Farmland Partners revealed a $100m shopping list of US farms
as its unveiled plans to raise cash from a further share sale, only three months
after raising some $50m at its stockmarket flotation.
The farmland investment group said its staff had "identified,
and are in various stages of reviewing" more than 10 potential farm purchases,
covering a total of 20,000 acres, and with an estimated aggregate price of
"We have engaged in preliminary discussions with some of the
owners and commenced the due diligence process on certain of these farms," the group
However, it said that it did not expect to seal a deal until
the completion of an offering of 3.71m shares, with the option to underwriters
to sell a further 557,620.
That would make the offering larger, in share terms, than
the group's initial public offering of 3.80m shares completed in April, at
which it raised $48.0m, net of costs.
It forecast net proceeds of $54.4m from the latest offer,
assuming underwriters exercise the opportunity to sell the extra shares.
Although that sums falls well short of the price needed to
acquire all the land in its sights, Farmland Partners said that it was to
borrow a further $30.0m from state-backed Farmer Mac Mortgage Securities, and
had extra firepower from selling partnership interests.
This scheme allows farmland owners to defer the crystallisation
of capital gains on land sales.
'Economies of scale'
Farmland Partners has announced four farm acquisitions since
its April flotation, taking its portfolio from 7,300 acres to nearly 25,000
acres, and expanding out of Midwest row crop land.
Purchases in Colorado totalling more than 15,000 acres "diversified
our crop exposure with significantly more wheat, a crop in which we previously
had only nominal exposure", besides "being potentially sizeable enough to
potentially allow us… to create economies of scale for our tenants".
Farmland Partners, rather than operating purchased farms
itself, leases them, to exploit farmland returns which have averaged 12.2%
since 1992, factoring in rents as well as appreciation, according to the National
Council of Real Estate Investment Fiduciaries (NCREIF).
"Over that time, the NCREIF Farmland Index has not posed a
negative annual return," Farmland Partners said.
In fact, NCREIF produced its latest quarterly report this
week, showing "strong" returns of 17.2% in year on year.
However, that increase disguised a slowdown in the April-to-June
period to a return of 1.73% for the quarter, comprising 0.78% appreciation and
0.95% income return – the weakest growth in three years.
Prices fell in the lake states, by 1.8% quarter on quarter,
and in the south east by 2.4%, contrasting with 1.7% appreciation in the
Pacific West, including California, an area including many farms growing the
likes of almonds and avocados, besides field crops.
Indeed, while "historically annual cropland has outperformed
permanent cropland in the second quarter, that trend has recently reversed",
Shares in Farmland Partners shed 0.4% to $13.569 in early deals in New York.