Farmland Partners: growing pains

Farmland Partners, a US-based real estate investment trust, listed on the New York Stock Exchange in April after raising $49.5m. The REIT  is now back in the market for a further $44m earlier this month. Here, Luca Fabbri, chief financial officer, secretary and treasurer tells Agri Investor about the journey.

What were the reasons for going public in April 2014?

The idea of a farmland investment firm trading on the public market was a joint proposal between myself and our now chief executive officer, Paul Pittman. As early as 2003 we were discussing the possibility of there being a public investment vehicle for farmland, in which the ‘average joe’ investor could buy shares. At that time the markets were doing well, and the idea didn’t take off. It wasn’t the sort of opportunity investors were looking for.

We had been operating for about a decade and half, as an integrated farming operations and farmland investment firm until last year, when we began splitting the business into separate entities. We took the farmland investment business public in April this year but the farming operations business has remained private.

For this second offering most recently, we are aiming for growth and development, and the only way to do that is to issue more shares. We deployed the capital from the IPO fairly quickly.

Who are your investors?

At the early stage of the business we only had two investors. Paul, who owned 75 percent of the integrated business and a Nebraskan family office who owned the remaining 25 percent. Today, Paul remains our largest shareholder in the farmland business, and he recently increased his exposure by buying shares on the open market. The Nebraskan family office didn’t exit at the IPO stage, they continue to have holdings in the business.

Investor identity in the IPO was concealed, but as far as we know we had a very small institutional contingent which expanded in the recently announced offering. We also had a mix of family offices and smaller hedge funds. We are relatively small in size with a small market cap of $121 million, which isn’t attractive to institutions. As far as we know, there were no large institutions.

How has the share price performed?

Our stock price has shown the volatility typically associated with new microcap issuers. After the announcement of our follow-on offering we closed as high as $13.63, however on the day we priced the offering, speculation drove the price down leading to an offering at $12.50. [The firm’s share price at IPO was $14]. Our asset class should be viewed as a long term investment. We think that we have proved our ability to deploy capital quickly and will grow out of this stock price volatility problem. Eventually the valuation of our shares will have to be more in line with the valuation of our portfolio.

How has the agri investment climate changed recently?

The climate right now is completely different. Everyone wants to at least hear the story. There is still a lot of education that needs to be done. The spheres of public and private investment differ greatly when it comes to knowledge of farmland investment. Private investors in recent years have become very knowledgeable. In the public sphere, there is little knowledge of the asset class.

On the retail side, from what we found during the IPO, there was a lot of interest in the Mid-West and the US generally. A lot of the investors we had contact with had some connection to agriculture already, through their family or otherwise, so they were interested for that reason.

What is your strategy for acquiring farmland?

We are currently focusing on three states: Nebraska, Illinois and Colorado and we have a 1,250-acre farm in Arkansas. We expect to expand our portfolio to cover all of the US in the future. The farmers we lease to focus mainly on primary commodity crops such as corn, soybeans and wheat, but we are also looking to invest in farmland used to produce vegetables and other specialty annual crops, as well as permanent crops such as fruits and nuts.