Foreign farm tax to drive agri REITs: Pitcher Partners

With tighter rules on foreign investment in farms, expect more listed agricultural trusts with everything from crops to dairy. (Photo: Michael Wood)
Australian Financial Review | 16 September 2018

Foreign farm tax to drive agri REITs: Pitcher Partners

by Matthew Cranston
Stricter rules on foreign investment into farms across Australia could hurt attempts by farmers keen to sell out and may trigger new listed real estate investment trusts (REITs) on the Australian Securities Exchange.
Under a proposal from the federal government entitled the "Making Sure Foreign Investors Pay Their Fair Share of Tax and Other Measures Bill", the 15 per cent concessional rate of withholding tax for foreign investors in agricultural land will be lifted to 30 per cent by July 1 next year.
Pitcher Partners executive director Stuart Dall expects this will deter the traditional route for foreign investors into farms.
"Previously, subject to overcoming the FIRB "yay or nay" approval process, foreign investors looked at wholesale Managed Investment Trusts as vehicles through which to structure their holdings," Mr Dall said, "But the proposed change should have the effect of dampening enthusiasm, in which case we may see more listed Agri-REITs created."
Mr Dall, who advised on the newly listed agri-REIT Vitalharvest Freehold Trust, said vendors of farm assets would need to look at different strategies when it comes to taking their properties to market.
"Agri-REITs could become a growing area. Sellers could pursue a dual-track strategy of exploring an asset sale or the IPO path, potentially reviving some of the competitive tension removed by the clampdown on foreign buyers."
Work together
"It could also allow several owners to work together to aggregate a portfolio of assets into a single Agri-REIT offering, or to fold their interests into an already existing REIT like Vitalharvest."
The listed space opens up deeper access to domestic capital markets, whilst still also allowing for foreign investment, albeit without the concessional tax rate.
"Agri-REITs don't exclude foreign investors, but they do provide them with an opportunity for part ownership of an asset or portfolio, as opposed to a controlling stake, which fits with the federal government's apparent policy objective."
A number of farm REITs have been considered this year already.
Original source: AFR

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