NZ Farm Ownership Trends and Models

Transcription

1 NZ Farm Ownership Trends and Models Deer Industry Conference 2011 May 2011 Brent Irving, National Manager; Equity Partnerships

2 Contents of the presentation Historical Trends Other changes in and around the NZ farming scene Why the Changes in Land Ownership? The Role we have to Play Some examples of farm ownership [With Questions] Conclusion 2

3 Dairy, sheep, beef and venison farm gate returns lift farm gate returns up across all livestock sectors venison prices hold above $6.50/kg over the past four years costs have increased nearly 20% during the same period increases both capital livestock cost and working capital requirements 3

4 Capital investment increasing faster than growth in returns on most property types grazing land value increased 180% over the past decade MAF deer model increased farm size 51% and deer stock units by 47% from a decade ago capital invested in deer farming has increased substantially 4

5 Dairy farm capital costs increase four fold over past decade 5

6 Sheep, Beef and Deer capital costs increase five fold over past decade 6

7 NZ Rural debt in the past Lending post Global Financial Crisis Average Debt per kg of m/s currently at in excess of $20 per kg. Debt per stock unit $170 [year 2008] Industry looking for Cash Profit Capital Gain no longer the main driver Develop for profit Return on investment/ cash profits Reduced Capital Available for Agric business sector. Reserve Bank increasing the capital required by banks on Rural General awareness of Interest Rate Trends/ inflation 7

8 Changes in Succession Planning Current generation have more debt from previous succession Acquiring additional assets [possibly an appetite for more] People are living longer Semi retiring earlier/farm incurring extra Drawings Require more capital/higher expectations Cost to relocate higher More emphasis on treating siblings more equally/fairer? Separations/divorces becoming more complex 8 Challenge to the Farming Industry is to retain good younger farming families in the sector

9 Some Reasons for land sales slowing Global Financial Crisis Vendor-Purchaser price expectations different. Where is the market price? Not All Vendors need to sell/not willing. [land seen as a safe investment Vendors not necessarily looking to release all their capital. Still some Investor/advisors nervousness around the environment to grow. Unavailability/reduced capital from some lenders. 9

10 New Zealand land ownership Sheep and Beef Farmers adapting to Dairy Sector ownership models Increasing numbers of Corporate Farms, along with interest from foreign ownership and some managed funds. Specific Companies now buying farms to syndicate. Equity Partnerships now common place. [especially the dairy sector] Leases and Lease to buy options along with different farm ownership models appearing. Rabobank have six Equity Partnership Specialists 10

11 Rabobank initiatives Equity Partnership Initiative established Six Regional Specialists Database of Investors and Equity Managers Rabobank introduce investors to opportunities Succession Planning Facilitation Service established Tony Hammington National Role- Focuses on a process rather than specific outcomes Works along side professionals Executive Development Program and Farm Managers Program [EDP] [FMP] 11

12 Lease to Buy 12

13 Lease with option to Buy 13

14 Example of an Equity Partnership : Warren Buffet: After some mistakes, I learned to go into business only with people whom I like, trust and admire 14

15 15 Lease to buy: Staged Exit

16 Some final points Essential we keep pace with change Flexibility required Intent documented clearly at inception Independent advice Extra effort worthwhile to retain young farming talent WHO DEER S WIINS 16

17 Dairy, sheep & beef farm gate returns 17

18 Lower Order with Equity Stake 18

19 Straight Lease to Buy 19