Agricultural Consultant and managing director at Brady Group: Agricultural Consultants & Land Agents.
The Lodge, Lee Road, Cork. T23 KW88
1st published in the Farming Independent 01.11.2023
Land is just another asset class in the institutional investment world, but the emotional attachment makes it different from other assets. I call this the human or H-Factor.
Investors buy and sell shares, houses and commercial property with minimal emotional attachment, but investment in agricultural land evokes an undefinable factor in owners which can make or break a land transaction.
Institutional investors such as pension funds and private equity firms who manage wealth for high net-worth families or individuals rarely invest large portions of their funds in land, mainly because the return on investment is simply too low.
However, even though the returns on cash invested are low, it is always considered a safe investment and a good hedge as it is a counter cyclical investment in recessions. Many of the large institutional investors would have a low percentage of land in their portfolios, often they would lease out the land after purchasing it as they don’t want the risk or don’t have the expertise to operate or farm the land.
As a general rule, these institutional type of land investments do not occur in Ireland as we do not have large enough farms to justify the investments. However, the recent announcement of an investment fund in Irish forestry by British institutional investor Gresham House in partnership with Coillte, the Irish semi-state body with responsibility for forestry and the largest land-owner in the state, has certainly raised a few eyebrows.
Of course, we have high net worth individuals and families too in Ireland. The agricultural land purchased by The Magnier Family of Coolmore Stud in Tipperary and beef baron Larry Goodman in Co. Louth are just two examples who feature regularly in the public eye for land purchases. Such accumulation of land polarises opinion when local farmers find it impossible to compete. It begs the question if a foreign investor was accumulating land by purchase in Ireland would the law be changed? Such laws are common in developing countries where a local must be involved in the ownership of land.
Worldwide, institutional investment in land is in fashion again because of climate change. Natural capital investments are investments in land with a climate, environmental or biodiversity benefit. Of course, the return on investment of cash invested is still the prime motivating factor for those holding the purse strings, but the glossy brochures are full of the ‘natural capital’ benefits such investments will deliver to the planet earth, this is the bait to draw the money into the fund for investment in the first place.
However, whether one is investing in a few acres of land in rural Ireland or tens of thousands of acres in USA, Australia, South America or Africa you have to take into account the local human emotional attachment and attitude to your purchase – the H-Factor.
Whether it is the Native Indians in USA, Aboriginals in Australia, Mapuche tribe in Chile or disgruntled Paddy in Ireland you need the goodwill of locals for a successful investment in agricultural land, capitalism is only one side of the equation. The detailed excel sheet may project the investment returns and factor in many contingency factors to minimise risk, but goodwill is an essential ingredient.
The 800 years of British occupation in Ireland has shaped our political parties and the ethos and attitude to land in our country. The Russian / Ukraine war and the Israeli/Palestinian war fundamentally are all land disputes escalated to scale of human bloodshed.
Another contentious land purchase area is ‘vulture funds’ buying agricultural land loans at a discount and then selling on the agricultural land used as security for profit when the loan is distressed. This is a risky business in Ireland as many funds are finding out on the ground and through the courts. Yes, there is the judiciary and the law in a country, but as the Bull McCabe famously said in the film ‘The Field’ there is also ‘The Law of the Land’!!
Genuine farmers are and most likely will always be the main purchasers of agricultural land in Ireland. Yes, it may be a true saying that when investing in assets that ‘Cash is King’ but it’s very clear that when investing in agricultural land in Ireland ‘Goodwill is Priceless’.