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Farmland Partners buys $110m of nut orchards from Olam

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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 terms.

By area, the purchase, at 5,100 acres, will take the Farmland Partners portfolio to some 159,000 acres.

Row crops vs specialty crops

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 capital perspective".

'Sizeable portfolio'

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.

By Mike Verdin

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