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Farmland Partners makes another US land purchase

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Farmland Partners raised further its rapid growth as an owner of US agricultural land by unveiling its second acquisition in a week, taking its portfolio to more than 23,000 acres.

The group, which listed in New York in April, said it had agreed to purchase a 640-acre farm in Nebraska growing corn and soybeans for about $1.0m, equivalent to about $1,500 an acre.

The farm will be leased back to the seller at a rate of 6.25%, consistent with the Farmland Partners model of renting out its land rather than farming it itself.

Paul Pittman, the group's chief executive, said that the deal showed the company's "ability to create value for our stockholders, while establishing long-term partnerships with successful farmers".

Mr Pittman is a former University of Illinois agriculture graduate who worked as an investment banker at Merrill Lynch and Wasserstein Perella, and for eight years in the technology sector, before returning to the farming industry in 2008.

Acquisition spree

The deal is the latest in a series of purchases in a shopping spree underwritten by the $53m raised from the group's initial public offering of shares in April at $14.00 a share.

The group days after its flotation revealed the purchase of a 3,696-acre row crop farm in Colorado for $8.75m, equivalent to about $2,370 per acre.

The land, which Farmland Partners it said would purchase backed by mortgage financing equivalent to 40-50% of the value of the deal, will be leased back to the seller at an annual rate of 4.63%.

And Farmland Partners last week agreed to pay $12.5m for 12,500 acres of corn and soybean land on the Colorado-Kansas border, which it expects to lease to the current tenants for a cash return of about 5%.

'Near-zero vacancy rate'

Wednesday's deal means that the group has more than tripled the size of its portfolio since its flotation, amid a bid to exploit the demand by farmers for rental plots.

Noting the "near-zero vacancy rate" on US farmland, the group believes that "many farm operators will continue to compete for farmland even during periods of decreased profitability due to the scarcity of farmland available to rent".

"In our experience, many farm operators will aggressively pursue rental opportunities in close proximity to their existing operations when they arise, even when the farmer anticipates lower current returns or short-term losses."

While the group, in its stockmarket prospectus, acknowledged the recent fall in US farm prices, it said it did "not expect a major long-term reduction in farmland values, and believes any reduction in land values is likely to be short-lived as global demand for food and row crops continues to outpace supply".


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