Aussie fund managers failing to see value in land: DomaCom
DomaCom's crowd-funding campaign to purchase the Kidman Station shows that Australian fund managers are not atuned to investors' desire to invest in the land, the firm believes.
Announcing that firm had secured a commitment of more than $70 million from more than 4,500 investors, through its crowd-funding campaign, DomaCom chief executive, Arthur Naoumidis, said the widespread interest showed that fund managers were failing to address a huge retail appetite for investment in agricultural assests.
Naoumidis said there appeared to be "a disconnect between Australian fund managers and their overseas counterparts who clearly see a benefit in our agricultural industry".
"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," he said.
"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.
"This has many benefits, including more robust business structures by reducing 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 further 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 per cent asset allocation from the current 0.3 per cent.
"Investment in our agricultural sector will encourage young people to stay on the land, particularly if equity capital can be crowd-funded 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."
AUTHOR
Nicholas O'Donoghue
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