Two North Waikato properties leased to Inghams (NZ) Pty Limited (Inghams), Australasia’s largest poultry producer, form the asset base for a new investment scheme worth $29.3 million, recently settled by Silverfin Capital Limited (Silverfin). Inghams is a wholly owned subsidiary of Australian stock exchange listed company Inghams Group Limited (ASX:ING).
The Scheme commenced 20 October 2023 and consists of two properties with a combined land area of 44.56 hectares, with 20-year, ‘triple net’, leases in place to Inghams. Improvements include a state-of-the-art hatchery facility and over 25 poultry sheds and associated infrastructure.
The Scheme is delivering a 7.5% per annum pre-tax distribution (forecast to 31/03/2028) payable monthly.
Silverfin have developed a long-term relationship with Inghams, who are Silverfin’s tenant across an extensive existing property portfolio consisting of a processing plant, a hatchery and poultry farms worth $120 million in the Waikato.
The relationship commenced in 2019, with the acquisition by Silverfin of a $86 million portfolio of six properties all leased to Inghams and all located in and around Matamata, Waikato. At the time, Silverfin liked the strong tenant covenant offered by Inghams, the long lease term, the fundamental strength of the poultry industry, and the fact that New Zealand was one of the best places in the world to farm poultry. We also noted that chicken was unable to be imported into New Zealand, meaning that the large poultry farmers had a captive domestic market.
In the five years since it commenced, the original portfolio has increased in value to $100 million, whilst paying a steady monthly distribution of 8.25% p.a. (pre-tax). In 2022, Silverfin bought an additional Inghams poultry farm for $20.0 M.
Miles Brown, Silverfin Capital’s CEO, says “there has been strong growth in chicken consumption in New Zealand due to continued population growth, greater affordability due to increased production efficiency, and consumer trends including health, wellbeing and convenience.”
The investment fundamentals for Inghams remains unchanged today, and as a result of their successful existing relationship, and the continued growth of Inghams Group, Silverfin have partnered with them on this third scheme, being the Inghams Hatchery Scheme.
Brown says that this most recent Scheme was an interesting transaction in that Inghams was looking to purchase a suppliers established hatchery business, to bring that part of the supply chain ‘in house’ to enable efficiencies and quality control. At the same time that Inghams purchased the business operations, Silverfin entered into an agreement with the vendor to purchase the associated real estate. The 20-year lease was put in place with Inghams on settlement and the properties will now play a key role in Inghams’ poultry supply chain moving forward.
The property syndication industry has been impacted by high interest rates, with the utilisation of bank debt no longer improving returns to investors. In light of the tougher environment, Brown says he was pleased with the level of investor demand in the Scheme, noting that most investors look longer-term and appreciated that this Scheme represented ‘counter cyclical’ buying.