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CowBank Dairy Farmland Fund
CowBank Pty. Ltd.
Rod Banks – Managing Director Suite 1103, 9 Yarra Street PO Box 343 South Yarra, VIC 3141
Australia P: +61408131706 E: [email protected] www.cowbank.com.au
CowBank: a 12 year track record
CowBank is an established dairy industry financier and
asset manager.
In 1999 CowBank designed and commercialised a rent-to-
buy product that enables capable dairy farmers with
limited capital to rent and eventually buy their dairy herd.
CowBank has since funded over $60M of cow herd assets,
with proven dairy farmer credit and asset management
systems. CowBank’s client base exceeds 250 farmers,
across farmland worth more than $600M.
In 2004, CowBank conceived and developed a corporate
dairy farming investment with employee farm
management. The corporate dairy farming concept was
promoted with Warakirri Asset Management, raising
$100M from institutional investors and commencing
operations in 2006. As management advisor CowBank
played a key role in development of the farm portfolio,
management systems and processes. CowBank’s active role
concluded in 2010, with the investment well established
and stabilised.
CowBank has a diverse team with broad experience and
knowledge in farming, agribusiness, investment
management, commercial/investment banking, food
manufacturing and marketing.
CowBank’s Dairy Farmland Fund is a unique farm
management model for dairy farmland that capitalises on
CowBank’s proven capabilities. This model will create an
investment portfolio of prime farm land under scalable
“rent-to-buy” management.
A unique investment in pasture-based dairy
farmland that targets quality land and water
resources. Enabling investors to benefit from the
global population’s growing demand for quality
dairy foods.
CowBank’s Dairy Farmland Fund (DFF) presents an
opportunity to invest in premium agricultural land
generating a consistent income stream. The fund provides
investors with a scalable and cost-effective opportunity for
defensive long-term capital growth.
Fund equity will be invested in high-quality established
pasture land with well-developed dairy infrastructure.
Farms will be tenanted, with rental growth underpinned by
the global demand for dairy products.
Structure:
High calibre dairy farmers will be “rent-to-buy” tenants and
minority co-owners of each farm. This provides a safe
transitional capital structure that is currently unavailable to
farmers. The opportunity will attract quality next-
generation farmers and encourage a long-term outlook on
farm asset development and custodianship.
As asset manager, CowBank will launch this product in
Australia with approximately $A350M to be invested over 5
years. There is significant future potential to extend the
“rent-to-buy” model to New Zealand, as well as globally
and into other agricultural land uses.
Returns:
The Fund is expected to generate a total pre-tax return of
11.5% per annum, with a total operating yield from land
rental, finance and milk aggregation of 6.2% per annum.
The DFF is insulated from the volatility of seasonal and
agricultural operating risks.
The total return is influenced by the future demand for
dairy products and capital growth in land asset values,
driven by demand for the finite supply of quality
agricultural land in the developed world.
CowBank’s Dairy Farmland Fund
An Innovative Farm Portfolio Management Model
As asset manager, CowBank will draw on its extensive experience and established processes to manage the farm
portfolio.
CowBank will identify proven high-calibre dairy farmers as “rent-to-buy” tenants for individual farms. The farmer
operates the dairy farm, managing and absorbing the operational and climatic risks. Investors receive secure rent,
which is insulated from the volatility inherent in agricultural production.
Each farmer becomes a minority co-investor in the farmland they operate, aligning long-term farmer and investor
interests. This is comparable to “Fund-of-Funds” methodology, where the selection and success of individual asset
managers is fundamental to portfolio performance.
Farmers have the opportunity to increase their investment share over time and eventually buy-out the fund at market
value. This enables investors to realize equity growth in land assets, increasing liquidity within the portfolio and
providing an additional exit pathway.
A unique investment in pasture-based dairy farmland
The Dairy Farmland Fund is underpinned by Australia’s global
competitive advantages in dairy production.
The fund provides an opportunity to invest in a scalable real-
asset portfolio, across selected areas of Australia. The DFF will
acquire high quality, established pasture farmland with well-
developed dairy infrastructure and water resources.
Diverse low-volatility income streams are derived from land-
rental, land-finance and milk aggregation; plus equity growth
in dairy farmland ownership.
The DFF will control an aggregation of milk that is valuable for
both domestic and export processors, at a time when there is
tight supply and growing demand for milk products.
Investor and farmer interests are aligned by creating future-
focused relationships with skilled and motivated farmers.
Dairy Farmland Fund
Investors
Shared ownership of many Individual Farms
Assets
Dairy
farm
asset
Dairy
farm
asset
Dairy
farm
asset
Dairy
farm
asset
Dairy
farm
asset
Dairy
farm
asset
Dairy
farm
asset
Asset
Manager
The DFF addresses the most significant difficulties with farmland investing;
specialist management, insulation from operating risks and higher asset liquidity.
Dairy Australia 2011
Capital cities
Suitable investment regions
Next-gen Aussie dairy farmers
Investment capital to drive wealth & prosperity in
rural communities
The DFF facilitates the retention and growth of wealth
within farming communities. This stable and long-term
co-investment structure promotes rural development
and prosperity.
