Investing in farmland

Miller & James offer complete property management solutions to investors who see rural property as an attractive asset class.

In the first instance, Miller & James identify suitable farms, which meet certain investment criteria and risk parameters. After a ‘ground truthing’ due diligence process, the findings are reported back to the investor. The next step is to set up an entity to hold the asset. Miller & James have close relationships with several law firms, all of whom specialize in rural transactions and foreign investment. Also, at this stage, an accountant needs to be appointed. The solicitor and the accountant work closely together to ensure the optimum investment vehicle is created for the farm investment.

Purchasing Farm Land

On most occasions, prior to the purchase of the property, Miller & James have already identified a tenant who is interested in a long-term lease of the farm. Miller & James have access to a large pool of quality farmers who are interested in increasing their operations through leasing additional farmland. It is important to take special care in selecting the right tenants. A good tenant is important to ensure your farm will improve in quality, fertility and appearance and ultimately, also in value.

Once the property is purchased, the next stage is the management of the lease for the investor. Miller & James ensures the lease payments are made on time and takes care of the invoicing, collection of GST, and CAPEX issues. If a tenant believes funds need to be spent on improving infrastructure, Miller & James will conduct an on site visit, collect quotes, and then advise the investor on the best way to proceed.

Farmland Annual Reports

Miller & James also provide annual reports on the cropping program and other relevant facts to the investor. This might include a summary of commodity price trends or a detailed analysis of the weather.

At the end of the lease term, Miller & James will either renegotiate an appropriate new lease price with the existing tenant or find a new tenant.

The Farmland Lease

Leases can be structured in many ways. Miller & James usually recommend five year leases, but they can be for shorter or longer periods. The lease price is often linked to CPI (consumer price index) and will increase on a yearly basis. The lease yield depends on many factors such as, the region where the farm is situated, whether it is a cropping farm or a mixed farm, whether there is expensive infrastructure on the property etc. Lease yields currently range from 4% to 5.3% based on the purchase price. Lease yields have reduced slightly over the last few years, mirroring
falling interest rates across the globe.

Farmland Assets Under Management

Miller & James currently manage over $100 million worth of farming assets across Australia on behalf of local and overseas based investors. The farms are in NSW, QLD and Western Australia. The purchased farms include cropping, sheep farms and cattle stations.

Based on global farmland index information, published by Savills (2018), the cost of Australian farmland per hectare is the lowest in the world. The average farmland value in Australia is US$2,117 per hectare. Australian average farmland values are 79% cheaper than the United States representing a strong value opportunity compared to its peers. There are of course a range of reasons for differences in pricing, from subsidies, tariffs and other barriers, as well as productivity, soils and climate.

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