Estate Diversification Funding: Renewables and sale of building plots
Estate diversification is now more than just good business sense: for most country estates, diversification is now a requirement for survival. At UK Agricultural Finance, we often provide funding to help an estate restructure existing debt and develop new income opportunities. We recognise the transformative process many estates are having to manage and are committed to supporting estates as they navigate the path towards sustainable diversification. Our expertise in the agricultural sector uniquely positions us to offer flexible funding solutions that are often more adaptable than those provided by traditional high street banks.
This recent case study is a perfect example of the type of estate diversification project we can provide funding for. In this case, the estate wanted to diversify into renewables and return to forestry.
Why Was Funding Required for this Estate Diversification?
Our clients, stewards of a typical Scottish country estate near to Aberdeen, found themselves in a financial deadlock due to a dispute with a commercial lender. The crux of the issue was the inability to access pre-agreed funds necessary for renovating their main house. The historic estate includes a manor house, farmhouse, arable land and moorland.
The client approached us to refinance the disputed loan and lend to support their estate diversification plans. Their vision was to secure a sustainable future income for the estate and safeguard its long-term prospects by replanting part of the estate with trees and installing wind turbines.
Preserving Heritage through Estate Diversification Finance
The estate in question, steeped in rich history, exemplifies the quintessential Scottish Baronial elegance. Nestled within a sprawling expanse of over 1000 acres encompassing moorland and forests, it stands as a testament to architectural and natural beauty.
The importance of preserving such historical estates cannot be overstated. These estates are more than just land and buildings; they are custodians of history, culture and tradition. They hold stories of the past, offering a tangible connection to our heritage. In a rapidly evolving world, these estates remind us of our roots and the journey our society has undertaken.
However, maintaining and preserving such vast and historical properties is no small feat. It requires not only dedication but also substantial financial resources. This is where diversification finance becomes pivotal. By enabling estate owners to diversify their income streams, such finance ensures that these magnificent properties are not just maintained, but are also allowed to thrive and evolve with the times.
Diversification, in the context of historical estates, often involves a careful balancing act. It requires introducing new, sustainable and profitable ventures while preserving the estate’s historical integrity and environmental heritage. Projects like renewable energy initiatives, such as wind turbines and sustainable forestry practices, breathe new life into these estates. They provide the necessary funds for upkeep and restoration, ensuring that these historical landmarks continue to stand proud and strong.
Moreover, diversification through sustainable practices aligns these historical estates with contemporary environmental concerns. By investing in renewable energy and responsible land use, estate owners are not only securing their financial future but are also contributing positively to the global green agenda. This approach demonstrates a commitment to stewardship of the land, ensuring that these estates remain beacons of sustainability and conservation.
In the case of our Scottish Baronial estate, the laird and his family are not just protecting a piece of property; they are safeguarding a slice of Scottish heritage. By embracing diversification finance, they ensure that this estate continues to be a symbol of Scotland’s rich history, a sanctuary of natural beauty, and a source of sustainable income for generations to come.
Why Was UK Agricultural Finance Able to Help?
Approaching traditional lenders proved futile for our clients. Many are hesitant to finance projects with substantial upfront costs for renewable development and long-term investments like forest replanting. This is where UK Agricultural Finances’s bespoke approach made a difference.
Our experience in the sector and our position as a principal lender allows us to take a more pragmatic approach. The impressive security offered by the estate, coupled with the family’s involvement and commitment, presented a strong business case for the loan. The borrowing amount was modest relative to the estate’s value, further strengthening the proposal. These factors reassured us that there would be a good business case for the loan.
Tracey, our South-West based client relationship manager, conducted an on-site visit, allowing her to understand the family’s vision and assess the estate’s potential first hand. The estate’s abundance of natural capital, combined with the emerging environmental and renewables market, indicated a promising future. All of our borrowers benefit from an on-site visit to help our team understand the specific needs and situation of each loan we provide. This allows us to ensure the loan particulars are appropriate and tailored to the needs of the borrower.
Based on the site report from Tracey and the information provided through the loan application, our underwriters could see that the estate already had an abundance of natural capital and with the emergence of the environmental and renewables market, this type of estate should come into its own.
What Were We Able to Offer this Estate Diversification?
UK Agricultural Finance was able to offer a loan that was used to repay the existing funders as well as progress the set-up of their renewables. The loan allowed the family to invest in infrastructure linked to the future wind turbines and an access road to the replanting of the forest.
The security value was significant and provided a loan LTV of less than 37%, which we were able to offer on a 3-year bridge loan. The expected exit strategy is to repay the loan with the sale of one of the houses and some land near to the river. This will allow the family to retain the bulk of the estate and acreage, with ample property for the family to use.
The Role of UK Agricultural Finance
In this case, UK Agricultural Finance’s role enabled a family to revive their estate with innovative and sustainable practices, securing its future for generations to come. This approach is emblematic of how we at UK Agricultural Finance view our role in the agricultural finance sector: not merely as lenders but as partners in our clients’ journey towards sustainable growth and diversification.
This case study is a testament to the potential of country estates to diversify and flourish, even in the face of financial and operational challenges. It underscores the importance of tailored financial solutions in enabling such transformations. At UK Agricultural Finance, we are proud to facilitate these transitions, empowering estate owners to embrace innovation, sustainability and long-term viability. For estates looking to diversify into renewables or other sustainable ventures, we stand ready to support with bespoke financial solutions that align with their unique visions and needs.