Farm Management

INTRODUCTION TO PREMIERE LAND SERVICES, INC.
AND GUSTINE & THEIVAGT, LTD. STAFFS

Premiere Land Services, Inc. is an Illinois Business Corporation incorporated by Charles E. Theivagt and Samuel L. Collins. Charlie and Sam are licensed attorneys, real estate brokers and insurance producers.

Premiere is an established real estate brokerage and farm management service managing farms in Greene and Macoupin County, Illinois. Charlie and Sam come from farming backgrounds and have been engaged in a rural law practice service agricultural clients with more than 32 years of experience.

Premiere shares office space with Law Offices of Gustine & Theivagt, Ltd., 620 North Main Street, Carrollton, Illinois 62016. Gustine & Theivagt, Ltd., is an Illinois Professional Corporation incorporated in June, 1977 and is currently owned by Charles E. Theivagt, associated with Patrick C. Davis and Samuel L. Collins, licensed attorneys. As attorneys, Charlie and Sam are uniquely equipped to provide as part of their farm management services legal drafting of leases, legal notices, crop and grain lien documents and other agricultural related documents.



INTRODUCTION TO PREMIERES STAFF

Premiere provides both legal and real estate sales and management services. Premiere's agricultural advisors, David Woods, Ronald Dowland and Chris Dowland are respected farmers in Greene, Macoupin and Morgan County, Illinois, having both college accreditation in agriculture and extensive farming experience. They own and lease more than 2,500 acres of farm land both a crop share and cash lease basis and maintain detailed automated farm record systems.







Premieres wildlife and recreational land management advisor, John Will advises in the development of wildlife habitats, recreational land management and timber management and harvesting. John is a retired Illinois Conservation Officer and private consultant.

Our hunting and timber management consultant, John Koster advises relative to the management of hunting leases, outfitting and timber management. John is an Illinois Licensed Outfitter independently managing and leasing 3,000 acres of hunting lands in central Illinois. John is a lifelong farmer owning, leasing and managing 1,000 acres and holds the office of Vice-President of Illinois Recreational Resources.

The Law Offices of Gustine & Theivagt, Ltd. also employ Patrick C. Davis, an attorney with extensive estate, gift and income tax preparation experience. Patrick represents various banks, estate and collection clients and is experienced in agricultural contract drafting and in residential, agricultural and commercial lease law.


PERSONNEL RESOURCE ALLOCATION


Charlie and Sam are responsible for contract review and drafting, preparation of legal notices, and legal compliance, determining comparative cash rents and comparative farm values, conducting cash lease and/or sealed bid auctions, overseeing farm advisors’ field activity, maintaining client accounts, and advising, reporting and communicating with our farm clients. Charlie and Sam maintain farm accounts through their brokerage trust account or client accounts, as desired, deposit all income, pay all expenses, prepare quarterly income and expense reports, and prepare an annual report to our clients.

David Woods, Ronald Dowland and Chris Dowland are assigned specific farms by geographical area having approximately equal aggregate acreages. They work directly with existing tenants, photographing improvements, gathering fertility test data, fertilization records, crop production records, communicating capital improvement needs such as tiling, maintenance of drainage ditches, terraces, dry dams, waterways and auditing lease compliance, soil conservation practices, tillage practices, and the like. They conduct at least two routine farm visits per year at or near planting and harvest time, establish and maintain good tenant relations, make recommendations concerning capital repairs and improvements, supervise the completion of repairs and improvements as needed, and maintain up to date records of planting practices, fertility, chemical application, production and return on investment and prepare reports at least annually to be incorporated within the annual farm management report.

John Will is assigned to inspect, inventory and value timber and advise and manage timber, creek land and lakes for recreational use on an as needed basis.

John Koster is assigned to access and manage hunting leases and advise and manage timber properties for recreational and commercial hunting and wildlife management on an as needed basis. John also offers independent outfitter services, private quail and pheasant hunts by appointment and lodging. He may also be contacted at info@kosterfarmshuntingclub.com.

