Drivers : Capitalise on Scale & Quality of Undervalued Land in Romania

 

Acquire large consolidated holdings with high soil quality and at prices not available elsewhere within EU.

- Utilise National Rural Development Grants to develop farm infrastructure in order to enhance final sales value of property and increase attractiveness for securing tenant farmers, by offering complimentary facilities.

- Source reputable farm operators who pay premium lease for large consolidated plots with infrastructure in place.

- Financial crisis increases opportunities to purchase: i) large scale land holdings at a discount and ii) infrastructure such as silos, sheds, farm buildings and machiner

 

 

Medium Term Drivers : Investing within EU

 

- Security of legal and political framework provided by Romania's EU membership ensuring long term stability.                    

- Farm Subsidies underpinning increase in farmland values and convergence with prices of other EU member states.

 

 

Long Term Drivers : Shifting Macro- Economic Trends

 

- Rising populations, increasing use of bio-fuels, increase demand for protein and decreasing productive land.

- Opportunity for significant capital appreciation provided by ownership of a strategic resource. Romanian legislation permits undisputed foreign ownership of land in comparison to other agriculture land investment opportunities such as Africa, Ukraine and Russia.

 

EU Grants and Subsidies

 

The EU has allocated €8 billion to support Romanian agriculture up to 2013. Single Farm Payments under CAP scheme rising from €120 per Ha in 2010 to €318 by 2013 are accessible and payment distributions are improving driving demand for prime agriculture land by international tenant farmers. EU Rural Development Grants are excluded from Financials but the strategy will be to exploit them for infrastructure improvements.

Rural Development Grants: 50% of capital expenditure can be re-claimed up to a €1m non-refundable grant.

 

 

Fund Objectives

 

The Fund is seeking to capitalize on converging EU land values and rising soft commodity prices. The focus is on Romania due to an abundance of low price and high quality agricultural land combined with EU security and stability.

The Fund's management anticipates Romanian agricultural land prices to increase and approach international/EU levels for areas of similar quality. The Fund is well positioned to capture significant capital gains by taking advantage of the current financial crisis. There currently exists a window of opportunity for investors to purchase large tracts of agricultural land at very advantageous prices. There are a number of different factors producing a rise in the number of distressed sellers, while simultaneously restricting the number of buyers able to enter the market to take advantage of those opportunities:

 

- Short-term pressure on profits because of temporarily depressed commodity prices. This is further worsened by the fact
that input prices have not fallen to the same extent as crop revenues.

- Tightening credit policies of many agricultural lenders leaving many farmers struggling to obtain working capital.

 

This offers a unique window of opportunity for cash buyers. Although Romania’s agricultural land area is significant in size, due to a very fragmented land reform and restitution process, legal ownership is extremely convoluted. Identifying and securing large plots of consolidated land is the single most important barrier to agriculture land investment!

The main objective of the Fund's investment activity is purchase large core holdings of agricultural land, purchase of neighbouring land, consolidating this, leasing out to capable farm operators and finally divesting of the land holdings in accordance with the parameters specified in this Prospectus. In addition, the Fund intends to invest in agriculture based assets such as infrastructure, storage, buildings and possibly agriculture machinery in order to increase the attractiveness of the Fund's holdings for tenant farmers in addition to increasing the overall value upon exit. 

 

Investment Objectives

 

The Fund's Management Team will manage the portfolio of assets in order to increase the value of the Fund by delivering the following investment objectives:

 

- Provide investors with access to an actively managed Fund holding an asset offering strong investment benefits with
limited correlation to traditional asset classes such as stocks and bonds.

- Offer a safe investment option to investors pursuing capital preservation whilst simultaneously maintaining the
opportunity for strong capital appreciation due to attractive long-term fundamentals.

- Acquire core consolidated agricultural land holdings with any value-adding infrastructure.

- Increase the size of the each core holding by acquiring unconsolidated parcels.

- In caseS where the Fund purchases consolidated plots with a mixture of owned and leased land, the Fund will administer and control the process of converting leasehold into freehold and in turn consolidating each holding further.

- Provide a steadily increasing net operating income through leasing the owned land plots. 

- Maximize shareholder value through properly managing, advantageously acquiring, and suitably consolidating the Fund's
assets.

- Diversification of agricultural land portfolio in terms of geography and tenant operators through investments located in different regions of Romania.

 

 

 

 

 

Phase 1(1~5year ) : Core Land Acquisitions ( Consolidated Holdings)

• Approximately 70% of the funds will be deployed in acquiring core pre-consolidated land holdings and any existing infrastructure and machinery that provides added value for securing tenant farmers with a premium lease for properties with all facilities available.

Phase 2(1~7year ) : Portfolio Management

 

• The land is leased back to the existing farm operators to mitigate tenant vacancy risk.

• In the event that a deal with the existing farmer cannot be reached, or where a more competitive lease agreement can be obtained, the Fund Managers will arrange lease agreements with credible operators after a thorough due diligence has been carried out to avoid risk of default and improper land governance.

• The Fund is already in discussions with large foreign operators who are interested in securing lease agreements and in some cases, to lease out existing machinery and infrastructure.

• Acquiring existing infrastructure and machinery (in some cases retaining the management in place) increases the  attractiveness of the property to potential tenants farmers as they avoid set up costs and minimise lead times.

• The premium on the lease obtained by offering complementary facilities in some cases justifies acquiring and renovating existing machinery and infrastructure.

• Existing machinery may be obtained currently at a discount due to the financial distress in the sector and additional investments can be supported through EU grants.

• The Fund's portfolio will be appraised on an annual basis and quarterly reports will be provided.

• Tenant operator farming practices are monitored and reviewed with the support of the technical team.
   

Phase 3(2~6year ) : Asset Enhancements

 

• Approximately 15% of the funds will be used to increase and further consolidate core holdings via the acquisition of neighboring unconsolidated land parcels.

• Another 15% will be allocated to infrastructure improvements such as buildings, storage, irrigation and in some cases rehabilitation of the land.

• Investing in  infrastructure will be judged on a case by case basis, against the added value potential and whether the market for leasing the land with existing machinery (such as in the case where there are a number of active operators seeking expansion, or where the target site can be pre-let) justifies the required investment.

• Have complete registered ownership i.e. convert any leasehold property into freehold by the end of the funds life cycle.

Phase4( 7year +) : Exit 

• The entire Fund's portfolio will be disposed either through selling shares in the Holding Company or each property separately, increasing the Fund's exit options.

• Option to extend after the 7-year holding period.

 

 

Our Approach

 

A typical agricultural investment strategy is to assemble small strips of land and consolidate into large plots from scratch. Although delivering attractive returns it is subject to risks and lead times required to consolidate holdings.  Several investments in the Ukraine have undertaken purchase of long-term leases. Contracts acquired in 2008 by private equity funds for $1,000 per Ha are now trading at $500 per Ha or less. By contrast land values in Romania have held up in value. Apart from acquiring at the lowest prices available under the security of the EU, Romland AgriFund's core strategy is to target pre-consolidated holdings and structure lease agreements with tenant farmers; limiting commodity risk through fixed income element. The secondary strategy is to increase existing holdings and develop infrastructure that adds to the overall capital appreciation of the property as well as its attractiveness for credible tenant farmers who typically  pay a premium lease.

Large consolidated plots in Romania are available though limited in supply. The Fund has managed to successfully identify an attractive pipeline of investment opportunities consisting of more than 50,000 Ha of opportunities located primarily  in the South Eastern and Western regions of Romania.