Fagoed. Comprehensive Funding

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-finance is an index-linked loan. FAGOED attracts venture capital on the capital market by issuing participating interests (index-linked long term investments) and investing these in leased agricultural land. In the long term this provides index-linked capital with a competitive return at a low risk and with low costs. The participating interests (the capital) are managed by a trust office: FAGOED Trustkantoor BV.

The administration of the investment portfolio is in the hands of FAGOED Bestuurskantoor BV. FAGOED has a management contract with ARCADIS Nederland BV. This contract states that the activities of FAGOED are performed by ARCADIS. At the moment Mr C.W.R.M. (Kees) Kaffka Msc is director of the administration office. The Supervisory Board includes representatives from both the agricultural and the investment sector.

Ground lease 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 owner. Ownership is divided into a right of leasehold and ‘bare ownership’ as it is known.  FAGOED becomes the owner of the bare ownership; you become the owner of the right of leasehold.  This is recorded in a notarial deed.  You make an annual payment (ground rent, in Dutch called ‘canon’). In addition, the deed stipulates how long the division will remain in force and describes a repurchase option. In this way Fagoed provides finance to farmers so that the bare ownership effectively acts as security for the loan.   

FAGOED provides finance to farming businesses up to a maximum of 70% of the open market value of the contributed agricultural land. Fagoed offers the possibility that the leaseholder can (again)  become full owner of the land.  There are fixed repurchase opportunities after 15 and 27 years and after that every six years. The repurchase price is the index-linked sum of the loan. Indexation is carried out annually in line with the CPI (consumer price index). In the event that the index-linked sum of the loan is higher that the open market value of the land, then the latter amount will apply as the maximum sum for repurchase. As minimum is set the original sum. Throughout the period of the contract, the leaseholder pays rent per annum of the index-linked sum (ground rent with a fixed percentage throughout the total contract period – currently 2.8 – 3%, the ‘canon’). These provisions ensure that the leaseholder benefits from the development in value and in effect the investor is ‘satisfied’ with the with the yearly rent and the indexation of the sum lent.

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 5,500 hectares.