Merricks Agriculture Credit Fund Report – August 2021

Market Review

2021 continues to see rural property values on an upward trajectory At Merricks Capital, we are constantly in discussion with rural sales agents and are seeing strong demand for properties valued at more than $10m. The agriculture investment strategy is focussed on $25-$50m loans where we see the strongest investment opportunities. Growth in property price has been driven by a combination of factors. Ultimately, supply and demand dynamics underpin the increase.

Strong commodity prices and good seasonal conditions have tightened the hold producers have on their current land assets while prompting an expansion phase in their operations. Low supply of farms on the market has improved transaction expectation of vendors.

Additional demand has originated from investors and international buyers who are seeing value in Australian rural property. Urbanites chasing a regional lifestyle are pushing up rural land value on urban fringes while investors looking for environmental driven outcomes, for example in the carbon farming space, are also increasing competition in the market.

When we complete loans, we do not assume any asset value appreciation in Loan to Value Ratio (LVR), our key credit metric. However, asset value appreciation reduces individual loan risk exposure in our Agriculture Investment Portfolio.

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