Farmland's Elephant Hunter
Marcia Zarley Taylor DTN Executive Editor
Mon Nov 23, 2015 10:55 AM CST
(Page 1 of 2)

HADDONFIELD, N.J. (DTN) -- Farmland Partners CEO Paul Pittman admits his firm's purchase of 120 Illinois farms last week is "a very, very big deal," probably one of the largest single Grain Belt purchases in history. But while this mega-landlord expects the agriculture real estate investment trust he founded in 2014 to become a multi-billion dollar player one day, elephant hunting for farm real estate isn't easy to replicate.

Cash rents of $350 aren't hard to get in Illinois despite pressure on growers to economize, said Farmland Partners CEO Paul Pittman. (DTN photo by Pam Smith)

"We think we can keep growing very substantially, and target doubling in acreage and value every year," Pittman told DTN in a wide-ranging phone interview from his Denver office. At the moment, his latest 22,300-acre shopping spree brings Farmland Partners' portfolio close to 100,000 acres, up from only 7,500 acres in April 2014. (See DTN's related story at…)

"I can't keep growing 10-fold per year forever," he admitted.

For one thing, institutional buyers like REITs -- along with pension funds, insurance companies and wealth management firms -- can't often find their preferred minimum-sized deals of $20 million, let alone the $197 million Pittman packaged to buy farms from Illinois businessman Gerald Forsythe. Last year, Pittman told DTN he scoured the country assembling smaller sales, even bidding at auctions that professionals normally shun for fear of overpaying.


Pittman's preferred operating method is to have landowners privately contact Farmland Partners (NYSE: FPI) and offer a three-year sale leaseback. The owner has the benefit of turning an asset into something more liquid, yet temporarily retaining the right to farm it. That can appeal to those nearing retirement and those growers who are overextended and need to get their balance sheet back in order.

Critics contend institutional investors are often fair-weather landlords, buying on up-cycles and dumping agricultural portfolios when commodity prices reverse. That lack of patience can be a risk in areas where they are concentrating: Near the Nebraska-Kansas border, for example, at least five institutional owners compete in the same neighborhood. Land markets in parts of the Mississippi Delta and Texas have also become hotbeds of such ownership.

Pittman downplays that risk, saying his firm doesn't intend to "flip" farmland properties, instead adopting the patience and 50-year horizons that insurance companies like John Hancock, Metropolitan Life and even the Mormon Church integrate into their investment strategies.

Because of public concern over absentee ownership, states like Iowa, Kansas, Missouri, Wisconsin and others still outlaw institutional ownership of farmland. But advocates like Pittman argue ag REITs are in the public interest by making millionaire-priced assets affordable for small investors.

"No individual can afford to buy a New York skyscraper, but they can get exposure to that asset class by buying a REIT," Pittman said. With a modest, 80-acre farmland parcel now commanding $1 million and up in the Midwest, Pittman believes small investors will find REITs a better fit than direct ownership. Half of his REIT's investors are retail customers who buy shares through brokers to diversify their investments or retirement accounts, he said.


The Farmland Partners' CEO is a down-to-earth Illinois native who studied agriculture at the University of Illinois then accumulated advanced degrees at Harvard and the University of Chicago. He speaks farmer lingo, but burnished his Wall Street credentials with stints as a senior investment banker for Merrill Lynch in London and a series of software firms.

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