Super farm sell-off predicted

20 Apr, 2015 07:57 AM
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TIAA-CREF's Jose Minaya (left) and Randall Pope. Photo: Nic Walker
The average age of farmers is increasing and there has not been a lot of succession planning
TIAA-CREF's Jose Minaya (left) and Randall Pope. Photo: Nic Walker

GIANT US investment fund TIAA-CREF expects Australia's ageing farmers and a lack of sons and daughters willing to inherit their farms will lead to large numbers of properties hitting the market over the coming decade.

The pension fund, which has bought just under $1 billion of Australian farmland since 2007, expects to increase its holdings as this trend plays out in Australia and to attract the nation's big superannuation funds to TIAA-CREF's innovative land investment model.

TIAA-CREF's senior managing director and head of private markets asset management, Jose Minaya, and the chief executive and president of TIAA-CREF's agricultural land manager Westchester, Randall Pope, have been in Australia to meet clients and set up an office in Sydney.

"There are some interesting demographics at play in the industry," Mr Pope said.

"The average age of farmers is increasing and there has not been a lot of succession planning done, so we could be on the cusp of seeing more land come available than we have in the past several years as a result of that.

"It is very difficult to divide a farm but easier to divide dollars."

The median age of agriculture industry workers in Australia is 50, according to the Australian Bureau of Agricultural and Resource Economics and Sciences' (ABARES) February workforce report. That is 10 years older than the general Australian workforce. Furthermore, about 95 per cent of farms are family-owned and operated.

"We believe that as a result of the lack of succession planning we will see more land become available over the next several years," Mr Pope said.

He added he expected it to happen gradually and suspects there will be no impact on land values.

This month, Australia's largest cattle station owner, S. Kidman & Co, came up for sale.

Owned by the Kidman family dynasty, the sale adds an element of poignancy to TIAA-CREF's observations on increased family divestment and lack of succession planning.

Mr Minaya said that cattle station operations would not be part of the group's future acquisitions, which are made with 100 per cent equity and focus entirely on cropping land.

"Not investing in cattle doesn't mean to say that its a bad investment; it just means its a different risk-return profile," Mr Minaya said.

Mr Minaya said that as TIAA-CREF grew its Australian portfolio, he had noticed more interest from offshore and local institutional investors.

"The pool of partners has been growing," he said. "We would like to think that it will continue to grow as we continue to scale our operations.

"We think they would be great partners for us and we think it is a market where I truly hope we start getting much greater partnership and collaboration between TIAA-CREF and some of the Australian super funds."

Westchester's Mr Pope said the TIAA-CREF's strategy was different to anything that had been done in Australia before.

"Our leasing strategy has not really been employed. Every strategy in the past here has been a direct operating strategy, which is much more volatile," he said.

"I think when the super funds look at the history of what is going on, they don't really understand the leasing model we have yet, and so they ask questions about that."

Key pointsGiant US pension fund says demographic trends will see a surge in Australian sales.

TIAA-CREF expects to lift its $1b farmland holdings and to attract the local super sector.

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READER COMMENTS

Frank the Furious Farmer
20/04/2015 8:20:43 AM

The more important question is what is actually for sale when the properties are leasehold and hence any kind of development cannot be justified!
sarcy
20/04/2015 8:27:40 AM

what are u saying, the sons and daughters don't believe that equity pays the bills?, or that maybe the real economic story is not being told and that the banking system has deliberately destroyed their future, aided by gov't legislation that has chosen a generation to be rich while its children are captives. Or maybe it makes u rich if u own city property?, interest rates stay low forever don't they. Why do we let these super mobs/overseas govts lease our land and distort farm values?, if they weren't allowed to, those children might return and make a living more in line with the farms value.
Jacky
20/04/2015 2:02:35 PM

"a lack of sons and daughters willing to inherit their farms". This hits the nail on the head. Many young men and women would love to be in a position to buy a property but the bulk of the properties are only to be had through inheriting either the property itself or the wealth to purchase.
Freshy
20/04/2015 4:10:05 PM

Australia needs to re-aggregate farms...and the way to do this is for equity partnerships, farming families working together and building bigger more resilient businesses. All the money in the world and an excel spreadsheet will never replace real knowledge....as farmers we shouldnt be looking to up the likes of Westchester, they should be looking up to us with skills and ability. In reality this offer big opportunities if handled correctly
qlander
20/04/2015 5:18:33 PM

The elephant in he room is the age of farmer workers. You can buy all the farm land you like, but who's going to work it?
Jock Munro
21/04/2015 4:18:16 AM

Australians should question where we have gone wrong as a Nation, when a foreigner who has already spent a billion in a buy up can say that we don't want to own our own land.
Makka
21/04/2015 7:29:46 AM

Freshy- "getting bigger" is exactly what has got so many farming families into dire financial situations. The ones who were happy to coast along on their inheritance are still doing quite nicely.
Roger Crook
23/04/2015 11:44:58 AM

Why foreign investors find Australian agriculture attractive when Australians with money do not, is a serious question which Australians do not seem prepared to answer. So to is the average age of farmers, put the two together and we have what could be the perfect structural storm for Australian agriculture. What does the future hold? Why are we where we are? What can we do about it. I invite readers to go to www.globalfarmer.com.au and to an article I wrote in February last year called 'No More Farmers'. We have every right to be concerned, in the WA east ABARES puts the average at 63.
Kanzi
23/04/2015 12:28:00 PM

There are two sides to a coin and in this case, more leased land means more opportunities for young and keen farmers who have not inherited 5 million$ worth of land. Good news for them, if they can lease land, buy some gear and have a go.
Jock Munro
23/04/2015 5:50:39 PM

Buying land is a better option for young farmers. Leasing can be a form of slavery.
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