What is in this article?:
- Farmland gold: 29,000 acres sells for $108 million
- $4.5 million for vineyard
- A $108 million farmland purchase is unusual for its scale and reflects both the growing ranks of institutional investors aiming to boost their exposure to the buoyant agricultural real estate sector and a tight market in which few attractive properties are available for sale.
$4.5 million for vineyard
In June, it paid $4.5 million for an irrigated wine grape vineyard in Sonoma County, Calif. Some market observers suggest UBS AgriVest may have reduced its rent income yield threshold in order to invest its mounting pile of investment cash. Mr. McCandless didn't respond to an email inquiry.
The Wisconsin seller is Cass Realty Company LLC, an investment vehicle of Ray Eckstein, a Cassville, Wis. native who founded Marquette Transportation, a Paducah, Ky.-based tugboat operator serving the Mississippi River System and the Gulf Intracoastal Waterway.
Most of the land sale proceeds are expected to go to Eckstein philanthropic organizations. In 2007, The Ray & Kay Eckstein Charitable Trust donated $51 million toward construction of a new law school facility at Marquette University.
Mr. Eckstein was the largest private landowner in Wisconsin's Grant County. The property sold to UBS AgriVest was assembled over the last 30 years or so and includes an estimated 8,300 tillable acres spread across a patchwork of mostly 200 to 400-acre tracts, and 1.6 million bushels of grain storage.
Mr. Eckstein's decision to liquidate his portfolio surprised locals since he continued to expand his land base through July 2011. Last year, Cass Realty Company paid $5.1 million for three Grant County farms totaling 1,109 acres.
"Mr. Eckstein is in his late 80s and he felt it was time to get out of the farming business," says Bobby Miller Jr., a Paducah attorney who represents Mr. Eckstein. "[UBS AgriVest] is a very good entity to take over this farmland and to work with local farmers in the future. They will be a good citizen of Grant County."
Institutional investment in Wisconsin farmland has previously focused on cranberry marshes and vegetable and potato production tracts in the Central Sands region. More recently, investment managers have focused on southwest Wisconsin's corn producing counties for deals on the periphery of more competitive markets in Illinois, Indiana and the Mid-South. Last January, the Arkansas Teacher Retirement System paid $10.9 million or $7,098 per acre for 1,719 acres in Lafayette County.
This month, UBS AgriVest is expected to close on the purchase of 19,255 acres of mostly irrigated cropland in Texas' northern high plains. The deal is estimated at $40.5 million or $2,133 per acre.
UBS AgriVest is buying its Texas land from Wexford Capital, a Greenwich, Conn.-based hedge fund manager that is liquidating a near 49,000-acre portfolio of cropland in Nebraska, Texas, Oklahoma and Kansas. In 2009, Wexford said it aimed to "build the Wal-Mart farming operation of the world."
Now the firm says it sees more compelling investment opportunities outside agriculture. Wexford paid around $95 million for its farmland in 2007 and 2008.
If pending sales are completed, the firm appears poised to pocket $64 million in gross capital gains on its five-year land play. Market observers are watching whether other institutional investors will follow Wexford's lead and harvest their capital gains.
UBS AgriVest Farmland Fund is a seven-year-old private real estate investment trust (REIT) that invests in U.S. farmland. The fund's current portfolio is concentrated in the Mississippi Delta (Ark., Miss., and La.), California, the Mountain States (Colo., Idaho, and Ariz.) and Georgia.
Farm properties are leased to farmers who grow vegetables, corn, cotton, soybeans, strawberries, rice and apples. As of Sept. 30th, the fund held 46 properties valued at $284 million.
The fund is managed by UBS AgriVest LLC, a Hartford, Conn. unit of Swiss banking giant UBS. The fund's 27 investors are mostly pension funds ranging from the Sonoma County Employees Retirement Association and the Orange County Employees Retirement System in California and retirees of the Town of Manchester, Conn., to the Anchorage Police & Fire Retirement System and the Army and Air Force Exchange Service.
The fund has generated a net annual average total return of 10.3% since its June 2006 launch. That lags the 13.4% annual return of the NCREIF Farmland Index, a gross return (before management fees) benchmark of all U.S. farm properties owned by pension funds. Still, the UBS AgriVest fund's performance is more than double the stock market's 4.6% return over the same period, as measured by the S&P 500 Index.
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