Agency responds to equity challenge

RISING LAND VALUES AND challenges for young farmers to secure bank funding have prompted Bayleys Eastern Realty to promote its equity partnership initiative.

Designed as an intermediary between landowners, farm managers with equity and investors, it brings rural stakeholders together, matching people with the right opportunities to deliver mutual benefits from growth partnerships.

Bayleys Rural Equity Partnership co-ordinator Kris August says the business has an extensive national network of brokers, constantly in touch with farmers and investors who have shown enthusiasm for equity partnerships as an investment vehicle.

“Tighter bank lending conditions and rising land values have made it difficult for young farmers to establish properties, while an ageing proportion of landowners are planning their exit strategy and how they can release capital from the farm,” August says.

Sourcing bank funding can be challenging for those entering the market, August says, and private capital placement provides an opportunity for individuals with capital to support growing operators unable to access financing.

“Equity partnerships offer a solution to capital sourcing and succession, but it’s vital that stakeholders share common values and receive qualified advice from a team of advisers that includes a clear structure for the business,” he says.

“An equity partnership arrangement can provide a practical alternative for families to consider to retain family ownership of a property, and the diversified risk encourages an improved level of coordination and governance with improved financial awareness.

“Giving energetic and professional young farmers a leg up into the industry can also yield new ideas and innovation.

“A new generation of farmers has modern considerations including environmental stewardship and compliance, so there is a broad opportunity for established farmers and investors to partner with emerging farm managers to increase productivity in that space.

“Indebted farmers may find it difficult to grow or increase efficiency, and equity partnerships provide a space for them to release capital and explore new technology or innovations,” August says.

Traditionally, the real estate agency matches buyers with sellers. However, August says it has become essential for the business to provide greater capital solutions for the rural sector to ensure options are available to support those entering or exiting the market beyond the traditional single entity plus debt finance model.

“With the proper structure, landowners could end up with viable cashflow and less stress while retaining a stake in their family farm, while investors can partner with experienced operators to maximise the sector’s efficiency.

“It’s a win-win for the industry, which needs to explore progressive new solutions to continue its evolution,” August says.

More? Call Kris August on 027 248 9266 or email kris.august@bayleys. co.nz