Help needed with a business case

Mickey

Dear Friends,I would like to receive your input concerning a business case that I have difficulty solving.Case:In an underdeveloped island of Indonesia, there is a big land (70 hectare) that I want to lease. This peace of land has more than 100 owners. All owners are rice farmers, these farmers use this land to grow rice and sale the crop to Chinese or eat it themselves.After different meetings and discussions with all the owners, they have agreed to lease us the land for a period of 5 to 10 years, renewable!Of course this is fantastic news but now there are asking me how much are we willing to pay them?I need you please to think with me and to help me find out in which form I can pay these people. 70 hectare is big and it's a lot of money. So my goal by posting this thread is to find the best possible deal for us.Thank you ladies and gentleman for your input.Of course, please feel free to ask question before you starting proposing and potential solutions.Regards,Mickey

ferdie

Mike, I think you have to survey how much is the average income per hectare from the rice fields.At first I wanted to put profit as an indicator but they also consume the rice so there's a hidden benefit that you can't calculate, so I go with income. From the numbers that you discover, than you'll be able to give them a price that might appeal to the people there.

lumumba

In an underdeveloped island of Indonesia?????? (it would be better to give more info) If undeveloped island well away the price per will be low

Markit

Initial thoughts - disaster, stand well back!Authorize a local of your choice (Kepala Desa?) to organize the whole thing and to get back to you when [U]everyone[/U] is on board - an not before! Tell him how much you will pay per are (you have researched the local average, I'm sure) - and not a Rupiah more. Tell him along with whatever commission you agree with him that he will also get 25% of whatever sum is UNDER the calculated amount per are price. Tell them they have until ****** to finalize the deal. Allow 2 months for your notary to do due diligence (make sure all the titles are good).Danger - think Access, access, access - I have a neighbour that bought 2 hectare beachfront without first getting the road rights through to it - the road now looks like a crossword puzzle, all over the shop, because he had to bargain with each farmer for access and the closer he got to his land? You guessed it, the more expensive and difficult the talks got. Go on holiday for 6 months.

balibule

This peace of land has more than 100 owners. [/QUOTE]How much will it cost you to make legal agreements with 100 different land owners? Is that going to be 100 different lease certificates?I also agree with Markit to not commit before all owners agree. If one holds out he will have you by your balls.

joji gulapetis

WOW! A psychologist would have a ball with two of the above answers. :boxing: See the difference between the Indonesian approach Ferdie) Mushawara mufakat. And the German approach (Markit)? Achtung!! ACHTUNG!! Shows the difference in cultures. But if I was doing it I would combine the two. For something this big it would be absolutely necessary to get the local village officials onside. The Kepala Desa and the guy who allocates the water rationing if there is irrigation involved (in Bali called the Pekaseh). Just keep in mind that the village head and the pekaseh are elected officials and are liable to change over the time of yr lease, so be nice to the respective second in command of both guys. Be careful any deal you make with the village head is legal, so it does not leave you open to repercussions from his replacement if or when there is a change of personnel. Also make sure the 100 or more landowners do not find out about any under-the-table deals you made with the village head. Personally I would try ferdie's approach to the land owners, and then work out a fee to the village officials for doing the necessary paperwork. You would need someone, preferably a notaris to check the validity of ownership of the ppl you lease the land from. If the place is as under-developed as you say i don't think there will be any sertipikats on the land. Most probably giriks, or a surat pipil (village level ownership papers.) For pipil they may not even be registered with the BPN (lands dept), and only be registered at village level. Re-employ the ppl you leased the land from if possible. And others from the village. But try to avoid employing ppl dropped on you from the village head or other officials, because once hired, you will never be able to fire them.Make sure everything is legal and put down on paper, including if an owner sells his land, dies, or divorces or (changes religion or gender :anonymous:) the conditions of the lease and extension(s) cannot be changed by new owner(s). I am sure there are other loopholes that you will have to consider and plug. Hopefully the other podders here can offer many more ideas and suggestions. Best of luck in your enterprise mate, and please keep us informed on your progress, because I for one would love to hear.:topsy_turvy:

ferdie

@joji, maybe my approach is different with markit but you got it backwardsMarkit style is basically the local rich guys style here, you use local power to mobilize the people and pay him, so I think Markit is more native in Bali than I am.:icon_e_ugeek:Make no mistake, if you read my post, I always recommend meeting the local elders or leaders in the community, but I can't rely on them and trust them heavily anymore because the experience that me and my friends had in the past.Just make sure you have good relationship directly with the local community as a whole, because local leaders also have certain periods for their position and there will be new leaders afterwards. Sometimes changes in leadership can create a backlash if the successor is not at the same page with the old ones. So as a business stand point, you better have an agreement with the whole community than with a guy that has power for a limited time span.

