4,500 mum-and-dad investors commit more than $70 million for stake in S. Kidman & Co
The willingness of more than 4,500 mum-and-dad investors to commit more than $70 million to acquire a stake in the iconic S. Kidman & Co pastoral holding is proof of the retail appetite for investment in agricultural assets.
Arthur Naoumidis, chief executive officer of property crowd-funding company DomaCom, said in the group’s submission to the inquiry into the foreign investment review framework by the Senate Economics References Committee that this was the only conclusion that could be drawn from the public interest in Kidman, and that should be encouraged.
He said the widespread interest in Kidman has been spawned by two inter-related themes: the public’s desire not to see rural property (as distinct from rural businesses) sold overseas and the realisation that it was a good defensive asset suited to most investment portfolios.
Barnaby Joyce, the Federal Agriculture Minister, had last year called for a veto on foreign governments being allowed to buy Australian farmland. The comments followed as the Kidman cattle empire is for sale.
“Although the value of agricultural land fluctuates in line with the highs and lows of climatic changes, such as drought, it attracts reasonable yields and enjoys capital gain," said Naoumidis.
“In our opinion, domestic investment into agricultural assets has the potential to be a significant game changer in the rural sector as the replacement of debt with long-term investment equity not only provides stability to rural enterprises but can substantially reduce the debt servicing load for the operating business."
Naoumidis listed several benefits, such as more robust business structures by a reduction of debt servicing, the ability to reinvest by the operator into operating assets such as cattle, feed expansion, equipment for improvement, thus enhancing the outcome of greater revenue to increase equity or for expansion.
“Business is increasingly looking to rural land, just as foreign interests are, and we should be encouraging our $2.1 trillion superannuation industry (including the SMSF sector) to increase their exposure to a 2.5% asset allocation from the current 0.3%”.
“Investment in our agricultural sector will encourage young people to stay on the land, particularly if equity capital can be crowdfunded through investment channels to give relief in the often never-ending cycle of debt that many on the land face while trying to increase productivity.
“Co-investment instead of debt leads to equity-based succession planning that is more attractive to next generation of owners and would encourage many young people to stay on the land.”
Naoumidis said there seemed to be disconnect between Australian fund managers and their overseas counterparts who clearly see a benefit in the agricultural industry.
DomaCom Australia Limited helps SMSFs acquire property through the fractional acquisition of units in a unique trust structure that enables investors to choose the property they want, it says.
It says the government must encourage more domestic investment, in spite of some failures over recent years in the agri sector, mainly because they were tax-driven schemes without the backing of solid assets such as the land. They were also heavily geared.