The dairy industry generates comparatively high
economic revenue for the rural economy. Providing an
achievable pathway to farm ownership encourages the
next generation of dairy farmers, sustaining the
prosperity of dairy farming communities.
The DFF supports and enhances the future of the family
farm management model, which is inherently efficient
and resilient.
The DFF provides a unique opportunity to support the next-generation of Australian dairy farmers.
It creates an innovative pathway for young farmers to progress to farm ownership
and in doing so, sustains our future farming communities.
Inter-generational transition with long-term
outlook
The DFF extends the dairy career pathway to create a
safe and transparent mechanism for next-generation
farmers to advance to farm ownership.
The fund offers an innovative capital structure for
investors to attain competitive returns from the
structural adjustment of inter-generational transition.
Thus, facilitating divestment by older-generation
farmers, with a new-generation able to access capital to
"buy-in".
The long-term nature of the fund encourages farmers to
farm for the future, as they directly benefit from the
farm's sustainable productivity and environmental
management.
Farmland: A Real Asset
Globally, farmland is an attractive real-asset
investment with stable yield and fundamentally
strong growth prospects.
Historically, investments in farmland assets deliver
attractive risk adjusted returns compared to traditional
investment assets. This is demonstrated in the
comparison of Sharpe Ratios for US Investments since
1992.
Farmland investments across the period (1992-2010)
average 11.1% annual return, as reported by the US
National Council of Real Estate Investment Fiduciaries.
The stability of investment portfolios can benefit from
the inclusion of farmland, with farm returns exhibiting
low or negative correlations with traditional investment
assets and positive correlation with inflation.
World Agri-Land area has been stable since 1960, while
population has more than doubled in this period.
Looking forward, the United Nations Population Division
forecasts a global population of over 9 billion by 2050.
Australian Dairy Land has achieved 6-7% p.a. average
capital gain over the past 25 years. The positive outlook
for dairy and the finite availability of farmland are
expected to continue the rising trend.
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
1984 1989 1994 1999 2004 2009
$A
U/H
ect
are
Source: Victorian Valuer General - Annual Guide to Property Values 1984 - 2009
Southern Victorian Dairy Land Values
This population growth, combined with increasing bio-
fuel demand, creates price and productivity pressure on
farmland output. Environmental, social and political
barriers limit the creation of new farmland and
urbanisation is forcing contraction of existing farmland.
Together, these elements create an opportunity for
attractive returns for those who are invested in the finite
supply of farmland.
USA Farmland Investment Index & USA Commercial Property Index 1992-2010;
Barclays Capital US Aggregate Total Return 2000-2010 & Lehman Aggregate Bond
Index 1992-1999; Standard & Poors Index Services, 2011; Federal Reserve Bank of
St Louis Database (FRED), 2011.
-
0.20
0.40
0.60
0.80
1.00
1.20
US
Investment
Farmland
US Bond
Aggregate
US
Commercial
Property
S&P 500
Total
Return
Sha
rpe
Ra
tio
s
Sharpe Ratios (Excess Return / Risk) 1992-2010
0.5
1.0
1.5
2.0
2.5
3.0
1960 1970 1980 1990 2000 2010 2020 2030
Population Index Agricultural Land Area Index Indices = 1.0 in 1960/61
Index Comparison of World Population and
Agricultural Land Area
UN Population Division, 2011; UN Food & Agriculture Organisation, 2011
Australia’s temperate climate and year-round pasture
feeding systems place them amongst the lowest cost
dairy farmers in the world.
Combining this low cost of production with an efficient
and competitive processing sector, has made Australia a
trusted international supplier of quality dairy products.
With no reliance on government subsidies, Australia is
ideally situated to capitalize on the growing dairy food
demand in the developing world.
0
10
20
30
40
50
60
70
80
Pro
du
ctio
n C
ost
US
c/L
Dairy cost of production
Future Bright for Aussie Dairy
Australian dairy farming is set to benefit from
growing demand for dairy products.
Demand for dairy products is growing most rapidly in
developing countries, driven by greater ability to pay for
food protein as income per capita increases.
Based on the current world supply and demand
outlooks, Dairy Australia predicts future unmet demand
of 4.0–5.0 billion litres in 2020. This indicates there will
be an ongoing upward trend in dairy prices to stimulate
future supply.
0
100
200
300
400
500
600
700
800
1980 1990 2002 2015 2030
Mill
ion
To
nn
es
pe
r Ye
ar
Developed Countries Developing Countries
Global Milk Supply & Demand Growth
Dairy Australia Situation & Outlook 2011, Dairy Australia.
(UNFA
Global Dairy Consumption – History & Forecast
(UNFAO, 2006)
IFCN Global Dairy Report, 2009; Dairy Australia, 2010.
0
100
200
300
400
500
600
700
800
1980 1990 2002 2015 2030
Mill
ion
Ton
nes
pe
r Ye
ar
Developed Countries Developing Countries
UNFAO, 2006