Low interest rates, falling yields on listed shares and tenancy pressures in the wake of the Covid-19 pandemic are stoking interest in horticultural assets.
Over the past eleven months, Kiwi investors have purchased $129 million of horticultural assets in ten investments offered by rural property syndicator MyFarm, with more than $57 million of that sum invested since March.
MyFarm Chief Executive Andrew Watters said: "The main interest has come from more than 300 investors who have invested in six SunGold kiwifruit orchards making up $61 million of the total asset base with the remainder of investment into a hop garden development and three vineyard purchases.
"Investors have increasingly been seeking out real assets to supplement their returns in the face of declining interest rates and dividend yields from listed stocks. The normal go-to for real asset investment has been commercial property, purchased either privately, through private syndicators or through listed commercial property owners.
"The trend of wholesale investors considering high returning horticulture assets has been building, but it has gathered pace following COVID-19. Mainstream investments – bank deposits and the share market, are delivering lower cash returns and tenancy risks with commercial property are now apparent.
"By contrast, horticultural assets are generally performing very well as the world continues to pay very good prices for tasty and high nutrition value New Zealand products.
"Investors particularly like the returns and outlook for SunGold Kiwifruit orchards. Although real estate prices are high, SunGold orchards are very productive with top quality orchards earning between $150,000 and $200,000 of revenue per canopy hectare. Costs at 30% of revenue means that investment returns are extremely resilient, a key focus of investors during these uncertain times.
"Despite challenges through picking and packing this year's harvest due to level 4 and 3 lockdowns post-harvest operators and Zespri has performed superbly. Zespri has cleverly promoted SunGold as a source of high vitamin C which has seen them increase projected returns three times this season. The current forecast $10.50 to $12/tray outlook is well in excess of their long-term price range of $8 to $10/tray."