Farmland Partners, fresh from a fund raise, unveiled one of
its biggest acquisitions ever, with the purchase of California nut orchards
from ag trading giant Olam International.
Farmland Partners said it had agreed to pay $110m for the
almond, pistachio and walnut land, under a deal which will see Singapore-based OIam
International keep a 25-year farming agreement at the site.
The deal, which including a revenue share agreement with
Olam on the orchards, represents one of Farmland Partners' largest ever, in financial
By area, the purchase, at 5,100 acres, will take the Farmland
Partners portfolio to some 159,000 acres.
Row crops vs specialty
The purchase comes a month after the group raised $144m from
the sale of 6.0m preference shares, with the company saying at the time it
would "use the net proceeds from the offering for future farmland acquisitions".
While Farmland Partners, which began with a small portfolio
of Illinois land, initially focused on row crops farms, a more liquid and less
expensive market, it has increasingly spread into land bearing permanent or
higher value crops.
Paul Pittman, the Farmland Partners chairman and chief
executive, told investors in July that "we want to maintain an approximate
balance of 75%, 25% between the primary row crops and the specialty crops,
meaning the vegetables and the permanent crops".
However, the ratio could reach "something like 65%, 35%
maybe in the extreme case", depending on factors such as expected returns from
rents and capital appreciation.
Indeed, Mr Pittman hinted at the time that row crop land had
become less of a priority, saying that "even if I like the long-term
appreciation opportunity of an asset we see in the core of the Midwest, it's
just really hard to make the math work on a current yield basis, from a cost of
Mr Pittman said on Friday that the purchase of the California
farms, and the agreement with Olam, "will bring higher cap rate permanent crop
production into our portfolio, furthering our goal of delivering a
well-balanced portfolio of US farmland to our stockholders".
He termed the farms "unique, high-quality", and situated "in
the heart of California's tree nut industry".
For Olam, which has come under shareholder pressure in
recent years to curtail its debt levels, Ashok Krishen said that the group was,
having "built a sizeable portfolio of prime orchards… looking for an asset-light
model to participate in the production economics of the tree crops".
The sale to Farmland Partners did not represent a retreat
from the industry.
"We intend to further invest in growing almonds, pistachios
and walnuts in California," Mr Krishen said.
Farmland Partners shares stood 2.0% higher at $8.68 in
morning deals in New York.