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"Farm REIT Farmland Partners files for a $86 million IPO"
Perhaps, my reit fund will invest in this. For me as a direct investment, I don't think so.
Many years ago, dating back to my great-grand father, my family voted to start selling some of our farmed land off piece meal. Through the years the family went from havesting cash crops from the soil to harvesting cash dividends form stocks. One family member who chose to keep some of the land recently gifted some of it to his church because he was tired of paying high taxes on his land. In this way he got a tax deduction for his contribution to the church ... and, well the government will now have to go tax someone else as chruchs usually don't have to pay property taxes on their land holdings. And, since this property sits next to his church I believe they plan to use it to expand their cemetery with part of it and perhaps sell some of it off with proceeds to the church's investment account.
He also told me, since his cost basis was so low and the land had good appreciation he felt his best course was to gift it to the church and then let the church sell the part they did not plan to use. Again, with this, he got credit for the land's appraised value as a contribution on his giving to the church while they received an asset that could be used to expand their cemetery and the rest might be sold.
Said he was telling me this as it might be something I might consider doing with the land my mother took and gifted to me. And, the high taxation on this land has me considerding doing as he has done as my cost basis is also very low and the land has now appreciated and has a high tax value placed on it by our local government. Seems the church is wanting to expand its facilities on the other side of the main church form where the cemetery sits. This is where my land lays.
Be careful of how much land you choose to own. When the economy slowed both my local city and county governments raised property taxes to balance their budgets as sales tax revenues declined. My property tax bill increased by more than 50% (as land had been developed around us) and I have heard of some that doubled. Needless to say many land owners are now rethinking owning excess land as a long term investment because of its higher taxation. I know I am. I also know of some land owners that have had their land listed for sale at its assesed taxed value for several years, with no offers. And, with this appealed their tax assesments with no avail. Phillip Morris closed its plant in the county and moved the operations back to Richmond a few years back as the result of a tax dispute with the city & county governments; and, with this many in the community became unemployeed. And, even today as I write the plant sits vaccant. The local papers have reported that Bruton Smith, the principal of Charlotte Motor Speedway (which lays in Concord, Cabarrus County, NC) has had many a run ends with both the city and county governments about taxation and land improvements ... and, he has said he was thinking of relocating speedway operations to another neighboring state unless a compromise could be reached. Thought he had a deal ... but, the city renigged on the mayor's letter telling Bruton what they'd be willing to do ... and, with this he took them to court (Cabarrus County) and lost . I believe this ruling is under appeal; but, I look for Bruton to move on at a time of his choosing just as Phillip Morris did.
If Phillip Morris & Burton Smith can't lick these boys why do I think I can as a small land owner! Hello, Church ... I just now decided what I am going to do. It's yours.
Seems to me our government(s) is/are getting too greedy for the community's own good.
Farmland is now selling for $10,000/acre in mid-northern Indiana, where I grew up. Cash rent ranges from $250 to perhaps $400/acre (My bro pays me less, but we bought the land at about $3300/a, so it's ok) Property taxes take about 10% of what he pays me. That's not a great return at current prices, and it is partially dependent on the corn for bio-fuel mandate, so I suggest close perusal of any prospectus. The weather only wipes out the farmers who rent the land from the owner, but enough dry years may make the farmers refuse high cash rents. It might be risky relying on the gov't. to continue farm subsidies to corporate landowners, if that's part of the underpinning of the return on investment. They aren't making more land, of course, but these prices seem to me to have exceeded the Bigger Fool threshhold. The link supplied had scant information. If there is a REIT buying land where the Chinese are investing in farmland (Africa, I think), it may make money, and I presume it would be risky unless (or even if) one had sovereign interests supporting the investment. I buy things I don't understand all too often, but this idea seems a few years too late and very dependent on long term low interest rates. Given the typical response of the market to my assessments, it's probably going to turn out to have been a screaming buy, but not for me.
I would have to look at it. Gladstone Land, which is a farmland triple-net REIT, is interesting but not without issues. Adeoagro (AGRO) has dropped huge since it IPO'd and there's probably value there but political issues, too.
