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Michael Fritz is the Editor and Publisher of Farmland Investor Letter, a Monona, Wis.-based investment letter that tracks changes in farmland values and lease rates, trends in rental agreements, analysis of buyer and seller demand, and the impact of government farm programs on crop returns and... More
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  • Is Money Manager TIAA-CREF Behind A Proposal To Repeal Wisconsin Limits On Land Ownership By Foreigners? 0 comments
    Apr 18, 2013 11:42 AM

    Ever since Wisconsin Gov. Scott Walker proposed in February to loosen state restrictions on land purchases by foreigners, media reports have speculated on the driver behind the change.

    The rule change concerns a provision in Chapter 710 of Wisconsin Statutes that bans foreign corporations and foreign individuals who are not U.S. residents, from buying or owning more than 640 acres of Wisconsin land. Gov. Walker's proposal would change that to allow such "nonresident aliens" to own land and do away with the acreage cap.

    Patrick Hughes, a policy advisor in the governor's office, says the proposal was sparked by a request from the Croatian Embassy in Washington "on behalf of companies in Croatia" to clarify what laws govern the buying and selling of Wisconsin land.

    The Wisconsin Realtors Association also passed along concerns over the limits to the governor and other legislators. The group says it was made aware of the state land ownership limits by an attorney at a round-table meeting in Milwaukee. But media reports have continued to suggest other corporate interests are behind the proposal to remove Wisconsin's foreign land ownership restrictions.

    One U.S. firm that would benefit from the change is New York money manager TIAA-CREF, which has quickly risen to become the biggest private investor in cropland after the Mormon Church. The financial services giant manages some $3.5 billion in farmland, encompassing more than 600 properties totaling more than one million acres in the U.S., Australia, South America and Eastern Europe. TIAA-CREF is already a sizable landowner in Wisconsin. Since 2009, the firm has invested at least $21.2 million to purchase 3,562 acres of cranberry bogs and row crop land in Adams, Portage and Price Counties.

    Last May, TIAA-CREF and several institutional investors created a new company called TIAA-CREF Global Agriculture LLC, and committed $2 billion for cropland investments in the U.S., Australia and Brazil. The venture's co-owners include Sweden's second national pension fund Andra AP-Fonden (AP2), and Canadian money managers Caisse de dépôt et placement du Québec and British Columbia Investment Management Corporation of Vancouver. As of year-end 2012, we estimate Global Agriculture has invested around $810 million of its $2 billion in committed capital.

    AP2, of Gothenburg, Sweden, has committed $400 million to Global Agriculture and holds a 23% stake in the company. Caisse, based in Montreal, manages public and private pension and insurance funds in Québec, and will invest $250 million in Global Agriculture, giving it an estimated 14% stake in the venture.

    The current restriction on Wisconsin land ownership by foreigners applies to corporations having 20% or more of their stock owned by foreign corporations or foreign nationals who don't live in the U.S. Irrespective of British Columbia Investment Management Corp., foreign shareholders own more than 37% of TIAA-CREF Global Agriculture. Thus, the company's ownership structure appears to restrict it from owning Wisconsin farmland. A company spokesperson confirms that Global Agriculture currently owns no land in Wisconsin.

    TIAA-CREF was among a short list of institutions invited to bid on last November's $67.5 million sale of 9,754 acres of cropland in southwest Wisconsin by businessman Ray Eckstein. The unusually large sale was of the scale and quality that would normally be attractive to TIAA-CREF Global Agriculture, especially given the limited supply of investment quality land for sale. But Global Agriculture passed on the deal.

    The investment company aggressively pursues large farmland tracts that come to market. This month, TIAA-CREF Global Agriculture received Australian government approval to buy 17,474 acres of cropland and water entitlements in northern New South Wales and Queensland, Australia from PrimeAg Australia Ltd., a Toowoomba, Queensland-based farming company that is liquidating its holdings. The deal-valued at up to $134 million-also includes an option for Global Agriculture to purchase either of PrimeAg's 8,440-acre "Lower Box" Queensland property, or its 10,856-acre "Warra" holding in northern New South Wales before April 30. Last July, Global Agriculture acquired 19,593 acres from PrimeAg spread across six dryland and irrigated properties in Queensland and northern New South Wales for $35.7 million.

    It may simply be coincidence that the proposal to abolish restrictions on foreign ownership of land has found its way into Gov. Walker's budget just three months after the Eckstein sale. A spokeswoman for TIAA-CREF declined to comment on whether the company raised the issue with state officials. Mr. Hughes, the governor's policy advisor, says he has not spoken to TIAA-CREF on the issue, but couldn't say whether the money manager weighed in with other members of the governor's office.

    TIAA-CREF already has a relationship with the state. Last fall, it took over management of Wisconsin's $2.7 billion EdVest college savings program from Wells Fargo. ■

    © 2013 Farmland Investor Letter All rights reserved.

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