New analysis from Excellion Capital, the boutique debt advisory and investments firm, reveals that developing agricultural Class Q land into residential dwellings can create a market value of £3.7m for savvy investors. As British farmers face the threat of a new 20% inheritance tax levy on all land and business assets worth more than £1m, some farming families are looking at ways in which they can sell all or part of their land to pay inheritance tax bills, or at the very least mitigate the future cost of inheritance tax. But does such an investment make sense for developers? Excellion Capital has analysed the investment potential available to developers who purchase Class Q land for the construction of residential properties, to see what sort of return they can expect. Some farmers are selling the entire farm With the new inheritance tax proposal potentially disincentivising farmers from passing their businesses down to the next generation, some families are having to consider the idea of selling the entire farm. Excellion’s analysis of current market listings* has found that there are currently 112 farms currently listed for sale in England. Existing data shows that the average sale price of arable land over the first half of 2024 stands at £11,000 per acre, while the average sale value of pasture land stands at £9,600 per acre*. According to further data from the UK government*, the average size of a UK farm is 202.6 acres. As such, the estimated average value of an arable farm currently stands at £2.23m, while the average value of a pasture farm is £1.94m. The Class Q option To avoid having to sell their farms, or sell quality farming land, Excellion’s research reveals that thousands of farmers have the alternative option of selling agricultural buildings and their plots, otherwise known as Class Q land. Under Class Q permitted development rights, disused or current buildings located on agricultural units can be converted into residential dwellings, with the option to create as many as 10 homes from a single building. As such, plots that aren’t in regular or meaningful use and don’t contribute greatly to the ongoing success of the farm, can be offloaded to residential developers for substantial amounts of money. Excellion’s analysis of planning data* reveals that there are currently 8,892 Class Q sites in England eligible for change of use from agricultural to residential. These sites are not necessarily listed for sale. Instead, they are opportunities identified through the planning classification assigned to them. What investment potential does Class Q land hold for developers? As of 2024, developers can build a maximum of 10 homes on a Class Q plot across a maximum floor space of 1,000 square metres. As such, the average floor space of each home can be calculated at 100 square metres. According to the most recent figures (November 2024), the average value of developed land stands at £347 per square foot. 100 square metres is equivalent to 1,076 square feet, which means a 100 square metre home has an average market value of £374,019. Therefore, developers who build 10 homes on a Class Q site are looking at a potential total sale value of more than £3.7m. How much should an investor pay for undeveloped Class Q land? If the potential value of a developed Class Q site sits at £3.7m, how much can developers expect to pay to purchase the land in the first place? An average expected land cost can be calculated by taking the value of the developed land (£3.7m), and subtracting the estimated cost of construction* combined with the developer’s required profit margin (which sits at an industry average of 20%*). This means removing an average of £2.6m. The figure you’re left with is roughly £1.1m which is, therefore, the average price that a developer can expect to pay for a plot of undeveloped Class Q land large enough to build the maximum number of properties allowed. Who is currently buying farmland? In 2014, private investors, institutional investors, and overseas buyers purchased little more than 20% of English farms that were put up for sale. By 2023, buyers accounted for approximately 30% of all English farm purchases. This suggests that over the past decade, investors and developers have identified the potential returns available from purchasing and redeveloping farmland, and given the new situation that farmers find themselves in, it’s reasonable to assume that these numbers are going to increase further over the coming months and years. Robert Sadler, Vice President of Real Estate at Excellion Capital, comments: “Farmers are understandably concerned about the proposed inheritance tax changes, and the tax bills involved could put real financial pressure on them. But while many farmers might be cash poor, they are increasingly asset rich – there is a lot of hidden value in farmland – and that’s why Class Q opportunities present such a great opportunity to create cash wealth by selling off what is, in many cases, little more than brownfield land. And while these Class Q designated plots provide an income opportunity for farmers, they also make for a very promising avenue that investors and developers should now be exploring. Considering that many farmers aren’t even aware of the Class Q opportunities that exist on their land, it’s clear that investors have the chance to strike up some very interesting and lucrative conversations with farmers up and down the country. But Class Q opportunities aren’t the only thing that developers and investors should be considering when it comes to conversations about farmland. Land promotion – in which a land promoter agrees with a farmer to gain planning permission for a small portion of their land, at which point the land can become up to 100-times more valuable and can be sold to local developers and housebuilders – is also becoming an increasingly fruitful endeavour. I personally worked on four land promotion deals in 2023, all in local areas with a drastic shortage of housing. With planning permission obtained, the land value was projected to be between

Responding to the Government’s announcement of £740 million capital investment in the SEND system to create more specialist places in mainstream schools, Cllr Arooj Shah, Chair of the Local Government Association’s Children and Young People Board, said: “To tackle the challenges within the SEND system, any reform must focus on boosting mainstream inclusion, and we are pleased government has set out steps towards this. “However the rising number of Education, Health and Care Plans means councils are under ever increasing financial pressure, and so it is vital today’s announcement is followed up with urgent action to write off councils’ high needs deficits. “Otherwise many councils will face a financial cliff-edge, and be faced with having to cut other services to balance budgets through no fault of their own, or their residents.” Building, Design & Construction Magazine | The Choice of Industry Professionals

Catella APAM, a leading UK investment and asset management specialist and a subsidiary of the Catella Group, has launched its inaugural fund, Catella APAM Strategic Equities I (“the Fund”), to invest in UK listed property companies. The Fund has closed with £102.2 million in commitments from institutional investors, focused on identifying mispricing within the UK listed real estate sector. Simon Cooke, industry veteran and founding shareholder of Catella APAM, and Ben Kennedy, Head of Investment and Research at Catella APAM, will lead the Fund’s investment strategy, supported by Catella APAM’s senior asset and development management teams, which has advised on over £4.5 billion of assets within the UK and Ireland since its inception. Cooke and Kennedy designed the Fund’s strategy to target undervalued UK listed real estate companies, where underlying asset values have been impacted by recent macroeconomic challenges and shifting demand patterns. The Fund is the Group’s first fundamentals focused product investing in the listed markets following the launch of Catella Systematic Property Fund in 2022, a Swedish UCITS fund targeting Nordic listed property companies through a systematic investment approach. Kennedy commented: “The real estate sector has become more operationally intensive and complex, as asset owners begin to acknowledge their role in providing a service to customers rather than just passively holding assets. This is likely to create a more disparate distribution of returns as the gap between winners and losers widens. Our access to actionable, real-time asset data and hands-on expertise gives the Fund a predictive edge in assessing companies’ current and future value trajectory. Adopting a value investment approach in UK listed equities after a period of re-pricing should offer strong risk-adjusted returns to our investors.” Cooke, who has worked closely with equity fund managers throughout his career, particularly at Deutsche Asset Management throughout the 1990s, added: “I believe the listed sector is often undervalued compared to the wider market, as is the strategy, assets, and management teams, particularly following economic downturns. The sector currently trades at a significant discount to NAV, dragged down by recency bias and consolidated by the backward-looking valuation process. This has been a long journey, and I’m proud that we are now launched and mandated to unlock this embedded value.” Building, Design & Construction Magazine | The Choice of Industry Professionals

Clarion Partners Europe, a leading real estate investment fund manager specialising in European logistics and industrial properties, has partnered with NatWest to secure a £200 million Net Asset Value (NAV) Line facility for one of its co-mingled funds. This fund reports under Article 8 of the Sustainable Finance Disclosure Regulation (SFDR), marking the first collaboration between the two organisations. This NAV facility is also a landmark transaction, as it includes green loan provisions aligned with the Loan Market Association’s (LMA) Green Loan Principles. This is the first such agreement between NatWest and Clarion Partners Europe, setting a precedent for green financing in real estate. The funds will support a range of sustainable initiatives, including refinancing existing properties, implementing green capital expenditure (capex) programmes, and acquiring assets that either meet or aim to achieve specific building energy certifications. Florina Capraru, Acquisitions Director at Clarion Partners Europe, commented:“Integrating green loan provisions into the NAV facility is a natural progression in our sustainability and value creation strategy. It aligns with our mission to future-proof our portfolio of mission-critical assets. NatWest has been an outstanding partner, demonstrating a deep understanding of the decarbonisation challenges facing the real estate sector. Their alignment with our sustainability ethos reinforces the idea that sustainability acts as both a risk mitigant and a driver of value.” Dan Kumagai, Head of Asset-Backed Funds Financing at NatWest, added:“This innovative green structure is a significant development for the NAV line product. By supporting Clarion Partners Europe, we hope to encourage other leading investors to take pivotal roles in decarbonisation and broader responsible investment.” Rahel Haque, Climate & ESG Capital Markets Lead for Private Finance at NatWest, shared her thoughts:“We are thrilled to have supported Clarion Partners Europe with their inaugural Green NAV facility. This funding will enable them to acquire additional logistics assets and enhance energy efficiency across their portfolio. We look forward to deepening our partnership as we work together towards decarbonising the built environment.” This collaboration not only strengthens the relationship between NatWest and Clarion Partners Europe but also underscores their shared commitment to sustainability and responsible investment in real estate. Building, Design & Construction Magazine | The Choice of Industry Professionals

UK Export Finance (UKEF), the UK’s export credit agency, has introduced a new guarantee product to help British firms secure international contracts providing engineering, design and technical services. The Early Project Services Guarantee (EPSG) is now available to overseas buyers who choose to use British services firms to scope and design their projects in the planning phase. The guarantee helps overseas buyers of UK services to access private finance by assuring lenders that they will receive payment, making the UK offer more attractive. Once the project services contract is complete, there is potential for the guaranteed loan to be refinanced alongside financing the wider construction project. The prospect of subsequent finance throughout the life-cycle of projects incentivises overseas buyers to select UK services firms for the early-stage work. Carl Williamson, Director of SME and Trade Finance, UK Export Finance, said: “This new export finance support will give international buyers even more incentive to tap into UK design and engineering expertise. Year-on-year growth in service exports shows that the demand is there for this country’s professional and technical services.”  “The development of our Early Project Services Guarantee is a clear signal of UKEF’s commitment to helping the services sector to maintain its competitive edge and international renown.” The EPSG addresses gaps in market provision for financing the preparatory stages of major projects. It also contributes towards UKEF’s objective of helping a broad range of businesses to export, driving growth across all regions of the UK. This announcement has been made alongside International Trade Week, an annual event run by the Department for Business and Trade which includes a series of virtual and in-person events to advise UK businesses on different ways to reach new international markets. Building, Design & Construction Magazine | The Choice of Industry Professionals