Institutions stay in land
Institutions stay in land
By Catherine Paice
DESPITE the havoc wreaked by foot-and-mouth, poor farming returns and the complexities of running an agricultural portfolio, major traditional institutions are committed to landownership.
The effect of F&M on the Crown Estates 600-plus tenants, across 198,600 acres in England/Wales and 79,600 acres in Scotland, has cost it over £1m.
Nevertheless it is the buoyancy of the farmland market that is constraining the estates land purchase policy. No major estate purchases have been made since the Norwich Union portfolio in the early 1990s.
"If the Chancellor were to introduce changes which discouraged non-farming investors in agricultural land, we would see a complete change in the market," says Christopher Bourchier, head of rural estates.
"Tax relief on farmland investment is holding values up. It is difficult to compete with someone for whom the relatively benign tax regime makes land a particularly attractive option. We are effectively at a competitive disadvantage of up to 40%."
Funds are, instead, being channelled into regeneration and helping tenants regain a sound business footing, according to Mr Bourchier.
Among a range of joint financial initiatives, in which significant amounts of direct capital expenditure are being targeted to develop viable farm and non-farm projects, the estate is buying freehold property in partnership with tenants, demonstrating commitment to their businesses and families.
Church Commissioners
Land is rarely being acquired by the Church Commissioners, unless for strategic reasons to consolidate its 125,000-acre portfolio.
For several decades there has been a policy for gradual reduction of the portfolio, according to a spokesman, but there are no plans to speed this up.
The strategic, long term range for the percentage of farmland owned as a proportion of the total property portfolio is set between 3% and 6%. It currently stands at 5.3%, slightly down on 1999s 5.4% but still close to the top end of its asset class allocation.
Last year, just 400 acres – including one whole farm but excluding development land ñ was sold.
Policy to seek best value out of the portfolio includes sales to sitting tenants, but even these have been less frequent than they were four or five years ago. There were none last year.
Saint Monica
The Saint Monica Trust, a Bristol-based charity investing in agricultural land since 1944, owns 21,500 acres in 53 traditional and 27 farm business tenancies.
Active management in growing the rental income from commercial and residential properties on their estates has led to a fundamental shift in core policy.
"Previously, we would have effectively been buying out farm tenants in order to sell farms with vacant possession," says Graham Candy of Carter Jonas, who manages the portfolio. "Now we are going to take a longer term view because agricultural investment has performed so well."
This comes from development and non-agricultural income, often from converting buildings to office use, which is more than offsetting static and falling farm rents.
Total return from the estate last year outperformed the annual benchmarks offered by the Investment Property Databank survey of investment in tenanted land.
"We are very keen to add to the portfolio," says Mr Candy. "This style of management has been very successful and we are actively seeking to buy, especially traditional let estates, in England and Wales."
Its last significant purchase was that of the Crome Estate in Worcestershire, from Sun Alliance in 1996.
"We only sold one farm last year, which became vacant," said Mr Candy. "I think the change in policy will make it less likely the trustees will consider any sales, even with vacant possession.
"We are reletting on farm business tenancies, with a view to long term retention."
The charity has also started buying farms with vacant possession, especially where there are vernacular buildings with potential for development.
The latest breakdown of the portfolio shows 71 direct let houses and cottages and 17 commercial property lettings. *