How Domacom helped mum-and-dad investors become part-owners of the world’s biggest pastoral estate

The acquire of Kidman was the first time that crowd funding had been used to acquire agricultural land.

The acquisition of Kidman was the first time that crowd funding had been used to acquire agricultural land.

When crowd-funder DomaCom began its book build to acquire the iconic Kidman Station late last year, it had no idea of the level of interest it would generate. For the first time mum-and-dad investors had a vehicle to become part-owners of the world’s biggest pastoral estate (at 101,000 sq km, it is larger than Ireland and almost half the size of Victoria), and they relished the opportunity. About six months later, more than 6,000 investors have pledged about $80m to acquire the land holding of Kidman.

Since DomaCom entered the fray to buy Kidman, there have been many twists and turns. But with each passing day it has become apparent that what seemed like a PR stunt is now a viable offer, with the sale agent for the extended Kidman family, Ernst and Young, giving DomaCom its imprimatur by finally agreeing to give it access to all the sale documents.

In particular, there have been three critical, inter-related events this year that have given DomaCom’s crowd-funding bid a fillip. In early February, Kidman’s reopened the sale process to Australian parties, recognition that an overseas bid required a Government tick that might not be forthcoming.

About seven weeks later, that decision assumed prophetic proportions when Treasurer Scott Morrison rejected a bid by the Chinese company Dakang Australia Holdings, giving fresh impetus to the DomaCom bid.

The third event occurred in late May when DomaCom made the strategic decision to split the sale of the land and operating businesses by linking up with Lloyds Business Brokers; the former will continue to crowd fund the acquisition of the land and Lloyds Business Brokers was charged with finding a buyer for the operating businesses.

That decision radically changed the dynamics of the offer. Using the reported Chinese offer of $370 million as a yardstick, it now valued the land at $210 million and the operating businesses at $160 million. Lloyds has since confirmed there has been substantial interest in this pastoral business, with some parties wanting to acquire the entire operation and others proposing to buy either majority or minority stakes. Most of the interest has come from private equity funds or professional investors with experience in the pastoral industry.

More fundamentally, it reflects a keen appetite by investors to get a stake in the growing worldwide demand for premium Australian beef.

On the land side of the equation, DomaCom believes the offer of a 3.9% yield, when coupled with a 20-year average growth of 5.8% in farmland prices, will prove attractive, especially at a time of historically low interest rates. For self-managed super funds, in particular, such a yield and capital growth dovetail neatly with their long-term investment framework.

When DomaCom put its hand in the air to acquire Kidman, it was the first time that crowd funding had been used to acquire agricultural land. But since then it has launched another book build for a pastoral property in northern Queensland. It’s still early days, but a track record is being established.

It was said that Australia rode on the sheep’s back. Although that’s certainly no longer the case, primary industry still plays a critical role in our economy – and, unlike mining, is renewable. According to the Australian Bureau of Agricultural and Resource Economics and Sciences, the gross value of farm production is forecast to increase by 2.7% to about $60.3 billion in 2016-17, while on the export front it is expected to rise to $45.3 billion in 2020-21. In short, it means agriculture is a sunrise industry – and mum-and-dad investors should have the opportunity to invest in it.

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