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keu4bike
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Individual investor starting over on retirement saving way too late in life and trying not to buy any more bubbles. I write and comment to give back to the community which has helped me so much. While I don't have the stock market and trading experience of so many on this site, I do think about... More
  • Seeking Farmland REIT For My 401(K) 20 comments
    Sep 19, 2012 1:41 PM | about stocks: MOO

    I am looking for a publicly traded REIT or ETF that earns most of it's money through owning and leasing agricultural land. I want something I can put in my 401(k). Are there any such REITs and if so, where do I find them? Either Google hasn't been particularly friendly or I've been using the wrong terms.

    Generally, I get two suggesions when I ask this question. The first is an agricultural commodity fund. The second is MOO. While there is nothing wrong with either of these suggestions, neither one is what I'm looking for. I want to own a diversified portfolio of agricultural land.

    I'm looking for something where a large fraction of the income comes from relatively high-value farmland. I perfer geographic and crop diversification. I have no objection to minority positions in grazing lands and timber lands. I prefer a fund that is largely North American in nature, but I have no objection to a minority international position.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: REIT, commodities, agriculture, farmland Stocks: MOO
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Comments (20)
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  • Jchow70
    , contributor
    Comments (2) | Send Message
     
    Please let me know if you find something suitable. Jeffwartchow@gmail.com Thank you.
    8 Oct 2012, 09:21 AM Reply Like
  • keu4bike
    , contributor
    Comments (213) | Send Message
     
    Author’s reply » The only thing I have found so far is a proposed filing for Gladstone Land Corporation. I'm not impressed with the offering. I will continue to monitor it as it's the only thing out there at this time, but I don't view it as a buy right now.
    8 Oct 2012, 10:36 AM Reply Like
  • KirkWolf
    , contributor
    Comment (1) | Send Message
     
    I'm looking for the same; please update this if you find / have found any answers. Thanks...Kirk
    14 Oct 2012, 06:32 PM Reply Like
  • benfurth64
    , contributor
    Comments (14) | Send Message
     
    Check out SCZPF - Sprott Resources. They are building the largest farm in Canada. Its a private equity firm with other interests - oil and gold.
    21 Oct 2012, 04:58 PM Reply Like
  • Jeffrey Notaro
    , contributor
    Comments (9) | Send Message
     
    It still appears as though a much needed farmland REIT is some time away. I would be leery of what first comes to market as well since this will viewed on the inside as a chance for the private investors and the issuer to cash out. The best alternative for now are private limited partnerships. I know they do not offer all the advantages of a large, liquid trading REIT, but they do target the farmland asset class directly. With prices appreciating so quickly, it might be best to find a good one and jump in before it is too late.
    28 Feb 2013, 02:09 AM Reply Like
  • keu4bike
    , contributor
    Comments (213) | Send Message
     
    Author’s reply » I'm bullish on farmland as long as the world population and meat consumption increase. That said, there may be a bubble developing in the U.S. at the moment -- or at least prices are increasing faster than the value proposition at the moment.

     

    I'm starting to think about owning my own land directly -- again, not the convenience of a REIT. I can take my time, buy what I want when I want, make sure the land can support the price, and not overpay because farmland is a very long haul investment.
    28 Feb 2013, 09:29 AM Reply Like
  • Jeffrey Notaro
    , contributor
    Comments (9) | Send Message
     
    It seems very likely that emerging market's increasing incomes and urbanization in the coming years will keep the pressure upward on food prices, therefore farmland. Unfortunately, the market in the US has probably priced this in for the moment. There is still great long term value in farmland, I believe reaching out to emerging agriculture regions is where to find good prices still. I focus on the Black Sea region of Eastern Europe. My March 1st blog post compares the the two region's prices versus yield: http://bit.ly/13tue1N
    1 Mar 2013, 11:54 AM Reply Like
  • Sadiesue
    , contributor
    Comment (1) | Send Message
     
    Based on your interest in Ag REITS...Are you all accredited investors?
    3 Jul 2013, 06:09 PM Reply Like
  • FROGBERT
    , contributor
    Comments (40) | Send Message
     
    Looking for farm REITs I stumbled on this http://bit.ly/1dTwCA0 that is in the IPO process....raising 83mm
    I see no rational investment case: It's tiny, focused more on green/organic than profit and since it's the only game in town, will likely trade at a premium to rational value.
    The most interesting thing is that it indicates a farmland REIT is possible and may stimulate others to put together larger more attractive farm REITs.
    3 Mar, 10:18 AM Reply Like
  • keu4bike
    , contributor
    Comments (213) | Send Message
     
    Author’s reply » Frogbert,

     

    Don't confuse green/organic with lack of profit in farming. At least in the direct market business, organic is often lower cost, usually higher price and therefore better margin. Cost is lower because you can't use the expensive inputs -- although you can pay for it in labor (weeding) and yield. Modern techniques for organic farming are pretty well developed to avoid these issues.

     

    In addition, for a reason nobody has figured out yet, organic lettuce and greens tolerate shipping better and have a slightly longer shelf life than conventional. This is at least one commercial case where organic does well.

     

    If one runs the numbers as a grower, organic can make a lot of financial sense depending on what one is growing and what one's market is.

