Farmland REITs?

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wije
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Farmland REITs?

Post by wije » Mon Jul 18, 2016 9:45 pm

I've seen some discussion here about timber REITs and buying farmland directly, but what about farmland REITs? The below article explains why their returns haven't been so great- the market expects lower rents and thus prices these REITs lower:
http://farmdocdaily.illinois.edu/2015/1 ... reits.html

However, there's a lot of talk about the growing global demand for food and how farmland investments could pay off in the long term. On portfoliovisualizer.com, farmland REITs were far less correlated with the market (VTI) than the REIT ETF VNQ and even timber REITs. What's unclear (to me) is their long term viability as investments and specifically whether they could capture the benefits of a higher demand for food as 1) owning farmland directly or 2) owning stock of big agribusiness like ADM which work at global scale (relevant to timber REITs as well).

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stratton
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Re: Farmland REITs?

Post by stratton » Mon Jul 18, 2016 11:52 pm

I forgot about these REITs. I remember reading about them starting up, but farmland was at record highs so any interest was academic and not for investing.

Pretty tiny in the ~$140 million range. Microcaps.

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Engineer250
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Re: Farmland REITs?

Post by Engineer250 » Tue Jul 19, 2016 10:34 am

Interesting this would get posted as I am looking into this right now.

1) Options to specifically invest in US Farmland seems pretty limited. I think there are a whopping 3 US farm-specific REITs: Gladstone Land Corp (LAND), Farmland Partners Inc (FPI), American Farmland Co. (AFCO). For comparison, if I invest in Vanguard REIT ETF I get access to 150 stocks. These 3 stocks do not a diversified portfolio make. There are some other international companies that invest in farmland in other countries, and there are certainly plenty of US stocks that invest in agricultural products: food, seeds, machinery that could diversify a bit, but then it wouldn't really be an REIT.

2) I've looked into what these 3 companies actually do, and possibilities of investing directly in farm property. I decided I both don't have the funding, but also don't know enough about setting up contracts with renting farmers to get too deep into this solo (if any savvy group of investors in here is interested in starting a farmland investment club and someone has experience with sharecropping or per acre renting to farmers let me know, haha).

3) Everything I've read about farmland implies it's pretty expensive right now, possibly overpriced. Not surprising when you think about where the housing market is nationally right now.

Those caveats in mind...

I am considering buying some stock in one of the 3 companies above. I'd keep it less than 1% of my retirement portfolio. It would be my first individual stock purchase, so incredibly risky. And I have to balance having low exposure with the $7 fee I pay to buy stocks through Vanguard and keeping that as a low percentage of my total buy. I believe it's incredibly likely farm property is overpriced right now, and none of these three companies appear to be doing fantastically, so it could all have crappy gains OR could go bankrupt and I lose my 1%. But I really like the idea of investing in US farmland, agree they aren't making more land, and that food should always roughly be in demand as world populations grow. So I think of it more as something I think should safely keep up with inflation. I'm open to being talked out of my first possible individual stock option, but that's where I'm at today. :D
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Re: Farmland REITs?

Post by Hawkeye_Saver » Tue Jul 19, 2016 11:24 am

I'm in Iowa and follow farmland pretty closely as I'm looking to buy a farm in the coming few years. Around here, and the Midwest in general, farmland (tillable) is very overpriced compared to the income it can produce based on current commodity prices. It's probably listed around double what it's worth. About 3 years of insane grain and beef prices, due to mostly to drought and a bad blizzard in the Dakotas, really screwed up land values, not to mention the low interest rates. Personally, if we're talking US farmland, it seems like a pretty bad time to buy in unless you have a very long time horizon.

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Re: Farmland REITs?

Post by psteinx » Tue Jul 19, 2016 12:00 pm

I am not a farmer, and have basically no direct knowledge of farming. However, I do live in the Midwest (suburbs of a city) and have looked into farmland (and timberland) in the past.

