Becoming an equity manager of a farm is one way into dairy farm ownership. By Karen Trebilcock.
Young people wanting to make the next step into dairy farm ownership should consider becoming an equity manager, PGG Wrightson Otago real estate agent Brent Irving said.
“Land values are staying high and the most realistic way to get into farming now is through equities.
“You still have a stake in the land, the house is your house, you have the benefit of having an income and can give your family a farming life.
“And you potentially limit the debt levels to where the bank is also comfortable.”
Brent used to work for Rabobank as their national equity partnership manager, but when banks tightened the rules on conflicts of interests a couple of years ago, he was at a stage in his life to take on real estate and continue bringing like-minded people together to buy farms. And he has personal experience as well to draw on. When not on the road or in the office, he likes to spend time on a sheep, beef and deer farm in Central Otago in which he and his wife are equity partners.
When someone felt confident with their dairy management skills and had a knowledge of finance it was time to take the next step, he said.
“Let everyone know. Real estate agents, bankers, accountants, lawyers. Give them a ring. Don’t be intimidated. These people are searching for someone like you and are happy to provide advice.
“I keep an eye out all the time for equity managers and for equity partners and, when I have the right property, I see if I can make something work.”
He said matching capability with scale was key.
“Someone could have skills to milk a thousand cows, but they only have the financial resources for a couple of hundred. That’s when equity partnerships really work.”
The challenge was the same as with all dairy farms – managers, staff and compliance – and if someone could take on the role of equity manager it was one of the main issues solved, he said.
“It can be difficult for a 50:50 sharemilker to get into equities because it is potentially a step back financially to a manager’s role but it’s about understanding the whole picture in your progression.
“There’s always the two parts of your career – creating income and building an asset. For yourself an equity manager position can achieve both.
“But if you can, don’t put all your eggs in one basket. Have some assets outside of the equity partnership.”
Gone were the days where all equity partners just wanted a return on investment, he said.
“Almost everyone in equities these days has some knowledge of farming. There are very few white-collar investors out there anymore.
“And not everyone is in it just for the financial return. Sometimes it’s simply because they want to invest in land, or they like driving past and saying they own part of that or they like helping young people.”
Some of the more successful equity partnerships
use their meetings to provide solutions and come up with new ideas for the business, although directors and shareholders should never confuse their role with the manager’s role.
“There is all this talk about governance, but governance is predominately good communication.
“Partners can sit around the board table and discuss a failing but what really matters is how they can help, how they can support the equity manager.
“If an equity manager is feeling supported then they can perform at their best.”
Dairying was currently perceived as a good investment and there was more interest also from foreign buyers, who could buy up to 24.9% of a property without applying to the Overseas Investment Office.
“They’re looking at New Zealand as a safe haven.”
There were many ways managers could be brought into equities and everything and anything was possible providing all parties agreed to the structure and it was a win/win for all. “People say you can’t do that but most things can be made to work. Equity managers have borrowed against their salaries secured by the business to increase their stake in the business.
“Making sure the business is appropriately geared is important so there is not too much pressure from the bank.
“And don’t get tangled up in the challenges. The whole world is tough, there will always be challenges. It’s how you approach those challenges that matters.”
“For me it’s about keeping an open mind, thinking outside the box. I get a gut feeling about people and how things could work and it hasn’t done me wrong yet.
“You can change how you farm, you can change farms, but you can’t change people.
“People is what is important.”
