MIDAS SHARE TIPS: US farms could reap you returns of 9%

Flotations were scarce this year. In the first nine months of 2021, 86 companies entered the stock market, raising nearly £14 billion.

This year there were only 34 deals that brought in less than £1.2 billion. Now there are signs of change.

Two new companies are hoping to hit the market in the coming weeks, both somewhat unusual but with generous dividends, a hedge against inflation and the opportunity for long-term growth.

Sustainable farmland confidence

Farming is in Charlie McNairy’s blood. His family has been involved in farming since 1827 and McNairy grew up helping on the farm in North Carolina.

After an MBA from Harvard and a stint as an investment banker, he decided to combine financial expertise with his agricultural heritage and founded International Farming Corporation (IFC) in 2009, just after the financial crisis.

Today, the company has over 160,000 hectares of farmland, collectively valued at nearly £2 billion, and grows crops from maize and soya to apples and almonds.

Now McNairy and his team are powering up a new business in London. Sustainable Farmland Trust starts with a portfolio of farms from IFC, supplemented with own investments.

The company hopes to raise £200m in the stock market and is offering shares at £1 each. Applications can be made through intermediaries including Hargreaves Lansdown, AJ Bell and Interactive Investor and the deadline is October 7.

Shareholders can expect a dividend of around 2 pence in the first year as the Trust carefully acquires farmland and related assets, including grain storage sheds, greenhouses and packaging facilities.

From the end of next year, Sustainable Farmland Trust is targeting an annualized return of 7 to 9 percent, including a dividend yield of 4.5 percent, which is equivalent to a share of 4.5 per annum at the bid price of £1.

From the start, however, Sustainable Farmland Trust is not just about making money; it is also about taking care of the land that the group acquires.

Agronomists are a core part of the team, ensuring that water use is responsible and efficient and that the soil is healthy, with all the nutrients needed for successful cultivation.

About a dozen assets have already been earmarked for the Trust, from wheat and sunflowers in Colorado to alfalfa and potatoes in Idaho and hazelnuts in Oregon.

Other deals are in sight, including an almond and pistachio farm in California and two somewhat neglected apple orchards in Washington, which need expert help, such as blossom management to encourage healthy fruit growth.

The US is one of the largest agricultural markets in the world with 335 million hectares of arable land and some three million farmers. This gives Sustainable Farmland Trust many opportunities, but the group will be very selective in the acquisitions it makes.

Through IFC, the Trust has developed relationships with a network of farmers, primarily from agricultural stock, but with an interest in modern farming methods and responsible stewardship.

This network gives IFC access to high-quality agricultural deals before they hit the open market, ensuring nearly 90 percent of the company’s purchases to date have been made privately.

Sustainable Farmland Trust benefits from the same dynamic, allowing the team to invest in farms that grow crops, from basic commodities to high-quality fruits and nuts.

The Trust should also benefit from a generational shift in the US agricultural market. More than 40 percent of U.S. farmland, worth about $1 trillion (880 billion pounds), is owned by farmers over the age of 65.

Many would like to retire, but their descendants are hesitant to take on the farming mantle. Sustainable Farmland Trust can offer these families a way out so that they can sell their land in the knowledge that the new owners will take good care of it.

From an investor perspective, Sustainable Farmland Trust also makes sense. The war in Ukraine has drawn attention to the value of food security as never before. America is the largest exporter of agricultural products in the world and its farms are increasingly valued, as food producers, not only for American citizens, but also for the rest of us.

This should mean that Sustainable Farmland Trust’s land becomes more valuable over time, especially as farmland tends to increase in price when inflation is high.

Midas verdict: Sustainable Farmland Trust offers British investors access to the vast US agricultural market, where yields are rising and should remain in that vein for some time to come. With generations of farming expertise built into the business and a 4.5% dividend yield in sight, this trust should deliver attractive long-term rewards. To buy.

Traded on: Main market ticker: AGRICULTURE Contact: sustainablefarmlandtrust.com or 001 252 523 0800 or 020 7466 5109 (via Buchanan public relations)

Independent living Reit

Assisted living is bad. There are currently about 330,000 such homes, but according to independent research, at least 100,000 more are needed, and again in the next decade.

The shortage is greatest in two areas: homes for people over 55, who need some care but can still live independently, and homes for people with special needs, who need support but still benefit from living in their own space.

Many of these people are now in hospitals, care homes or temporary housing, which is of no help to them and costs the UK millions of pounds each week. But building new homes will require investment, estimated at nearly £25 billion by 2032.

Independent Living Reit was founded to help close the gap between supply and demand, improve the lives of those in need, save taxpayers money and generate solid returns for shareholders.

The group, led by director David Blakeborough, hopes to raise £150m in the stock market. The company aims for a total annual return of 7 to 10 percent, split between a 5 percent dividend yield and 2 to 5 percent capital appreciation.

Shares are £1 each, the application deadline is this Thursday and stock will be available through intermediaries such as Hargreaves and AJ Bell.

Housing support funds have faced serious problems in recent years and have been criticized by regulators for profit-seeking at the expense of tenants, local authorities and ultimately taxpayers.

Independent Living is designed to be different. Greedy funds have offered developers huge sums and demanded rents at a premium of more than 80 percent over the average private burden.

Independent Living cuts developers’ profits, allowing the company to make rents significantly more affordable while still providing quality accommodation for those who need extra care.

The new model, developed with the Social Housing Regulator, has several advantages over previous approaches. Residents will be well taken care of, taxpayers will save money and shareholders can earn decent rewards while basking in the knowledge that they are using their money well.

Ahead of the IPO, Independent Living has identified a pipeline of opportunities worth nearly £550 million. Not everything will be realized, but a quarter is well advanced and the fund should be fully invested within 12 months. Rents are also inflation-linked, which should translate into steady dividend growth for investors.

Independent Living has also analyzed its contribution to society and calculated that for every £10 million invested in the fund, 67 new homes could be built, saving £1.7 million annually in housing costs and other benefits.

Midas verdict: Independent Living wants to do good and make money for shareholders, both worthy goals. Blakeborough and his team are highly experienced, have spent several years improving their model and are backed by Atrato Partners, the investment group, which has achieved successes including Supermarket Income Reit. At £1 a share, the stock should offer rising long-term earnings and a decent hedge against inflation.

Traded on: Main market ticker: LIVE Contact: Independentlivingreit.com or 020 3925 5882