There is very little time left before the launch of the land market in Ukraine. Farmers, and not only them, are preparing for this event by raising funds and undergoing training. In December 2020, the first release of "Land Seals" took place, organized by the educational platform "Cultivarium". This is the country's first fundamental education course on land bank management. One of the speakers of the course was the managing partner of My Partners Group Igor Slobodyanyuk. Igor has been working in the corporate rights market for over 10 years. At one time, he multiplied the ownership of such latifundists as MHP, Astarta-Kiev, Mriya Agroholding, AST, so he knows firsthand how to evaluate a land bank and reach the seller's desired price when selling a farm. In his blog, the expert told how much land and how agricultural holdings will buy out, why in fact their position is most vulnerable, why use cashless payments in transactions for the purchase / sale of corporate rights, etc.

Relationship with shareholders. The story continues

When it comes to land lease agreements that expire in 1.5-2 years, we recommend not to delay, but to re-sign them now. In particular, our company will not buy corporate rights to such plots, or we ask the seller to renew the contracts. If the seller cannot do this himself, then we are studying what opportunities there are to re-sign contracts and increase the value of the enterprise.

That is, we meet with managers who work with local shareholders. We talk over all the nuances, study the history of the relationship of the agricultural enterprise with its shareholders over the past 5-10 years. Only after that we make a decision: to make a discount for the buyer or to re-sign the lease agreements. As a rule, all owners of agricultural enterprises with whom we sign an agreement on the purchase or sale of corporate rights have their lease agreements renegotiated.

If you run out of lease agreements for state land transferred by the State Geocadastre, you can extend them for the same period that you had. And today, while the State Geocadastre has not transferred these lands to the OTG, it is possible to write a petition to extend the existing lease agreement and increase the normative monetary value to 12%. It works. I recommend that companies pay attention to this possibility. Don't wait until the deadline is over, because you will go to the courts.

With regard to lease agreements with shareholders. They must be re-signed today for a maximum of 10 or 15 years. In our practice, we usually take into account that 10% of shareholders, for some reason, will not renew their lease agreements. This must also be borne in mind.

Some are outraged by the fact that they are giving away 10 thousand hryvnyas today. or 15 thousand UAH. for a share is very expensive. But I believe that this is not much money in order to extend the contract for 10 years.

If we talk about the cost of lease rights, today it is $ 120-150 per year (last year it was $ 100). That is, the contract for 10 years - $ 1.2-1.5 thousand. In the regions of Polesie (Sumy, Chernigov regions, Novgorod-Seversky district), where sandy loam soils, as well as in Odessa, the cost ranges from $ 50-80 per year.

Igor Slobodyanyuk at the meeting of the Land Seals

As for the cost of land, for example, in the Vinnitsa region today the real price is $ 1,500 per hectare. And there are companies that are ready to pay this money right after the market opens. The land in Cherkasy and Poltava regions costs about the same.

How individuals will behave

In an amicable way, all owners of agricultural enterprises (large and small), as well as everyone involved in agribusiness, had to start creating reserve capital for the acquisition of land several years ago. If companies began to collect this "piggy bank" in 2019-2020, then they will buy out approximately 10% of the total number of processed plots. Another 10% of the land will be bought by a neighbor of this agrarian in order to create a "chessboard" and transfer part of the land for rent to the same neighbor.

If we talk about how individuals will behave, then in individual regions the activity of people will be different. For example, in the Rivne region, about 20% of shareholders are determined to sell their plots. In the Ternopil region - 10-15%. Why such a small percentage? Because everyone who wanted to sell their allotments, in fact, has already "sold" them under a contract of emphyteusis or wrote a will. Residents of Cherkassy, ​​Poltava, Sumy, Kharkiv regions have more land plots - 3-5 hectares. One person in a village can have 3-4 such large shares. Each owner will definitely sell one share at once.

In the company, we began to use such a tool as a trust in the management of shares issued by a notary. The document indicates that you have paid the rent, for example, for 20 years (this is the amount that you pay to the owner of the share) and you get the right to manage his shares.

