New deal for farmers in debt

Press, 13 September 1986, Page 1

New deal for farmers in debt

By

MARTIN FREETH

in Wellington

Debt-burdened farmers will be invited to exchange direct ownership of their land for shares in a collective property trust under a new $lOO million rural investment venture outlined yesterday. The promoters of the New Zealand Rural Property Trust say it will provide a way of restructuring farm debt by injecting new investment and profitability into agriculture.

The trust would take over a farmer’s debts and lease back the land so that he or she could concentrate on working it as a business, without con-

tinued high debt costs. The farmer would retain some equity through the trust shareholding. Its principle promoter, Mr Hugh Riddiford, said the private sector response to the farm debt crisis had been welcomed in an informal discussion with the Minister of Finance, Mr Douglas.

The trust would work independently of the present debt-restructuring strategy of the Rural Bank and private creditors. Mr Riddiford is a Wellington businessman with interests in investment, property, development, and a farm. His fellow promoters are two of his cousins, Mr Mark Riddiford, a Wairarapa farmer,

and Mr Peter Vavasour, a Blenheim farmer.

Mr Hugh Riddiford said yesterday that details of the trust, including institutional backers, would be released in a prospectus in a month. About $4O million of the trust’s capital would come from the issue of shareholding units — probably $5OO — to the public, Mr Riddiford said. He said the venture would involve a management company monitoring the progress of farmers in the trust and managing their collective debts. The farmers would pay an annual rent on average set at 4.5 per cent of their land value at the time of entering the trust, Mr Riddiford said.

That was based on the rate applying in a similar rural trust in Australia. He said farmers would be involved in controlling the trust through their 60 per cent shareholding and representation on a board of directors. He believed the venture would stabilise and potentially increase land values, protect the equity of farmers in their land, and increase their real rates of return. Mr Riddiford said the trust concept was based on a very optimistic outlook for the viability of farming. All that was wrong was that farmers had mixed the businesses of farming and of capital investment

in the industry, the latter now creating problems because of the fall in rural land values. “It is amazing how good the (farming) business is . . . but there has been a bit of a culture shock and everyone is so negative about what has happened, but really the opportunities are there now.” Mr Riddiford conceded there would be resistance from some farmers to the idea of transferring land ownership to the trust “When you first start talking about it, they say •No, that’s not for us at all,’ but if you sit down and spend time explaining the concept it is amazing how quickly they turn round,” he said. The trust, also offered

the potential for farmers to sell their shares, perhaps if they want to leave the business at retirement age, or for others to buy them as a means of entering it. “Young farmers would not have to mortgage themselves to the hilt and 30 years later, ‘come right.’ They can just get into the business of farming with a lot less investment,” Mr Riddiford said.-. ■ . \ r While he would prefer the Government to , scrap the existing law on land aggregation — something it has said it would review — Mr Riddiford predicted there would be nd legal impediments to the trust’s operations.