AT Colliers we have seen a trend of capital flows into horticultural investments changing from debt to equity, in the form of joint ventures, sale and lease back scenarios and through public share offerings. These inflows have targeted a range of horticultural assets from intensive tomato and blueberry developments to large scale almond orchard developments and other permanent crops.
Often this capital has been used to acquire direct competitors or undertake significant expansion such as what is being experienced in the almond sector. Investment has come in the form of several structured investment models, primarily utilising leasing options, with Colliers International estimating more than $3 billion worth of transactions have occurred involving sale and leasebacks in the past five years.
The two largest almond producing companies, Olam Orchards Australia and Select Harvest Limited are both currently involved in numerous large scale developments, with both having hybrid lease or development agreements in place. Such structures appear to be increasingly common as they provide different investors with exposure to different risk profiles, while collectively providing the sufficient capital requirements for development.
Another great example of equity driving growth was the recent announcement of Costa Group taking control of a large avocado property through a 20 year lease. The public announcement of the transaction had an immediate positive effect on Costa’s share price illustrating the market’s positive sentiment in horticulture and Costa’s strategy.
As free trade agreements improve access to export markets, investment in horticulture from these key trading partners will follow. This investment will increasingly be in the form of sale and leasebacks, joint ventures and public share offerings and is likely to drive more aggressive change in horticulture than traditional debt driven investments.
- Nick Cranna is Colliers’ director of valuation, rural and agribusiness.