AeroFarms Vertical Farm

Source: AeroFarms

Grosvenor portfolio company AeroFarms

Global property group Grosvenor increased its investment into food and agriculture businesses last year, despite the macro-economic headwinds facing the sector that saw it withdraw funding from some portfolio companies.

The group’s annual report showed investment in food and ag-tech businesses totalled £111m in 2022 across its 28 portfolio companies, up from £81m in the previous year.

The group, which is invested in US brand The Jackfruit Company and meal kit brand Gousto, made new investments of £45m and follow-up investments of £66m to support existing portfolio companies.

That saw the overall portfolio value of its companies in the space rise by more than 28% from £364m to £468m.

However, CEO Mark Preston said its own portfolio had suffered from valuation volatility related to wider economic and inflationary conditions.

He said further investment in its portfolio companies was reflective of some needing growth capital and some needing funds to navigate current headwinds.

The group’s annual report said it “continued to support our most promising portfolio companies”, but chose not to commit new funds to those “facing more fundamental challenges”.

As such, it highlighted investments in Ostara, a producer of sustainable phosphate fertilisers, and TemperPack, a manufacturer of sustainable plant-based packaging, to expand capacities.

Vertical farming

Additionally, AeroFarms, the commercial leader in fully controlled vertical farming, opened a new facility in the US and significantly expanded in the Middle East, while Oxbury, the UK bank dedicated to serving British farmers and the rural economy, raised new equity.

However, 2022 saw sustainable producer of feed ingredients Enterra cease trading, while Purfresh, which preserves fresh fruit in global transit, was hit by supply chain issues, while its technology and IP was acquired by a new company.

“As a private long-term patient supply of capital, we the ability to look through the shorter-term disruptions in the market and look to the longer-term opportunities,” Preston said.

This longer-term investment strategy meant it could take a view on companies independent of market cycles and would continue to support those companies that needed funds to achieve long-term ambitions, he said.

“If you are going to invest in early-stage ventures, you have to accept that some are going to fail given the high-risk nature of the game. Those are difficult decisions to take, but ultimately we will make an objective and carefully analysed assessment of the opportunity and if it’s clear to us that these businesses are not going to make it then you cannot justify continuing to support them.”

While he said current global economic conditions had made it more cautious about new investment opportunities, the current environment has not “changed our motivation, ambition or commitment to this area”.

“We still feel it’s relatively early in terms of disruption and consolidation of what is still a very fragmented industry that is somewhat lacking in interventions to innovate and create a more sustainable and efficient food system,” he said.

“We’ve got an eye on what may come after this disruption and very likely it will mean there are opportunities – and perhaps the market may have cleared out some of the shorter-term, less thoughtful capital.”

Meanwhile its rural estates arm, predominantly centred on dairy and arable farms, Grosvenor Farms and a rural portfolio of more than 750 properties, saw asset values increased to £387m from £345m, though net profits edged down to £2.1m from £2.4m due mainly to the development of potential projects in Grosvenor Farms.

Urban property revenue profit of £52.7m almost halved from £99.7m with a total return of 3.5% compared with 5.2% last year, which reflected “solid performance in the face of challenging economic conditions”.