     

    As far as green in farming, the usual indicators beyond organic are soil conservation and fossil fuel consumption. Erosion can devalue farmland. I don't want to be holding farmland with a tenant that doesn't practice good soil conservation practices. In terms of fossil fuel consumption, it's just an expense -- and aside from using solar for irrigation, it's pretty much marketing gloss.
    4 Mar, 09:17 AM Reply Like
  • FROGBERT
    , contributor
    Comments (40) | Send Message
     
    Further looking found this recent but more seasoned farmland REIT option: http://yhoo.it/1gN7lti
    There are others http://bit.ly/1gN7ltk but LAND seems the best of the lot...still given the recent outperformance of land prices, this is a watchlist item for me..unless inflation breaks loose
    3 Mar, 11:18 AM Reply Like
  • keu4bike
    , contributor
    Comments (213) | Send Message
     
    Author’s reply » If you have LAND on your watchlist, keep an eye on the California drought and the number of farms in the hard-hit Salinas valley. For me, it's simply not well enough diversified in terms of crops or geography.
    4 Mar, 09:18 AM Reply Like
  • FROGBERT
    , contributor
    Comments (40) | Send Message
     
    CEO Gladstone [Who has lot's of skin in the game] addressed that in the CC http://seekingalpha.co...
    * "it’s weighed on a lot of people’s mind is that the drought in California Most of that drought is in the Central Valley. We have no farms in the Central Valley. So we don’t have that problem. At Watsonville, where we do have farms, They’re all okay. All the farms have wells on them. they seem to be fine"
    I'm concerned that many consider farmland prices to be in a bubble. Most references are to Iowa & Midwest grain farmland. When I compare a chart of farmland prices http://on.mktw.net/1dI... to DBA ETF, I do see a worrisome disconnect.
    These guys mostly do non-grain row crops, vegetables...even blueberries. Cap rates average 5.5% on LAND now but Gladstone says they should move up to 6 or 7%...not great but not implying a bubble, methinks.
    10 Mar, 01:07 PM Reply Like
  • keu4bike
    , contributor
    Comments (213) | Send Message
     
    Author’s reply » Frogbert.

     

    While I did live in Monterey County for about 15 months, I really know the midwest corn/beans and Wisconsin corn/hay/dairy better than I do berries. In a lot of ways, I am more comfortable with corn because I know it better.

     

    As of nine Spring 2013 when I last researched heavily, I found northern Illinois corn ground priced reasonably to the then drought-inflated corn prices which means it is very much over-priced when corn prices revert to the mean. If I buy land on a 20 or 30 year contract, I want to price the land to the average corn price I expect over that time period (actually 2/3 the average corn price plus 1/3 the average beans price) rather than the best price I expect over that time period.

     

    What was happening was very low interest rates and very high corn prices driving land values very high. I don't the corn prices as sustainable which means the land price is in a bubble.
    11 Mar, 10:48 AM Reply Like
  • Wade J
    , contributor
    Comments (95) | Send Message
     
    I added up all the acreage owned by LAND (5989 acres):
    http://bit.ly/1dNmgoF

     

    I then took their Market CAP of $88M and divided it by the acreage to calculate $14693 per acre. This seems a bit high to pay for farm land.

     

    Please respond with feedback.
    11 Mar, 04:07 PM Reply Like
  • FROGBERT
    , contributor
    Comments (40) | Send Message
     
    Take the cost of real estate as of the 12/31/13 AR, divide it by acres:
    $78,478,053/5990=$13,1... [assumes no owned office space or non-farm property]...still seems pricey, but I lack perspective to really judge this: " ..twenty-one properties are farmed for strawberries, lettuce, cabbage, radicchio, cantaloupes, watermelons, okra, peas, grape tomatoes, raspberries, cucumbers, onions, potatoes, carrots, green peas and blueberries." Far tougher to find comparisons for a mix like that than Midwest corn/Soybean acreage.
    The BV/sh is 3.51, which CEO Gladstone says is the base metric he wants to judged on...does it grow over time? He's got >$20mm bet that it does.
    This just came out on LAND: http://seekingalpha.co...
    11 Mar, 05:35 PM Reply Like
  • keu4bike
    , contributor
    Comments (213) | Send Message
     
    Author’s reply » Wade,

     

    At drought corn prices and 220+ bu/acre and 3% interest for the land, one can justify almost $12K/acre for IL farm ground. Problem is corn prices won't stay that high.

     

    The sort of crops LAND is leasing for are typically much more intensive forms of agriculture than corn which tends to be extensive. Therefore, the yield in $/acre is going to be higher. I don't think $13.1K or $14.6K/acre is out of line in terms of land valuations, particularly if they have good water rights on the CA farms.
    12 Mar, 03:22 PM Reply Like
  • FROGBERT
    , contributor
    Comments (40) | Send Message
     
    Good to have some confirmation from someone more familiar with farmland pricing than I am, Wade. If there were a healthy shift in the American diet [SAD] away from meats and grains towards the produce like LAND farms, [Fat chance], there's some real growth potential.
    13 Mar, 03:52 PM Reply Like
  • Wade J
    , contributor
    Comments (95) | Send Message
     
    Frogbert and keu4bike,

     

    Thanks for your feedback. This makes me feel a little better. I have been wanting a farmland REIT for some time. Limited resource (pro) with dividends (perhaps volatile). I will be watching this one for a pull back, hoping for a deal rather than a fair price or premium.
    14 Mar, 08:18 AM Reply Like
  • FROGBERT
    , contributor
    Comments (40) | Send Message
     
    I have a "Toe in the water" initial position <13...waiting for dips. Might not be big bargains considering the scarcity of Farm REITs, current uptrend in land values, concern over inflation, relative value versus gold.
    14 Mar, 03:22 PM Reply Like
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