Australian Farmland Values 2020 report*
The median price per hectare of Australian farmland increased by 13.5 per cent in 2019 to $5,271 per hectare. This marks the sixth consecutive year of growth, bringing the 20-year compound annual growth rate to 7.5 per cent.
Over time, we are seeing the number of farmland transactions decline. This may mean opportunities to expand become less frequent as fewer properties come on the market. Tightening access to suitable parcels of land, and increased competition for fewer parcels will play a role in driving increased values.
Keeping in-line with the long-term trend, we expect farmland values will continue to rise, underpinned by strong demand for agricultural assets and increasing profitability of farming operations in an environment of low interest rates and strong commodity prices.
*Courtesy of Rural Bank
The DomaCom Rural Farmland Strategy is a perpetual campaign designed to acquire quality agricultural properties in grazing, cropping or other areas of food production.
Acquisition may be in syndication with other investors, the property vendor or a next generation farmer.
DomaCom mainly look for properties in the $1m – $5m range and investors can participate in one or more properties as they become available.
When sufficient funds have been accumulated, investors have the opportunity to accept or decline specific properties as they are presented by joining the individual property campaign.
When a property is accepted with sufficient funds, DomaCom move to acquire it after conducting due diligence – legal review of the contract of sale, formal valuation and property inspection.
Funds surplus to the acquisition cost may be applied to the next farm acquisition which will also need investor acceptance and go through due diligence, and so on.
As each property becomes fully subscribed it is segregated in its own sub-fund.
DomaCom may lease properties to the current vendor or to a next generation farmer for a rental yield in the 4% – 6% range for a period of 5+ years with an indicative growth of 6% + – see Key Information.
Properties currently under consideration are listed below.
• an ESG (environmental, social, governance) responsible investment.
• the opportunity to fractionally own a farm – the shared equity model enables investors to diversify into one of Australia’s most significant markets.
• attractive returns on your investment – the long term target return of 10% – 12% comprises approximately 4% – 6% rental income and 6% capital growth – see figures from Rural Bank Report
• a farm succession plan to keep farmland in Australian ownership – the Rural Farmland Strategy may also provide a succession plan for retiring farmers looking to unlock equity or transition their farm to the next generation of farmers for the opportunity to begin or expand their farming enterprise.
Agriculture is a major export industry and part of Australia’s Five Pillar Economy is well regarded by Australians who are looking for an ESG style investment in agricultural land with a reasonable return by way of income and capital growth.
We believe that such opportunities should provide an attractive return to investors whilst enabling young farming families to acquire a working property without having to lock equity into the land. Equity can then be used to improve business by increasing productivity.
Using the DomaCom platform, aspiring farmers can increase their equity over time by purchasing investor units in the sub-fund that holds the property. Retiring farmers who sell and lease back the family farm will similarly not be burdened with debt and can use the released equity to increase productivity.
If you are interested in the Rural Farmland Strategy, you can join this crowdfunding campaign by completing the application and lodging your investment funds through this General Advice page. Note that you will not be committed to investing in a specific property at this stage – you will receive a formal offer to invest in a specific property once it has been identified.
Please ensure that you first read the DomaCom Fund’s Product Disclosure Statement (PDS). Download a copy of the current PDS or call your financial adviser.
Once properties have been identified, you have lodged your bid and the campaign is filled, you will receive a Supplementary Product Disclosure Statements (SPDS) outlining the specific offer to invest in specific properties which will contain all information required for you to make a decision. You are not bound to proceed with your bid amount in the Rural Farmland Strategy until you accept the offer contained in the SPDS (which will include the specific details for the properties).
If you are new to DomaCom, click on the Apply button below to begin your application. If you are an existing DomaCom Fund investor, you can log in to access your account and all the other public crowdfunding campaigns by clicking the Investor Login button below.
Risks for Property Sub-Funds
Refer to Section 7 of the Risk section of the PDS for an explanation of the risks involved in an investment in the DomaCom Fund and the general risks associated with property markets.
