The Land Fund will start offering a reverse lease service in November.

To provide support to farmers who need funds for development or to stabilize the farm's financial flow, starting in November of this year, the Land Fund managed by the Development Finance Institution ALTUM will begin offering a new service – reverse lease.

The reverse lease service will give farmers the opportunity to sell their property to the Land Fund and, by leasing it from the fund, continue to use it for production. This will allow farmers to obtain the financial resources necessary for the continuation and development of their operations when they are not available from a commercial bank, stabilize cash flow, while maintaining guaranteed rights to repurchase their land at a guaranteed price.

Reinis Bērziņš, Chairman of the Board of ALTUM:  “It is important that reverse lease allows a farm not only to obtain the financial resources it needs, but also provides clear and transparent contract terms – by concluding a reverse lease transaction with the Land Fund, the land repurchase price and term will be immediately determined, as well as a land lease agreement will be concluded. We plan to carry out the first reverse lease transactions this year, while next year we predict the volume of reverse lease transactions to be approximately 3 million euros. Reverse lease is essentially another state support instrument that promotes the use of agricultural land for agricultural production and helps farmers stay in the countryside. We developed the reverse lease service based on farmers' demand, in close cooperation with the Ministry of Agriculture and farmers' organizations.”

Ina Alksne, Head of the Land Fund: "We see the reverse lease service as a support tool for farms that need additional financial resources for further development. For example, in a situation where the bank cannot issue a new working capital loan to the farm due to large existing credit obligations, a reverse lease may be a suitable solution - by selling land to the fund, the farmer can use the obtained financial resources for the further operation and development of the farm, while continuing to manage his land and after some time buy it back from the fund."

The reverse lease service is regulated by the Law “On Land Privatization in Rural Areas”, Cabinet Regulation No. 748 “Regulations on Decision-Making for Transactions with Agricultural Land” and ALTUM internal documents.

In reverse lease transactions, the Land Fund will purchase the property at a price that corresponds to the average market price of the property at the time of sale minus 10%. The annual rental price of the property will be 5% of the purchase price, and the rental fee will be divided into four equal payments and will be paid quarterly. The lease with repurchase term will be five years, while the farm will be able to repurchase the property at the price that was the market value of the property at the time the property was sold to the Land Fund. Thus, the farm will already know the price at which it will be able to repurchase its property from the Land Fund at the time of the reverse lease transaction, and this price will not be affected by fluctuations in real estate prices.

In the first 10 months of this year, the Land Fund managed by the Development Finance Institution ALTUM has acquired 115 new properties covering an area of almost 1,800 hectares, investing 5.1 million euros in their acquisition. Compared to the same period last year, the number of transactions has increased by 62%, while the amount of purchased areas has increased by 23%.

The Land Fund has been operating since July 1, 2015. As of the end of October this year, the Fund owns 3,800 hectares of land (226 properties), which were purchased with the aim of preserving them and returning them to agricultural production. 9.7 million euros have been invested in the acquisition of properties since the Fund began operations.

Source: ALTUM