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The Sustainable Farmland Trust targets £200m IPO

The Sustainable Farmland Trust targets £200m IPO – The Sustainable Farmland Trust has announced its intention to launch an initial public offering on the Premium Segment of the Official List of the FCA and to begin trading on the Main Market of the London Stock Exchange, by way of a placing, offer for subscription and intermediaries offer targeting the issue of 200 million ordinary shares at an issue price of £1.00 per share. The company expects to publish a prospectus in due course.

The company aims to provide shareholders with an attractive level of risk-adjusted income together with the potential for capital growth by investing in a diversified portfolio of farmland and related agriculture-focused assets predominantly located in the US. Whilst not forming part of its investment policy, the company will also aim to deliver a target NAV total return of 7% to 9% per annum (net of all fees, expenses and taxes), once fully invested, and a target annual dividend yield of at least 4.5%, both on the basis of the Initial Issue Price.

Intl Farming Investment Management and affiliates (IFC), the manager, is based in the US and entirely dedicated to agricultural asset management, with over $2.2bn in group assets under management, an established track record in the sector since its inception in 2009, and family roots in agribusiness dating back to 1827. As a market leader in farmland investing, IFC has owned or managed approximately 420,000 farmland and ranchland acres across over 18 US states, two Australian states and Chile, cultivating more than 80 crop types.

Sustainable Farmland Trust will invest in a performing and diverse portfolio of US farmland assets held in the IFC Core Farmland Fund, an existing private fund managed by the IFC’s investment management team and, additionally, in direct farming and agricultural supply chain and infrastructure assets predominantly located in the US, which are expected to generate current income and to provide for potential capital growth. Not only are returns from farmland assets historically negatively correlated to equity market movements, but they also exhibit a historical positive correlation with inflation and are anticipated to be accretive in a high inflationary environment.

The company will seek to promote sustainability by delivering a secure and reliable food supply through its farmland investments, with an investment process that considers key environmental factors in keeping with IFC’s commitment to “leave the land better than we found it”. The company will focus on acting as a responsible steward for the subsequent management of these investments, including the land and its tenants and/or operators.

Proven expertise in managing and optimising farmland assets

  • Since its inception in 2009, IFC has been dedicated to agricultural investing with current AUM1 of c.US$2.2 billion and family roots in agriculture dating back to 1827
  • IFC believes it has several key competitive advantages in this sector, including IFC professionals’ extensive industry experience and farming operations backgrounds, a focus on data analytics and technology, the ability to source opportunities off-market, and a generational farming heritage
  • As of 1 August 2022, IFC has over 50 professionals across its Investments, Data Sciences, Agricultural Services, Investor Relations, and Finance departments
  • IFC (on behalf of its clients) has historically owned or operated across 420,000 acres, grown over 80 crop types and completed over 400 transactions across the United States, Australia and Chile
  • IFC’s proprietary data platforms provide analytics, pre-qualified sourcing, electronic property management, food traceability, and real time reporting capabilities
  • IFC seeks to own US farmland and partner with pre-qualified progressive farmers, termed “Top Growers®”
  • IFC leverages its land base and technologies to develop relationships with Top Growers® and major food / consumer packaged goods companies. The firm seeks to arrange long-term off-take agreements with food buyers, which can generate higher revenues for growers and can reduce variability of grower profitability. This partnership can enable IFC to charge premium rents to its tenants and maximise income returns on its investments

Existing portfolio of performing assets accessed through the Core Fund, in addition to significant new investment pipeline

  • Through the Company’s investment in the Core Fund, shareholders will gain access to an existing portfolio of performing US farmland assets with the following characteristics:
    • 10.6% net IRR for the period from inception (25 October 2019) to 30 June 2022, outperforming the NCREIF Farmland Index, comprised of institutional investors, on income, appreciation, and total returns
    • 11 properties with over 30,000 gross acres located in seven US states and five NCREIF regions, producing 20 different crop types
    • The Core Fund has an unaudited net asset value of US$232.75 million as at 30 June 2022
  • Through its history and expertise in the farming industry, reinforced by deep industry relationships, IFC has identified a current pipeline of Farmland Investments valued at more than c.US$3 billion, which is expected to expand. This figure includes:
    • c.US$2.7 billion of opportunities that may fit the Core Fund’s strategy, ranging in size from c.US$15 million to c.US$500 million
    • c.US$270 million in potential Core Plus Assets

