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Summary

  • FPI is a REIT, focused on the acquisition of primary row crop farmland in North America, largely in Illinois.
  • FPI plans to raise $70.0 million in its upcoming IPO, offering 4.7 million shares at an expected price range of $14-$16 per share.
  • We recommend caution to potential FPI investors due to the experimental business model and lack of certainty the company can expand its portfolio.

Farmland Partners Inc (NYSEMKT:FPI), a REIT that owns and acquires row crop farmland in North America, plans to raise $70.0 million in its upcoming IPO.

The Westminster, Colorado-based firm will offer 4.7 million shares at an expected price range of $14-$16 per share. If the IPO can hit the midpoint of that range at $15 per share, FPI will command a market value of $102 million.

FPI filed on January 10, 2014.

Lead Underwriters: BMO Capital Markets Corp, Janney Montgomery Scott LLC, Robert W Baird & Co Incorporated

Underwriters: Mitsubishi UFJ Securities (NYSE:USA) Inc, Stephens Inc

FPI Summary

FPI is an internally managed REIT, focused on the acquisition of primary row crop farmland in North America. FPI believes that farmland for crops like corn and soybeans will provide strong returns over time between rental income and value appreciation.

The firm's initial portfolio will include 38 farms, 33 of which are located in Illinois, with a total of approximately 7300 acres. The initial portfolio will be leased to Astoria Farms, which is controlled by FPI CEO Paul A. Pittman, and Hough Farms, in which Mr. Pittman has an interest.

FPI's revenue will be principally derived from rent from tenants, who will be responsible for paying all property-related expenses.

Valuation

FPI offers the following figures in its S-11 balance sheet for the year ended December 31, 2013:

Revenue: $2,350,025.00

Net Income: $34,172.00

Total Assets: $39,668,676.00

Total Liabilities: $44,392,598.00

Stockholders' Equity: ($4,723,922.00)

Fragmented Business

Farmland ownership in the United States remains extremely fragmented. According to the USDA, some 87% of American farms were owned by families as of 2007.

FPI is among the first public firms focused on owning and acquiring US farmland.

Highly Experienced Leadership

Paul A. Pittman serves as FPI's Executive Chairman, President and CEO; since 2008, Mr. Pittman has also served as the president of American Agriculture and Pittman Hough Farms. Mr. Pittman previously served as the chief administrative officer and executive vice president of Jazz Technologies, Inc. Mr. Pittman also served as the principal accounting officer and CFO of Jazz Technologies Inc and as Partner and Head of Mergers & Acquisitions at ThinkEquity Partners LLC. He previously worked as the President, CEO and COO of HomeSphere Inc. He also spent time in senior investment banking roles at Merrill Lynch & Co and Wasserstein Perella Co.

Mr. Pittman holds a B.S. degree in Agriculture from the University of Illinois, a Masters in Public Policy from Harvard University, and a J.D. from the University of Chicago Law School.

Investors Should Be Cautious With FPI IPO

We are neutral to negative on this IPO.

FPI boasts a highly experienced leadership team, but its business model is essentially experimental. The firm will benefit from Mr. Pittman's tenancy on its initial portfolio of farmland, at least for as long as it suits Mr. Pittman, but there remain many unknowns in terms of whether the firm will be able to successfully expand and widen that portfolio.

If FPI is unable to effectively expand, it will face significant exposure to risks related to the markets for the limited crops appropriate for cultivation on its current farms.

The lack of major underwriters could also reflect investors' early caution with FPI.

Source: Farmland Partners IPO Could Be Fallow