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Farmland Partners to look offshore within 3 years

The largest farmland REIT in the US will grow to about $2bn within three years, after which it will expand into Australia and Canada, according to its chief executive.

The largest US farmland real estate investment trust, Farmland Partners, is looking to expand into low-risk countries outside the US within two to three years, according to executive chairman and president Paul Pittman.

“I think you will watch us grow past $1 billion or $2 billion in assets before we go international,” he told Agri Investor. “That is several years in the future – probably not ten, but two to three at least.”

In the meantime, the publicly listed investor will also continue to look out for further company and farmland acquisition opportunities, he added, which announced last week that it will merge with smaller REIT American Farmland Company. The deal is expected to close by early January.

AFCO went public last year, offering 6 million common shares on the New York Stock Exchange at $8.00 each. The shares finished the day trading at $6.93 per share, and roughly 76 percent (4.6 million) of the shares had changed hands. Pittman said the company eventually recognised it was too small to be profitable as a public company, and put itself up for sale.

The latest transaction is expected to increase Farmland Partners’ total revenue from $26 million to $42 million, based on present and projected income figures. It will also unite Farmland Partners’ row crop portfolio with AFCO’s specialty crop one, with the crop types representing 75 and 25 percent of the portfolio’s value respectively.

But once the firm is large enough, it will set its sights on Canada, Australia and New Zealand, and could one day even go into Chile.

“The issue is, where do the good ag regions line up with iron-clad property rights? The only places they line up are Western Europe, the UK, Canada, Australia and New Zealand,” said Pittman. “Outside of that, as a land investor, you have to be very careful.”

Europe and the UK however, are likely to be excluded.

“Farmland [there] is fundamentally priced under what I call a population density-based methodology. Ag land in so much of the UK and Europe is based on so many other uses for land in what is a reasonably crowded part of the world … the valuations don’t make sense from an agriculture perspective,” said Pittman.

He added that corporation and inheritance tax benefits associated with farmland in the UK also distorted prices. “Of course Brexit may change all of this and we could become big UK investors,” he said, should the laws and investment landscape change, but made it clear that Britain would remain off their radar for now.

Pastoral dairy in New Zealand, canola in Canada and protein and specialty crops in Australia, Pittman said, are areas Farmland Partners could eventually consider.

Pittman’s company will continue to buy new farmland as rural land prices fall in the US, and plans to spend about $500 million a year. As of June this year Farmland Partners also had $143 outstanding in credit, under a MetLife loan of which $21 million was funded in April 2016 and $15.7 million was funded in June, according to SEC filings.

Pittman is a 10 percent shareholder in Farmland Partners, as are at least two other directors, pre-merger. He added that the company is about 50 percent institutionally owned, and 50 percent held by individuals.