Landmark Illinois Sale
Marcia Zarley Taylor DTN Executive Editor
Fri Nov 13, 2015 02:00 PM CST
(Page 1 of 2)

HADDONFIELD, N.J. (DTN) -- Farmland values may be off their peaks, but keen interest from Wall Street and other wealthy investors may keep real estate from tanking as deeply as it did in the last crash 30 years ago.

Farmland Partners' $197 million acquisition of 22,300 acres from an Illinois race car magnate shattered records this week. The 120 farms are scattered over seven counties. (DTN illustration by Nick Scalise)

Just take the buying spree of Farmland Partners Inc. (NYSE: FPI), one of the nation's first agriculture-only real estate investment trusts, or REITs. This week, it announced acquisition of 22,300 acres of Illinois farmland for a purchase price of $197 million. That makes the sale (composed of 120 farms owned by racing car magnate and businessman Gerald Forsythe and his family) the largest farmland transfer in modern Illinois history, local realtors say. Forsythe, of Wheeling, Illinois, had spent decades accumulating the properties in Edgar, Clark, Coles, Crawford, Douglas, Vermillion and Cumberland counties. He also serves as a chief shareholder and CEO of Indeck Energy Services.

The record-breaking Illinois deal is just a fraction of what the REIT intends to acquire nationwide. In a 2014 interview with DTN, Farmland Partners' CEO Paul Pittman said he expected to be running a multi-billion dollar fund in five or 10 years. "Thirty billion dollars of farmland trades hands every year. [Ag REITs] could be a very large industry," Pittman said (read full story at…).

Outside of agriculture, REITs have become a fixture of real estate investing. It's a way to bundle what can amount to trillions of dollars in apartment complexes, shopping centers or commercial real estate, and then pay public investors a share of the rents.

In this latest acquisition, Forsythe will receive $50 million in cash and the balance in a combination of stock and other ownership shares for the deal, so the properties will add enough collateral to allow Farmland Partners to acquire another $100 million of farmland properties elsewhere, the company said in a press release. Many of those properties are already in negotiation.

However, it was the scale of the Illinois deal that stunned many locals. "I don't know any sale bigger than 22,300 acres in my 42-year career," said Mac Boyd, a farm realtor based with Farmers National Co. in Arcola, Illinois. He once sold a 19,500 acre tract -- one of the two or three biggest sales in the state's history -- but he was not involved with the latest transaction.

For Boyd, it's a sign that investors may be replacing some of the fierce farmer bidding during 2010-2012's high income years.

"When farm income surged, farmers were buying most of the properties," Boyd said. "Now we're seeing investors coming back and buying a lot of this land."

Absentee owners have always held 70% to 75% of farmland ownership in his home Douglas County, he added, including retired farmers and wealthy locals. Nebraska, Illinois, Indiana and Ohio have been particularly attractive to newfound interest from pension funds, insurance companies and other institutional owners, since they lack the corporate farmland ownership bans still technically on the books in other Midwest farm states. In Iowa, where corporate ownership is prohibited, investor groups buy properties as individuals.

But with the stock market still skittish and bonds suffering from uncertain Federal Reserve policy, farmland remains an attractive option for investors of all stripes -- if they consider capital gains as well as modest cash rents.

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