The €300m Pan-European farmland fund (PEFF) has been billed as the largest product of its kind to date and the only direct investing, EU-based farmland fund for institutional investors.
An average net income return of 5.5% per annum over the 10-year fund life is predicted and when combined with the envisaged capital growth in land prices over this period, net returns are predicted to be 10-15% per annum.
The fund management company will be owned by the two organisations and will be run under the joint directorship of Guy Barker at PCI and Richard Warburton at Bidwells.
“Essentially it is a real estate investment which is non-correlated to other mainstream property sectors,” Mr Barker explained. “As assets will all be in the EU, it also avoids the political and economic risks of some of the more temperamental foreign land fund products.”
Mr Warburton said the fund would invest in good quality arable, dairy and vegetable land in seven western and eastern European countries, with around 20% going to support infrastructure and commercial forestry.
“There is great potential for investors; however, this doesn’t come without certain challenges in a number of countries, including fragmentation of ownership from land reform, archaic tenancy legislation and foreign ownership restrictions. This joint venture brings together unprecedented understanding and expertise to be able to deploy funds and manage assets effectively.”
There had already been “considerable interest” from UK and German institutions, with about €45m of commitments made to date, Mr Barker added. The fund is due to go live this November.