Rural property syndicator MyFarm expects to have its planned share trading platform operating on the Unlisted market next month.
The move has important implications for investors because as well as improving share liquidity in MyFarm's syndicated dairy farms, it could also provide a model for share trading for more widely held commercial property syndicates and may eventually provide the base for the float of a substantial farm owning entity.
MyFarm has been a major syndicator of dairy farms and has also started syndicating sheep and cattle farms through a new company, MyFarm Sheep & Beef (see story page nine).
One of the major drawbacks of property syndicates, whether they own a farm or a commercial property such as an office building, is a potential lack of liquidity in a syndicate's shares or units in cases where individual investors want to cash up before the syndicate is wound up.
This could be a particular problem for farm syndicates because they are often structured as limited partnerships where the minimum investment can be $200,000 or more, restricting the pool of potential purchasers of any interests that were offered for resale.
MyFarm intends to tackle the problem through the use of collective investment vehicles (CIVs). These would be special purpose companies set up to acquire the interests of investors who were wanting to sell out of farm syndicates.
Each CIV would offer shares to new investors, in bundles of say $20,000, making them more accessible to the general public than limited partnerships.
The shares could then be traded on MyFarm's Unlimited platform.
MyFarm successfully used the CIV structure to allow investors in one of its limited partnerships to sell down their holdings in July.
MyFarm director Andrew Watters said the CIV model would be the standard method of arranging a sale for syndicate members wanting to sell their interests, from now on.
How well the CIV shares trade on Unlisted is likely to be watched closely by the major commercial property syndication companies because the potential lack of liquidity in their schemes is one of the major negatives investors must consider when weighing up whether or not to commit their money to them.
MyFarm now manages farms collectively worth around $550m, with about two thirds of them in syndicated ownership, according to Watters.
If its CIV plan is successful, it is likely that the proportion of those assets controlled by CIVs will progressively increase until a substantial market has been created.
Once the number of investors and the value of the assets they own is large enough, it might be possible to merge individual CIVs into a single, large farm owning entity which could eventually be listed on the NZX, although Watters said the company had no plans to do that "at this stage".
Myfarm close to trading shares by tower technology news