Radoslav Manolov for "Forbes" magazine


Funds such as ADVANCE TERRAFUND make a profit from the rising prices of agricultural land and the shareholders are happily rubbing their hands.

Radoslav Manolov’s tone of voice is decisive and is seemingly impatient of opposition. “Absolutely. It is certain that land funds will remain attractive, at least while we are still within the reach of the current economic crisis,” says Manolov in response to Forbes’s question whether funds for agricultural land investment would be the gold stars on Bulgarian stock exchange in 2013. The 41-year old Manolov, CEO of ADVANCE TERRAFUND, immediately adds, “The hard part with land funds is the initial gathering of momentum, to start functioning properly. It’s like with any other business – the first three years are the hardest. Then, if it is properly structured, it starts paying off.”

During the past two years, land funds that are obliged to allocate at least 90% of their profit as dividends, have been definitely paying off and ADVANCE TERRAFUND is no exception. In 2011 land sales and revaluation of assets launched the fund’s profit to the record amount of BGN 57 million, which is more than 23 times more than the previous year. In 2012 the company reported 84% revenue growth from the sale of land, boosting its securities to the record level of BGN 2.5 per share in mid- February. Land funds buy agricultural land and then may rent or lease it. The strong revenue, however, comes from the sale of the initially bought and consolidated land plots whose price is higher than the land’s retail price (According to Mr. Manolov, there is an approximately 50% surcharge on the retail price which serves as a base for the price at which funds sell the land in their portfolios). What makes this investment even sweeter, is that the price of land is rising and this trend is likely to continue at least in the medium term. In 2009 ADVANCE TERRAFUND sold land for about BGN 540/dca on average, while in 2012 the average price rose to more than BGN 870/dca (or over 60% increase). The price for the best and most fertile plots is over BGN 1000. “Mid-term the price is steadily going over BGN 1000 –  at around BGN 1200. Transactions are being made as we speak,” says Radoslav Manolov.

These attractive prices encouraged ADVANCE TERRAFUND to sell out part of its  agricultural land portfolio in order to cash out the appreciation. In 2012 the company was a net seller of land, i.e. it sold more land than it bought. This left the company with about 250,000 dca of land in its portfolio in the beginning of 2013, which is likely to continue to reduce its size (although, according to the last published bulletin, ADVANCE TERRAFUND has not sold any property in January – editor’s note). “The general feeling is that we will continue to sell this year and the next. Whether we are going to do it at the same rate depends on the market”, says Manolov. “Considering the new European agricultural policy for 2014-2020, all  farmers should secure their position by buying land.” This means that those who do not have enough consolidated plots must either rent them or buy them and the land funds are the most likely sellers. In the past few years agricultural land in Bulgaria continues the process of fragmentation instead of consolidation (the average size of agricultural plot is approximately 5.5 dca). “Property is fragmented in Bulgaria, which is characteristic for Europe in general,” says Manolov. “The difference is that the other European countries have adopted the policy to oppose fragmentation through land consolidation. We have no state policy focused on consolidation development. Everything is done through private companies like us, with private funding and as far as we could go on our own.”

Investors are irresistibly drawn to the attractive market where land funds operate. Companies with special investment purposes /REITs/, functioning as public companies and with shares traded in the stock exchange, register significant activity. In 2012, the BGREIT Index, monitoring shares of real estate funds, reported over a 50% growth, considerably ahead of the more modest 8% growth of the main stock index – SOFIX. The BGREIT increase is largely due to the real estate funds. Within the previous year, shares of companies like ADVANCE TERRAFUND, whose market capitalization is already over BGN 200 million, or AGRO FINANCE, have nearly doubled. In the last quarter of 2012 the two funds formed one fifth of the total turnover of the regulated market. ELARG shares have also registered a considerable increase on the stock exchange after its shareholders adopted the resolution to liquidate the fund. The reason – investors preferred to take advantage of high land prices and get the returns from the sold assets of the fund instead of waiting for returns from financial results and share increase. From the end of November 2011, when ELARG management proposed its liquidation, its shares have appreciated by more than 200%.

ADVANCE TERRAFUND entered the agricultural land market in 2005 as part of Karoll Financial Group which is one of its major shareholders. In the same year the fund invested nearly BGN 3 million in approximately 18,000 dca of land. While the fund was building assets in the form of agricultural land for several years, the plot prices were gradually increasing. The company decided on a few capital increases and the International Finance Corporation /a member of the World Bank group/ took part in one of them, investing 15 million euro. Having built up large portfolio of concentrated lands, ADVANCE TERRAFUND started selling its portfolio while simultaneously buying more land. In 2011 the company revenues from the sale of land have increased up to BGN 38 million, whereas the total turnover was almost twice as large due to revaluation of its land plots. The actual dividends distributed – BGN 21 million – were much smaller than the net profit, namely because the financial results included large profit of asset revaluation.

In 2012 the sale of land brought revenue of over BGN 69 million, leaving its shareholders in eager anticipation for its distribution. “We started with 3.5% dividends and now we achieve over 40%, at least that is this year’s estimate. We are talking about immense growth,” says Radoslav Manolov while the investors are probably happily rubbing their hands in anticipation.


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