The field seduces investment funds and socimis with returns of 10%

By: News Team

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The field seduces investment funds and socimis with returns of 10%

While the traditional farmer ages and the land is increasingly fragmented, the Spanish countryside is receiving investments from large capitals that see in the sector a safe investment with high profitability, above 10%, factors that have also aroused the interest of the socimis.

Investment funds buy large plots or a set of small contiguous farms – those that become fragmented with each inheritance that is distributed among young people who do not want to work the fields – and seek to scale yields, with intensive and highly mechanized crops.

But the entry of venture capital in recent years has occurred mainly through mergers and acquisitions of companies in the agri-food sector.

In Spain the phenomenon is incipient, but worldwide, in the last 17 years, the number of investments in agri-food has multiplied by 20, giving entry to almost 900 investment funds with assets under management that are around 140,000 million dollars (almost 132,000 million euros), according to an analysis carried out by Valoral Advisors for the property purchase and sale company Cocampo.

A RETURN ABOVE 10%

“Agriculture has ceased to be a traditional sector, it has matured and has reached that critical point for institutional investors (investment funds) to enter the field,” the associate director of the Agribusiness sector for Spain of the real estate consultancy CBRE, Héctor Rodríguez, told EFE.

These funds incorporate technology and make crops a safe value to obtain returns “above 10%” and are based on a scale production model that reduces costs, this expert has abounded.

They are attracted by the fact that it is a “stable” and “simple” asset, necessary to cover a basic need such as food, and consider agriculture as “a refuge sector” that has been resistant to economic cycles and inflationary periods, said Rodríguez.

SOME LARGE OPERATIONS

Although there have been land transactions, the ownership structure remains almost unchanged and 93.8% of farm owners are natural persons while the remaining 6.2% are legal entities, according to the latest official data.

This is because the main operations of the Spanish market have been acquisitions of companies in the agri-food sector, “sale & leaseback” (purchase with a subsequent lease of between 20 and 25 years) and the introduction of a new capitalist partner, according to a CBRE report.

In recent years there have been operations such as the purchase of Pastas Gallo and the juice manufacturer Go Go Fruselva by ProaA Capital, as well as the entry of this fund into the table grape company Moyca Grapes.

In addition, among other moves, Abac Capital has acquired the fruit and vegetable company Agroponiente, the investor Atitlan has joined the Portuguese Sovena to acquire Frutas Romu, CVC has bought the pasta business Panzani, and the real estate manager Azora has entered the almond company ISFA.

SOCIMIS WAIT THEIR TURN

The sector has also aroused the interest of listed companies in the real estate market (socimis), created 10 years ago to attract foreign capital and savings from individuals towards real estate investments, but at the moment they cannot operate with rural properties.

These companies benefit from a zero tax rate and are obliged to distribute 80% of their profits in the form of dividends.

The stock exchange consultancy Armanext presented in 2022 a project to the Ministry of Finance that exposed the convenience of reforming the law of the socimis so that they can also invest in land of an agricultural, livestock and forestry nature, as is already the case in other countries, but the Department has not yet pronounced.

For Fernández, the authorization of the socimis in the countryside would facilitate the entry of small investors and not only of large investment funds, and would favor the small owners of land who do not work them and who could lease them to these companies, which would invest in them and distribute large dividends.

The founder of Cocampo, Regino Coca, has been in favor of the entry of socimis into the agricultural business but has expressed to EFE that it would have “ensured from a legislative point of view” that “they favor leasing by new farmers and ranchers”, instead of being solely focused on investors and their benefits.

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