AP Pension hands over the reins of large agricultural portfolio

AP Pension is retaining majority ownership of the Farmland fund. | Photo: Ap Pension/pr
AMWatch | 05/07/2023

AP Pension hands over the reins of large agricultural portfolio

For almost ten years, AP Pension has bought farms for DKK 700m (EUR 94m). Now, private equity fund Erhvervsinvest will take over the administration and ”develop” the portfolio.

by Caspter Nørregaard & Dorte Stenbæk Bro
English edit by Katrine Gøthler

Danish private equity fund Erhvervsinvest takes over as investment advisor in the company formerly known as Dansk Farmland, which has now been renamed Erhvervsinvest Farmland.

The change means that Erhvervsinvest Farmland has now taken over from the former day-to-day management of Agrofond, which has managed Danish pension fund AP Pension’s agricultural portfolio throughout the first ten years.

”We have had a fruitful collaboration with Agrofond, but now it is time to pass the baton and get a new partner to further develop the portfolio,” says Peter Olsson, head of real estate at AP Pension.

Thus, AP Pension is passing on control of agricultural investments worth almost DKK 700m (EUR 93.98m) – A series of investments in agriculture that never became as large for the pension company as originally desired, but which caused considerable attention and something close to an outcry when the ambition to acquire and run agriculture was launched back in 2013.

With this also comes a farewell to both the management and the board of directors, all of whom have been replaced by company EIK Farmland Aps, which includes the private equity fund Erhvervsinvest’s managing partner, Thomas Marstrand.

However, these are mostly technicalities in the agreement between Erhvervsinvest and AP Pension, Marstrand states.

”AP Pension is still an investor in Farmland, and this will not change even if Erhvervsinvest takes over the administration,” he adds.


In addition to the administration, Erhvervsinvest also invests and gets ”a minor ownership stake” in Farmland in connection with the acquisition, which means that Marstrand and the other partners in Erhvervsinvest are investing money in the company themselves. He doesn’t want to disclose the size of the investment.

In addition to a prospective return on the investment in the future, the private equity fund will receive earnings from the management agreement itself.

AMWatch’s Danish sister media AgriWatch has spoken with Danish Farmland’s former chairman of the board Povl Fritzner and now also former managing director Hans Christian Jørgensen, who has, so far, been in charge of the practical administration of purchased farms and screening of potential acquisitions.

None of them wish to comment on what has happened in the companies, but they confirm that they have resigned.

However, Marstrand says that Povl Fritzner, Lars Langhoff and AP Pension’s head of real estate investments, Per Olsson, who together made up the previous board, will join an advisory board that will help the private equity fund make decisions about future investments.

Back in 2013, AP Pension caused quite a stir when it founded the company Dansk Farmland with the purpose of investing in agriculture.

Critics feared that AP Pension’s many pension funds would put farmers at a disadvantage when it came to purchasing land and farms - and that the much-vaunted self-ownership in the industry would be lost. Advocates, on the other hand, argued that the industry faced a massive infusion of capital - and that agriculture itself could not solve the problem of generational change from a large number of older farmers to a new generation.

In the first few years, AP Pension bought a small number of farms and the original DKK 500m (EUR 67.13m) was put to use. In 2015, the amount for which AP Pension could buy farms was further increased to DKK 700m. However, Dansk Farmland hasn’t come close to investing this amount.

According to the latest financial statement, Dansk Farmland had holdings, receivables and loans of almost DKK 700m in 2022. The company owns 12 subsidiaries that run agriculture on a number of farms.

Sticking to same business model

The business model of Dansk Farmland, now Erhvervsinvest Farmland, is that the company acquires the farm and the farmer then leases the farm in return for an annual rent.

Initially, AP Pension’s required rate of return from investments in land and buildings was 5.2% and 6.5%, respectively. However, after a few years of operation - and also a number of bankruptcies among the tenants - AP Pension had to adjust the required rate of return downward.

The farmer owns livestock and machinery. He also receives the ongoing profit from the actual operation of the farm. After ten years of operation, the farmer has the right of first refusal (ROFR) on the property - with a 20% ”discount” on the increase that may have occurred in agricultural land prices. If, on the other hand, the price of land has fallen, it is the pension fund that has to take the loss. According to AgriWatch, the first ten-year contract between the tenant farmer and Dansk Farmland expires next year.

Marstrand says that this model will not change under Erhvervsinvest’s administration.

”The agreements and terms will not change, but we will be responsible for the development of the portfolio, just as new investment opportunities may arise,” Marstrand asserts.

To date, AP Pension has purchased farms with a total of 13 tenants, several of which have multiple operating units.

No new acquisitions on the horizon

However, acquiring new farms and putting them under the Farmland umbrella is not on the horizon.

”Our initial focus is on further developing the current portfolio,” he says.

He does not want to comment on the individual development and investment plans for the farms, but says that it could, for example, be an expansion of production or the purchase of more land on specific farms. However, he also stresses that it’s not about the land, other or existing farms, but rather it’s about the fact that Erhvervsinvest sees agriculture and food production in general as a solid and less cyclical investment.

”We like investments that are stable in the long term, which is also why we have invested in companies related to agriculture in the past. It’s something that’s always needed,” notes Marstrand.

The private equity fund owns, among others, the Danish companies Bogballe and Bredal, which were recently merged by the fund, and both produce fertilizer spreaders, as well as the machine manufacturer, Agrometer.

(This article was provided by our Danish sister media, AgriWatch)
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