Five year average dividend yield of Advance Terrafund stood at 12.3% distributing BGN 125m to investors for the period – concluded ELANA Trading analysts in their latest research report on the largest land REIT in the country on the basis of earnings Q4 2015. Experts estimated a BGN 0.096 DPS from 2015 net profit at 90% payout and BGN 0.105 DPS at 98% payout with the former being regulatory payout and the latter Advance Terrafund normal payout. This yields 4.6% and 5.04%, respectively, at current market quotes and should stay in the c.5% range in the midterm if the company maintains current strategy.
Outperformance despite difficult 2015
Advance Terrafund had a tough year but outperformed expectations. The company could not temporarily operate normally due to ridiculous regulatory issues. A regulatory change prevented the Fund from selling/buying land without a penalty for the Company. However, the Bulgarian Parliament abolished the questionable regulation in early summer and the Fund initiated normal land banking operations.
Over the course of the second half of 2015, Advance Terrafund accelerated land sales and initiat-ed land leasing operations to smooth out revenue and cash flow streams and to lock in higher land prices. Management guidance was to have 5400 dca of land sold and 2400 dca leased by the end of the year. However, due to higher demand the company sold 7212 dca of land or 33% above guidance and leased 2424 dca in line with guidance. For 2016, the Company already has preliminary sale agreements for c.4600 dca.
Who is Advance Terrafund
Advance Terrafund is the largest REIT owner of agricultural land in Bulgaria. It is also one of the largest owners of land in the country after the Bulgarian state. It owns 23K ha of arable land which it rents or leases to farmers.
The Fund’s holdings are mainly concentrated in the most fertile regions of the country: 40% of the land is in North-East Bulgaria.
The company was established in 2005 to take advantage of the consolidation wave in the agricultural sector as arable land was highly fragmented at time point in time. In addition, it took advantage of the lower land prices which almost tripled from the EU accession of Bulgaria (2007) until nowadays.