The types of farmers we like working with
As a general rule, our clients are passive agricultural investors. That is to say that they buy farmland to hold as a component of a diversified investment portfolio of other asset classes, usually only intending to resell farms in the mid to long term.
As a result, we are particularly interested in land with existing tenant farmers or land where the seller wishes to remain on as a tenant farmer. We are also happy to consider land under charge / covenant to a lender where we can assist farmers in restructuring debt in order to facilitate a transaction under a purchase and leaseback arrangement.
Here are some examples of situations that farmers have been in where our purchase and leaseback model has helped them achieve their objectives:
- Expansion capital – With the opportunities presented by modern mechanised farming and changing terms of trade, scale is becoming all the more important for farmers. It might happen that a neighbouring block comes onto the market and because of your bank’s lending policies you can’t raise enough money to buy it, but you’ve got enough equity to do so if you sell all or part of your current holdings.Normally there would be little point in doing so since you wouldn’t’ be able to farm the land you sold, but if you sell to a buyer that will leaseback to you as a condition of sale then you get to expand your operation. Subject to negotiations, we can also grant you first right of refusal to buy the farm back in the future if our client sells. What’s more, the economies of scale you are able to achieve will put you in a stronger position if that opportunity arises.
- Alternatively, you might take the view, as an increasing numbers of the most talented farmers do, that you can make more money if all of your capital is allocated towards operating farms than owning them. If a big lease opportunity comes up in your neighbourhood, we can buy your property and lease it back to you giving you the capital you need to lease further land and make the big machinery investments needed to maximise your returns on a commercial scale enterprise.
- Retirement of the principle owner / family split – The elder family member has reached retirement age and wants to sell the farm, but the younger generation wants to keep farming. We can buy the farm and lease it back to the younger generation.
- Estate restructuring – The elder family member passes away and some heirs wish to sell in order cash in on their part of the estate, but another sibling wants to take over the family farming business. We can buy the farm and lease it back to the sibling that wants to carry on the family tradition.
- Management buy-out type situation – You might be a successful contract manager and your owner decides to sell the farm. Because you know the farm, you know exactly how well you’ll do if you stay on as a tenant farmer with a new owner.This can also work the other way round. An owner might want to reward a good contract manager for years of good service. In these situations we can buy the farm from the current owner and lease it back to the contract manager. Again, subject to conditions, we could give the new tenant certain rights to buy the property in the event of a sale by our client. This can be a great way of husbanding talented young managers into an ownership situation whilst at the same time achieving a great outcome for our investor clients.
- Distressed owners – Perhaps you’ve had a run of poor weather and that’s taken your equity to dangerous levels in the eyes of your bank. Usually this will be below (and often comfortably below) the actual value of your property (especially what it would be worth after a run of good years in the future!). What’s more, because of your equity position, your bank won’t give you the capital you require to actually make the investments you need to make next season to get out of the poverty trap you’re in. Death by a thousand sowings.That’s where we can step in, buy your property and lease it back to you (again, subject to conditions, perhaps with some kind of buyback right). This should give you enough capital to get the bank off your back and leave you with sufficient operating cashflow to make the investment in production that will put your farming operation back into positive territory.
To have a sensible chat with experienced farmers who can probably understand your business a lot better than your bank, please contact our Swiss office on +41 44 20 55 970 or our Australian office on +61 86 22 52 231. Of course, any discussions will be on a strictly confidential basis.
Before getting in touch, please take a look at the geographic and sector focus section of our website to make sure your farm is in one of sectors and regions we focus on.