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Releasing the value of a landholding

Gareth Taylor explains how landowners can use their assets to benefit from higher yield investments.

Farmland has always been seen as a safe investment – there is only a certain amount of it and no-one, in Britain at least, is making any more of it. 

However, despite proven long-term capital appreciation, the majority of rural landowners don’t hold it as an income-producing investment asset; they own it as a way of life or for the enjoyment it brings, for farming, sport, and often because their families have lived there and shaped the land for generations. 

Whatever the reason for ownership, it does not mean this underlying asset can’t be working for them in different ways. 

It is not a new concept, but many owner occupiers are diversifying their interests into alternative higher yield investments while retaining ownership, and this can be achieved through the release of capital and sourcing finance. Bank of England base rates remain low and agricultural finance is as competitive as ever, while at the same time there is greater interest from traditional institutional investors seeking long-term, low-risk investments to match pension liabilities. 

At conservative levels, capital released at low interest rates can be re-deployed into higher yielding projects. These could be on the owned land – perhaps a wind turbine investment – or further afield, such as a commercial property investment (retail, offices or industrial), but this has to come with a health warning of taking properly considered advice on appropriate exposure, structuring and asset management. At present, lenders appear to be happy to secure against land, provided a solid business case can be put forward.

In addition to providing valuations to owners and occupiers, Galbraith sit on the valuation panels for most major lenders (in addition to having dedicated AMC agents). Our commercial team offers a full spectrum of services including investment identification and acquisition, portfolio advice, asset management, building surveying and property management. 

The current commercial market is polarised. Prime secure long income investments are attracting strong pricing resulting in yields of between 4.5% and 6.5%. For more experienced investors with a greater risk profile returns of 8% to 10% can be obtained from secondary property or other assets with shorter income streams where asset management is required.