In Spain, four in ten rural property owners and half of livestock farm owners are about to retire. This data means that thousands of hectares of crops will be inherited or left unattended if their relatives do not want to take responsibility for the land. Investment funds know this and are already on the alert: Corporate investments in the agricultural sector increased by 20 percent in 2022 compared to the previous year, to 1,000 million euros, and by 150 percent compared to 2021, and forecasts show that this figure will double in 2023. They buy companies and land based on profitability what they want to achieve, In a range between 8% and 15%Even the bad omens of drought don’t make them rethink investment. “I think this is a permanent phenomenon,” says Gabriel Trenzado, general manager of Agri-Food Cooperatives.
Private equity funds are making the most of market conditions and one of them is the lack of generational change. According to the statistics of the Ministry of Agriculture, Fisheries and Food, 93% of property owners are individuals and the number of companies is less than 5%. “Institutional investors and small and medium-sized farmers and ranchers will purchase these lands available on the market to ‘consolidate’ areas of wider use and will be able to derive profitability from these lands largely through economies of scale. “Mechanization of tasks,” explains Cocampo’s founder. Rural This platform, which offers ads for the buying and selling of properties, has experienced first-hand the appetite of institutional investors: it has increased its advertising by more than three times in the last two years. In total, the announcements amount to around 2 billion euros.
There have been significant acquisitions in agricultural companies in the last two years. ProA Capital It acquired Patatas Hijolusa in 2022 and also has Moyca, a producer of quality seedless table grapes, and more than 2,200 hectares of land in its portfolio, Edit Frutas acquired Agromillora, the nursery company to which Bollo belongs Fremman Capital since that year and Magnum Capital Fernando became a shareholder of Corral Group. Miura Partners It stands out on the list with its fruit group Citri&Co, which has an annual turnover of over 700 million Euros with an area exceeding 300 hectares. in 2023 Capital of Portobello acquired 45% of the Valencian company Eurocebollas and Fair Capital It joined the agriculture-food industry by purchasing Innoliva. CVC is also available in olive oil through Deoleo.
Assets to diversify
Spain is the country with the second largest agricultural expansion in the European Union. It has 23 million useful agricultural areas, of which 17 million are cultivated (76% is divided into dry land and 24% is irrigated land). Investment funds’ interest in Spanish rural properties dates back to 2017. Since then, units have averaged 400,000 transactions, 234,000 in the first half of 2023 alone. Latter, 43% of operations concentrated in Castilla y León, Andalusia and Castilla La Mancha.
There are various strategies depending on the profitability the company wants to achieve. “There have been more acquisitions in sectors such as citrus or vegetables, and in the woody sector (olives, almonds, pistachios) there have been more farm leases or purchases,” explains Coca. In Spain, almond, pistachio, avocado, kiwi and red fruit farms have recently expanded and are still being developed by a smaller number of companies, so investment goes directly to the farm. According to INE, the number of rural property transactions reached a historical maximum in 2021, and although it fell slightly in the following two years, it remains above pre-pandemic figures and the rest of the historical series. A total of 371,144 transactions took place, nearly half of which (153,889) were inheritance. In the case of leasing, “funds They usually lease land for 30 years at an average premium of between 1,000 and 1,500 euros per hectare.It’s something that “causes farmers to flee these areas,” Trenzado laments.
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Pension funds and large insurance companies often prefer lower-risk operations such as “purchase and leaseback” that “yield returns of 5-8% depending on the product and land,” he notes. consulting firm CBRE, Héctor Rodríguez. On the other hand, in medium-risk investments, agricultural equities acquire land to be managed by an operator with returns of 8-12%. And finally, private equity funds prefer higher risk operations By purchasing shares of companies operating in the agricultural sector. “Expected returns in this case are usually above 15%,” says Rodríguez.
While there are more than 900 investment funds worldwide specializing in the agri-food sector, 15 years ago this number was no more than a hundred. 50% of operations are still concentrated in North America, but Europe is attracting more and more managers due to its geography, and profitability in Spain is expected to continue to increase due to “increase in prices of irrigated fertile land”, where investor interest is expected to continue to grow. and offers the opportunity to develop diversified portfolios”, notes CBRE. According to the consultancy firm, climate change and drought do not have a significant impact on the volume of investments for now, but they lead to changes in the sector. “They condition the ownership and exploitation of land,” Trenzado said. “This affects us because they are competing for production,” he says. And at the same time, Pushes up land prices due to land availability. “This will be a challenge for food production, amid challenges such as the emptiness of Spain and the lack of generational change,” he assures.