MyFarm says investors in its syndicates are benefitting from the export success of New Zealand's horticultural sectors, with strong cash returns in 2018/19.
MyFarm Investments has released its first full year of financial results for horticultural and commercial property syndicates.
The aggregate result is a 10 per cent cash return in 2018/19.
This covered nine MyFarm syndicates in the permanent crop space including vineyards, apple, kiwifruit, avocado orchards and two commercial properties.
MyFarm said in a statement it had established 17 permanent crop syndicates since 2015, as it shifted from being solely dairy focused to offering investors access to a wider range of opportunities across the different New Zealand primary sectors.
The 2018/19 financial results were taken from syndicates that generated an income, while development properties forecast to generate income in later years were excluded.
MyFarm Head of Investment Research Con Williams said the results reflected a focus on pulling together the right propositions.
This included investing in sectors and businesses that had bright prospects; buying into or developing high quality assets/orchards; and partnering with leading growers and exporters that brought the right management expertise, as well as access to specific intellectual property and high value markets.
Williams said the Bay of Plenty-based SunGold kiwifruit orchard syndicates that MyFarm formed showed what could been achieved when all these factors were combined, generating cash returns of 14-26 per cent in 2018/19.
When the capital uplift in orchard values was included, the overall result would be even more notable.
"Kiwifruit's impressive run in 2018/19 was maintained as Zespri continued to deliver strong orchard-gate returns with exports to China and North America increasing, solid climatic conditions and first class management by the DMS Progrowers team producing good quality crops."
In contrast Williams said the MyFarm apple, vineyards and commercial property investment syndicates generated solely lease-based incomes and steady cash returns of 6-8 per cent.
However he pointed out that as production kicked in on the developing apple orchard, returns from the profit share arrangement with the lessee was forecast to generate double digit cash returns.
"These syndicates are obviously suited to investors looking for more stable cash returns, versus the extra risk of an investment based solely on the operating profit it generates."
Williams also acknowledged risks such as those that occurred with an avocado investment in Northland, which was hit by a series of harvest timing, pest and market access issues.
Those aspects that were controllable had been addressed for the coming season and investors had since expanded their landholding to include a neighboring avocado orchard, he said.
Other investments settled by MyFarm in 2017 and 2018 included investments in bare land developments in hop gardens, cherry orchards, manuka plantations and Rockit apple orchards.
These had a period of no or low returns while the plants matured, but also had the advantage of new improved plant varieties which were planted using modern formats and operated at scale, he said.
The earliest of these would start contributing cash returns in FY 2020.
Williams said overall the market value of the permanent crop sectors had grown about 10-12 per cent per annum since 2012 and continued to grow.
"The blueprint of product uniqueness with trademarked IP; targeting affluent market segments; strong branding, stringent quality and food safety, and the application of best practice management and new innovations from orchard through to end customer all continue to deliver growth."