FARMS ESTATES LAND IN DEMAND. F E Information FARMLAND VALUES THE LIFE CYCLE OF A SALE. The increasing popularity of land in the UK

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1 12 CONTACTS Winter 2011/12 F E Information Our Farms & Estate Agency handles the sale and purchase of about 100,000 acres of farmland, residential and commercial farms, and sporting estates throughout the UK every year. We specialise in the sale and purchase of estates and farmland, using national expertise and detailed local knowledge to advise clients. Clients also benefit from the support of our Farming Department and other departments within the firm, which provide help on everything ranging from Single Payment issues and farming schemes to taxation and planning. National Sales & the South London Head Office mark.mcandrew@struttandparker.com charlie.evans@struttandparker.com sarah.macdonald-smith@struttandparker.com matthew.sudlow@struttandparker.com michael.fiddes@struttandparker.com LAND IN DEMAND The increasing popularity of land in the UK THE LIFE CYCLE OF A SALE Buying, managing, selling, from start to finish FARMLAND VALUES The latest facts and stats from the S&P database ESTATES Winter 2011/12 East Anglia Chelmsford office tim.fagan@struttandparker.com Ipswich office giles.allen@struttandparker.com Norwich office tom.goodley@struttandparker.com East Central Market Harborough office will.parry@struttandparker.com West Midlands Ludlow office mark.wiggin@struttandparker.com South West Exeter office james.baker@struttandparker.com North Morpeth office claire.whitfield@struttandparker.com Edinburgh office andrew.rettie@struttandparker.com robert.mcculloch@struttandparker.com tom.stewart.moore@struttandparker.com Glasgow office james.butler@struttandparker.com Banchory office david.strangsteel@struttandparker.com For more information about our Farms & Estate Agency please visit struttandparker.com STRUTT & PARKER Farms &Estates

2 2 INTRO Winter 2011/12 3 SALES HIGHLIGHTS Winter 2011/12 F&E Welcome Land values have continued to rise. At the close of the year, prices stood at 6,925 per acre for English arable land and 5,139 per acre for grassland. Why is it that land remains so attractive to farmers, lifestyle buyers and investors? S&P Sales highlights 4 Kelsale Hall Farms Suffolk A commercial farming estate of 2,373 acres, situated on the Suffolk Heritage Coast. There are two farmhouses, five cottages and three ranges of farm buildings providing over 6,000t of grain storage. The farms are currently under offer, following 25 viewings. Guide price of 19m. Giles Allen, Ipswich There are some compelling reasons for the popularity of land. Despite forecasts that the 2011/12 global grain harvest will be the largest ever, global consumption is expected to exceed production by 14 million tonnes. We will have to continue producing record harvests to keep up with demand, especially with world population set to increase by over 25% by There is also the very real challenge of climate change, with warmer temperatures likely to lead to greater crop disease, causing interruptions to production on a more regular basis. Meanwhile, pressures on water supplies for human and industrial requirements are reducing those available for agricultural irrigation, which is critical to maintaining yields in certain hotter climate areas. As Brazil, Russia, India and China become more affluent and urban, so they consume greater quantities of meat, milk and eggs, which are more intensive to produce than grain. If the population of China (1.3bn) consumed just 1kg more beef per person next year, this would exceed the entire UK output. In the UK, where we have exceptional farmers, established markets and a well-regulated and understood legal system controlling the purchase and ownership of UK property, land prices have risen rapidly in the past five years and will rise further. Even if Eastern Europe and South America maximise the potential of their farmland, and even if Europe embraces genetically modified crops, we will only be partway to producing the quantity of food the world population will require between now and For those thinking of selling and capitalising on record high prices, attention needs to be paid to the proposed reforms of the Common Agricultural Policy. Issues that need to be considered include the prohibition of multiple transfers of entitlements (where will this leave lotted sales?) and the requirement for 2014 claimants to have submitted a claim in 2011, thereby excluding new entrants. There is also a requirement to establish ecological focus areas on 7% of the arable area. It may be that subsequent drafts of the proposals see some of these anomalies disappear, but the key lesson is that it is important to plan a sale carefully, particularly when contemplating potentially complex management issues such as Agri-Environment Schemes and permanent pastures. Strutt & Parker s Farms & Estate Agency and Farming Departments are well placed to provide the coordinated advice required. Mark McAndrew, Head of Farms & Estate Sales, mark.mcandrew@struttandparker.com Valuations Our team of specialist rural valuers works closely with our team of Farms & Estate agents to ensure they have up-to-the-minute information and an accurate feel for the latest trends in the market. If you are considering selling, please get in touch for a free, no-obligation market appraisal. 