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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This is in response to it Boerenbusiness article:
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