From what I can tell, farmland is generally priced at something like a cap ratio. i.e. If the land will produce $300/acre from rental, and the current cap ratio for similar farmland is 3%, then the land will sell for around $10K. In this respect it's not dissimilar from commercial real estate.

A real farmer may have a lot more details he/she cares about - soil quality, rainfall, etc. But for a passive investor, it basically boils down to the income the land can generate. And that in turn, appears to be based on a combination of the quality/productivity/location/etc of the land (how much yield of the prevailing crop can be expected), combined with current prices for crops, and some prevailing market sentiment and the like.

i.e. If corn prices are high (low), then Iowa farmland rental prices will be high (low). And if farmland cap ratios are low (high), then a given expected rental stream will translate into a high (low) price for the land itself.

It's possible to research land sale prices, yields, rental rates, etc, both currently and historically. Various state agricultural departments and other sources provide this (typically, for a given state).

So, you can look up prevailing cap rates, and also make some estimates of whether rental rates will likely rise below, at, or above inflation in the years ahead, and then compare farmland as an investment to other alternatives, including REITs, bonds, and even equities.

Farmland cap rates do not exist in a vacuum. I haven't looked recently, but IIRC, they were pretty low a few years ago, and I'd guess they're even lower now, given that so many income oriented investments are seeing low rates.
Last edited by psteinx on Tue Jul 19, 2016 11:55 pm, edited 1 time in total.

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Rob5TCP
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Re: Farmland REITs?

Post by Rob5TCP » Tue Jul 19, 2016 3:09 pm

An interesting article today in Seeking Alpha - author gives his reasons why he prefers farmland Reits over timber Reits.

This one is very pro FPI.
http://seekingalpha.com/article/3989550 ... s-farmland

To be "fair and balanced", from the same source an article that is not so favorable on FPI.
http://seekingalpha.com/article/3988581 ... d-partners

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Re: Farmland REITs?

Post by ralph124cf » Tue Jul 19, 2016 3:44 pm

I have also been looking for this type of investment. Looking at LAND and FPI, they seem to lease a great percentage of the farms that they operate. AFCO does own at least some of the land, but leases other farms.

I want a REIT that actually owns the land, so that I can participate in any land price increases. As everybody says, "They're not making any more of it."

Ralph

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Re: Farmland REITs?

Post by Engineer250 » Tue Jul 19, 2016 3:59 pm

ralph124cf wrote:I have also been looking for this type of investment. Looking at LAND and FPI, they seem to lease a great percentage of the farms that they operate. AFCO does own at least some of the land, but leases other farms.

I want a REIT that actually owns the land, so that I can participate in any land price increases. As everybody says, "They're not making any more of it."

Ralph


Are you sure that's the case? I think in the case of FPI, they own all the land and then lease out to someone who then rents it out to farmers. That way they are paying someone else for dealing with all the renter/rentee contractual stuff, and FPI is just the land owner. At least, that's how I understood it. This is from their IPO info on NASDAQ:

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. The leases with our related tenants will be triple-net leases with terms ranging from one to three years and pursuant to which the tenant is responsible for substantially all of the property-related expenses, including taxes, maintenance, water usage and insurance, as well as all of the additional input costs related to the farming operations on the property, such as seed, fertilizer, labor and fuel. All but two of the leases that will be in place upon completion of this offering have fixed annual rental payments and provide that 100% of the annual rent is due and payable in advance of each spring planting season. Although our leases typically do not provide that lease payments are based on the revenue generated by our farm-operator tenants, all but one of the leases that will be in place upon completion of this offering have payment terms that represent approximately 35-45% of the revenue expected to be produced by farm operations at the respective property, which we believe is typical for farm leases in the midwestern United States. In the future, we expect that the farms that we acquire will be leased to farm-operator tenants unrelated to Mr. Pittman or us pursuant to similar triple-net leases. We believe this lease structure will help insulate us from the variability of farming operations and reduce our credit-risk exposure to farm-operator tenants. However, we may be exposed to tenant credit risk and farming operation risks, particularly with respect to leases that do not require advance payment of 100% of the annual rent (such as our lease for the Crane Creek farm), leases for which the rent is based on a percentage of a tenant's farming revenues (such as our lease for the Baca farm) and leases with terms greater than one year.
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ralph124cf
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Re: Farmland REITs?

