Real estate and property investments have always been the center of interest for investors. People usually focus on traditional real estate Investment schemes such as flipping, buy to rent, build to sell, land banking etc. depending on the type of returns they are looking for. Ideally, a real estate investment produces good income while creating capital growth over the years. one of the best ways to achieve such results is to combine two of the most valuable sources of income on the planet which is farming – agriculture and land.
Over the years, great fortunes have been created from agroforestry investments all over the world. the advantages of this type of business– investment are literally unlimited. Agriculture and farming is maybe the oldest type of investment and one of the most lucrative business opportunities as it is directly connected with the survival of the human race. For dozens of centuries now, vast fortunes have been created around the world from farming, plantations and agriculture while hundreds of millions of people have been making their living from smaller scale agroforestry facilities.
Although agroforestry scheme has been existing for centuries, it is now becoming extremely popular, attracting more and more investors. For at least the last two decades, eco- nomically savvy investors have been investing in hard assets as an infla- tion hedge against future and present economic uncertainty.While much of this demand for these hard assets has poured into precious metals and energy, other investors have been buying farmland as an investment hedge against future inflation in food prices. this trend is not isolated to europe, Asia, or America. Global investors are scooping up deals on farmland in America, russia, brazil, and many African countries.
Investors are often drawn to farmland based upon its cash flow potential (rents or crop yields) in addition to its capital appreciation. Additionally, many investors who are seeking less exposure to paper assets often find that farmland offers the type of diversification that they desire.
the reality is that everyone agrees it would be ideal if someone could combine a land investment with an annual return produced directly or indirectly by the land. For anyone who lives in a coun- try where farming has been tradi- tionally one of the main sources of the economy, it is not a secret that huge fortunes have been made via farming. the problem with modern times is that someone who likes to live and work in the city cannot same time easily run a farming busi- ness. Another important fact is that around the world people focus more in office jobs and technology which results to lack of knowledge and experience on how to manage a farm or plantation.
Then again nowadays there are several options for someone to com- bine both, living in the city and be a successful farmland investor. over the last decades around the world, a new trend is gaining more space day after day, it is called managed farms. A professional established forestry or farming corporation is setting up a big fully managed plantation or farm. Someone can buy his own piece of land, part of the big plantation or farm and the corporation will fully manage it for a reasonable management fee. there are different types of managed farms available around the world. Most successful are the ones that are fully managed, providing a vertical line of managing – process and marketing a plantation –farm usually for a specific crop or tree.
The key to success is the combination of knowledge, experience, size (that is reducing costs), and the ability to penetrate the markets in order to sell the processed product fast and for a very good price. the business model that big farming corporations follow is based on the modern portfolio theory. Modern portfolio theory states that a balanced portfolio should have a unique diversification of uncorrelated asset classes. by taking that principle and adding another layer, that layer is the product, which in itself has many uncorrelated commercial end uses that completely diversifies the investment.
Usually the companies who are running this type of farms – plantations following the modern portfolio theory prefer to grow crops or trees that have several alternative uses. this could either be as a raw material or final product and produces income at least once per year after a maturity period, in order to create constantly growing yields for the investors. the end products can be provided to completely different sectors of the market hedging any possible oversupply of one sector which will cause drop of the prices and returns simply by changing the end market to another sector.
There are several types of crops that could provide this type of results, but the one that seems to be almost ideal is bamboo plantations. bamboo is extremely popular in several parts of the world with china and the US leading the way. Demand for this amazing grass is growing over the years together with the number of available alternative uses of bamboo. From a hard raw material (often compared with steel) up to a fine end product such as cashmere quality fabric, bamboo is a product in high demand.
In the last decade, there has been a boom of manufacturing industries utilizing bamboo world-wide. bamboo can be used for simple things such as charcoal , scaffolding, furniture, clothes, accessories, yearn ,eco-houses as well as more complicated products like bamboo biomass (energy production) , activated charcoal, bamboo nanofibers with prices reaching in some cases over USD. 2000 per metric ton. the Global Market exceeds USD. 20 billion Annually and growing.