OUR PHILOSOPHY

We believe that farm management should secure and maintain consistent, predictable and competitive annual lease income for the Owner while at the same time maintaining the overall value of the farm assets.

We believe that good farm management requires careful selection of new tenants and establishment and maintenance of good working relationships with existing tenants, development of good tillage and soil stewardship practices, application of up to date farm husbandry methods, maintaining compliance with agreed farm tillage practices and lease obligations and careful documentation and reporting of farm productivity, lease compliance, and comparative market analysis of farm rents and sales values.

Long term increases in farm productivity and asset appreciation must necessarily emphasize maintenance of optimal soil fertility and stabilization, maintenance of functional capital improvements, eradication of noxious weeds, saplings and pests, maintenance of farm borders and waterways for aesthetic attractiveness, and consistent monitoring of changes in productivity, return and asset value.

MANAGEMENT PLAN

Our initial objective is to examine the existing lease arrangement to determine comparative cash lease values for the managed property based upon productivity, soil type, drainage and other factors, audit the current use of the land to determine whether all available acreages are in production, whether fertility levels are being maintained for optimal production, whether productivity is hampered by wet spots, erosion and examine the overall features of the property.

Our farm advisors are assigned specific farms for which they are responsible to establish and maintain good owner/tenant relationships. We believe our farm advisors, as farmers, relate well to other farm operators. Their function is to inspect and document existing tillage, crop rotations, fertility applications, chemical applications, weed and pest control practices, productivity levels and maintenance of waterways, drainage ditches, levies and borders. Capital improvements are to be photographed for insurance purposes and functional analysis.

Our farm advisors make two routine farm visits per year to visit personally with the tenant, inspect the premises and gather data. Utilizing Excel farm records software, our farm advisors will prepare detailed informational reports for incorporation into a comprehensive farm management report.

Our annual farm reports typically will include the following information:

(1) A profile of the subject farm to include statistical information regarding tillable, pasture, wooded and homestead acreages, soil types, fertility reports, crop rotation practices per field and an inventory of improvements to include photographs, demographics, plat and map references.

(2) A tenancy profile of the subject farm to include the farm's rental history and existing lease arrangement.

(3) Our opinion of comparative cash lease values of similar farms leased in the area and comparative market values of similar farms sold in the area.

(4) Our assessment of the functional value of capital improvements and recommendations concerning repairs, sale or removal.

(5) Our assessment of tenant tillage and farm husbandry practices, compliance with lease requirements and recommendations regarding current rents.

(6) A summary of income and expenditures for the agricultural year, budget projection for the next crop year and return on investment analysis.

(7) Such other matters as may arise during the course of the lease year.

CASH LEASES

We understand that good farm management requires excellent communication between landlord and tenant. As professional farm managers, our first objective is to determine the landowner's priorities and to seek a tenant who will meet those priorities, or, to work with the existing tenant to meet those priorities. The key to achieving the landowner's objectives is to develop a farm lease which meets those objectives.

As agricultural attorneys, farm managers, and licensed real estate brokers we are uniquely qualified to provide lease drafting, termination notices, lien documentation, bid advertisements, to conduct sealed bid sales and to prepare, review and advise our client regarding an array of legal matters affecting the farm lease operation as part of our basic farm management service. It has been our experience that good business documentation often avoids misunderstandings that lead to disputes.

CLIENT REPORTING

Premiere provides periodic reports of farm income and expenditures on a quarterly, semi-annual or annual basis, as appropriate, providing a complete accounting of day-to-day deposits and expenditures. Premiere's bookkeeping system program can provide calendar year or fiscal year reports as needed.

A comprehensive annual farm report will be presented to the client on or before January 15 each year, or, at such other time as the client may direct, addressing each of the subjects detailed above.

GRAIN MARKETING


In a cash lease arrangement, grain marketing will fall exclusively upon the tenant, except where default might necessitate taking possession of crops, or, in transitional lease periods. In those limited, temporary situations where grain marketing may be required by Premiere, we are fully prepared to assess local markets with an eye toward the most economical marketing plan.

Our basic grain marketing plan would be to sell commodities to local facilities offering the best prices while considering the reasonableness of their grading practices. Sale to distant facilities or river terminals will be considered when the cost of fuel and transit do not outstrip the increase over local markets. Grain marketing is affected by an array of constantly changing variables and would need to be calculated on a case by case basis, depending upon the availability and cost of storage, hauling costs, recent market trends, and the like. Premiere can also make recommendations concerning forward contracting when advantageous.

ENVIRONMENTAL STEWARDSHIP AND CONSERVATION

We deem environmental stewardship very important, not just from a conservation perspective, but from a liability perspective as well. All landowners must insure that their property does not develop environmental hazards. Premiere inspects chemical application certifications of tenants annually and maintains contact with the tenant to carefully monitor all chemicals applied and insure that all chemicals are disposed of in an environmentally sound manner and do not threaten water supplies or violate environmental regulations. Our annual reports specifically address each tenant's compliance with environmentally safe farming practices.

OPERATOR SELECTION

Operators should not be selected based solely upon the farm rent they are willing to pay, but also upon their apparent competency, experience and financial stability. Knowledge and observation of good farm husbandry practices and aesthetic maintenance of all tillable areas is a requirement of all good tenants. A tenant must have an open door policy in terms of communication with farm managers on all aspects of the farming operation. Ideally, the tenant must believe that everyone benefits from the sharing of farm operating information. A good operator must have access to all necessary equipment and maintain it in good working condition, and be skilled in the selection of the appropriate piece of equipment for the job at hand.

We routinely request tenant resumes and check references. While we find many cash lease tenants willing to pay cash rents up front, rent balances may be easily secured by a valid letter of credit and are preferred to other forms of security. Our leases require fertility applications projected to produce minimum projected yields in average crop conditions, compliance with environmental law, disclosure of productivity records, fertility and chemical applications, tillage practices and other information useful in creating and maintaining an agricultural operations history for each farm.

CAPITAL PROJECTS/INVESTMENT

While capital improvements such as tiling, terraces, farmsteads and the like are necessarily photographed, inventoried and valued for appraisal purposes, they sometimes provide little functional support to today's farm operation and often add little or no value to the sale of the property. While some improvements are important to the owner/operator, most Owners today are interested in total return only. In light of our experience, our assessment of capital improvements and the advisability of repairs or improvements necessarily focuses first at the functional viability of the improvement. Does it add or detract from annual return on investment? Does it add significantly to the value of the premises? Will the cost of such repairs or improvement be feasible in light of the anticipated return or increase in asset value anticipated?

We assess the need for capital improvements or repairs, primarily with a view to maintaining those improvements that perform a viable function and are feasible in the circumstances. We will provide such services as needed and oversee the construction or repair of the improvement to insure the work is done to specification in a workmanlike manner. Farm visits for purposes of supervising such capital improvements or repairs would normally be in addition to regularly scheduled farm visits.

SPECIFIC SERVICES

Premiere Land Services, Inc. can provide all or any portion of the following specific services pursuant to its Farm Management Agreement with Owner:

1. Become thoroughly familiar with each farm and its current operator and make recommendations to the tenant regarding tillage, fertilization, crop rotation and other basic operating practices.

2. Locate qualified operators as needed, negotiate rents and lease terms and prepare lease documentation expressive of those terms.

3. Collect all cash rents on each farm, retain a budgeted amount from each farm to meet anticipated semi-annual expenses and disburse all remaining funds to the Foundation treasurer within five (5) business days.

4. Pay all real estate taxes, insurance expenses, and approved capital expenditures or repair costs as they come due.

5. Render a quarterly income and expense statement to the Board indicating income received and expenses paid for the quarter and fiscal year to date.

6. Closely monitor soil fertility, pesticide/herbicide application, and tillage practices for each farm and maintain records of each.

7. Inspect and inventory capital improvements and make recommendations regarding major repairs and improvements, and oversee routine repairs as needed.

8. Purchase farm liability insurance and make recommendations on insuring out buildings.

9. Provide comprehensive annual reports for each farm.

10. Provide real estate brokerage and farm consulting services on subject farms on an ongoing basis.

11. Insure that the tenant remains in compliance with all applicable laws and regulations and remains in compliance with all terms of the cash lease.

12. Determine optimum crop rotation and tillage practices which meet the owner's needs, are in compliance with government regulations, and are beneficial to the long-term value of the farm.

13. Recommend appropriate measures for land-use restrictions and assist with their implementation.

14. Provide legal services incidental to drafting leases, security agreements, notices to terminate and related farm operating agreements as the need arises.

15. Monitor participation in all government programs.

16. Manage all improvements on the farm, including negotiation, drafting and supervision of rental agreements.


Services for which additional compensation would be required as specified herein, would include:

1. Supervise major repairs and improvements, including procurement of bids, letting contracts, overseeing work, procuring lien releases and assuring completion in a workmanlike manner.

2. Provide real estate brokerage services and farm consulting services on unrelated farms, including inspection and valuation of other acquired properties. Provide listing and sealed bid auction sales services relative to subject and unrelated farms.

FARM MANAGEMENT FEES

Our farm management fees are typically based upon a percentage of gross farm income and vary depending upon the nature of the operation, the size of the operation and the specific services requested by the Owner, typically 5% to 6%. We find tat our farm management fees are often more than compensated for by increased annual rental income and productivity.

Sealed bid land sales services are typically provided at 2½% of the gross sales price, with Premiere to pay for advertising and Owner to pay all real estate closing expenses and other necessary and customary expenses of sale.

Sale of farm lands and improvements by private listing agreement at 5% of gross sales price with Premiere to pay all advertising expense, and Owner to pay real estate closing expenses and other necessary and customary expenses of sale.

We typically offer 1% to 2% discounts for sealed bid and listed sales of managed properties.

OTHER MATTERS

CALCULATION OF FARM VALUES/CASH LEASE RATES

Premiere receives bi-monthly reports of farm sales throughout the State of Illinois. Additionally, we are in frequent communication with other real estate brokers and farm managers throughout the State. We recently sold a farm tract in Piatt County, Illinois, deriving the comparative sales value through local sales data, aerial photos, soil types and in consultation with local brokers. We customarily suggest a listing price approximately 5% above our comparative sales value opinion and have been successful in obtaining sales for 90 to 95% of the list price.

We utilize a similar procedure for determining cash rents, also consulting local Department of Agriculture Farm Service Agencies and University of Illinois Agricultural Extension Advisors. We have also found that cash lease bid auctions have been very successful at achieving the highest cash lease value of a particular farm, and, in surfacing qualified farm operators. When we have historical data concerning farm fertility levels and average annual production levels we can normally negotiate competitive cash rents with existing tenants without letting bids publicly, within 10% of our comparative cash lease value determination. Reaching 90% or above of our cash lease goals is deemed satisfactory, particularly, in maintaining qualified, proven tenants.

PROOF OF INSURANCE/LETTER OF CREDIT

We prefer annual proofs of insurance from our farm tenants reflecting liability insurance coverage for the tenant, his/her agents and employees. We also prefer letter of credit security for installment payments of cash rent and can readily build those requirements in to any given farm lease if preferred by the Owner.

Many Owners utilize tenants who are long-time family friends and are less businesslike in their approach. We try to accommodate the Owner's wishes while at the same time recommending and obtaining as much security and protection of the Owner's interests as possible.

Premiere is a real estate brokerage and farm management firm committed to providing excellent service. Premiere was developed in order to complement our existing rural agricultural law practice and title business. It has proven more than successful in allowing us to provide more and more services to farm owner clients. Our management team has both experienced and young members to bring experience, consistency and longevity to our firm.

Please give us a call at (217) 942-6966.