Post by ralph124cf » Tue Jul 19, 2016 8:29 pm

Interesting. This does make FPI more attractive than I thought from my initial research, but the apparent self dealing does concern me a bit.

Ralph

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Re: Farmland REITs?

Post by IowaFarmBoy » Tue Jul 19, 2016 9:07 pm

Hawkeye_Saver and Psteinex are right on the money.

I grew up on an Iowa farm and my brother recently retired from running the family farm. The ethanol boom drove crop prices up a lot during some low yield years which made land prices go crazy. Grain prices have dropped a lot now and it seems like land prices are following, at least to some degree. Land prices are somewhat irrational in that many farmers keep score by how much land they own so they will bid it up when it comes on the market. The actual rate of return is a lesser concern for them. "Where else are you going to put your money- the stock market?" Once someone gets some land paid for, it generates a lot of cash flow which can then be used to acquire more.

In the mid-60's land in our part of Iowa went for about $600/acre. By about 1972, it was up around $2000. By the late 70's it was a little over $3000/acre when Russia started buying a lot of US grain and prices were up. Then the big farm crash hit in the early 1980's and it went as low as $900/acre. Another brother picked up several parcels in the $1500-2000 range during this period and leased it to the farming brother. A couple of years ago it had gone back up to around $8-10,000/acre. It has dropped somewhat from this price but I don't think we have hit bottom.

I like farmland as an investment at the right price but I don't think we are there yet. I'm sure some of my interest in investing is sentimental, just like the farmers accumulating land. I am glad to know there are farmland REITs out there because acquiring an adequately sized parcel requires more cash than I am willing to commit to land right now. 80 acres is pretty much the smallest parcel reqularly available where I am from and that would really mess up my asset allocation.
Last edited by IowaFarmBoy on Tue Jul 19, 2016 9:25 pm, edited 1 time in total.

Engineer250
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Re: Farmland REITs?

Post by Engineer250 » Tue Jul 19, 2016 9:10 pm

ralph124cf wrote:Interesting. This does make FPI more attractive than I thought from my initial research, but the apparent self dealing does concern me a bit.

Ralph


Agree. I am trying to decide whether it's two people who are good at farm management and were just seeking a larger pool of investment to do more of what they were good at, or two guys merely trying to find a way to make more money, and have more business.
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staythecourse
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Re: Farmland REITs?

Post by staythecourse » Tue Jul 19, 2016 9:34 pm

I have ALWAYS wanted to invest in farmland. I have looked at this several years ago. At that time Farmland Partners i inquired about as they were private at the time. Interesting to see they went public so quick.

My opion after much investigating at that time and I believe the same now after reading the article is that there just is no good mousetrap. It has the same problems as many alternative investments (direct real estate, timber, oil, etc...) which are: High points of entry, illiquid, nontransparent, not diversified, etc...

If one is going to do it then best bet is just to buy farmland and start farming or renting it out to a farmer. Considering I know NOTHING about farming I forgot about the whole idea and will continue to do so.

Good luck.

p.s. If you are interested the best avenue I saw for direct farmland investing was through Ceres partners (at that time). Seemed like a hedge fund (at least by its 2/20 expenses), but had a point of entry at 250k or so and owned actual farms. Recommend doing one's DD if still interested.
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Cyclone
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Re: Farmland REITs?

Post by Cyclone » Tue Jul 19, 2016 9:50 pm

You can also invest in the stock of Alico (symbol ALCO). They own something like 121,000 acres of farmland in southwest Florida.

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Re: Farmland REITs?

Post by IowaFarmBoy » Tue Jul 19, 2016 10:03 pm

staythecourse wrote:My opion after much investigating at that time and I believe the same now after reading the article is that there just is no good mousetrap. It has the same problems as many alternative investments (direct real estate, timber, oil, etc...) which are: High points of entry, illiquid, nontransparent, not diversified, etc...


