Nuveen reaps rewards of steady agricultural focus

Nuveen’s global head of alternative asset investments John Goodreds. (Photo: John Feder)
The Australian | 6 September 2017

Nuveen reaps rewards of steady agricultural focus
by Sue Neales
The purchase of more Australian farms, agribusinesses and food processing plants is high on the agenda of one of the world’s biggest investment managers, the Chicago-based Nuveen.
Formerly known as TIAA — the $US900 billion ($1.1 trillion) fund holding the retirement savings and superannuation assets of America’s teachers and university professors — Nuveen has long focused on the purchase of farmland and forestry reserves as a key part of its diversification strategy.
Nuveen’s global head of alternative asset investments, John Goodreds, visiting Australia this week to address a superannuation convention, said yesterday that farmland had become a staple of TIAA’s investment plans.
Nuveen owns $US6bn of farms around the world — most located in the US, Australia and Brazil — covering 700,000 ha.
About $US750 million has been spent buying Australian grain and cropping farms in the past decade, with Nuveen holding considerable rural assets across NSW (117,000ha), the Darling Downs in Queensland (30,000ha), Victoria’s Wimmera region (7000ha) and Western Australia’s southwest grain belt (122,000ha).
Its buying spree attracted particular attention in 2012 when TIAA-Westchester bought 17,200ha Cobran Station in NSW for about $18.5m to lease out to the US-owned Auscott cotton company.
Mr Goodreds said the business’s proven investment strategy was to mitigate and spread risk by buying farmland in geographically separate regions, to own the properties for more than 10 years and to focus on grain, grapes, fruit, vegetables and tree crop production rather than livestock.
A common philosophy of Nuveen — which is better known in Australian agricultural circles through its farm purchasing and management arm Westchester — is to buy the farmland and then lease it out to local farmers.
Mr Goodreds said the average return for Nuveen from its agricultural investments was 8-10 per cent.
He said there was no reason for investors — particularly Australian superannuation funds — to steer clear of owning farms purely because they were worried about the vagaries of nature and seasons.
“Our view is a land-based approach — very rarely do we farm ourselves — based on cropping and a globally diversified portfolio, 50 per cent of which (by value) is US farmland,” Mr Goodreds said.
“In our view it is very important (when investing in agriculture) to be patient capital with a long-term investment horizon — thinking in terms of 10 years plus — with (assets) in each country spread across different regions and different crop types to mitigate some of the risk in agriculture.”
He said the reluctance of Australian superannuation funds — which have only invested about $2.6bn of the more than $2.2 trillion of retirement savings they manage in local agriculture — was due to the time needed for thorough research.
“It’s about forming long-term partnerships and diversification, and investing globally as well as within Australia. If you have had a choppy ride in the past it does take a while to analyse the data and research how it will benefit your portfolio,” Mr Goodreds said.
Nuveen’s only exposure to value-added agriculture in Australia is through its 19.5 per cent purchase of listed Ridley stockfeed company, now housed within a specialist private equity agribusiness fund run by Nuveen and California-based AGR Partners.
“Australia is one of their targets in the agribusiness sector; (we want to) move down the supply chain and here we find (intensive) protein production and food processing at a high level are two attractive segments where we would like to invest more,” Mr Goodreds said
“Australia’s real competitive advantage is its proximity to Asia and its growing population and middle class.
“A growing population means need for more and new food, and agricultural infrastructure has to grow along with it.”
Original source: The Australian

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