How to find investors for a durian plantation?

The durian industry is seeing skyrocketing demand from China. I'm now helping a fledgling durian plantation find investors.

They've structured the investment like this:
1. You buy the title to a number of trees
2. Based on how many trees you buy, you're then entitled to a proportionate share in the profits on the entire plantation come harvest time.
3. The plantation is expected to yield profits for 60 years +.

The pertinent characteristics of this investment seem to be:
1. It's high risk for the first 6 years (when it matures and bears fruit)
2. But after the tree matures, you get a profit share for decades to come.

How do I find funds out there that would invest in a scheme like this? I imagine pension funds could allow for a small allocation in alternative investments like this?

Sorry if this is in the wrong forum. But it seemed like the most appropriate place to post this.

Region

Comments (7)

 
Jun 16, 2018 - 7:16am

This sounds a bit like an E&P project to me in terms of it seems like you'd model the NAV of depleting the fruit like an O&G upstream deal.

Depending on the intrinsic risks (are the discounts applied to the exploration and production higher or lower than the 10, 15 and 20% applied to provable, probable and possible reserves) and other risks, like location, management quality etc., the financial sponsors who tend to work on E&P are the likes of Warburg Pincus, Brookfield and First Reserve / Blackrock. In other words, look at high balance sheet funds who will take risk and have a strat opps backbone / willingness. Obviously, this will be relative to the size of your investment opportunity.

Otherwise, it sounds like two stages of investment, with two target investors: first is the high-risk fund who then exit to the pension / long-term fund. You sell this project to the first and package the project to them by saying they should exit to long-term funds. You then pitch to the second in 6 years

 
Jun 30, 2018 - 4:17am

Thanks Harrisoon.

Modelling E&P projects is greek to me right now, but I like your suggestion about high balance sheet funds with a high risk appetite.

I also like the idea of targeting high-risk funds for the first five years. Thank you for that. Is there any way that I can find these high-risk funds using a platform like Capital IQ?

 
Jun 30, 2018 - 4:37am

No problem!

Given your mention of the size of investment, how local the product / investment dynamics are and the possibility to invest in one tree, I bow to Camondo in approach and agree with targeting HNWIs (as well as local PE).

So to answer your CapIQ question, I'd probably start looking for deal announcements of this nature / agri in the geography in your size range with a financial sponsor or pvt investor acquirer and see what names have cropped (no pun intended) up over the last ten years.

 
Jun 16, 2018 - 12:03pm

Deal size will determine your approach. How much money are they looking to raise?

 
Most Helpful
Jun 19, 2018 - 6:25am

Your scheme is very similar to investing in a real estate development. Huge execution risk at the beginning and high yielding asset once the property has been built.

I don't know the durian market at all, but I have helped a friend develop her avocado plantation in Thailand. I guess the model is fairly similar, but the ramp up period was way shorter. In her case, after building a solid business case and explaining the key trends (e.g. healthy food, millennials, etc.) supporting her growth assumptions, she approached a number of HNWIs in Bangkok rather than small-cap PE investing in the agri space.

Given the execution risk, people will only be willing to invest in they get a huge discount upfront and a guaranteed yield in excess of x% even if things go south for at least a few years. You need to explain it's as safe as investing in a bond. You put 100 and get 2 or 3 every quarter.

Your best shot is to liaise with small family offices and wealth managers. It's a fairly tedious process, but the agri space is extremely hot right now, so if your presentation is well structured, it should be fairly easy to raise money.

Any question, let me know.

Camondo

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