I had the same thought- one of the real challenges in this is valuing the land in the REIT. It just isn't very transparent. One of the challenges is that "normally" farmland sales close on March 1, which coincides with normal lease dates. So you could go under contract in the summer but not close till March. Appraisals generally use only closed sales so they can be lagging the market unless the appraiser chooses to adjust the comps. I saw this happen a few years back when the market was really hot.

I guess normal REITs would have a similar problem in valuing office buildings, apartments, etc. It might even be worse.

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Re: Farmland REITs?

Post by abuss368 » Tue Jul 19, 2016 10:05 pm

I forgot about this REIT sector.
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staythecourse
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Re: Farmland REITs?

Post by staythecourse » Tue Jul 19, 2016 10:42 pm

abuss368 wrote:I forgot about this REIT sector.


Not much of a sector when you are talking about 3 companies.

Good luck.
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Re: Farmland REITs?

Post by Valuethinker » Wed Jul 20, 2016 10:00 am

psteinx wrote:I am not a farmer, and have basically no direct knowledge of farming. However, I do live in the Midwest (suburbs of a city) and have looked into farmland (and timberland) in the past.

From what I can tell, farmland is generally priced at something like a cap ratio. i.e. If the land will produce $300/acre from rental, and the current cap ratio for similar farmland is 3%, then the land will sell for around $10K. In this respect it's not dissimilar from commercial real estate.

A real farmer may have a lot more details he/she cares about - soil quality, rainfall, etc. But for a passive investor, it basically boils down to the income the land can generate. And that in turn, appears to be based on a combination of the quality/productivity/location/etc of the land (how much yield of the prevailing crop can be expected), combined with current prices for crops, and some prevailing market sentiment and the like.

i.e. If corn prices are high (low), then Iowa farmland rental prices will be high (low). And if farmland cap ratios are low (high), then a given expected rental stream will translate into a high (low) price for the land itself.

It's possible to research land sale prices, yields, rental rates, etc, both currently and historically. Various state agricultural departments and other sources provide this (typically, for a given state).

So, you can look up prevailing cap rates, and also make some estimates of whether rental rates will likely rise below, at, or above inflation in the years ahead, and then compare farmland as an investment to other alternatives, including REITs, bonds, and even equities.

Farmland cap rates do not exist in a vacuum. I haven't looked recently, but IIRC, they were pretty low a few years ago, and I'd guess they're even lower now, given that so many income oriented investments are seeing low rates.


One of the returns from farm land is the actual production from it. It's a significant contribution to total returns.

Cambridge University in particularly has owned land for nearly 1000 years (literally). Some of the best arable cereal land in the UK is in Cambridgeshire and the east of England ie Cambridge and north.

I believe long term data collected on the UK farm market suggests about 1% real return. Low, but with a high degree of inflation protection. Also owning farmland here is tax favoured. There could be some serious readjustments in price post Brexit. It is not known what, if any, effects the removal of EU farm subsidies could have.

In short, farmland valuation has a lot to do with existing tariff and subsidy arrangements, and these are vulnerable to political change.

Similarly, farmland returns tend to be low and long term, and the income generated from farmland is an important part of them.

The Economist last week had a big piece about US timberlands. For various reasons, partly associated with warmer average temperatures, both the risk of wildfires (of massive proportions) and the impact of pestilence has significantly altered the risk profile of timber land. You could have a nice stand of trees, and pine bark beetle could destroy it-- and very quickly.

In short, both these investments present significant specific risks, and capital invested in these asset classes is almost by definition illiquid.

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Re: Farmland REITs?

Post by psteinx » Wed Jul 20, 2016 10:09 am

There are a number of risks to the cash flow generation of a particular plot of farmland.

Among them...

