Exclusive: Investor appetite for Mississippi River Delta drives $5m to LandFund fourth fund

Founder John Farris tells Agri Investor the vehicle, which targets $30m, will offer annual returns of about 11% through a value-add strategy that could include organic conversions.

Farmland fund manager LandFund Partners has raised $5.5 million for its fourth investment vehicle, according to the Tennessee-headquartered firm’s founder and president.

John Farris told Agri Investor that LandFund Partners IV has a target of $30 million and is soliciting investments from family offices, small university endowments, high-net-worth individuals and family trusts. The amount gathered by the fund thus far comprises $2.5 million from the firm’s executives and $3 million from existing investors, he said.

LandFund Partners IV will target internal rates of return of 10-12 percent, according to Farris.

As part of the value-add strategy followed by Fund IV and its predecessors, he said LandFund will look to purchase farmland properties in the Mississippi River Valley region that the firm can improve through investments in precision-leveling, irrigation systems and, in some cases, conversion to organic production.

“We have relationships with some of the largest transitional and organic rice growers in the country,” Farris said. “When and if those opportunities exist, we’ll be ready take advantage of those opportunities in this fund.”

“You can buy large, contiguous tracts in the Mississippi River Valley, where it’s hard to do that in the Midwest”
John Farris, LandFund Partners

Farris said prices for transitional rice – so-called for being produced on farms then undergoing the three-year transition to organic production – have surged to about 1.7 times that of organic rice, encouraging farmers to switch. LandFund, which manages farmland in its funds through a dedicated in-house unit,  employs an organic consultant to help determine on which farms the firm pursues such conversions.

If the $30 million vehicle eventually comes to contain as much as 10,000 acres, Farris estimated, LandFund is likely to pursue conversion for 500-1,000 acres of that land.

“While some ground is much more suitable, if we have an opportunity to have a farmer come in and pay us more rent because they want to do transitional rice on our ground, we think it’s one of the value-add opportunities we look for for our investors.”

‘Smart Money’

Founded in 2013, LandFund’s first vehicle closed on $7 million later that year.  Its second closed on $7.5 million in 2015 and the firm also runs a separately managed account for a family trust that is referred to as LandFund Partners III. The latter contains about $80 million in farmland assets, according to Farris.

The Mississippi River Delta region has been quietly attracting major investors from across the country, LandFund managing director Chris Morris told Agri Investor. GMORR, Westchester Group Investment Management and International Farming Corporation are among investors known to have been active in the regional market recently, said Morris.

Farris added that land prices and crop yields are about the same in the Mississippi River Delta region as the Midwest, a fact that means large farmers are active in market as well.

“You can see why the smart money says the Mississippi River Valley is a good place to own because the convergence in prices is bound to happen in farm values,” said Farris. “You can buy large, contiguous tracts in the Mississippi River Valley, where it’s hard to do that in the Midwest.”

While much of the farmland in the region is devoted to rice production, Farris said the increasing use of heat-resistant seeds over the past 30-40 years has led to much more sorghum, wheat, corn and soybeans being grown in the region.

“The seed companies of the world have made the row crop seeds to be more heat-resistant and so where in the past it would be really difficult, in really hot weather, to have the same yields as in the Midwest, you can have yields that are equal to the climates in the Midwest,” Farris said.