Research has shown that on average a high quality fully managed and irrigated bamboo plantation can produce over 30 tons of biomass per acre per year, per harvest (respectively), depending on the type of bamboo and the specific characteristics of the plantation. Unlike most timber, bamboo is a self-regenerating natural resource, as new shoots that appear annually ensure production after individual culms are harvested. bamboo is really special. It is not only producing great wealth when it is properly managed, it is also an amazing plant for the environment as it provides considerable environmental benefits. It is used for ecological purposes such as soil stabilization and erosion prevention on hill slopes and verges. It is a very important forestry plant which is harvested from existing natural forests, plantations, and mixed agro forestry systems. bamboo silviculture is an option for conserving and protecting tropical forests while creating enduring supplies for the wood and cellulose industries.
It can be quite easily grown but under professionally managed agro forestry schemes a bamboo plantation will produce more. bamboo agro forestry requires a modest cap- ital investment and generates steady income to investors. During the last decade, increased knowledge and research about bamboo has had a tremendous. Many export markets have been opened and the development of innovative products is a continuous process.
But let us not get over excited. bamboo or any other crop same as any other low risk investment will create a good income, will achieve a nice capital growth but cannot make you rich in a day or in a year. If someone is expecting returns that will double triple or more their capital , then farming , and real estate is not the correct option. For those who are interested to secure their future with a low risk project then agroforestry could be a good choice . Farming is not easy work. Investors have to decide whether to farm the land directly themselves or contract the work out or work with a farming management company who will take care of their investment.
For those who live in the city and want to combine capital growth with annual yields under the security of a land investment, today managed farming-plantations are the solution as an alternative progressive land investment that will minimize the risk while creating serious income and wealth.
Over the last few years one of the leading International Plantation Management Companies, Africa Plantation Capital, a member of Plantation Capital Group, has been investing in Kenya’s large scale agro-forestry sector. The company’s plans are to grow bamboo, process it into fiber and export it via its global existing network to Asia , Europe and other international markets , following a vertical production line model.
Africa Plantation’s capital first investment in Kenya is projected to have a total size of 5000 acres in 5 a years’ time period. Phase one has already taken off and the company’s target is to establish its Africa Headquarters in Kenya. The Plantation Capital group is financing extensive research, working together with the experienced Kenyan authorities such as KEFRI as well as private laboratories to bring in several other types of agroforestry species that are not native to the African continent, such as Agarwood and Indian Sandalwood as it expands further its operations.
Currently the group has over 120 plantations under management in four continents offering plantation management services for more than 8 different type of crops. Africa Plantation Capital’s plan is to offer the opportunity to individuals as well as companies or investment groups to partner with the company in its Kenyan projects offering fully managed income creating farms. It is the group’s policy to only offer a fraction of the available acreage of its operations to third parties so only a limited number of partners will have this opportunity.
At this point I need to be very clear and ring the bell to all of you who might be interested in a similar type of investment. Successful farming requires much more than just a piece of land and big words for future returns that might excite you. before you put your money with anyone who is offering to you any type of agroforestry – farming investments make sure you do your homework. Make sure that what they promise you can be delivered. Verify that they have the experience, the network, the stuff, the knowledge and most important that they know what they are doing. Ask for their business plan, their licensing, their environmental approvals, make sure that your money will be placed to a well-established project and not to a “castle made from sand” that will collapse shortly after you pay your money.
Real estate is usually a passive sector of the economy but combined with farming becomes one of the most lucrative possible investments around the world. Investors should start to think how to diversify their portfolio and create alternative sources of income with minimum risk.
So if you targeting capital growth while mitigating risk and diversifying asset classes, then a farm investment, no matter if that is apple mangos, corn, maize or bamboo, should be part of every modern investment portfolio.
In a few words if you want to go forward … just go green !
Business Monthly East Africa Edition ( October 2016 -Issue)
** For more information on Bamboo Plantations and APC Group you can visit www.africaplantationcapital.com