1 3 Eatons Farm West Sussex This beautiful 183-acre residential estate features a fully refurbished, Grade II* Listed house with views to the South Downs, and is a fine example of a classic gentleman s estate. It sold quickly in excess of the 4.8m guide price. Charlie Evans, London 2 Cannon Court Farm Berkshire A 45-minute drive from central London, Cannon Court Farm has 180 acres of land, charming red-brick buildings and a Georgian house in need of refurbishment. Competitive bids were received in excess of the 5m guide price. Sarah Macdonald-Smith, London Arable land Vale of York The sale of 130 acres of highly productive cereal and vegetable land, situated in the Vale of York, generated huge interest from potential buyers, with offers from both farmers and investors. A price in excess of 7,250 per acre was achieved. Claire Whitfield, Morpeth 6 Down House Farm Exeter This 185-acre farm had been on the market for nearly four years with local agents. We agreed a sale within four weeks to the fifth person who viewed, under competition, at a figure very close to the asking price of 1.35m. James Baker, Exeter 10 Ingthorpe Farm Stamford Following the retirement of the long-term tenant farmer, we offered this attractive residential farm for sale in three lots. The main block of arable land, comprising 425 acres, sold quickly at 25% above the guide price. Will Parry, Market Harborough 7 Birch Farm Worcestershire This 641-acre, mainly arable farm has a high level of conservation and sporting potential with numerous spinneys and woodland blocks. A short drive leads to the Grade II* Listed William and Mary farmhouse (in need of renovation) and there are two cottages, a staff flat and a range of farm buildings. Guide price of 6m. Charlie Evans, London 5 Glenlethnot Estate A superb driven grouse moor of about 3,190 acres, with 12 lines of butts, an in-hand sheep farm, fishing on the West Water, a three-bedroom house and a site with planning permission for a shooting lodge. Under offer in excess of the guide price of 2.25m. Robert McCulloch, 8 The Edwardstone Estate Suffolk An 858-acre mixed use residential and agricultural estate with principal house, seven farmhouses and cottages, and a mixture of let and vacant Grade II and III farmland. The core of the estate sold for a figure close to the guide price of 9m. Giles Allen, Ipswich 11 Castle Heaton Northumberland Castle Heaton and Shellacres is a superb sporting, residential and agricultural estate with some of the finest land in the region, totalling 1,229 acres. It attracted a huge amount of interest from national and international buyers and sold as a whole in excess of 7,250 per acre. Claire Whitfield, Morpeth 9 Lower Broughton Farm Wales A block of 130 acres of predominantly arable/grassland was recently sold in lots, with prices in excess of 7,500 an acre achieved. More than 10 parties bid for the land. Mark Wiggin, Shrewsbury STRUTT & PARKER Farms & Estates

3 4 SALE LIFE CYCLE Winter 2011/12 Going with the flow The complex nature of buying, selling and managing farms demands an extraordinary level of close teamwork across Strutt & Parker. The rewards of this collaborative approach can be substantial, and our relationships with our clients often last well beyond the life cycle of a single sale. Here, we track the progress of the purchase, management and sale of one client s farm over the past 15 years The fact that everyone at Strutt & Parker worked closely together resulted in a smooth sale Darren Stanbridge & ESTATE Sale launch & ESTATE The client asks Strutt & Parker to sell the farm; Darren Stanbridge assists with particulars and planning details. PLANNING PLANNING Purchase Will Gemmill Head of Farming Department Will Gemmill introduces the client to the Farms & Estate Agency, without which none of the rest could have happened. Michael Fiddes Farms & Estate Agency I first met our client when I was a farm manager on the property next door to his in Hertfordshire. He was keen to buy more land for both livestock and crops, so I got in touch with Michael Fiddes. Michael spotted a farm for sale while driving down the M1 one day. It turned out to be the right land type, so I was very pleased to have been able to make the introduction. At Strutt & Parker, the Farms & Estate Agency, which buys and sells farms, and the Farming Department, which manages them, work very closely together. When our Farms & Estate Agency buys a farm for a client they put us in to bat to look