Year to year stuff, for the person actually farming it (as opposed to someone renting the land):
Crop failure
Significant change in crop pricing versus what was anticipated in the spring (can be mitigated with various financial products, but still)

Medium to longer term stuff:
Changes in subsidies and mandates (Various programs that subsidize farming more or less directly, plus indirect stuff like ethanol blend mandates)
Expansion/contraction of export markets
Changes in crop preferences (relates to the export markets)
Climate changes and/or water usage issues

All of the above relates primarily to how much cash a given piece of land can be expected to throw off to the owner/farmer. On top of that, the price paid for land, in relation to how much cash it throws off (i.e. the cap rate) can change significantly as well.

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Re: Farmland REITs?

Post by KyleAAA » Wed Jul 20, 2016 10:22 am

Inherited a farm. Don't think I'd buy at current prices as the income from leasing the land is meh. You would need well over a thousand acres to generate any sort of reasonable income. I will grant that it is an extremely effective long-term inflation hedge, though, and we get all kinds of property tax breaks.

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Re: Farmland REITs?

Post by nedsaid » Wed Jul 20, 2016 10:25 am

I owned two Timber REITs which earlier this year merged into one. The combined entity got to be a larger percentage of my portfolio than I thought prudent and I sold about 30% of my stake. Forest products was a fertile area of investment for me, particularly the Timber REITs, but the cat is out of the bag. My best guess is that Timber will produce just about market returns going forward.

As far as climate change, I am far more sanguine on this issue than the Economist magazine. Winters where I live tend to be milder than they were maybe 30-40 years ago but I don't see big differences. I notice that it is no longer called Global Warming. It seems that this current generation believes that human history starts with the date of their birth. Thank goodness that climate has changed as much of North America was at one time covered in sheets of ice. We may only be emerging from what was called the "little ice age."

At age 57, I have survived many environmental disasters that should have ended civilization. We ran out of oil in the 1970's, our topsoil all washed away, we got polluted to death years ago, world populations long ago exceeded the earth's ability to produce food or provide natural resources, our fresh water lakes turned to acid, and the polar ice caps melted back in 2013. I suppose climate change will kill us off in similar fashion if the asteroids don't get us first.

With Timberland, you want geographic diversification as there are wildfire and pest risks. Climate is a factor but it has had variations in the past and I suppose will have variations in the future. For example, Californians are realizing that much of their state is actually desert and they may be coming out of a period that was historically a bit wetter than normal. The state might be reverting to the mean with rainfall, the drought might be a return to more normal conditions.

Valuethinker's comments on farm land sound about right. I am not an expert on this area but what he rights is consistent with what I have seen from other sources. You might even say that subsidies are a very important cash crop so I agree that policy has a lot to do with all of this.
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Re: Farmland REITs?

Post by Engineer250 » Wed Jul 20, 2016 10:32 am

staythecourse wrote:p.s. If you are interested the best avenue I saw for direct farmland investing was through Ceres partners (at that time). Seemed like a hedge fund (at least by its 2/20 expenses), but had a point of entry at 250k or so and owned actual farms. Recommend doing one's DD if still interested.


Thanks another piece of the puzzle. There were some companies that will direct connect you with buying property, but most of the farms I saw were minimum of $4M or so. Even $250k is out of my reach, perhaps forever considering I'm not sure I'd want it to be too huge a chunk of my portfolio. I'll have to settle for stock in one of the companies mentioned if I decide to go through with it. I won't have the money to allocate until mid-August so may change my mind before then. Having my first individual stock be a farm REIT seems an odd choice and not necessarily something I know well.
Where the tides of fortune take us, no man can know.

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Re: Farmland REITs?

Post by staythecourse » Wed Jul 20, 2016 10:54 am

Engineer250 wrote:
staythecourse wrote:p.s. If you are interested the best avenue I saw for direct farmland investing was through Ceres partners (at that time). Seemed like a hedge fund (at least by its 2/20 expenses), but had a point of entry at 250k or so and owned actual farms. Recommend doing one's DD if still interested.


