COMMUNITY LENDING at GOOD EARTH FARM, Gabriola Island, B.C.
What are you to do when you want to buy the farm but don’t qualify for a traditional mortgage? This is a story about how relationships and community can come together to support the next generation to buy the farm through private lending.
Located on Gabriola Island, just off the city of Nanaimo on Vancouver Island, Good Earth Farm produces mixed vegetables on about three acres using regenerative growing practices. The original farmers, Rosheen Holland and Bob Shields, founded the farm in 1993 and ran it together for 22 years until Bob passed away in 2015. Graham Bradley started working on the farm in 2016, and as of early 2020 is the new owner and operator of the land and business.
Graham had recently moved to Gabriola when Rosheen reached out to him in the winter of 2015/16 and invited him to work with her. Graham was actively working to launch the Gabriola Food Hub, a growers collective which offers vegetable subscriptions to Gabriola residents, and Rosheen agreed to commit to Good Earth being the core contributor while Graham worked there. “In that first year we referred to each other as ‘co-creators’ as Rosheen was reforming the farm after 37 years of loving and working with Bob and I was figuring out my farming future,” Graham explains. “At the end of the first year we agreed to carry on. We talked about it and thought we had a good thing going. With the Gabriola Food Hub it was one of the first years all the veggies grown at Good Earth were sold on Gabriola instead of going off-island.”
In late 2016, Rosheen and Graham began developing a partnership agreement with the help of Sibyl Frei, a community volunteer with business experience, who encouraged them to see that a formal agreement was a natural next step. Working towards the transition of the farm was the obvious thing to do as Rosheen began to think about taking a step back and Graham was committed to the project Sibyl met with Graham and Rosheen over several months in early 2017, and together they negotiated a three-year partnership, with the intention of a sale of the land and farm business to Graham at the end of that period. When fully drafted, they had the agreement reviewed by Young Agrarians, and then signed it with a celebration in April, 2017.
Sibyl coached them along and met with them over the three years, as the partnership agreement had a clause for renegotiation each year. Graham and Rosheen shared the farm revenue in a profit split: 60% for Rosheen and 40% for Graham for first two years, then 50/50 in the final year. Graham reflects that in retrospect it may have been better to have split the revenues 60/40 (40% for himself) in the first year, then 50/50, then 60/40 (60% for himself) to phase in Graham’s responsibility in, and Rosheen’s out. For those three years, it was hard to always feel equal and like a true gradual transition was taking place. For example, Graham valued taking Sundays off each week, while Rosheen didn’t; having different working styles and slightly different visions for the future of the farm made partnership challenging at times. Also, the additional income for Graham could have made the farm purchase easier.
It was difficult to estimate a sale price for the farm. There was little information on which to base it: there were not many comparable properties to research as the land doesn’t have a home on it, is located on a Gulf Island, and includes a large riparian area—and it is always difficult to put a value on goodwill. However, Rosheen and Graham did agree on a purchase price, which was included in the partnership agreement from the beginning.
By late summer 2019, Graham realized he had agreed to the purchase price without doing enough market research. After helping run the books of the farm, learning more about how much revenue the farm generated annually and the cost of operating the farm, and realizing how long it would take him to pay off the mortgage, Graham realized he couldn’t afford to buy the land and business at the agreed-upon price. He told Rosheen, and she asked him to make him a new offer. Graham made a revised offer and, when he presented it to Rosheen, she agreed in 10 minutes, saying, “If that’s what you can afford, then yes, let’s do it.” Clearly, they found a fair price.
In late October 2019, it looked like the sale was happening. Sibyl encouraged both parties to hire lawyers and told Graham to fundraise: go to banks, go to friends, find the money. Graham spent the winter writing a business plan designed for private investors. He didn’t go to banks, as he didn’t think they would lend to him. He focused instead on the extensive network of community connections that supported him and the farm already. After this point, Graham didn’t share his business plan or investor search with Rosheen. All of a sudden their relationship changed; he was the buyer, she was the seller, and he needed another level of privacy. There is much to understand about fundraising.
Graham extensively used Young Agrarians resources, including the Land Access Guide, in developing the transition plan. He also met his accountant, Cory Vanderhorst at MNP LLP, through Young Agrarians networks. Cory advised Graham to include a non-compete clause in the purchase agreement, a standard clause that meant Rosheen, who lives across the road from the farm, couldn’t start a competing farm once the sale of the farm was complete. After months of hard work to pull it all together, Graham was able to raise enough money for the down payment. He was also advised to borrow some extra to account for legal fees and unexpected infrastructure upgrades, etc.
In the end, Graham found seven investors, each lending different amounts and with different terms. Some were able to offer low or no interest rates, others needed more. The largest investment needed 2% interest. Each loan was separately negotiated and he wrote promissory notes to each investor. According to the lawyer, writing a mortgage was complex and lengthy (and thus expensive) to write due to such a high number of investors involved, but it was possible.
Graham went from being co-manager of the farm for three years to owner, entirely with fundraised money. He is still a little amazed he was able to pull it off! When the sale went through, investors sent the money to the lawyer directly, and the lawyer told him the land had been transferred into his name. Rosheen now has the money she needs to fund her retirement, and Graham is excited to continue stewarding the farm and taking it to the next level by streamlining systems, developing new markets and making more compost.
Though he likes having the security of knowing that the farm is his, he prefers to think of it as many people’s. In his ideal world he would have liked to have bought it with others, and there is still a future opportunity for people to buy in. With the amount of work a farm takes, perhaps a small co-op would allow for two days off a week? Graham is grateful that the opportunity to take over the farm was there when it was, and that he was able, and supported, to seize it.
The most valuable assets Graham had in creating this transition agreement and finding investors were relationships. He recognizes that people wanted to help out a local farmer, and that his reputation in the community was invaluable in making the transition happen. He also attributes the success of the transition to having worked so closely with Rosheen for the three years of their partnership. They put the time into developing the relationship, and she trusted that he was going to keep farming the land, which was very important to her. She would eventually have had to sell to someone, but she was particularly motivated to make it work with him because she likes that he is already a part of their farming community and that he is committed to keeping the legacy of the farm going.
Throughout this process, Graham has thought a lot about fundraising, and wants to share that it’s okay to fundraise! “It’s okay if people believe in you and what you are doing. There can be a lot of awkwardness with asking for a large sum of money, but if you feel the timing is right, it’s worth the ask. If you are able to demonstrate what you do and your commitment to a project over time, people can trust you. It’s okay to build up a social media presence over time to eventually ask for money—the community can fund a farm.”
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Photo courtesy of Good Earth Farm.