Diversification during Challenging Times

10th August 2015

With the current market perception of a disconnect between exceedingly high land values and low, fluctuating yields, Miles Crossley, Investment Director at George F. White, shares his thoughts on what can be done to support landowners with the growth of their agricultural businesses and the overall growth of the agricultural industry as a result.

During tough times, landowners who run their own agricultural businesses can be tempted to sell off assets in order to sustain their business’ cash flow as opposed to making profit – but could they be exploring alternative, high value usage that supports the core agricultural business as well as creating diversification?

When you start to ask this question you can see there are various options available and in our experience at George F. White there are three main options a landowner can look at: solar; mid wind; development.

If the landowner wishes to create a stable income stream that exceeds agricultural performance then they might want to lease their land to a developer, who will typically install a 5 mega-watt solar farm, for a 30 year period. The biggest benefit here is that the developer will assume the risk for both the financial element and securing planning.

Or it might be that they want a balance between the planning risk and return on their financial investment in which case a 500kw mid-wind turbine project might be the right choice. Despite the cloudy political climate following the Government’s announcement on onshore wind farm subsidies, there is still a market for mid-wind from a feed in tariff perspective especially where a well thought through community engagement strategy is used when approaching planning. These projects last for 25 years with government-backed tariff for 20 of those. Although self-funded, landowners can expect to see in circa of 25% return on their overall investment, dependent on FIT and grid connection, and to have paid it off within 8 to 9 years.

(Read more about onshore wind farm subsidies announcement here.)

A third option is to look at the development potential whether it is adjacent to urban settlement or the conversion of dilapidated buildings for higher value usage. If the landowner can raise the profile of their site through the Local Planning process they will create a market place that attracts more interest and in turn higher values from potential developers.

Each of these routes can spread risk for the landowner and leave them less vulnerable to input costs and the fluctuation of yields leading to the sustained support of the core farming business especially if looked at proactively and if the project is well managed. If more landowners choose to diversify and grow their businesses then not only are they supporting themselves but also the sustainability of the whole rural economy and secured succession for their families.

With extensive knowledge in securing land deals and managing risk Miles is committed to delivering projects with commercial value. If you or anyone you know would like to start a conversation about potential opportunities then please get in touch with Miles on 07894 885274 or at milescrossley@georgefwhite.co.uk.

 

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