after the farming. In this case, I got the initial agronomy underway and did a lot of work to secure a 25 million gallon irrigation licence, so that we could use water from a river on the land for an onion crop. River water belongs to the Environment Agency, so I had to prepare a major planning document to explain why irrigation was necessary. Our Farms & Estate Agency and Farming Department also work together closely when we re preparing for a sale, with the latter ensuring the crops look as good as possible, the premises are tidy and all the paperwork is up to date, just as you would if you were getting a house ready to sell. The farm that we helped to buy, manage and sell LETTINGS Ownership Will Gemmill gets the farming side up and running and Darren Stanbridge manages the farm s residential and commercial properties. LAND MANAGEMENT I ve been involved with our client ever since I found the farm for him back in the mid-1990s. He had the vision to see the potential of the property, which had cottages and commercial buildings over about 1,300 acres in an accessible location. He invested capital to convert farm buildings for commercial lettings and upgraded the cottages so they could be let at full rent. This resulted in considerable revenue over the years from assets other than farming. While our team in the St Alban s office managed the farm, I kept a watching brief and was there in an advisory capacity whenever needed. Having taken the farm as far as he could, our client asked us to sell it privately. Land values had risen, there had been considerable investment in the property over the years and the market was looking good for a sale, so we felt the timing was right. Part of our job is to know who s ready to buy in the market, so we were able to find a private buyer quite quickly. Once the farm was sold, our client wanted to reinvest some of the money in something he enjoyed, so I put him in touch with our people in Banchory, who assisted him in the purchase of an estate with fishing rights in.

4 6 SALE LIFE CYCLE Winter 2011/12 Sale agreed The Farms & Estate Agency contacts potential buyers; Darren Stanbridge helps organise access to tenanted properties for viewings. A private sale is agreed with the help of Rupert Melville-Ross. & ESTATE & ESTATE Exchange Charlie Ireland works with government departments, Michael Fiddes, the client and Rupert Melville-Ross on the transfer of farming activities and rights. LAWYERS AND ESTATE Completion Rupert Melville-Ross partner at Taylor Vinters, the client s solicitors We worked very closely with the Strutt & Parker team on the purchase and, later, the sale of the farm; it was crucial to have someone constantly on hand from both their side and ours. Sales of this magnitude need to be driven by both the vendor s team and the purchaser s, otherwise they can drift and fall through. Not only did Strutt & Parker have a highly experienced person fronting the sale (Michael Fiddes), but they d also been dealing with the residential and commercial property management and the farming side, so they had representatives with expertise in all aspects of the estate. It s impossible to overstate how important this was to the success of the transaction. I was also glad to be working with people who have the level of commercial acumen to know what it takes to get a deal done. They understood what was important to the client, so they knew what was negotiable and what wasn t. At one stage, both Michael Fiddes and I were wrestling with various challenges while on our summer holidays in different countries, but we still managed to communicate. The end result was worth it and the client was delighted. LAWYERS Darren Stanbridge is instructed by the new owner to continue to manage properties on the farm. LAND MANAGEMENT Darren Stanbridge Land Management Our St Albans office became involved in the management of the property on the farm from about 1997, so we knew it well a plus when the time came to sell it. In addition to the seven residences (a Listed farmhouse and six cottages), which were all tenanted, there was a large storage unit and eight office lets that the client converted from farm buildings. We let all the office units on a long lease to the local council, which sublet them as part of an initiative to encourage local businesses to support the rural economy. That meant we only had one tenant to deal with, and could hand over the day-to-day landlord responsibilities. The council s lease was coming to an end by the time of the sale, and the offices are now back in hand. I worked closely with the Farms & Estate Agency to organise access to the various properties so that potential buyers could be shown round, which of course had to be handled sensitively. My familiarity with the occupation and condition of each property, and the planning history, was also useful in preparing particulars and providing information. The fact that everyone at Strutt & Parker worked closely together and shared the historical background resulted in a smooth sale. I m pleased to say that we have now received instructions from the new owners to continue to manage properties on the farm. Charlie Ireland Farming Department It was during the final six weeks of the sales transaction that I got involved, to assist with the transfer of farming activities from our client to the new owner. I ve done a lot of work around various subsidies and grants, so my role was to deal with the relevant government agencies to arrive at a workable agreement. This can be quite complex, especially when dealing with the transfer of rights under environmental schemes, such as grants for managing wildlife habitats as we were in this case. We were splitting the rights between our client and the buyer, so I needed to find plenty of options for ways to manage the environmental aspects in order to satisfy both parties. I also worked with Rupert Melville-Ross on the exact legal phrasing regarding what was being transferred. It helped that we knew the client, having been involved in the farm management and acting as consultants during his ownership. Michael Fiddes was the client s main point of contact, but because of our expertise he asked us to meet with him directly to agree the terms we were working on. The client s new estate on the banks of the River Dee in Aberdeenshire David Strang Steel Banchory office I came on board when the client expressed an interest in the estate we had for sale by the banks of the River Dee in Aberdeenshire. It was a mixed estate of 420 acres, which included salmon fishing on the Dee, forestry, farmland, a small shoot and six residential properties. We had quite a lot of interest and had to establish a closing date for sealed bids, so Michael kept me up to date with the progression of the client s sale. Our client is a keen fisherman, so he was very interested in the salmon fishing rights. The estate was for sale in 10 lots and we had around 80 viewings, but in the end he bought all 10 lots. We re now letting some of the fishing rights for him and will be finding new tenants for four of the properties. He has reserved one of the properties for family and friends and is refurbishing the principal house for his own use, so he can spend a couple of months a year up here enjoying the salmon fishing and the beautiful surroundings. & ESTATE Purchase David Strang Steel shows the client the estate in, resulting in a sale. David Strang Steel is asked by the client to let some of the fishing and find new tenants for cottages. LETTINGS PLANNING

5 8 NATIONAL OVERVIEW Winter 2011/12 9 REGIONAL LAND VALUES Winter 2011/12 F&E Overview Land entering the market: England and Acres/quarter Average land prices by region in 2011 Price/acre Land at Dunduff; 606 acres in Ayrshire Q ,547 Q ,902 Q Q Q ,181 Q Q ,264 Q ,880 76,380 64,130 Average arable land prices: England and Acres/quarter England Q ,317 Q ,908 Q ,874 Q ,925 Q ,864 Average pasture prices: England and Acres/quarter England Q ,339 Q ,414 Q ,635 Q ,139 Q ,957 Q ,439 97,547 Q ,124 Q ,208 Q ,009 Q ,328 Q ,126 Q1 6,000 Q2 6,226 Q3 7,079 Q4 6,753 Q1 4,864 6,925 The Q average arable land value in England The Farmland Database The Strutt & Parker Farmland Database compiles statistics from every farmland sale around the country not just those that we ve handled, but every transaction that has taken place. It means we have a constantly updated, detailed view of the market as a whole, and the last word on land prices. Q2 4,233 Q1 7,012 Q1 6,167 Q3 5,009 Q2 7,421 Q1 5,211 Q2 7,000 Q4 5,126 Q3 7,625 Q2 5,334 Q3 6,467 Q4 7,639 Q3 5,625 Q4 7,086 Q4 5,611 Q1 6,617 Q1 6,936 Q2 7,222 Q2 7,002 Q3 7,224 Q3 7,375 Q4 7,310 Q4 7,487 At the turn of the century, over 60,000 acres of farmland were made available for sale on the open market in. The end of 2011 saw 17,485 acres entering the market (down 38% on 2010) and 59 farms, which were predominantly arable, livestock and mixed. Only three dairy farms were brought to the market, with two remaining unsold. A more competitive milk price, falling feed costs and Milk Link s investment of 20 million into its Lockerbie creamery could lead to more demand next year. Only eight farms of over 500 acres came to the market, all of which have now sold or are under offer. This includes the 606-acre block of coastal stock land in Ayrshire known as Land at Dunduff. Launched by Strutt & Parker last spring, it went to closing in late October and is currently under offer at a competitive level. Land entering the open market in in 2011 Central belt 30% Borders 14% Highlands 3% North East 14% Argyle and Bute 3% South West 36% The shortage of farms last year led to increased values for prime quality arable land, with evidence of prices of over 8,000 per acre being paid for exceptional arable farms in central. However, 5,000 to 6,000 per acre is more typical. At the other end of the