Thursday, December 7, 2023

Big names back kiwifruit fund

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A GROUP of high-profile kiwifruit identities are backing an investment fund aimed specifically at raising money to purchase existing or greenfield SunGold kiwifruit orchards.
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Origin Capital Partners’ four principals include ex-Zespri chief executive Lain Jager, ex-Zespri chair Craig Greenlees and Zespri deputy chair Paul Jones. Fourth founder Dominic Jones has left a banking career in the United Kingdom to oversee Origin’s fundraising. He says the group is initially aiming to raise $50 million by Christmastime for its first funding tranche, and already has two established orchards under offer and has a third greenfields conversion in its sights. “The interest we have been receiving has varied from smaller investors with $100,000-$200,000 to larger investment identities with several million to invest,” Jones said. He says that interest also includes existing orchardists who wish to expand their investment in the sector beyond their existing orchard, but may lack the capital they need to do so on their own. SunGold orchards in Bay of Plenty (BoP) can fetch $1m a canopy hectare, and this year the licence fee to grow the fruit averaged out at $400,000 a hectare through Zespri’s tender process.

Dominic Jones | November 24, 2020 from GlobalHQ on Vimeo.

This was a considerable leap from the 2019 offer where prices averaged $290,000 a hectare. The second most expensive fruit licence in NZ is Envy apples at about $100,000 a hectare. The bid for Zespri licences was also oversubscribed by 3.5ha to every hectare on offer. Jones says the group is defined as a “committed fund”. In such a model the investors are first sought, funds secured and then desired properties are purchased up to a predetermined value. The first fund close off is for $50m, with drawdown commencing once that level is reached. Investors are required to supply committed funds as purchases are made, and the fund managers can draw on the funds they raise over time. Jones says the group intends to operate with about 50% leverage as required on orchards, in keeping with industry average, with debt secured on the orchard title rather than the company’s cash assets. With term deposit rates at historical lows, returns on all primary sector investments are looking attractive, but SunGold kiwifruit particularly so, with rates of cash returns between 10-13% a year possible from the heavy fruiting, high-value crop. “There are a bunch of unique factors that make gold kiwifruit hard to replicate elsewhere,” he said. “You have a fruit that has a high market value, supported by an industry structure with a single marketer, and a co-operative structure for growers, and New Zealand is proving the best place to grow this fruit in the world.” Jones says the biggest surprise to principals in establishing the fund was that covid-19 has not dampened down investor interest. “We started putting this together just as covid came along, and thought we may have to put it off, but the interest is there and it still stacks up,” he said. While land supply in kiwifruit’s traditional growing area of western BoP is tighter, SunGold’s ability to grow well beyond that area has also opened up opportunities for orchard investment. “There is about 85% of the fruit grown in Bay of Plenty, but we will be lower, nearer 65% with Kerikeri and Gisborne, than the other areas,” he said. Jones says the orchards purchased could be managed by capable third-party companies, or investors would look to continue the operations with existing operators if proving successful. Zespri has been tendering off SunGold licences for several years in tranches of 700-750ha, with two more years to run under its current allocation. “They have not put a position in the ground beyond that other than they expect a further 2000ha over the following four years. We have three years to spend what we raise,” he said. The group has outlined in its initial profile that by 2030 Origin Capital intends to be NZ’s leading provider of primary sector investments, with a second fundraising tranche aiming to raise $100-$200m and a third raising $250m in kiwifruit and other primary sectors.” The first tranche of $50m closes in December.

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