An investment strategy with sustainability credentials

  • The Company has been categorised as an Article 8 “light green” fund for the purposes of SFDR
  • Strategic alignment with 11 of the 17 UNSDGs, with IFC’s main four areas of focus in addressing sustainability issues (Protection and/or Improvement of Natural Resources; Sustainable Agricultural Practices; Community Respect and Resilience; Fair, Respectful and Inclusive Labour Practices) aligned to seven UNSDGs
  • IFC has been a signatory of the UN Principles of Responsible Investing (UNPRI) program since 2016
  • IFC was certified by an independent third-party audit in late 2021 and found to be in conformance with Leading Harvest’s Farmland Management Standard, in addition to being a Founding Participant member
  • An annual ESG report to be produced each year noting Company’s adherence to ESG goals
  • IFC has a very strong network of significant relationships across industry, non-profit, academia and government, focused on sustainable farmland, agriculture and food
  • Dedicated IFC Director of Sustainability working cross-departmentally to oversee its ESG strategy, measurement and data collection, investor reporting, and strategic partnerships with organisations like UNPRI and Leading Harvest

A proactive approach to attaining environmental and social impact

  • IFC embeds the identification, consideration, and response to sustainability issues within each of the core areas of its activities
  • The firm undergoes detailed environmental assessments focused on soil and water analysis, climate and weather mapping, labour needs, and cultural findings, which are incorporated into each underwriting process for new properties under consideration
  • IFC’s in-house Agricultural Services team is key to attaining the environmental and social characteristics being promoted by the Company, providing critical input in evaluating assets for acquisition and developing post-acquisition plans for each asset
  • The firm has led the development of several proprietary data management tools which greatly enhance ESG data tracking accuracy and efficiency across the firm, from the grower level to investor reporting
  • IFC has ongoing partnerships with organisations, and continues to explore additional partnerships, that can help advance the firm’s understanding and awareness of market shifts and dynamics in the advancement of sustainable agriculture and food
  • In accordance with its Responsible Stewardship Promise™, IFC aims to enhance production and sustainability of a food resource with appropriate stewardship to provide a secure and reliable food supply with a commitment to “leave the land better than we found it®”; associated activities include:
    • Ongoing evaluation and testing of new technologies that can reduce the need for inputs, including water and fertilizer
    • The development of regionally-specific go to market strategies for a variety of crop types, in addition to the vertical integration of assets to control more of the value chain
    • Over 5,000 soil samples on average per year to monitor and improve soil health
    • A track record of installing over 20,000 miles of drip irrigation to reduce water usage
    • Planting over three million trees in the past five years
    • Dedicating over 9,000 acres to implementing cover crops to reduce carbon emissions

Scale provides significant benefits for investors in farmland assets

  • IFC aims to achieve food security by owning the land and leveraging the existing and future land base. The larger the land base, the greater the ability to provide a secure food supply to food buyers
  • IFC promotes reliability by seeking to ensure consistent production that adheres to the quality standards consumers demand today, especially as demands for traceability and trackability are rapidly evolving. To be able to reliably supply food to buyers requires a diversified land base with crop optionality and experienced growers
  • IFC’s scale in this sector as a manager can enable broader food sourcing capabilities for food buyers, better revenue for farmers, lower input costs for farmers and farm infrastructure, and higher returns on land and storage assets
  • IFC has realised cost efficiencies, receiving volume discounts on services such as well-drilling and land-levelling as part of over 450 capital expenditure projects, completed by IFC, that total more than US$400 million
  • IFC believes that the scale it has achieved as an aggregator of optimal land enables it to provide greater value to its stakeholders and form relationships that may result in better protections for shareholder returns

Andy Crossley, chair of The Sustainable Farmland Trust:

“We are delighted to be launching the first farmland-focused investment company listed on the London Stock Exchange. We believe that the Company is perfectly positioned for the current inflationary environment, with outstanding risk adjusted economic returns while also providing a sustainable and appropriately managed food source. We believe this unique and highly scalable asset class has enormous potential to provide long-term returns from a combination of both income and capital growth that historically outperform further in an inflationary environment.”

Charlie McNairy, CIO of Intl Farming Investment Management:

“We are proud of our deep agricultural heritage and the track record we have built at IFC managing over 420,000 acres, with a technology focused approach yielding both income and capital growth. Our proven track record of success has perfectly positioned us to launch The Sustainable Farmland Trust today at a highly opportune time in the sector. We believe that the long-term secular trends, rapidly changing farmer demographics and inflationary economic environment makes this a particularly attractive asset class for investors seeking inflation protection and portfolio diversification.”

The Sustainable Farmland Trust targets £200m IPO

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