Super farm sell-off predicted

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TIAA-CREF's Jose Minaya (left) and Randall Pope. (Photo: Nic Walker)
Financial Review | 20 April 2015

Super farm sell-off predicted

by MATTHEW CRANSTON

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.
Original source: Financial Review
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