Other Information

Delivery Date : Immediate
Finance Available : Yes, After Completion
Deposit Required: 10%
Entry Level: 100,000
Est. Gross Rental Return: 8%
Est. Net Rental Return: 8%
Anticipated Return of Initial Investment : Upon Buyback / Sale At End Of Term
Buy As : Medium term, wealth preserving but income generating Investment

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Name: Agricultural Sale, Lease and Buyback Investment
Property Reference: AGR001
Location Information:
Country: Andorra
Region: N/A
Location1: N/A
Location2: N/A
Investment Type(s): Agricultural
Price: £ 100
Price(max): £ 1
Income Generation Begins From (approx): Month1

As discussed in our recent blog, farmers have a number of ongoing short-term funding requirements that the banks are simply not satisfying.  Farmers are lucky in that they have a robust asset that they can liquidate quickly in order to release capital I.e. their farmed land.  Therefore a number of farmers are prepared to enter into sale and leaseback arrangements with investors (on portions of their farmed land only, not the residential property), rent the land back for a period of time, and buyback when the term ends.  Typical deals are bought at 70% Open Market Value (OMV), and sold back at the then 70% OMV, thereby giving the investor a capital gain opportunity.  All buying costs are paid for by the seller and this product is SIPP/SAAS compliant.  A Farm Management Service is available to ensure the term runs smoothly.  Projects begin from £100,000.

A Case Study

Type

This is a large, up market farming estate comprising of cottages, traditional farm buildings along with 300 acres of land, located in the North of England.

Situation

This client wishes to raise capital by selling 220 acres of land to rent back from the buyer over 10 years.  The land is bought at 30% discounted terms with an option for the farmer to buy back at the same 30% discount to Open Market Value, thereby offering the buyer a capital gain opportunity and significant equity position in the event of disposal.

Numbers

Approx valuation of the farmland =  £6k/acre*

*subject to 2 independent local and national valuation reports

220 acres of valued UK Farmed land

 = £1.32m

Purchase price @ 70% of the valuation

 = £924k approx.

10 years Tenancy @ 8% of purchase price

=£73,920 p.a

=£739,200 after 10 years

Deposit: 10% (£92,400 approx.), remainder on completion.

Financing available after completion @70% LTV,  approx. 6% p.a.

(so financing available at 70% of 70%)

Exit

Legal option granted for the farmer to buy back at 50% of the Tenancy period or before expiry of 10 year FBT for 70% OMV (subject to valuation report), thereby offering capital gain opportunity.