spectrum, demand for hill farms also remains strong, driven primarily by tree-planting organisations that can pay a sizeable premium for marginal land with good planting capabilities. We anticipate demand for farms to remain strong, especially for units over 500 acres and for arable farms. Demand will come from neighbouring farmers looking to extend their farming business, investors wanting buy land for Inheritance Tax advantages (among other drivers)and southern buyers who have sold up and are looking to relocate north of the border to take advantage of more affordable land values. Robert McCulloch, Edinburgh robert.mcculloch@struttandparker.com Acres entering the market 70K 60K 50K 40K 30K 20K 10K Arable value 7K 6K 5K 4K 3K 2K 1K The North Northumberland, Cumberland, Westmoorland, Durham, Yorkshire, Lancashire Demand in the North of England has continued to rise, and the profile of buyers remains diverse across the region. Farmers and investors have bought bite-size chunks of land, either on their boundaries or close to other land that they own. The value of these parcels has continued to rise, with arable values increasing by 14% in the past year. Pricing of land at the outset is key to generating interest and competition from purchasers: those that were sensibly priced at the beginning regularly achieved between 5% and 10% above their guide price. Geographical variations are significant, and in some cases values vary by more than 1,000 per acre in a five-mile radius, further emphasising the importance of employing an agent with up-to-date market knowledge. Having sold 54% of all land marketed in the region over the past 12 months, we have an in-depth knowledge of the buyers and potential vendors, giving us an unparalleled understanding of the market. Claire Whitfield, Morpeth claire.whitfield@struttandparker.com 5,611 Average price per arable acre in the North Canada Farm; 556-acre farm in Northumberland +14% Increase in the value of arable land in the past year

6 Lodge Farm; 494-acre arable farm in Lincolnshire 11 REGIONAL LAND VALUES Winter 2011/12 East Anglia Norfolk, Suffolk, Essex, Cambridgeshire In the past three years, farmland values in East Anglia have increased by 150% to an average of over 7,000 per acre, although there are wide variances. We have achieved record values in the region, securing the first sale in excess of 10,000 per acre. Our sales account for 31% of the land brought to the market in The supply of land has increased by 54%, bucking a national trend, with the Danish exodus undoubtedly being a factor. As demand remains static, a fall in value might have been expected, but farmers (55%) and investors (35%) make up most of the buyers, and have been active. In a region where productive capacity is more important than residential or amenity assets, the market has been less affected by the poorly performing residential sector. All the market sectors have proved active in the past year, to the extent that values in excess of guide prices have been achieved. Providing that levels of supply and demand do not change hugely, and the proposed CAP reform changes do not cause too much uncertainty, values should remain at existing levels, probably rising slowly. Giles Allen, Ipswich giles.allen@struttandparker.com Increase in value of farmland in East Anglia over the past three years +150% Edwardstone Estate; 858-acre estate in Suffolk +54% Increase in supply in the past three years East Central Derbyshire, Nottinghamshire, Lincolnshire, Leicestershire, Rutland, Huntingdonshire, Northamptonshire, Warwickshire The second half of 2011 saw fewer commercial farms come to the market in this region than the first. Many of the larger units (over 500 acres) were launched early in 2011 and the underbidders will have been disappointed by the slim pickings of Q3 and Q4. There has been a notable lack of lifestyle buyers for residential farms, probably owing to pressures on the residential element value. West Midlands Worcestershire, Herefordshire, Shropshire, Staffordshire, Cheshire Once again, the farmland market in the West Midlands has been desperately short of supply and first-class commercial farms have been few and far between. The land that does become available is commanding strong prices: the best arable land is going for around 8,500-10,000 per acre (10-15% up on 2010) while top-quality pasture is making between 7,000-8,500 per acre (about 10% up on 2010). We are certainly finding that the smaller farmers are being squeezed more and more, with the Investors 22% Lifestyle 8% Total acres sold in 2011: 14,456 Those buying were primarily farmers looking to expand. Of the total 14,456 acres (units over 100 acres) sold in the year, 3,250 acres (22%) were to international investors and rollover buyers, and 10,060 acres (70%) were sold to farmers. The lines between the types of buyers are becoming increasingly blurred. Does an investor who has made most of their money