hermit

SorryMickey,can you tell us what the benefit is for the people that now work the land?Once it is turned into a resort or something like that,there might be work for some of them,but they will be obliged to buy the rice they now harvest themselves.Generally speaking i think it is undesirable to convert ricefields into anything else,wherever in the archipelago.You are going to destroy the whole social coherence of this village.Think thrice before starting something that will turn their lives upside down.Their money will be quickly gone and then they are emptyhanded.

gilbert de jong

on wich Island is this piece of land?what's is the goal of the land to be leased? I mean what are your intentions with the land?how/where did you have a meeting with all 100 owners?how can/did they agree (all 100 of them) leasing it to you without knowing/establishing a price first?70 hectare-how many desa's?

joji gulapetis

ferdie

@joji, I think you have a gift to be an infotainment reporter :icon_biggrin:

joji gulapetis

Waaaaah pak ferdie.... tunggu saya cari uang kecil...... :highly_amused::topsy_turvy:(asal si Markit gak baca dengan seksama.... gue masih aman ) :culpability:

hermit

Markit

You guys are all on drugs!

joji gulapetis

Mickey,do you mind telling us what kind of development you are planning on that land?From a former thread you posted i assume it is on Sumba.Sumba already has a shortage of fertile land for ricegrowing,so why choose those sawahs for development?There must be much more nonfertile land there you can have for a scratch without uprooting whole communities,and do irrepairable damage.You might think it is a fair deal if they agree a price that suits both parties,but they have no longterm thinking.Anticipition is,to put it mildly,not the strongest point of indonesians.They will be rich and be able to buy some motorbikes,that will be rusted before the lease is over.What do you want a lease for 5 years for anyway?Do you see the difficulty of renewing the lease with one hundred families?Anyway,In My Humble Opnion,it is close to criminal to convert such an amount of ricefields to another use.I am not really surprised most members of this forum only give advice about how to bring this off and nobody puts any questionmarks about the desirability or undesirability of such actions.Most members here seem to have no clue as to that they are living in a third world country.[/QUOTE]Why bother to ask (your first sentence). You apparently already know where it is, and that Mickey is already going to destroy the island of Sumba (the rest of your statement). So, (in your last sentence) you want to keep the people of Sumba living as subsistence farmers in the 3rd world forever?Give the person a chance to answer your first question, then you may have enough information to comment on his plan. But, (without any real information) it must be nice to be omnipotent and know automatically what is right and what is wrong for these poor and childlike people in Sumba, and they must remain for the rest of their life on shanks pony, because you declared motorcycles forbidden to them. Haram! Sorry mate, I apologize for offloading on you like this, but in my honest opinion you are asking and answering all your own questions without giving Mickey (who I don't know from Adam) a chance to say anything. If he plans to convert 70 hectare into one huge parking lot, then we may all jump onto your bandwagon. I assume (again without sufficient information) that you too are a joni mitchell fan. (See the lyrics to her song Big Yellow Taxi).:topsy_turvy:

Mickey

Interesting ideas and comments everyone. Thank you.Few things that I think I need to clarify and apologies if I didn't mention them earlier:Our intention from this lease is to secure this land to stay as it is, which means. We want the control so that no one comes in the future and throws all the farmers out and build a resort with a golf course or something like thatWe would like to support the local community and develop for them a sustainable source of income.The deal we made with the farmers is: oWithin the lease period, all farmers will have the right to still cultivate their lands and no one will stop them from doing that oIf some of the famers want to sell their land, we will be the primary buyer.@Ferdi : Very good point, we started this approach already and we are investigating it.Here are my findings:Rice yields range from less than 1 ton per hectare under very poor rainfed conditions to more than 10 t/ha in intensive temperate irrigated systems. In this region we are considering 1 hectare because of dryness of the climate.1 kg of rice = 0.30 usd 10 = 3 USD100 = 30 USD1000 = 300 USD1t x 70 = 21000 USD per year21000 x 5 years = 105000 USD <-- too much@lumumbaPlease feel free to ask your questions, I will be happy to answer them@MarkitGreat Advice and we did indeed involve the Kepala Desa, the access is fine because we and farmers are using the same public road to access the rice field and my land as well.@balibulegood remark, I will clarify that with the notary and the Kepala Desa@ joji gulapetisAll land owner were issued land certificates by BPN. It was a government initiative to avoid land issues. When I bought my land, all 23 parcels had certificated from BPN as well.@ Hermit,We will not change this land to anything, we would like it to stay a beautiful rice field as it is now and we are against any such of the developments ideas. Actually we are leasing it for that reason. The land farmers will keep on cultivating their lands. But we are in control so that no Hilton or whatever hotel chain comes and destroy such a beautiful god creation.@ gilbert de jongalways sharp questions See above the intention behind leasing this landIt's one Desa, and we had 4 meetings, 2 were canceled because not everyone were there, we made a ceremony, we killed different animals.At the moment they agree to the lease concept/ idea but nothing is signed as they are waiting for us to come with a price.@ HermitI will assume I didn't read your last post , and if i were planing to rob and destroy the income of these lovely people i will not put this in a forum. but i appreciate your concern and if you have knowledge of nature conservation we will be happy if you can help.Now that more information is floating around, i would love that someone can come with a a BRILLIANT financial proposition to pay the people. i my self though about: - buy a tractor and a truck that can be used by the farmers. - look into the cadastral value, to see what is the real costs of the land? - follow Ferdi's approach and combine it with buying a tractor and a truck that can be used by the farmers.

ferdie

Its a different scenario that I thought earlier :icon_e_surprised:Just my 2 cents:1. You could buy the truck cause you could used them yourself and the local farmers might borrow it if they need them but use your driver at all times2. For the tractor, its your call, since I don't think the small tractor these days are not so expensive like in the old days.3. Make sure they didn't have lots of cows or pigs raised near your place, the smell alone might cause all of your guests running instantly to the airport4. I think the fair price would be almost as much as the price of the seeds that they might use, because the control of the land is still in their hands after all5. If you are going to be a primary buyer, what is the standard price? You might as well buy them upfront and let them used the land on a profit sharing scheme. It is safer for you.

Markit

Dear Robin, Help me out here - you are buying the land to protect it from potential big buyers that might, in some distant future, come riding into Dodge and throw out all the local farmers?Have I got that about right so far?What is your payback? Just that warm and squidgy feeling that you are now remembered in many nightly prayers all over the island of Sumba? Is your last name Hood?Send me the money instead and I'll make sure you are remembered every night or until my liver gives out. Cheers to Robin Hood!

joji gulapetis

i my self though about:- buy a tractor and a truck that can be used by the farmers. - look into the cadastral value, to see what is the real costs of the land?- follow Ferdi's approach and combine it with buying a tractor and a truck that can be used by the farmers.[/QUOTE]Robyn, have you thought of starting up a koporasi, a co-operative with the 100 farmers you have there. Or suggesting they start it, because I don't know the rules concerning co-operatives and foreigners in Bali/Indonesia. The Co-op may be able to borrow money to buy the truck and the tractor themselves. This is something you can check out with the head of the desa there. Then they could rent the equipment from the co-op for a fee which will have to be worked out equitably, where the high-yield farmers can help subsidize the lower yield ones. The rent money used to pay drivers and maintain the equipment. If they jointly own the equipment they may look after it better than if they just borrowed it from you. Or, if they cannot get a bank loan, you may be able to help them with the loan. Rather than you putting up the money up front you can act as guarantor for the amount of the loan with a bank. By taking out a time deposit for that amount, and placing it in the bank as surety on the loan. (with interest on the time deposit going into your own account), you actually lose nothing, assuming the co-op pays back their loan. It is just an idea, but you can discuss it with the farmers. One word of caution though. Co-ops in Indonesia have a very bad reputation because the ppl running the co-ops usually are busy ripping off the members. So I would suggest a very strict set of oversight rules be set into place right from the very beginning, as well as quarterly or bi-annual independent audits. Concerning the price you will pay the farmers for their rice, can I assume you are not out to make money on this operation, but just break even and cover your operating costs? If this is the case, find out how much they get for their rice now. Then as ferdie suggested, offer them a higher price, making enough to cover your operating costs. Or, if you supply all the seeds, fertilizer and whatever form of pesticide you use, Please keep us informed on your progress. I for one am really interested to see how it goes, and I am sure others here are also. Photos would be nice too if possible. :applause::topsy_turvy::topsy_turvy: