How to Evaluate Agricultural Land as an Investment in Ukraine: Rental Yield, Lease Term and Risks

01

Confirm that the buyer is eligible before modelling returns

For Ukrainian agricultural land, a financial model is irrelevant if the proposed buyer does not meet the statutory acquisition requirements. Article 130 of the Land Code sets out eligible acquirers and restrictions relating to corporate ownership, aggregate landholdings, sanctions and other circumstances. The notary verifies compliance in the course of the transaction, supported by dedicated functionality in the State Land Cadastre.

Before paying a deposit or signing a binding document, review:

• the buyer’s citizenship and legal status;
• for a legal entity, its participants and ultimate beneficial owners;
• the aggregate area of agricultural land already owned and applicable statutory limits;
• sanctions and other prohibitions;
• whether the parcel’s characteristics or location trigger additional restrictions;
• the proposed payment method and the evidence of funds required for closing.

This is not merely a closing formality. An ineligible buyer can stop a transaction after both parties have already spent time and money.

02

Calculate the total entry cost

The purchase price is only one part of the capital deployed. A meaningful comparison with other assets should include every cost directly connected with acquisition and with bringing the documentation into an acceptable condition.

Total entry cost = purchase price + documented transaction costs + due-diligence and remediation costs.

Depending on the transaction, the model may include notarial, registration, banking and valuation costs, professional review fees, and expenditure needed to resolve cadastral or registration discrepancies. The applicable items and the party responsible for each should be confirmed under current rules and the agreed transaction structure. Do not insert a universal percentage.

Do not add costs that do not exist or cannot be supported. Equally, do not omit a known issue simply because its exact amount is not yet available; show a separate scenario reserve instead.

03

Separate gross rental yield from net cash yield

The rent stated in the lease is not always the cash flow received by the landowner.

Gross rental yield = annual contractual rent ÷ total entry cost × 100%.

This is a useful first indicator, but it does not capture late payment, payment in kind, owner-side costs or other cash outflows.

Net cash yield = (cash actually received for the period − documented owner-side costs for the same period) ÷ total entry cost × 100%.

Use the same measurement period in the numerator and denominator assumptions. If rent has been prepaid for several years, do not automatically treat it as income available to the new owner. Establish who received it, which period it covers and what rights and obligations pass to the buyer.

Review separately:

• rent under the principal lease and every amendment;
• payment dates and mechanics;
• cash versus in-kind payment;
• the indexation formula and whether it has actually been applied;
• payment history and arrears;
• taxes or other amounts withheld;
• prepayments;
• owner obligations that create costs.

04

The remaining lease term matters more than the original term

A long lease may provide a more predictable cash flow, but it may also lock the owner into weak rent or ineffective indexation. A shorter remaining term may allow an earlier reset of terms, while creating a risk of interrupted income and the cost of finding a new tenant.

For investment modelling, focus on the remaining term at the acquisition date, not only the lease term stated when the contract was first signed. Also verify:

• the date on which the lease right was registered and the expiry date;
• renewal, automatic extension and renegotiation provisions;
• rights to adjust rent;
• early termination grounds;
• penalties and dispute-resolution provisions;
• every amendment;
• consistency between the contract, the register and actual use.

As a general rule, a transfer of ownership of leased land does not automatically terminate the lease. A buyer should therefore value the parcel together with the tenant’s existing rights rather than as vacant land when the documents show otherwise.

05

Assess the tenant and the quality of the cash flow

The same contractual rent can have a different economic value depending on who pays it and how reliably they perform. The buyer needs more than the tenant’s name: the review should establish payment discipline and whether actual use matches the documents.

Request:

• the lease and all amendments;
• payment evidence for the available review period;
• a reconciliation statement or other evidence of arrears or their absence;
• information about claims and disputes;
• an explanation of in-kind rent where applicable;
• details of the actual user if different from the contractual tenant.

Past payment performance does not guarantee future performance. However, a lack of evidence today already warrants a more conservative cash-flow assumption.

06

Reconcile cadastre, title, lease and encumbrances

A cadastral number starts the review; it does not complete it. The buyer should reconcile at least the title document, State Land Cadastre data, the State Register of Rights and the contracts.

Check:

• area, boundaries, shape and designated use;
• land type and practical access;
• the seller’s registered title;
• the registered lease right and its term;
• mortgages, attachments, prohibitions, easements and other encumbrances;
• litigation or enforcement proceedings that may affect the asset or a party;
• mismatches in area, names, cadastral number, dates or document details;
• overlapping boundaries and other cadastral issues.

Where a document and a register do not match, establish the remedy, responsible party, timing and cost before closing. Do not downgrade the issue to a “technical error” without a workable resolution path.

07

Account for pre-emption rights and the sale procedure

For leased agricultural land, review the holders of statutory pre-emption rights and compliance with the procedure under Article 130-1 of the Land Code. This matters to the buyer as much as to the seller: it affects whether the sale can proceed with that buyer, on what terms and on what timetable.

Confirm with the notary:

• whether any holder of a pre-emption right exists;
• whether the intention to sell has been registered and notices issued correctly;
• whether the price and material terms match those notified;
• whether a valid waiver exists or the exercise period has expired;
• whether a change in terms requires the procedure to be repeated.

Do not rely only on a verbal statement by the seller or tenant. The evidence must be suitable for notarial closing.

08

Build three scenarios instead of one “expected return”

The model should show how the result changes when assumptions change.

Base case

Documented rent is paid on time, the lease continues until its scheduled expiry, known costs do not materially increase, and the documents do not require substantial remediation.

Downside case

Some payments are delayed, indexation underperforms the assumption, documentation or dispute costs arise, and resale takes longer than planned.

Lease-reset case

After the current lease expires, the parcel is re-let on different terms or temporarily produces no cash flow. The model must not present a higher future rent as guaranteed.

Possible land-price appreciation belongs in a separate scenario. It is not rental yield and should not be used to make a weak base-case cash flow appear attractive.

09

Buyer risk matrix

10

Documents for an initial review

1. The seller’s title document and an extract from the State Register of Rights.
2. An extract from the State Land Cadastre and current cadastral information.
3. The lease and every amendment.
4. Evidence of state registration of the lease right.
5. Evidence of actual rent payments and any arrears.
6. Documents relating to indexation, prepayments, payment in kind or special terms.
7. Information on encumbrances, litigation and enforcement, where relevant.
8. Buyer information needed for the statutory eligibility review.
9. The draft sale agreement and evidence of compliance with pre-emption requirements where applicable.
10. A total-entry-cost calculation and scenario cash-flow model.

The final list should be confirmed by the notary and relevant advisers for the specific parcel, parties and transaction structure.

11

How to compare two parcels

Do not begin with “which one has the higher rent?” Complete the same review card for each parcel:

• total entry cost;
• documented lease receipts;
• net cash flow;
• remaining lease term;
• indexation and its application history;
• tenant quality;
• legal and cadastral issues;
• cost and timing of remediation;
• the post-expiry scenario;
• a realistic holding and exit horizon.

The stronger asset may not have the highest headline rent. Cleaner documents, a reliable tenant, workable indexation and a lower risk of interrupted payments can be more valuable.