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A new dairy investment targeting farm-by-farm acquisition has been launched.
It has a registered prospectus and plans to list in order to attract small investors from the general public, with a minimum $20,000 required.
This is the latest concept to attract new investment capital by director Andrew Watters, of MyFarm, a farm investment management company with assets of $500 million tied up in 47 dairy farms. By offering a registered prospectus for scrutiny means such direct investment in dairy farm operations will be a first for the general public.
Under PRD Investments Ltd, Mr Watters said he hoped the concept of farm-by-farm general public offers, each being a separate ''collective investment vehicle'' (CIV), could grow into four or five new offers a year.
While giving investors no promises in the prospectus on getting CIV share trading up and running on the Unlisted platform, Mr Watters said yesterday it ''was a priority''. Craigs Investment Partners broker Peter McIntyre said while there were many factors to consider, including foreign exchange, climatic events and global commodity prices, there was increasing small-investor interest.
''Liquidity is going to be the key for this,'' Mr McIntyre said of the CIV shares becoming tradeable on Unlimited.
Mr Watters, asked if large amounts of private capital to invest in dairying was drying up, said positive economic growth and ''strength in dairying'' was good.
He said a MyFarm average investment was $500,000, and an offer to the public was a good way to diversify for MyFarm About a year ago a similar capital-raising concept was floated by Mr Watters and Neil Craig, but failed to gain traction, and efforts to raise $75 million in their Pastoral Dairy Investment fund foundered through lack of interest, and analysts' concerns over fee structures.
Mr Watters and Mr Craig, along with Brian Cloughley and Dryden Rowan, are directors of PRD Investments Ltd, incorporated in early 2012.
Given fees, debt structuring, yields and complex assumptions on milk production and milk pricing, the public will need to scrutinise the 48-page prospectus carefully.
PRD already operates three CIVs utilising the new concept, but they were restricted to investment from wealthy or experienced investors. A fourth CIV at Poplar Road wants to raise up to $3.8 million to buy the four-year old dairy converted farm in Mid Canterbury, which was a ''high producing ... proven performer'', Mr Watters said.
''The syndicate in which PRD Investments Ltd intends to invest is focused on investment yield rather than capital gain and is based on providing a quarterly flow of distributions from next autumn onwards,'' he said.
''There is quite a lot of detail, and it's been past the Financial Markets Authority, but it's better to have too much information than too little.''
He said investment in the first three CIVs was ''well received'' due to their much smaller minimum investment level - $20,000 versus $250,000 - but they were restricted to wealthy or experienced investors.
''The move to prospectus-based offerings is not only aimed at making syndicate investment available to a wider group of investors, it is also aimed at facilitating the formation of a new secondary market that we are developing, called MyFarm Trading.''
MyFarm will manage PRD Investments Ltd for an annual fee of 0.5% of the value of its syndicate investment.
Mr Watters yesterday described the 0.5% fee as ''very realistic''. The fee covered all day-to-day running costs of PRD Investments, including accounting, auditing and Unlisted quotation fees.
The MyFarm syndicate, Poplar Road Ltd Partnership
Raising $9.5 million, of which up to $3.5 million is being sought from investors. Minimum investment $20,000, @ $1 per share.
The farm - Poplar Rd
Near Hinds in Mid Canterbury, the four-year-old 181ha irrigated farm, including 7ha irrigation lake and bores, runs 690 cows, producing 285,494kg of milksolids in 2012-13, earnings before interest, tax and depreciation, $688,341. To be purchased from another MyFarm syndicate; independently valued at $8.80 million, purchasing for $8.92 million; plus livestock, plant and Fonterra shares, totals $13.75 million.
Establishment fee to MyFarm, $455,000. Plus 0.5% annual management fee to MyFarm.
Growth; fewer cows (to 635) producing similar yields through soil ''improvement'' and less purchased feed. Forecast gross yield to investors, 3.7% for season 2013-14; 5.8% season 2014-15.
Three houses, 54-bale automated rotary shed, various farm buildings.
CIV - collective investment vehicle
Each new MyFarm farm will be an individual CIV.
Trading CIV shares. In development, MyFarm Trading for unregistered securities operating as private market on Unlisted trading platform. Uncertain when MyFarm Trading operational, possibly late-2013.
- Offer, which can be extended, closes August 5; payment in full due then.