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Farmland Partners buys $197m of US land - and plans more deals

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Farmland Partners revealed it was already in talks over further US farm acquisitions even as it, with a $197m deal, unveiled its biggest purchase yet getting the company close to joining the club of owners of more than 100,000 acres.

The Denver-based land investment group said that it had purchased 22,300 acres of farmland in Illinois for $197m, in by far its biggest purchase yet, and indeed a deal that it termed "one of the largest ever".

The acquisition - which equates to a purchase price of some $8,800 per acre - takes Farmland Partners' portfolio of farms either in negotiation or already in hand to 96,725 acres.

And the group revealed that it was already in talks to increase that area further – helped by using the latest acquisition as collateral for further loans.

More acquisitions

The closing of the deal, expected in the January-to-March period of 2016, will though debt secured against the new land "provide approximately $100m of capital for additional acquisitions", Farmland Partners said.

"Many" of their proposed targets have "already been identified, and are in various stages of due diligence and negotiation".

The acquisitive strategy - which has expanded the group's portfolio from 7,323 acres at the time of its listing last year - comes at a time when some other investors are shying away from a market in which appreciation has slowed from heady annual levels which topped 20% in some parts of the Midwest two years ago.

'Temporary blip'

A further insight into market conditions is expected imminently from the round of quarterly reports from central bank researchers based in Chicago, Kansas City and St Louis.

However, Farmland Partners believes that the market downturn will prove short-lived, telling investors last month that while "value growth in US farmland may slow temporarily… we believe long term trend is strongly positive".

Separately, researchers at the University of Illinois last month said that farmland prices in Illinois "decreased modestly during the first half of 2015, and it appears that downward pressures are likely to continue into 2016".

However, comparison with rental and interest rate levels "does not suggest that farmland is currently overpriced", albeit with the potential for rental and borrowing costs to change, they said.

'Landmark transaction'

Paul Pittman, the Farmland Partners chief executive, said that the latest acquisition would be a "landmark transaction", and bring a portfolio including "some of the best farmland in Illinois", built up over decades by the seller.

Besides boosting the company's balance sheet, and offering some $6m in annual rent, the deal also highlighted the "efficiency" of the Farmland Partners business model, in allowing extra revenue without increasing significantly administration costs.

"We run a very efficient business model, with 12 employees as we are approaching 100,000 acres," Mr Pittman said.

Improved results

Separately, the group unveiled earnings of $492,465 for the July-to-September quarter, a jump from just $5,151 a year before, on revenues more than tripled to $4.17m.

On the group's preferred measure of adjusted funds from operations, its results came in at $0.11 per share for the quarter, double that a year before.

Farmland Partners shares rose 2.2% to $10.30 in morning deals in New York.

Broker Stifel Nicolaus cut by $0.50 to $12.50 its target price on the stock, but kept a "buy" rating.


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