Origin Capital’s Dominic Jones says the fund intends to focus more on RubyRed and Green orchards in its second round.
Less than a year after successfully raising its first fund, kiwifruit investment company Origin Capital is again seeking funds exclusively for kiwifruit sector investment.
The first fund closed last June, raising $85 million from 153 investors and subsequently purchased or developed nine commercial orchards, totalling 101 canopy hectares.
The company’s largest orchard is 17ha held in the Bay of Plenty, while Gisborne accounts for about 50% of the company’s acquisitions to date, including a large 16.3ha operation
Origin managing director Dominic Jones said the latest funding round is intended to capture between $50m and $60m of investor capital, and he anticipates significant interest will come from existing investors.
“We have established something of a track record now, having already paid out $3 million to investors six months after closing, which is just over 7% cashflow yield, on an annualised basis,” Jones said.
In total, Fund 1 is expected to return 25% to investors in its first year, a mixture of cashflow yield and capital gain.
He said the decision this time around to focus on SunGold, RubyRed and Green is about balancing the risk and reward of each variety. While the outlook for RubyRed is positive, as a new variety it does carry greater risk.
“It is still really quite early in RubyRed’s lifecycle and work is still being done developing its cropping ability,” he said.
“Site location is important for its success and Psa risk can be higher. Red is good now, but we expect in five to 10 years it will be even better.
“There is a lot to learn and we’ve deliberately structured Fund 2 in a way that will allow us to be flexible – as we learn more about Red and gain confidence, we can increase the exposure to Red if it makes sense to do so”.
Jones did not expect RubyRed to be quite the revolutionary variety SunGold has proven to be.
“It has a smaller storage window and, therefore, the total volume will never be that of SunGold,” he said.
Zespri expects to export up to 30 million trays by 2030, this compares with 110m of SunGold this year.
“However, SunGold has been a runaway success and Red does not need to be at this level to still be a very attractive place for investment. Including it in our investment mandate this time around means we have the option to increase our exposure to it as our portfolio develops,” he said.
RubyRed also brings a higher level of orchard infrastructure requirements, particularly in terms of shelter needs.
With investment levels set at a minimum of $100,000, Jones said there was significant interest in the first round from private investors, including in some cases kiwifruit orchard owners.
“We had some orchardists who sold to us, then reinvested back into the fund. They were looking for an exit strategy, but wanted to keep some of their proceeds in an industry they knew well,” he said.
Origin continues to carry some well-known industry faces on its board of directors, including ex-Zespri chief executive Lain Jager, Craig Greenlees of DMS Progrowers, and Zespri deputy chair Paul Jones.
Origin also includes current Zespri director Tony Hawken in its investment committee, and EastPack director Dylan Barret.
Jones said respected industry grower Robbie Mayston has also agreed to come on board for Fund 2 as an independent investment committee member.
“Robbie is an exceptional grower, who consistently achieves leading results, and has also been involved in RubyRed for a number of years as a pre-commercial trialist and so brings another set of skills to the team,” he said.
Applications to invest are now open, with the fund expected to have it’s first close in the second half of April.