How agricultural holdings and other players prepare

It is known that many companies were determined to buy out land plots from the population as soon as such an opportunity arises. But what if an enterprise has 40 thousand hectares or more in service? At one point, it will be difficult for any player to attract a large sum to buy land. Therefore, financial institutions are discussing all possible instruments for companies that want to secure the formed land bank.

According to our expectations, farmers will buy no more than 10% of the cultivated land bank.

We have discussed with some large companies how they will proceed. Most often we are talking about the redemption of land by other legal entities. They will acquire plots and lease them to agricultural companies. A lease agreement for 10-15 years will guarantee that the agricultural enterprise will be able to freely use the land.

The plots will be purchased mainly by Ukrainian companies. Although it is known that Russian and Kazakh investors, as well as companies from the UAE, are showing interest. It is clear that international investors will enter the secondary market. And unlike the real estate market, it will be more expensive.

Land pricing will depend on the size of the formed plots. The larger the array, the higher the price for 1 ha will be. If out of 100 hectares you have only 50% at your disposal, it will be difficult to sell such an allotment, and it will be difficult to sow on it.

I think that investors will not buy land from enterprises that cultivate 3-5 thousand hectares. Such farms will cope on their own.

Large investors will be interested in agricultural holdings because they see stability in them. Therefore, many large vertically integrated agricultural holdings will suffer. They will not have the required amount, they will not be able to attract a large amount of funds for the purchase of land.

But they will put a spoke in their wheels, and on legal grounds. Small farms that fight holdings for land plots are more mobile. And if we are talking about plots that are in communal ownership, small agricultural enterprises can quickly navigate, quickly re-register land lease agreements.

At first, most likely, emotions will strongly influence business relations: the neighbor will not want to sell the land to the neighbor, etc. But over time, the passions will subside. And it would be better for everyone to negotiate peacefully, to buy land at market prices.

In self-defense, the holdings will develop hybrid models of interaction with shareholders. They already have approved procedures for the purchase of land plots located on the territory of enterprises, in their structure.

Igor Slobodyanyuk at the meeting of the Land Seals

It is often asked what to do after the opening of the market for companies that have foreigners as founders? How can they not lose their cultivated land? I believe that it is necessary to acquire corporate rights of agricultural enterprises (for a period not less than 10 years) and further develop your business. There is no other correct option.

Cash and non-cash. How to conduct transactions

Regarding how settlements are carried out today in situations when land lease rights are acquired, I can say that 70% of the clients with whom we work carry out transactions in a non-cash form. Companies that have not properly capitalized their business, their economic activities (we are talking about the authorized capital, the purchase of equipment, etc.) work with cash. Someone will ask: how can you pay for the equipment on the balance sheet in cash? Can. Even if the farm has an authorized capital of 5 thousand hryvnias, all calculations can be made by bank transfer, having paid taxes. And I recommend everyone to do it.

I have familiar farmers who have 8-12 thousand hectares of land. They work officially, pay taxes, VAT and interest on dividends. Why? Because financial institutions are increasingly asking questions: “Where did you get this money? Show the financial statements, show the declaration. " And this all affects your future purchases of land from shareholders.

Yes, there are farmers who sell lease rights for cash. These are those who cultivate 800 hectares. But their 1 hectare is estimated not at $ 1-1.5 thousand, but at $ 500-800.

It is easier for us to increase the transaction value by 10% and share the tax with the buyer than to evade taxes. Cash transactions are expensive today.

Let's say I sell corporate rights to 2 thousand hectares of land for $ 1,000 per hectare, as well as property, equipment, "unfinished". How can I get cash for a construction in progress if I have a loan? They need to be transferred to bank transfer. The technique can also be calculated at market value, but you will lose VAT on this.

In addition, it is safe to work by bank transfer.

In order to become a pro in land issues, not to miss the most important and keep abreast of all the events of the upcoming land market, register for the online course on land bank management "Land Seals".

Igor Slobodyanyuk, Managing Partner of My Partners Group

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