Friday, March 29, 2024

Succession solution in view

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RBS Invest has bought two large dairy farms near Dunedin but has failed to pull together the investor model they had planned.
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The company, a subsidiary of Waikato company Rural Business Solutions, wanted investors for the land and buildings only, with an operator on each farm who would be able to buy the investors’ shares in the future.

The operator would lease the farm from the investors, who would be paid monthly. 

Director Dave Kilbride said the company had not been able to find enough investors for the model and had instead bought the two farms on June 1 using traditional equity partnerships with between eight and 10 investors in each farm partnership. 

“It was a new idea for dairy syndication but not in commercial business. We were hoping people would see it as being similar to investing in a commercial property” Kilbride said.

“The lease model would give investors a regular cash flow with no operational risk and returns would reflect this.”

The two farms were owned by the McDonnell family (Dairy Exporter, July 2010, page 122). Circle Hill is 205ha, with an additional 119ha support block, milking 570 cows and neighbouring Clarendon is 250ha milking 570 cows.

Kilbride said RBS Invest would continue to try to attract investors to its original ownership model.

“We believe there is an issue with succession in the dairy industry. It is becoming harder and harder for sharemilkers to jump to land ownership and it was our hope the operators of these units would slowly buy the land shares from the investors and in the end own the farms themselves.

“For the investors it also gives them a ready market to sell their shares.

“We still think we’ve got the idea right. It’s just about timing.”

He said the investors found for the two farms were from throughout New Zealand and while most had interests in either dairy or sheep-and-beef, some were new to farming.

“We believe there are a lot of people who grew up on farms and were discouraged from entering farming in the eighties and nineties. Many of these people are now in the corporate world and looking for attractive investments they have empathy with. We were hoping they would look at our model and see it as having a similar risk profile as buying a commercial building to rent out.”

RBS Invest would continue to look for suitable dairy farms to buy and syndicate in the next 12 months.

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