UBS: ‘We haven’t bought anything in the corn belt in 7 years’

The firm, previously known as UBS AgriVest, now has assets under management of $1.2 billion but still believes row commodity crop farmland is too expensive.

Returns are still not attractive enough for UBS Farmland Investors to invest in row crops in the US corn belt, head of global farmland real estate Jim McCandless told Agri Investor, as the firm gave an update on its assets under management.

“We haven’t bought anything in the corn belt in seven years and it still isn’t attractive to us today because it still needs to go down a bit for us; the returns still aren’t attractive enough,” McCandless said.

The firm manages three institutional separate accounts and the ongoing AgriVest Farmland Fund, which had raised $607 million at the end of June, according to an SEC filing. The commingled fund held a close last year on $555 million.

Across investment vehicles, dealflow has picked up. UBS had $48.3 million in deals waiting to close as of June, with $41.6 million in permanent cropland farms and $6.7 million in annual cropland farms. It closed on $91 million of new acquisitions in 2015, with $65.2 million going into annual cropland farms and $25.8 million in permanent cropland farms, according to McCandless.

The firm invests in commodity, vegetable and permanent crops, and has been focusing on the latter two categories in the last year.

“Each one of those segments has completely different economics. The commodity crop properties, they are not very attractive yet. There has been a decline in commodity prices but it hasn’t been fully baked into the land values [so far]. But the other two property types are totally unrelated to commodity crops. We seem to be finding some attractive transactions in those property types,” said McCandless.

“We have a pricing model that we use for farmland acquisitions based on market data that we get because all our farms are appraised every calendar quarter by independent appraisers,” said McCandless. “We …say to ourselves that if we are going to invest in this region, what kind of current return would we have? If what we have has a higher return than what is in that market, then it is not attractive to us. The corn belt fell into that category 7 years ago. It is just too expensive.”

He added that it is still difficult to find good opportunities. “If you look at the NCREIF farmland index, land values have kind of levelled off. There are some declines in the corn belt and some of the other regions, but as far as we are concerned it is still going well. We have found some good opportunities in places like Idaho and California, believe it or not; some permanent crop properties.”

The Alaska Retirement Management Board invested $494.5 million into farmland through a UBS Farmland Investor-managed fund last year. Arkansas Teachers Retirement System also lists the firm as a manager it has committed to and the Washington State Investment Board has a separate account with the firm. The firm changed its name from UBS AgriVest at the beginning of this year.