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Nuveen’s open-end farmland fund takes in $464m

The fund will focus on deals averaging $20m to create a portfolio of row and permanent crops with its first four investments targeting permanent cropland in California.

TIAA-affiliate Nuveen has raised $464.4 million from seven LPs for its open-end Global Farmland Fund, according to a late January filing with the Securities and Exchange Commission.

Nuveen’s Global Farmland Fund will target a net internal rate of return of 7-9 percent through a strategy focused on farmland acquisitions in the US, Australia, New Zealand, Brazil, Poland, Romania and Chile, according to a report presented to the Vermont Pension Investment Committee by consultancy NEPC.

The $4.5 billion Vermont State Retirement System made a $100 million commitment to the fund in October. Nuveen has committed $275 million to the fund, according to NEPC.

The consultancy’s report said Global Farmland Fund’s strategy will focus on deals averaging $20 million to create a portfolio balanced between row and permanent crops. It added that Nuveen’s plans call for the first four investments from the vehicle to focus on permanent cropland in California.

A large component of Nuveen’s existing permanent crop portfolio in California is devoted to almond ranches, according to the Fall 2019 edition of a newsletter published by Westchester Group Investment Management, which manages Nuveen’s farmland.

The investment rationale for almonds, Westchester said, benefits from healthy eating trends, the diversity of uses for the crop, its long marketing window, and the reduced price volatility created by the crop’s limited perishability. Westchester also highlighted barriers to entry presented by the relatively limited supply of land with soil, climate and water supply that are suited to the crop.

CoBank predicted in December that the supply of almonds from California over the coming decade is likely to be shaped by weather and the implementation of the state’s Sustainable Groundwater Management Act.

SGMA implementation is likely to result in limitations to groundwater extraction, Westchester said in the Fall 2019 newsletter, which also described how the firm was adapting to the regulations.

One element of the strategy involves construction of groundwater recharge basins. These would receive excess surface water, which could then percolate through the soil and enable the underlying aquifers to be replenished. Construction of one such project described in the report was completed in the third quarter of 2019, in a basin next to a property in which Westchester intends to plant pistachios.

Westchester said the basin would recharge an average of 678,000 cubic meters of water annually.

“Through this investment in sustainable groundwater management, investors are able to achieve a 20-year internal rate of return of over 14 percent while also reducing long-term water risk,” said Westchester vice president Brian Hauss.

Nuveen declined to comment.