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Exclusive: Westchester makes 50,000-acre Mississippi land purchase

The TIAA affiliate has bought a portfolio from Gaylon Lawrence Jr, a Nashville-based investor with holdings that include regional banks, an air conditioning company and farmland assets estimated at 180,000 acres, sources told Agri Investor.

Westchester Group Investment Management has agreed to purchase a 50,000-acre portfolio of farmland in the Mississippi River Delta region from entities connected to investor Gaylon Lawrence Jr, according to four sources familiar with the matter.

Agri Investor understands that the TIAA affiliate has bought property in and around the city of Greenville, which is located on Mississippi’s western border with Arkansas. The portfolio is not contiguous but does comprise some large tracts containing farms growing crops that include rice, cotton, corn and soybeans, sources said.

Westchester declined to comment and Lawrence representatives had not responded to queries at the time of publication.

No source claimed direct knowledge of the deal’s size, though based on current market rates and the high quality of the farmland, the people said Westchester likely paid between $4,500 and $5,000 per acre.

“Gaylon Lawrence always loved to buy low and sell high,” said one source, who added that, to their knowledge, Lawrence hadn’t been actively looking to sell the properties. “Depending on what TIAA really needed to do, you could probably say $5,000, but that would be a high end.”

“This was a way for them to get heavily invested quickly in a region, in one fell swoop”

One source said that word of the deal began to circulate in the market at the beginning of February and that the transaction likely took a year or more to complete. Another source reported having received multiple calls about the transaction this week from farmers in the region, who were interested to hear what motivated Lawrence to sell.

“It’s a lot of money for an area where rents are $150 per acre,” the source said.

In 2016, Westchester chief executive Martin Davies compared the economics of farmland in the Delta region favorably with those of the UK, according to an online publication associated with the Oxford Farming Conference, of which Davies also serves as chairman.

“For the US Delta – the states including Mississippi, Arkansas, Tennessee and Louisiana – cotton and rice widen the rotational operations over just soya and corn. Land values of up to $6,000 per acre and rents between $150 and $200 per acre make for sound investment,” said Davies, according to the conference’s blog.

Earlier this week, LandFund Partners founder John Farris told Agri Investor how the increasing prevalence of heat-resistant seeds has supported row crop expansion in the Mississippi River Delta over recent decades, helping to make its farmland market an attractive one for institutional investors.

The slow build

Three sources familiar with the regional market told Agri Investor that the Lawrence family built its ownership position in the area gradually, starting with farmland assets purchased from Prudential in the late 1990s and continuing to buy after land prices peaked earlier this decade.

A 2016 profile of Lawrence in the Nashville Business Journal said he spent 15 years working in the farm management unit of his family’s holding company, the Lawrence Group, which the report explained continues to maintain a farming enterprise.

“The most specific number from the company is approximately 180,000 acres of cultivated land in several states, including one of Florida’s largest citrus grove operations,” the Journal noted.

Two sources believed the sale of the Mississippi portfolio to be motivated by Lawrence’s desire to add farmland holdings on the West Coast to his portfolio and that the deal was structured so that Westchester will assume control of the properties gradually, in stages ending in 2020. A fund manager active in West Coast farmland markets told Agri Investor they were not aware of Lawrence making any recent purchases in the region.

One source speculated that the deal between Westchester and Lawrence may utilize 1031 exchanges, which can limit tax exposure when one property’s sale is used to finance the purchase of another.

Southern comfort

According to its 2017 Responsible Investment in Farmland report, Westchester, a unit of Nuveen, owns 33,768 acres of farmland in Mississippi, the fourth-largest one-state holding among the 10 US States in which it owns farmland. Published annually since 2012, the Responsible Investment in Farmland reports’ regional portfolio breakdowns suggest that Westchester purchased more than 9,000 acres in Mississippi between publication of the 2014 and 2015 reports.

Westchester’s total holdings in the state stayed flat between 2016 and 2017, according to the reports.

Another source said it was no surprise that Westchester was interested in further expanding its presence in the area, given the source’s contention that the Mississippi River Delta region currently offers the best cap rates, with the lowest risk, available anywhere in North America.

“This was a way for them to get heavily invested quickly in a region, in one fell swoop,” the source said. “The Delta is fast becoming an area that the institutionals really like.”