Craigmore Fund II secures cornerstone investor

Craigmore Farming Partnership, a New Zealand investment and private equity firm, has secured a cornerstone investor and a number of soft commitments for its second fund.

Craigmore Dairy Partnership II is targeting NZ$350 million ($224 million; €197 million) to invest solely in dairy. It expects to confirm a first close shortly and is aiming for a final close as early as possible in 2016, Craigmore Sustainables chairman, Nick Tapp toldPrivate Equity International.

Investors in the fund are from all over the world, he said, adding that the company “always welcomes local investors and our structure includes co-investment by our senior operational managers”. The company’s principals are all New Zealanders, he noted. 

The fund has a semi open-ended structure to tie in with foreign institutional investors' long term goals, as previously reported by PEI.

Tapp emphasised that Craigmore continues to make investments in the dairy sector throughout the commodity price cycle, including during the recent fall in the price of milk.

“Farmland ownership and operation is a long term investment, and we can see that the range of opportunities vary with the much shorter commodity price cycle,” he said. “We are not basing our decisions solely on the short term milk price, and do what most farmers do and look at the average commodity price over the medium term, and the longer term issues around global supply and demand.”

In terms of competition for deals in New Zealand and Australia there are very few funds in the agri-space, he said, adding that agriculture and farmland deals are very difficult to execute.

“The challenge is the extraordinary varied nature [of the asset], the exposure to weather and the vagaries of commodity price movement,” Tapp said.

Each deal has to be assessed on its own merits, he explained. “Agriculture is remarkably specialist. Everyone [in Craigmore] comes from an agricultural background. You can’t jump from investment banking to running a farm straightaway,” he said.

All Craigmore’s investments are in New Zealand – in sheep, red beef and horticulture as well as dairy. In terms of investment possibilities we are “always interested in what’s going on,” he said.

Foreign investment rules in most countries, such as Ukraine and China, prevent international investors from investing in farmland, he noted, citing property ownership and security issues. North America, the UK, Australia and New Zealand are exceptions.

“The OIO [New Zealand’s Overseas Investment Office] process is transparent and recognises the value of incoming capital,” he said. “What New Zealand has is a very sensible set of rules”.