March 12, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

As is often the case, potential cannot be realized without the necessary logistics and framework to support it.

Latin America currently accounts for 16 percent of the world’s total food exports, a figure that the UN FAO expects to increase to 25 percent by 2028. And, as food security has grown to be recognized by international investors as a strategic asset class, Mexico is a high-potential market in the region. 

Beginning in the 1980s, following a period of economic hardship, the country enacted a string of trade reforms that saw it emerge as a major global trade partner, according to the USDA. 

By 2021, the country’s agricultural exports to all global markets totaled approximately $44.8 billion, and last year, the country’s agricultural exports hit a record, totaling $34.12 billion in just the eight month period between January-August – a 15.5 percent jump over the same time period a year before. 

However, there’s a pervasive gap in productivity assets and capacity holding back companies in the region from even further growth. 

To address this need, in February, Farm Capital launched the first private agro-industrial real estate fund in Mexico with an initial closing of $35 million on a path to a funding target of $100 million over the next twelve months. 

Led by highly experienced team of investors and advisors that have collectively structured, funded, and managed multiple private market investment vehicles totaling more than US$1.5 billion across different asset classes, Farm Capital intends to leverage this experience to improve the productive capacity of exporting agro-industrial companies in Mexico by acquiring and upgrading, or building-to-suit strategic assets and leasing them back to companies meeting global food demand. 

The founding partner in this venture is Enture, a private equity and investment banking firm founded in 2004 that structures and manages private equity funds and other investment vehicles, and offers M&A services and advisory services in the agrobusiness, real estate, and hospitality sectors. 

Joining Enture as co-manager of Farm Capital is twocap, an international multi-asset alternative manager with a senior team of qualified specialists, each with over 20 years of private markets experience. Collectively, twocap’s leadership have managed over US$1.1 billion of third-party investors across several private market structures and asset classes, in addition to having led private market transactions, mainly with SMEs, worth more than US$4 billion.

As one of the few funds of its kind in Latin America, Farm Capital plans to invest in industrial cities in Mexico, writing tickets between US$4 million-$30 million in promising subsectors with clear growth potential. 

Prospective assets will include farmland and cattle farms, high-tech greenhouses, food processing, packing, and storage facilities, cold storage, abattoirs, grain warehouses and railway ports, agroindustrial parks, and agroindustrial facilities in Free Trade Zones. 

The goal is to build a portfolio of six-to-nine rent-producing properties that will be leased to exporting tenant companies with sales in excess of US$10 million. These triple-net lease agreements will have terms of 10-15 years with renewal options and cap rates of 9-11 percent. 

Andrés Vázquez, founding partner of Farm Capital, commented, “Farm Capital allows Mexican agroindustrial exporting companies and their qualified producers to lease productive real estate with advanced technology, allowing Farm Capital to offer investors the opportunity to participate in the profitability and resilience of the food sector through a diversified portfolio of agroindustrial properties with high appreciation potential.”

Through this structure, the fund expects to provide quarterly cash distributions of approximately 8 percent to its investors and a total cash-on-cash IRR greater than 13 percent, and to achieve final liquidity through the sale of lease contracts or assets to strategic investors, or the possibility of listing as a public REIT. 

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

*The content put forth by Global AgInvesting News and its parent company HighQuest Partners is intended to be used and must be used for informational purposes only. All information or other material herein is not to be construed as legal, tax, investment, financial, or other advice. Global AgInvesting and HighQuest Partners are not a fiduciary in any manner, and the reader assumes the sole responsibility of evaluating the merits and risks associated with the use of any information or other content on this site.