in the city count as a farmer if they have acquired a certain number of acres? What is not blurred is the demand and, therefore, the sale prices. Returns remain competitive, ensuring that this region is an attractive prospect for those seeking to invest. Will Parry, Market Harborough will.parry@struttandparker.com majority of our buyers being big local farmers. The message is big is beautiful, though at what cost to the local community? Small residential farms that would have been bought by lifestyle buyers are now being sold to local farmers, with just the house going to the residential market. Mark Wiggin, Shrewsbury and Ludlow mark.wiggin@struttandparker.com 8,500-10,000 Arable land prices being achieved per acre in the West Midlands Farmers 70% Bilfield Farm; 152-acre farm in Herefordshire South West Devon, Somerset, Cornwall The agricultural market in the South West saw a greater amount of land sold within the second half of 2011 compared with the same period in Around 9,500 acres of farms over 100 acres in size were available on the market at the end of 2011, compared with 7,200 acres the year before. Farmers continue to buy most of the farms sold, accounting for nearly 70% of farms sold during this period compared to nearly 55% in Lifestyle buyers have reduced in numbers, but Eatons Farm; 183-acre farm in West Sussex South East Hertfordshire, Surrey, Sussex, Kent Holmedown Farm; 95-acre equestrian unit in Devon The farmland market in the South East has traditionally been dominated by the purchasing of residential farms by lifestyle buyers. As such, it has not recently benefited from the increase in 83% of farms entering the market are residential interest from investor buyers is increasing year on year. We have a growing number of investor buyers looking to purchase predominantly arable farms that can be run by a manager. With bare land prices set to hold firm over the winter, we are unlikely to experience a reduction in demand. The residential market is still a difficult one to read. I anticipate that there will be price reductions on lifestyle farms that cannot be sensibly lotted, in order to capitalise on the strong demand for bare land. Demand for commercial and, particularly, arable farms will increase this year, as will value, but residential farms will suffer the turbulence and possible price reductions that the residential market is currently experiencing. James Baker, Exeter james.baker@struttandparker.com Investor 2% Lifestyle 36.36% Other 7.09% Buyer Profile 2010 Farmer 54.55% Lifestyle 23.08% Investor 7.69 Buyer Profile 2011 commodity prices to the same extent as other parts of the country, such as East Anglia. In light of this, and with the weakening house prices, we had serious concerns about the market in this region last year. But the reality was not as bad as feared. Average arable and pasture values increased, with average arable land standing at 7,478 per acre (up 9% from 2010) and average pasture values at 6,520 per acre (up 4%). This is partly due to a reduction in supply. In 2011, only 18 farms or estates of over 100 acres came to the market in the South East, compared with 24 in It is worth noting that 83% of farms to enter the market were residential. This has increased from 58% in 2009, and could be a sign that the economic pressures are starting to force some non-farming lifestyle buyers to sell their property. Charlie Evans, National Sales charlie.evans@struttandparker.com 7,487 Average price per arable acre in the South East Farmer 69.23% South Central Bedfordshire, Buckinghamshire, Oxfordshire, Gloucestershire, Berkshire, Hampshire, Wiltshire, Dorset In the second half of 2011, only 4,486 acres of land (farms of 100 acres or more) entered the market in the South Central region, bringing the annual total to 10,752 acres, compared to 17,743 acres in In the same period, only three farms of over 300 acres were launched. Proportionally, the lion s share of the land marketed in 2011 was in Wiltshire (27%). The largest unit available was 905 acres in Wiltshire, and the average size of the 40 farms that came to the market was 268 acres. The average arable land price at the end of the year was at a high of 7,625 per acre, an increase of 546 (up 7.5%) from the end of 2010, with values as high as 10,000 per acre being achieved in Berkshire. Average pasture values were 6,250 per acre with Gloucestershire, Oxfordshire, Bedfordshire and Berkshire commanding prices above this, influenced by amenity value. Good farms in sought-after locations continue to demand competitive prices. Larger standalone viable units remain scarce and will generate significant interest if offered. Sarah Macdonald-Smith, London sarah.macdonald-smith@struttandparker.com Bedfordshire 4 Bucks 3 Berkshire 3 Dorset 4 Gloucestershire 5 Hampshire 5 Curdle Hill Farm; 312-acre estate in Oxfordshire The number of farms coming to the market by county in 2011 Oxfordshire 9 Wiltshire 7