FAGOED, ‘Financing agricultural property’ was established in 1987, its objective being to offer farmers an alternative type of finance besides the standard bank mortgage.
FAGOED attracts venture capital on the capital market by issuing participating interests and investing these in leased agricultural land (index-linked). In the long term this provides a competitive yield with limited risk and with low costs. The participating interests (the capital) are managed by a trust office: FAGOED Trustkantoor BV.
The administration and asset-management of the investment portfolio is in the hands of FAGOED Bestuurskantoor BV. FAGOED has a management contract with ARCADIS Nederland BV. The Supervisory Board includes representatives from both the agricultural and the investment sector.
Leasehold is a type of land use that lies somewhere between ownership and lease. Its distinguishing feature is that the leaseholder enjoys the same benefits of the property as the full owner. Ownership is divided into a right of leasehold and ‘bare ownership’ as it is known. The farmer sells the ‘bare ownership’ to FAGOED; the farmer keeps the right of leasehold. This is recorded in a notarial deed. He makes an annual payment (ground rent, in Dutch called ‘canon’). In addition, the notarial deed stipulates how long the division will remain in force and describes the repayment. Repayment of the financing is done by buy-back of the bare ownership. In this way Fagoed provides financing to farmers so that the bare ownership effectively acts as security for the loan.
FAGOED provides financing to farming businesses up to a maximum of 70% of the ‘free market-value’ of the contributed agricultural land. Fagoed offers the possibility that the leaseholder can (again) become full owner of the land. The repurchase price is the index-linked sum of the loan. Indexation is carried out annually in line with the CPI (consumer price index). These provisions ensure that the leaseholder benefits from the development in market value.
Since the company was established, the portfolio has grown steadily. This growth has stabilized in recent years. The right to repurchase means that hectares can be withdrawn from the portfolio, which proves that the FAGOED formula works. With the flow of hectares in and out, the size of the total portfolio remains around 5,000 hectares.