thoughts?
“Our principal source of revenue will be rent from tenants that conduct farming operations on our farmland. Upon completion of this offering, substantially all of the farmland in our initial portfolio will be leased to either Astoria Farms, which is controlled by Paul A. Pittman, our Executive Chairman, President and Chief Executive Officer, or Hough Farms, in which Mr. Pittman and Jesse J. Hough, who will provide consulting services to us, have an interest.” - this, for some reason, bothers me. Maybe it’s nothing to worry about and is normal. Admittedly, though, I’m not familiar with the typical structure, and how they typically operate. I’m also not familiar with triple net leases. I’m only familiar with what type of farm leases my family and friends utilize ( crop-sharing and cash-rent). I’m not sure what states they operate in, I can tell you that rowcrop land is outrageously expensive and arguable unsustainable, particularly in Illinois (last summer, it exceeded $12,000/acre). Long-term corn yield in central Illinois is about 225 bushels per acre…
Anyway, it’s interesting nonetheless.
I watched that retailroadshow this morning.
If the price of land keeps going up, will there be a point where it’s feasible to start improving non-ag land? Is there technology for that? (Don’t know much about this type of investment, other than what I learned studying for CAIA level 1, possible smoothing due to appraisal approach).
Does anyone know how to value farmland? I’m looking at a farming company trading below BV…name is secret.
OP, I found this article using google:
http://www.dividendyieldhunter.com/stay-away-new-farm-land-reit
what do you think?
Interesting article… the author seems to have the same issue that i shared on this thread earlier:
“Also it is amazing that of the farm land owned by the REIT 36 of 38 farms will be leased to ‘related parties’. These related parties are companies owned primarily by the Chairman. (page 147 of the registration statement). What a joke!”
yikes…i didnt get deep into the doc as i was planing on doing so this weekend. this is a new thing so i was naturally interested in it. the article does bring up a lot of red flags about the whole thing. too much conflict for my taste.
Where I’m from, It’s all about soil types, long-term crop yields (bushels per acre), and expected prices for soy beans and corn. You need to consider the prices and crop yields of both because you have to rotate the crops annually to maintain “nutritient-rich” soil. I would imagine you could do some kind of DCF here, but the cash flows are going to flucuate so much with the changing of prices, weather impacts, and crop rotations. Best approach would, in my mind, probably be comparable sales on a per-acre-basis with adjustments for long-term average crop yields.