Thanks another piece of the puzzle. There were some companies that will direct connect you with buying property, but most of the farms I saw were minimum of $4M or so. Even $250k is out of my reach, perhaps forever considering I'm not sure I'd want it to be too huge a chunk of my portfolio. I'll have to settle for stock in one of the companies mentioned if I decide to go through with it. I won't have the money to allocate until mid-August so may change my mind before then. Having my first individual stock be a farm REIT seems an odd choice and not necessarily something I know well.


Not having a huge chunk of money (% wise) in one single company was the reason I did not pursue it at that time. If I did the good was I have entry into a different sector, but the bad FAR outweighs the good. The bad is: Manager risk and theft which is added to all the other negatives I wrote down previous.

Just curioius why even spend time thinking about investing at all in this sector unless you are now willing to commit 5-10% of your entire portfolio AT LEAST to whichever company you choose to invest? Even if the company goes up 500% how much are your really going to make if it is only 1% of your portfolio?

Off the topic, it reminds me of a segment in Ben Graham's book, "Intelligent Investor" when he goes into the only folks who make a ton of money in new companies are NOT investors. They are usually family members as they are usually funding at the very beginning and out of love for the family member will just stick with YEARS of losses without selling assuming they will never get their original money back. That is why I shy away from single companies. Unless you have A LOT (% wise) invested in the company who cares as it makes no difference to your long term portfolio performance.

Good luck.
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Re: Farmland REITs?

Post by Engineer250 » Wed Jul 20, 2016 12:09 pm

staythecourse wrote:
Engineer250 wrote:
staythecourse wrote:p.s. If you are interested the best avenue I saw for direct farmland investing was through Ceres partners (at that time). Seemed like a hedge fund (at least by its 2/20 expenses), but had a point of entry at 250k or so and owned actual farms. Recommend doing one's DD if still interested.


Thanks another piece of the puzzle. There were some companies that will direct connect you with buying property, but most of the farms I saw were minimum of $4M or so. Even $250k is out of my reach, perhaps forever considering I'm not sure I'd want it to be too huge a chunk of my portfolio. I'll have to settle for stock in one of the companies mentioned if I decide to go through with it. I won't have the money to allocate until mid-August so may change my mind before then. Having my first individual stock be a farm REIT seems an odd choice and not necessarily something I know well.


Not having a huge chunk of money (% wise) in one single company was the reason I did not pursue it at that time. If I did the good was I have entry into a different sector, but the bad FAR outweighs the good. The bad is: Manager risk and theft which is added to all the other negatives I wrote down previous.

Just curioius why even spend time thinking about investing at all in this sector unless you are now willing to commit 5-10% of your entire portfolio AT LEAST to whichever company you choose to invest? Even if the company goes up 500% how much are your really going to make if it is only 1% of your portfolio?

Off the topic, it reminds me of a segment in Ben Graham's book, "Intelligent Investor" when he goes into the only folks who make a ton of money in new companies are NOT investors. They are usually family members as they are usually funding at the very beginning and out of love for the family member will just stick with YEARS of losses without selling assuming they will never get their original money back. That is why I shy away from single companies. Unless you have A LOT (% wise) invested in the company who cares as it makes no difference to your long term portfolio performance.

Good luck.


Thanks that is all good stuff and very good points. I have to admit if I bought the stock it would not be with any intention of making a boat load of money or assuming it will go up. Actually, I'd predict it will stagnate or not go up as much as Total US would in the next 10 years. It's more about the emotional/primal aspect of it. Last year I took a long road trip and drove through hours and hours of crops. Also I was listening to Gone With the Wind on audiobook (Terra!). I do "own" (mortgaged) my own house, but it's a small house on a small plot of land in the suburbs. There is something really "American" about owning land, about being a part of the farming industry in some way. My grandparents were all farmers and I might have been too if I didn't get lucky with WWII changing the family's trajectory a bit. So it would be an entirely emotional decision, you know the worse kinds of ones to make :D :oops:
Where the tides of fortune take us, no man can know.

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Re: Farmland REITs?