Specific risks of this investment:
• Property not acquired – If there is insufficient investor interest the property will not be acquired however Investors with an Active Bid will all be proportionately liable for the Campaign Costs. A list of approximate campaign costs is set out below.
• Value changes – The value of an Investor’s investment will go up and down in accordance with the value of the Underlying Property. There is no guarantee that the value of the investment will increase, and it may in fact decline in value.
• No guarantee – Returns are not guaranteed, and Investors may lose some or all of their capital. The nature of this investment is to expect an appreciation in the value of the units, with little to no income to be paid to investors during the term of the investment. There is no guarantee that this expectation will be fulfilled.
•Past performance – While this area in which the underlying property is based has experienced capital growth in the land value in the past, this is no indication it will increase in value in the future.
• Liquidity risk – An Investor cannot withdraw from the Sub-Fund until the Sub-Fund is terminated, and the Underlying Property is sold. DomaCom does intend to offer a facility through which Investors can seek to sell their Units to another party, however there is no guarantee of this.
• Damage or loss – There are a range of events that can damage the Underlying Property including acts of God (fire, flood, earth quake and other natural disasters) through to accidents, negligence, and failures of maintenance. While insurances will be in place it may not cover or may not fully cover such losses.
• Insufficient income – The costs associated with Underlying Property may exceed its income, however if there is a shortfall Investors will be given an opportunity to subscribe for additional Units in the Sub-Fund to meet those expenses pro rata to their Unit holding in the Sub-Fund. Investors who don’t subscribe for further units will have their investment in the Sub-Fund diluted.
• Vacancy risk – a property manager will be appointed to manager the property and secure tenants to tenant the property and derive income from the underlying property. If tenants are not secured there is a risk that the property will not generate the income that has been budgeted for. If this were to occur the investors may be required to raise further funds to offset the expenses of running the property.
• Unexpected property event – The risk that the Underlying Property may be negatively impacted due to a property specific event, for example, a change could occur to local zoning rules, development of competing and other events that were not anticipated at the time of acquisition.
• Economic risk – There is a risk that the general economic conditions in Australia may change in relation to interest rates, employment rate and economic growth that could in turn have an impact on the Property market and specifically the value of the Underlying Property.
Fees and Costs
Refer to section 13 of the PDS for Fees and Other Costs
The Management Fees for managing your investment
- Cash held in your Cash Account 0.22% p.a.
- Syndication fee 1% of the Gross Asset value of your investment.
- Property Sub-Fund 0.66% p.a. of the Gross Asset value of your investment.
- Loan Sub-Fund 0.44% p.a. of the Gross Asset value of your investment.
Set out in the table below is illustration of the campaign costs that are likely to be incurred. An Investor who participates in a Campaign and has had an Active Bid which fails to result in the formation of a Sub-Fund will be liable (in a proportion that is equal to the amount of their bid divided by the sum of all Active Bids at the time the Campaign costs were incurred) for the Campaign costs incurred by DomaCom. The investors will be only liable for Campaign costs and Acquisition costs that are set out below if the Sub-Fund was not created, as these costs have been incurred prior to the acquisition of the property.
The settlement costs set out below are only incurred and payable if the Sub-Fund is created and the property acquired.
If the Sub-Fund is established, these costs will be deducted from the Sub-Fund and only those investors that accept the SPDS will incur the on boarding costs – Campaign, Acquisition and Settlement costs.
The costs below are an example of the campaign costs, the actual costs may differ and will be set out in the SPDS.
|Contract review and title search||$500-$1000+GST|
|Building inspection and pest report||$500-$1500+GST|
|Property valuation report||$500-$5,000+GST|
The following costs will be incurred, whether or not the property is purchased.
|Legal costs (if contracts require further amendments||$2,000-$2,500+GST|
Below is an estimate of the following Settlement costs if the purchase is successful and a Sub-Fund is created. These costs will only be incurred if the Property is purchased and will be paid from the capital raised on the acceptance of the SPDS.
|Estimated Settlement Costs||Estimates|
|Conveyancing costs||$1000 – $2,500+GST|
|Stamp Duty||Varies based on state and Property Value|