I do agree that buying farmland now is not buying at the bottom, but it's something that I would not mind sitting on to at least a little degree for years either way.
I do own Glencore, which owns or leases hundreds of thousands of acres of foreign farmland. However, certainly not a pure play on it by any means.
What interests me right now is "ag infrastructure" - transit, storage, etc. There are only a few public plays on that. It is not something that I would recommend as it has risks (and there are no ADR shares), but I keep buying Graincorp and would continue to buy it if it goes lower. Graincorp owns silos, rail and port/loading, as well as malt facilities and edible oil/oilseed facilities and storage.
I owned the Andersons (ANDE) in the US when it was $38 and sold in the $50's. Look at that now (although that's volatile as heck.) The Andersons is an Ohio company that owns retail facilities, ethanol processing, rail and silos.
Not saying I think Graincorp will do the same, but I do think it's undervalued and am willing to sit on it for years. In the meantime, pays around a 4.5% dividend.
Archer Daniels Midland (ADM) has finally started to get going, as well, although I'm more interested in Graincorp. Archer Daniels tried to buy Graincorp, but it was denied by the Australian govt late last year.
But, back to the question at hand, I'll definitely take a look but probably wouldn't be something I'd back up the truck for or anything.
Old_Skeet, STB65 and Scott...thanks for your helpful comments. While farmland sounds like an attractive alternate category on paper, your views highlight some important cautionary factors, in terms of the relatively high prices of farmland, potential for costs/taxes to increase etc. I will watch and read about this REIT carefully but limit myself to just that; too many downsides to buying into this category at this time.
I farmed for many years. Farming IPOs reflect demand of simply another product to be sold, while commissions and fees are likely to eat up most profits. Farmland prices always fluctuate, now they're high, often they're low but remember when brokers were hustling gold 3 years ago at gold's peak? Farming's narrow margins, high costs, unpredictable risk- a ten minute hailstorm can destroy a whole crop thus zero income- and erratic nature are unsuitable for non-farmers to invest in, especially through middlemen.
Several brokers on Wall Street even did IPOS of horse farms 30 years ago- the ultimate lunacy- selling them during the market's peak before they plunged by 70-100%. I never heard of even one broker refunding commissions to badly burnt retail investors. Farming just isn't like Coca Cola or Wal Mart. If you're still tempted, volunteer to work for a few days on a serious farm. Farming is a hard way to make money and Wall Street isn't its friend.
Chinese have recently bought over 40 dairy farms in New Zealand, a wise move for them.
Be extra sceptical if a salesperson calls you with exciting predictions that the IPOs' hog and corn farms in Missouri can be converted into oceanfront resorts.
Very interesting. Before you pull the trigger, explore the Federal tax implications of signing away the development rights. Basically, you take a tax credit on the difference between the assessed value in a developed vs. undeveloped state. Last I heard was you could spread the tax break over 5 years. Please check to see what alternative this might provide. I read of one woman that bought up the lots across from her new house and signed over their developments rights. I have an old battle axe of a friend that signed over the rights to her family 90 acre farm to a conservation trust. She still owns it but it can't be developed beyond what it is as a family farm.
Around here, mid-Michigan, that is also the nut with big family farms - taxes. Parents die and the kids can't pay the taxes and have to sell some, if not all off. The other issue is that for most farmers, their land is their retirement and they want to sell it to a developer for the big dollar, while those folks that just moved to the country, either in a small sub or a 5-10 lot across the road, want it to stay a farm. Cripes, on Martha's Vineyard they have a excise tax on all real estate transactions that goes into an historical preservation trust that actually did buy the last working dairy farm. They have a development rights trust on Old Mission peninsula near Traverse City to save the old orchards.