Post by dfitz247 » Wed Jul 20, 2016 12:37 pm

I would just go with the VNQ from Vanguard.

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Re: Farmland REITs?

Post by Engineer250 » Wed Jul 20, 2016 2:10 pm

dfitz247 wrote:I would just go with the VNQ from Vanguard.


None of the four publically traded companies we are discussing that invest exclusively or near exclusively in farm properties are in the holdings for Vanguard's REIT. Vanguard's REIT also doesn't claim any percentage in the agriculture sector.
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Re: Farmland REITs?

Post by dfitz247 » Wed Jul 20, 2016 3:24 pm

Engineer250 wrote:
dfitz247 wrote:I would just go with the VNQ from Vanguard.


None of the four publically traded companies we are discussing that invest exclusively or near exclusively in farm properties are in the holdings for Vanguard's REIT. Vanguard's REIT also doesn't claim any percentage in the agriculture sector.


Correct just saying what I said for simplicity. There is a reason vanguard does not offer farmland REIT.

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Re: Farmland REITs?

Post by Engineer250 » Wed Jul 20, 2016 3:41 pm

dfitz247 wrote:
Engineer250 wrote:
dfitz247 wrote:I would just go with the VNQ from Vanguard.


None of the four publically traded companies we are discussing that invest exclusively or near exclusively in farm properties are in the holdings for Vanguard's REIT. Vanguard's REIT also doesn't claim any percentage in the agriculture sector.


Correct just saying what I said for simplicity. There is a reason vanguard does not offer farmland REIT.


I concur 4 stocks do not a broad sector index make. But your advice is sort of along the lines of someone saying "I want to invest in oil" and you suggest an index fund that invests in coal and natural gas.
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chicagoan23
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Re: Farmland REITs?

Post by chicagoan23 » Wed Dec 06, 2017 2:57 pm

Was wondering if there are any updates to this thread? Seems like the past 18 months have not been good for appreciation of farm prices. Have the yields caught up to the underlying land prices yet? Are the likes of FPI and LAND overleveraged in a rising interest rate environment? Any other thoughts? Thanks!

not4me
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Re: Farmland REITs?

Post by not4me » Thu Dec 07, 2017 2:54 pm

chicagoan23 wrote:
Wed Dec 06, 2017 2:57 pm
Was wondering if there are any updates to this thread? Seems like the past 18 months have not been good for appreciation of farm prices. Have the yields caught up to the underlying land prices yet? Are the likes of FPI and LAND overleveraged in a rising interest rate environment? Any other thoughts? Thanks!
I'm not overly surprised there haven't been any updates. I've looked into these in the past, but never 'seriously'. I did a quick check & don't think either are currently in VNQ (Vanguard REIT ETF) -- which to me was interesting because I've occasionally seen posters claim VNQ included ALL reits. I didn't think that was the case & now have confirmation.

I believe the right piece of farmland can be a good investment. I also don't think the reit structure gives you the same benefits. That is, it serves a different purpose. I looked briefly at 3 year chart for LAND, VNQ, & FPI & it seems as if that is the clear order of performance for past 3 years. Will it repeat? I don't know. LAND is run by folks who run other reits. FPI has been busy getting more property -- perhaps taking advantage of what you pointed out about farm prices. I seem to recall they have different strategies. I didn't look at their current debt loads.

I would consider them to be speculative, likely volatile investments if made at all. I'd suggest thinking through your objective before jumping in if you decide to jump. I'd be interested in thoughts as to likely benefits in near term future. I think the downside has been covered pretty well

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abuss368
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Re: Farmland REITs?

Post by abuss368 » Thu Dec 07, 2017 8:57 pm

Many years ago we used to trade individual stocks including REITs. I believe we held 20 - 25 individual REITs then across many sectors and were very familiar with a lot of the companies. We even subscribed to a REIT newsletter.

Now we simply invest in the Vanguard U.S. and International REIT Index funds. This has worked very well and we intend to stay the course.

Keep investing simple.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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