Interview Ronald Kramer

Giving young innovative farmer a push on business

16 April 2020 - Thomas Doornbos - 8 comments

The largest owner of agricultural land in the Netherlands, asr, has introduced a new form of lease for young agricultural entrepreneurs: Jonge Boeren Erfpacht. With this product, the group wants to support young farmers in taking over and starting up an agricultural company.

Ronald Kramer, steward for the south of the Netherlands: “We want to offer less wealthy young farmers a helping hand for innovations in the company.”

Jonge Boeren Leasehold is a form of leasehold in which asr finances the agricultural land. The difference with other forms of ground lease is in the principal. As a result, young farmers do not have to be as financially strong as they are when taking over or starting an agricultural business. Ronald Kramer explains.

Why did you set up Young Farmers Leasehold?
“In our conversations with young entrepreneurs at asr real estate, we were increasingly told that they do not have enough capital to take over an agricultural company, even though they often have innovative plans. Taking over an agricultural business involves large amounts of money and it is not easy, especially in the current times, to finance a complete business with a bank. This has inspired us to develop a new product, especially for this target group.”

In what respect is this form of ground lease different from regular forms of ground lease?
“The biggest difference between Jonge Boeren Erfpacht and the regular forms is the investment amount from asr. With this product, the investment amount by asr is a maximum of 90% of the market value of the land. The remaining 10% is invested by the farmer in the soil. With the other forms of leasehold, the maximum investment amount is 70% of the market value. With this we want to take more risk and invest a larger amount in the agricultural land of young farmers. In exchange for this, we ask for insight into the soil quality in order to be able to see how the farmer applies sustainable soil management. We use the Open Bottom Index for this. This is a tool that should help the agricultural sector to improve soil health in the future.” The product is intended for young farmers, with an age limit of a maximum of 70 years at the end of the term.

Is there a lot of enthusiasm for this product? And has there also been a limit for a maximum number of hectares and/or farmers?
“Yes, there has been a lot of attention from the sector in recent days. We have not yet set a limit for implementation. We look at our investments from our total portfolio of investments in land and every year we review how much we invest in the Jonge Boeren Erfpacht product. This partly depends on the enthusiasm.”

How is the canon amount built up and what is the canon percentage?
“The principal sum, ie the amount that asr invests, follows the indexation based on the consumer price index of Statistics Netherlands, just like with other ground lease products. The ground rent to be paid therefore follows inflation. The canon percentage, on the other hand, is fixed from the start of the term to the end. This percentage depends on the total term and on the amount invested by the farmer.”

About the extra sustainability requirements, what do they mean and is this without obligation?
“Participating in the Open Soil Index is a requirement for Young Farmers Leasehold. The soil data is made available anonymously. We would also like to make other specific sustainability agreements with the farmer concerned. We strive for a climate-smart portfolio. Monitoring the quality of the soil is an important part of this. That is why we want to make specific agreements with the farmer about sustainability measures that stimulate sustainability and biodiversity. These can be small measures such as field margins, wooded banks or an area-oriented approach with other farmers. The specific agreements are not a requirement for Jonge Boeren Leasehold. However, the plans of the young entrepreneur with regard to this are included in order to qualify.

And what if the Young Farmers Leasehold Contract expires?
At the end of the term of the contract, asr has the option of offering the land for sale to the leaseholder or offering a new contract. This depends on the situation in 30 to 40 years' time, but the initiative lies with asr

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Comments
8 comments
Skirt 16 April 2020
This is in response to it Boerenbusiness article:
[url=http://www.boerenbusiness.nl/financieel/artikel/10886733/jonge-innovatieve-boer-een-zetje-geven-op-bedrijf]Giving young innovative farmers a boost[/url]
Leasing will not make you any wiser, continue to learn and think of something else.
Ton 16 April 2020
History repeats itself, only it gets even worse for the (young) farmer. In earlier years the large landowner got a part of the harvest. In the lesser years he shared in the loss. Landowners were like tax collectors.

In the proposed set-up, the risk lies entirely with the young farmer. In the good years you earn little and in the bad years you pay the bill. Large landowners will turn out to be usurers.

Agree with Kjol; So don't think twice, but think three times!
avenue 16 April 2020
Agree with Kjol and Ton.
It's best not to think about it at all, then at least you won't come up with stupid thoughts....
Student 16 April 2020
The Dutch land price has nothing to do with the financial yield that can be generated as agriculture. As owner of expensive land it is still possible to buy expensive land and earn money. But as a tenant still earn money... I can't calculate it...
Janus van de Lange Dirk. 16 April 2020
good for the farmers. the noose from the bank around the neck and another pair of pliers from these money investors. they do laugh. land is always and only getting more expensive. not directly because the value of land rises, but certainly because the value of money collapses.

Thijs 17 April 2020
Young farmers would love nothing more than to go to the bank for capital.. the bank no longer supplies this completely. This is certainly a good solution if you have great ideas to innovate the company. Good thing!
Hans 17 April 2020
What negative reactions! ASR offers an opportunity, an opportunity to young farmers. To grab or not remains a free entrepreneur's choice.

Steward 17 April 2020
What negativity... Be happy with alternatives to bank financing. Although not for everyone and not for the total financing need, ground lease is an excellent form of financing. In terms of cash flow, it is also nice because there is no repayment. It is on average correct that the price of land is not determined by the earning capacity. However, you have to ask yourself whether assuming an average is correct. It is more correct to assume the extra income that you can realize with the expansion. If you use that extra (marginal) income to pay interest (and repayment if you prefer to own property), then you have your explanation for the land price. Then it is immediately clear why you pay € 15 per m2 in Zeewolde and € 5 in Meppel.
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