Timber and agribusiness pushes MetLife ag lending to record 2018

Lowered feed costs have helped create the highest level of investor interest in livestock in a decade, says head of agricultural finance group Barry Bogseth.

MetLife Investment Management set an annual record with the $5 billion in agricultural credit it extended last year, bringing its total exposure to the asset class to $17.9 billion.

The loans offered in 2018 constituted a 72.4 percent increase in agricultural lending over 2017, according to MetLife, which describes itself as the largest ag mortgage lender not sponsored by the US government.

Despite headwinds in the agricultural economy, MetLife managing director and head of its agricultural finance group Barry Bogseth told Agri Investor the firm has been pleased by the resilience of farmland values, which he said reflect the long-term value of underlying assets.

As the broader US economy has continued to expand, Bogseth said, MetLife has found as much opportunity in agribusiness as it has in its traditional focus areas of farm and ranch mortgage loans. MetLife’s agribusiness loans typically range between $5 million and $250 million, with floating or fixed interest rates and terms of up to 30 years.

Key transactions included a $75 million variable rate term loan to El Maximo Ranch, a 38,458 acre diversified farming operation in Florida; a $125 million revolving line of credit to timber manager BTG Pactual secured by 165,000 acres of US timberland; and a $85 million variable rate term loan to FirstFruits HoldCo, an entity formed after the C$193.9 billion Ontario Teachers’ Pension Plan purchased Washington-State apple orchard Broetje Orchards.

Last year, Bogseth said, much of MetLife’s agribusiness lending focused on cold storage and included a $228 million senior secured fixed rate loan on a 10-year term to Every Bear Investment, a subsidiary of commercial real estate REIT iStar focused on the subsector.

MetLife expanded into timber in 2017 and typically offers loans of $10 million and larger on terms of up to 30 years to support acquisition of production timberland and manufacturing facilities for wood and forest products. Last year, according to Bogseth, the presence of excess timber inventories in the US South-East increased profit margins and led to a significant expansion of processing capacity in the region, which MetLife has extended credit to support.

“We view that as, like timber itself, a long-term asset play,” said Bogseth. “That’s why we’ve expanded into the US South-East. The continued growth of the inventory, we feel, is going to sustain that additional expansion of processing over a longer period of time.”

Family offices, sovereign wealth funds and pension funds have all been active, according to Bogseth, in creating vehicles to make equity investments into sub-sectors that have typically received institutional support, such as almonds and pistachios in California and apples in the Pacific North-West.

Livestock funds

One recent change, according to Bogseth, is growing investor interest in livestock funds that offer exposure across the markets for poultry, beef and pork. A potential driver of the increased interest could be growing fears of Asian Swine Flu in China that raise the possibility of a spike in export demand. Row crop commodity prices, Bogseth said, are also playing a role in bringing new investors into the livestock market.

“As feed costs are coming down, it’s creating opportunities within the livestock sector for anybody to expand,” said Bogseth. “Whatever the outlook is for profitability margin improvement within livestock, I would expect that would be what would be driving what seems to be a little bit more of an interest in the livestock sector than what I’ve seen over the last decade.”

Another important initiative for MetLife has been the expansion of its agricultural lending into Latin America, where Bogseth said large family operations have been expanding existing permanent planting operations in countries including Peru, Uruguay and Mexico.