The company has launched an initial public offer (IPO) to raise $75 million to $150m before a proposed listing on the NZX on December 18.
NZRLC says it is the biggest equity raising and primary listing in NZ during 2020.
It wants to purchase rural land and lease it to farmers and orchardists.
The proposition offers investors exposure to rural land as an asset class without direct involvement in agricultural operations, or the risk of commodity price cycles.
Elevation Capital Management founder and managing director Chris Swasbrook says the IPO offered investors a differentiated proposition to what is already available on the NZX in a very low interest rate environment.
Separating land ownership from agricultural operations increased capital efficiency for tenants and allowed investors to own only the rural land.
He says there was long-term value in rural land, and this was a vehicle for investors to access one of NZ’s largest and most important asset classes.
NZRLC would look to negotiate what Swasbrook called a minimum targeted gross lease rate of 4.5% a year on a 10-year term as part of its acquisition and leasing strategy.
However, this was not a targeted return to shareholders, which would be subject to other factors, including capital expenditure costs and NZRLC expenses.
It would be seeking tenants who are experienced, well-financed and sustainably focused.
In purchasing rural land, it would limit debt to no more than 30% of NZRLC assets.
It is also committed to retaining at least 75% NZ ownership of NZRLC to avoid the need for Overseas Investment Office approval of any land purchases and to retain a non-purchase price advantage over would-be foreign investors.
Part of the strategy is to target highly indebted, large-scale properties where vendors and their financiers have a limited pool of prospective purchasers.
Contributing factors include foreign buyers being blocked by the Government and tighter credit requirements by banks.
The issue price is $1.25 a share, with a minimum of 800 shares or $1000 investment and after December 18 they would be tradable on the NZX main board.
NZRLC hasn’t entered into any contracts or commitments to buy rural land, but it says 20-plus properties of interest are large dairy farms in the South Island.
The management fees include 0.5% annually of the NZRLC net asset value; a performance fee of 10% of any increase in NZRLC’s NAV/share one financial year to the next; a transaction fee of 1.25% of acquisition or divestment value for land bought or sold; and $30,000 fee for any lease entered into by NZRLC.
The manager is called the NZ Rural Land Management (NZRLM) Partnership, to provide management, investment and administrative services.
Rural services listed company Allied Farmers has signed a conditional agreement to buy half of the management company for $2.5m.
That would be payable by up to 5m ALF shares at 50c on completion of a successful IPO for NZRLC, being at least $75m raised.
Allied Farmers has a call option to buy the rest of NZRLM after two years, based on an independent valuation.
The independent chair of NZRLC is Rob Campbell, who is also chair of SkyCity Entertainment, Summerset Group and Tourism Holdings.
Former Fonterra executive Sarah Kennedy is an independent director, along with co-founder Swasbrook.
The proposed management company board consists of former BNZ Partners leader Shelly Ruha, former Fonterra director and Taranaki accountant Marise James, appointed by Allied Farmers, and co-founder Richard Milsom.
Swasbrook says the timing of the NZRLC IPO was different to those attempts of the past that had not been successful, of which he was well aware.
“I have been in this market since the mid-1990s and I can assure you we have learned the lessons of the past,” he said.
“We now have restrictions on foreign buyers for farmland and tightening credit conditions, plus we have stripped out the risk of farm management and commodity prices.
“On-farm earnings are up and prices for large-scale rural land assets are down.”
He says response from intending investors had been very strong over the few days in which the IPO details had been published.
