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Northern California draws in private capital in post-drought recovery

AgIS Capital has bought a 952-acre property in the region for a reported $24m amid a 'very efficient' almond market and rising land values.

Northern California’s farmland markets have been attracting growing amounts of private capital since their last episode of drought, according to a source familiar with the region.

That is in no small part thanks to permanent crops. Walnut markets have held up recently, despite uncertainties stemming from trade and climatic concerns, the source said, adding that almonds continue to be an important driver of local market activity.

“From a real estate perspective, the almond industry provides a very efficient market, which is always nice. There are always investors getting in and investors getting out.”

Just this week, AgIS Capital, a separate-account-focused farmland manager headquartered in Boston, was reported to have purchased a 952-acre property in Yolo County, California for $24.2 million.

The Sacramento Business Journal reported that AgIS purchased the property, which was planted with almond orchards and walnut groves five years ago, from local land broker A&T Ranches. The property contains 750 planted acres and the remaining acres are on a slope that is too steep to plant on, according to the report.

A source told Agri Investor that land values in the area where AgIS is reported to have made its most recent purchase have risen in the years since 2016.

“There have been a lot of investors looking at buying land in the Sacramento Valley because of water. Their water situation up there is probably a little bit better than water in the San Joaquin Valley of California. At the end of the day, the crops grown is what pays the rent, so it comes down to profitability and what the return profile is.”

AgIS declined to comment.

All about almonds

Almonds account for about two-thirds of annual tree nut production in the US, with walnuts accounting for 20 percent of production, according to a USDA forecast released late last month. Production of both crops is expected to increase this year, according to the outlook, which forecast an 8 percent year-on-year rise for almonds and a 10 percent jump in walnut production.

“Downward pressure on almond-grower prices due to a larger crop may be dampened by lower-than-average beginning stocks,” wrote USDA’s Economic Research Service personnel. “At the same time, walnut grower prices will likely receive additional downward pressure from higher-than-average carryover supplies.”

Founded by former Hancock Agricultural Investment Group founder and president Jeff Conrad, AgIS wrote in May that it expects returns on row-crop farmland to remain below 8 percent for at least the next five years. In a separate piece published late last year, Conrad wrote that grape vineyards and nut orchards are examples of crops the firm regards as attractive for patient investors with moderate risk profiles seeking current income.

In August, the firm reportedly paid $35 million to purchase a 260-acre vineyard property from Constellation Brands and in 2014 made an investment of undisclosed size in California Olive Ranch on behalf of a private institutional investors.