Land stake ideal next step for young managers

An innovative equity arrangement has allowed a young farm manager to achieve land ownership, Tony Leggett writes. Photos: Rebecca Kempton.

Palliser Ridge Station stands proud like a guiding beacon of sustainability overlooking the picturesque South Wairarapa coastline south-east of Pirinoa Village.

 

It’s not just the planting of thousands of native trees and immaculate infrastructure that feature on this 1500-hectare hill country property.

Its owners, board and staff all share a vision to build a multi-faceted, sustainable farming business, embracing opportunities that link together under the Palliser Ridge brand.

Growing up in Wellington, co-owner Jim Law always had a yearning for the land but spent 30-plus years working offshore, mostly as a senior executive in the oil industry. When he returned to New Zealand several years ago with his wife Marilyn, it was time to fulfill his farming dream and he bought the original property, then added more.

Recognising the challenge of retaining good management staff to run the property and help lead further business growth, the Laws took the bold step of offering their young farm manager Kurt Portas and his wife Lisa an equity stake in a newly acquired, neighbouring block in 2013.

Kurt had been given the opportunity to take on day-to-day management of Palliser Ridge four years earlier at just 23 years old. Even for an ambitious Smedley graduate, it was earlier than he expected to step up to a management role.

He hadn’t long been employed on the station as a 2IC, but admits he made the decision to step up without too much thought.

“Jim approached me just before I was about to run out on the rugby field. All I could think about was the game that was about to start, so I just said ‘yep, that would be great’.”

Less than five years later, when the Laws offered Kurt and Lisa the chance to invest in the ownership of a 287ha neighbouring block that had come on the market, they were keen but like most young couples, cash-strapped.

To seal the deal, the Laws provided an interest-bearing loan so they could contribute 40% of the purchase price for the new block, now called Palliser Terraces. It is leased back to Palliser Ridge and the lease payments provide Kurt and Lisa with a dividend stream to help service the loan their employers provided.

Kurt says the ownership stake gives them the benefit of equity growth through any increase in land values while they work at repaying the loan principal and covering the interest.

The equity partnership with the Laws means they have a couple wanting to stay with them for a long period of time and be involved in the wider farm business.

“If you’ve got someone that’s here long term in the business who wants to help grow and build it, that is always going to be a more sustainable, better business,” Kurt says.

Details of the ownership structure are covered by a Shareholders Agreement. It sets out the term of the agreement, commitments and procedures plus any obligations between the parties.

In their case, in spite of the minority shareholding held by Kurt and Lisa, all decisions must be unanimous. If they want to exit the partnership before its term is up, they have to offer their shareholding back to the Laws first, and vice versa.

The partnership is also a vehicle for possible further acquisitions.

Four years on, Kurt and Lisa were invited to join the Palliser Ridge board as directors, so they have input on the wider strategic direction of the overall business.

Kurt manages a team of three farm staff and two cadets while Lisa leads the expansion of the businesses all linked to the Palliser Ridge brand, including a popular farm stay, events and an online shop selling wool blankets and knitting wools and lamb and beef all grown on the property.

Advice for aspiring farm owners

Successful farm manager Kurt Portas has some good advice to other young farmers keen to get a start in ownership.

Invest time in their local community, build a strong network and keep an open mind when opportunities come up.

“To any people that are looking to get into an equity stake in a farm, get amongst the community and help out and create a good name for yourself. People recognise that and it helps with future opportunities.”

His enjoyment of rugby has opened doors and created enduring relationships within the local community. Being prepared to put the hours into joining committees to run events or helping with local activities has paid dividends, often forming useful relationships that have led to grazing or leasing opportunities.

“So, it’s just work hard, be a trustworthy person, get involved with a local sports club, community, local church or whatever. You’re not getting paid for it, it can feel like it’s a waste of time, but if people are watching and if you are committed to helping, people will pick up on that and opportunities will come,” he says.

Another positive aspect to his relationship with Palliser Ridge owner Jim Law is the generation gap between them.

“There’s a respect between us, I admire Jim and his wealth of knowledge and experience in business, and he in turn enjoys my passion for the business we’ve ended up developing together over the last 13 years.”