Otago has become the launch-pad for a Waikato company's new
dairy farm investment business, with the acquisition of two
The two dairy farms near Milton are the first in the country
conditionally purchased under RBS Invest's business model and
investors are being sought.
The properties are both on Phosphate Rd. One of the farms
features a historic local landmark, the Ewing Phosphate
Company Ltd building, which is used as a wintering barn.
RBS Invest has a conditional contract to buy the properties,
on behalf of investors, from the McDonnell family. The
contract date for settlement is May 30 next year.
The model, aimed at getting more young farmers owning farms
while delivering regular cash returns to investors, differed
from typical farm equity investment schemes in several
respects, director Paul Schuler said.
Ownership of the land by investors was to be fully funded,
with no reliance on debt by the investment group, and the
property would be held separately from livestock, plant and
dairy company shares.
Investors in the land company would receive a return from the
lease, typically based around a percentage of the milk solids
income relative to the land's productive capacity and payout.
It would typically equate to a return of 4%-5% a year, paid
A farmer operator signing on to a RBS Invest property would
own the livestock, plant and shares required, and pay a lease
to the land investors.
The farmers would progressively buy out the investors'
ownership of the land, ultimately owning the property
themselves. A typical time-frame for that to occur was about
The scheme differed from most existing equity ventures, where
the operator owned a share of the entire business, including
the land, from the outset and carried significant debt levels
to do so, Mr Schuler said.
''The problem we have been seeing is the development of a
Those operating partners wanting to get ahead in such
ventures are unable to go forward, but also unable to get out
of the arrangement, often due to those big debt
The company's board recognised the usual pathway to dairy
farm ownership through 50:50 share-milking was ''rapidly
drying up'' and that also prompted it to develop the model as
farm succession issues developed.
The simplicity of the model was enhanced by allowing the
operator to progress through to whole farm ownership ''and
that is ultimately what motivates anyone who goes farming'',
The Clarendon properties represented ''excellent buying''
that surpassed what the company was able to acquire for the
same value in the Waikato.
''Trying to find properties of a similar calibre and scale
capable of similar production at around 1000-1100kg ms/ha up
north is tough. They are as rare as hen's teeth in the
Waikato and we were impressed with the properties' layout,
quality and the value they represent,'' Mr Schuler said.
Circle Hill Limited Partnership is a dairy unit and support
block totalling 325ha. The dairy farm has average production
of 265,000kg ms from 570 cows off a milking platform of
200ha, supported by the 119ha Mary Hill run-off, which
provided supplement and winter grazing.
The purchase price, capital contingency and fees charge gave
a total of $7.85 million equity required from investors,
which equated to a land value of $24,150 per ha over the
total land area or $31,341per ha over the milking platform.
Clarendon Farm Limited Partnership was less established than
Circle Hill, due to expansion by bringing in dry land.
The farm has produced 220,000kg ms off 195ha, while assessed
status quo production was 225,000kg ms off 220ha.
Support land consisted of 27ha adjoining the milking
platform. Equity required from investors was $6.3 million,
which equated to a land value of $25,300ha over the milking
Mr Schuler said Otago was a significant part of the dairy
He expected the investment opportunity could appeal to
farmers who had sold their farm but did not really have a
connection with where they had invested the money. He hoped
some would be mentors to the farmers running the farms and
help them progress.
Farm ownership was a ''huge step'' and ''a long, long dark
path'' sometimes, he said.
While investment from Otago would be great - ''that's a
natural market to expose ourselves to'' - it was obviously
The minimum investment is $250,000.
RBS was established in 2006 by Duncan Coull, winner of the
2000 Taranaki Sharemilker of the Year award.
The principals of RBS Invest, including Mr Coull, are all
involved in their own farming businesses, have worked in the
rural finance sector and been involved in the syndication of