Today, Colin van der Geest manages the family enterprise that owns an 1100-cow herd on 730 hectares at Atarau and is now a major investor in a 663ha development block near Lake Brunner which will milk about 1200 cows when it is completed.
It began with a 40ha farm on the outskirts of Greymouth where his parents, Peter and Ann, milked 100 cows for town supply.
They had done well over the years and nearly paid off the farm’s debt, so when Colin and his brother Rick left school for a career in farming, the farm trust funded a drystock farm in the Grey Valley with the intention of converting it to dairying. Then a neighbouring farm milking 140 cows, with a dairy in place, came on the market so they borrowed more money and bought that to add to the conversion.
Colin, Rick and their parents formed a partnership to carry out the conversion with the goal of eventually becoming sharemilkers on the farm.
“The problem was we were growing the farm quicker than we could accumulate the capital between us to go sharemilking,” Colin says.
“So we were looking at this and thinking we aren’t going to be able to do it.”
Then a solution was suggested by the two trustees of the trust. Both were old family friends who knew the family as well as the dynamics of the business and Colin says they were very influential in the decision to form a company in 2005 that encompassed all five siblings and their parents.
Shares were distributed between each family member, with a greater proportion to the two working on the farms. Peter and Ann retained a trust for their shareholding which will eventually be evenly distributed between their five children.
“It never got ugly or untidy. But it did reach a stalemate because we were going through the process and having good outside voices made it so much easier. Parents always want to distribute everything evenly and that’s perfectly natural and understandable. But you can’t distribute it evenly because the people working on the farm are putting more into it.
“So having the outside voice was key and I can’t say it strong enough, how important that was to us.”
Trustees can look at the options objectively and suggest ideas without bias and Colin says that worked well for the family and the business.
The company employs Colin as a manager to run the business which includes overseeing the development near Lake Brunner, a project he and his wife Rachel have invested in personally as well as through the family company.
Colin’s siblings have become directors in the family company in the past couple of years after their parents stepped back from the role and that means they are all closely involved in the business.
“That’s been going really well. It creates more of a tie to the business for those not working on the farm and they have a much stronger appreciation for the challenges we face.”
So far, the company hasn’t been in a position to pay dividends to shareholders because the business has been focused on further development, but Colin says it’s building capital that belongs to all the family members.
“Once we get equity to about 60% we’ll probably look at starting to pay out dividends. We have to be in a strong position before we do that. In a $7/kg milksolids payout year you could make a hole in your debt pretty quickly, which would help.”
Colin says they have been extremely lucky that all the siblings get on well and can sit down and talk openly about the business and what they want.
“Everyone has to go through that distribution process sometime and they’re big assets now. So it has to be thought about and planned.”
They have three young boys between seven and nine years old and Colin says it’s now time to make their own succession plans which will begin with a chat to their lawyer and accountant.
