The Intermediary – March 2026 - Flipbook - Page 59
SPECIALIST FINANCE
Opinion
funder protection
profile, with no overseas Politically
Exposed Persons (PEP) or adjacents.
This eliminates a significant
compliance and reputational risk that
arises all too oen in mainstream
UK property. We also cap exposure to
any individual or group of connected
borrowers. This diversification
ensures funders are never over
exposed to a single actor. With
farmland being a national market,
geographic concentration doesn’t
bring postcode risk.
Our average loan size is deliberately
positioned at a level where it is
economically viable to provide
genuinely bespoke monitoring.
Loan books with many small loans
face a practical challenge: the cost of
meaningful individual oversight can
become prohibitive, and surveillance
either becomes superficial or is
effectively abandoned. We do not face
that problem.
Quality oversight
Our loan sizes make it cost-effective
to deliver a bespoke, hands-on
monitoring approach that smaller
loans could not economically support.
This means regular site visits, direct
borrower engagement, tailored
covenant structures, active portfolio
surveillance and an understanding of
the people behind the loan.
In other words, larger loans make
beer quality oversight possible and
therefore safer lending.
There is a misconception that
smaller loans spread risk. In practice,
they oen spread blindness.
They do not generate the economics
to support genuine, hands-on loan
monitoring. Scale, in this context,
becomes a risk mitigant.
Agricultural lending also benefits
from the practical advantage of being
able to sell a field, in a way that you
can’t sell a bedroom. While oen
a challenge to a risk commiee’s
preconceptions of concentration risk,
segments of land can be sold without
endangering the business, allowing
ready derisking given prompt
monitoring and action.
The fragmentation and small size
of MFS’ auditors could be seen as a
clear warning. Multiple small firms
might reduce the total cash cost of an
audit, but the management overhead
and risk of inconsistent standards
outweighs any benefit.
As is the norm, a single accountancy
firm handles reporting for every entity
within our group. This uniformity
reduces the risk of discrepancies,
accelerates audit cycles, and maintains
a high, consistent standard of
financial oversight.
Our financial picture is coherent,
consistent, and cannot be obscured
through conflicting methodologies or
fragmented reporting relationships.
Institutional capital rewards
predictability. That is why our
credit philosophy is built around
low volatility, intrinsically valuable
assets: primarily farmland and rural
properties. Funder security cannot
depend on personalities. It must
depend on frameworks.
The private credit industry has
too oen rewarded aggressive loanto-value (LTV) ratios, speculative
valuations, and returns that are
unsustainable anytime outside
of a rising market. We take the
opposite view.
Specialist expertise
The final and systemic protection is
the underlying assets themselves.
Farmland forms the core of our
security and agricultural property
is unlike other collateral classes. Its
characteristics make it a uniquely
resilient asset class: it is nationally
priced, slow moving, with low
volatility, relatively stable demand
and utility based value rather than
speculative cycles.
Farmland values move far more
slowly than residential property and
exhibit limited regional variability.
Using national valuation benchmarks
makes mispricing harder and
valuation shocks less likely.
All loans are wrien against the
lower of vacant possession value or
open market value. We do not lend
against gross development value or
speculative upli, removing a major
source of risk commonly seen in
specialist finance.
And we impose borrower and
connected party limits to avoid
concentration risk – a lesson many
lenders only learn with hindsight.
Combined with sensible LTVs and a
bricks and mortar valuation basis, you
create a portfolio designed to survive
full cycle stress, not just benign
conditions.
Our security is grounded in
what the asset is worth today, not
what someone hopes it might be
worth tomorrow.
This means our margin of security
is real rather than projected.
Farmland has unique complexities
that take time to understand and
specialist expertise is required to
lend safely and profitably, but its
consistency makes mis-pricing both
easier to detect and harder to conceal.
An asset that tracks broadly
consistent national data is an asset that
can be meaningfully benchmarked,
checked, and challenged.
It also benefits from low volatility
as an underlying asset class and has
historically demonstrated remarkable
resilience through economic cycles. It
is productive, tangible, and finite. It is
uncorrelated with the equity markets
in a way that commercial property or
development assets are not.
The failure of any lender raises the
same fundamental questions: where
was the investor’s money? How was
the security structured? Who was
checking? And what happened when
things went wrong?
These are questions that investors
are right to ask, not just of firms
in difficulty, but of every firm they
entrust with their capital.
Agricultural finance is a specialist
discipline. Done well, with the right
assets, the right governance, and
the right degree of transparency, it
offers investors something genuinely
valuable: consistent returns, backed
by real assets, in a structure designed
to protect their capital. ●
March 2026 | The Intermediary
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