Farmland investors are ‘tempted by discounts’ elsewhere – Peoples Company

President Steve Bruere says attractive post-covid-19 equity and bond prices have kept most institutional investors too busy to investigate farmland opportunities.

US farmland markets are yet to see a surge in activity following the widespread market volatility created by coronavirus, said the president of farmland management, appraisal and transaction firm Peoples Company.

On a conference call focused on covid-19’s impact on farmland markets – which attracted more than 650 participants – Steve Bruere said despite his firm’s expectation that there would be a rush into farmland, the market has been subdued.

“Some of the folks that we represent that were farmland buyers three or four weeks ago have really put the brakes on, as they’ve seen other opportunities,” Bruere said. “With equities trading at a discount and bonds trading at a discount, people are tempted to take their money and seek higher returns elsewhere.”

Although Peoples Company has not had any pending transactions fall apart as a result of covid-19, Bruere said there have been instances where investors who had been in due diligence on deals have pulled back to re-evaluate.

Other covid-19-related factors have also slowed the pace of farmland transactions, Bruere explained, including the closure of county recorder offices where deeds, titles and mortgages are filed, which delays the formal close of deals. Peoples Company was also forced to switch a planned in-person land auction in Iowa on March 20 to an online format, which might come to play a bigger role in markets when activity picks up.

“You really have to survive the short-term liquidity shortfall in the market in order to live to play again,” said Bruere. “In the short-term, people are sitting on their hands and a three or four [percent] cap rate on farmland just doesn’t look that exciting when you can buy the equity markets where they are.”

Bruere said that although Peoples Company’s family office clients have generally not been active following the events that have led to market volatility, the firm is aware of insurance companies who are viewing the aftermath of covid-19 as a good time to put money into farmland. The firm has received calls from individuals considering farmland investments for the first time, he said.

There is also anecdotal evidence that the virus could ultimately help increase the supply of land available in the market. Bruere highlighted a call his firm received last week from a landowner interested in selling land in order to pursue equities trading at discounted prices, following the market’s crash.

Bruere said he expects stimulus measures, likely to come into effect later this year, will drive inflationary concerns that could spur activity in farmland markets.

“There is money out there, you just have to figure out how to make it move,” he said. “There’s low interest rates, there’s lots of capital that is going to want to get deployed into a real asset, so we are out looking for those types of opportunities and trying to have those available to our clients as this thing rebounds later in the year. ”