Comments
Many years ago, dating back to my great-grand father, my family voted to start selling some of our farmed land off piece meal. Through the years the family went from havesting cash crops from the soil to harvesting cash dividends form stocks. One family member who chose to keep some of the land recently gifted some of it to his church because he was tired of paying high taxes on his land. In this way he got a tax deduction for his contribution to the church ... and, well the government will now have to go tax someone else as chruchs usually don't have to pay property taxes on their land holdings. And, since this property sits next to his church I believe they plan to use it to expand their cemetery with part of it and perhaps sell some of it off with proceeds to the church's investment account.
He also told me, since his cost basis was so low and the land had good appreciation he felt his best course was to gift it to the church and then let the church sell the part they did not plan to use. Again, with this, he got credit for the land's appraised value as a contribution on his giving to the church while they received an asset that could be used to expand their cemetery and the rest might be sold.
Said he was telling me this as it might be something I might consider doing with the land my mother took and gifted to me. And, the high taxation on this land has me considerding doing as he has done as my cost basis is also very low and the land has now appreciated and has a high tax value placed on it by our local government. Seems the church is wanting to expand its facilities on the other side of the main church form where the cemetery sits. This is where my land lays.
Be careful of how much land you choose to own. When the economy slowed both my local city and county governments raised property taxes to balance their budgets as sales tax revenues declined. My property tax bill increased by more than 50% (as land had been developed around us) and I have heard of some that doubled. Needless to say many land owners are now rethinking owning excess land as a long term investment because of its higher taxation. I know I am. I also know of some land owners that have had their land listed for sale at its assesed taxed value for several years, with no offers. And, with this appealed their tax assesments with no avail. Phillip Morris closed its plant in the county and moved the operations back to Richmond a few years back as the result of a tax dispute with the city & county governments; and, with this many in the community became unemployeed. And, even today as I write the plant sits vaccant. The local papers have reported that Bruton Smith, the principal of Charlotte Motor Speedway (which lays in Concord, Cabarrus County, NC) has had many a run ends with both the city and county governments about taxation and land improvements ... and, he has said he was thinking of relocating speedway operations to another neighboring state unless a compromise could be reached. Thought he had a deal ... but, the city renigged on the mayor's letter telling Bruton what they'd be willing to do ... and, with this he took them to court (Cabarrus County) and lost . I believe this ruling is under appeal; but, I look for Bruton to move on at a time of his choosing just as Phillip Morris did.
If Phillip Morris & Burton Smith can't lick these boys why do I think I can as a small land owner! Hello, Church ... I just now decided what I am going to do. It's yours.
Seems to me our government(s) is/are getting too greedy for the community's own good.
Old_Skeet
They aren't making more land, of course, but these prices seem to me to have exceeded the Bigger Fool threshhold. The link supplied had scant information.
If there is a REIT buying land where the Chinese are investing in farmland (Africa, I think), it may make money, and I presume it would be risky unless (or even if) one had sovereign interests supporting the investment.
I buy things I don't understand all too often, but this idea seems a few years too late and very dependent on long term low interest rates.
Given the typical response of the market to my assessments, it's probably going to turn out to have been a screaming buy, but not for me.
I do agree that buying farmland now is not buying at the bottom, but it's something that I would not mind sitting on to at least a little degree for years either way.
I do own Glencore, which owns or leases hundreds of thousands of acres of foreign farmland. However, certainly not a pure play on it by any means.
What interests me right now is "ag infrastructure" - transit, storage, etc. There are only a few public plays on that. It is not something that I would recommend as it has risks (and there are no ADR shares), but I keep buying Graincorp and would continue to buy it if it goes lower. Graincorp owns silos, rail and port/loading, as well as malt facilities and edible oil/oilseed facilities and storage.
I owned the Andersons (ANDE) in the US when it was $38 and sold in the $50's. Look at that now (although that's volatile as heck.) The Andersons is an Ohio company that owns retail facilities, ethanol processing, rail and silos.
Not saying I think Graincorp will do the same, but I do think it's undervalued and am willing to sit on it for years. In the meantime, pays around a 4.5% dividend.
Archer Daniels Midland (ADM) has finally started to get going, as well, although I'm more interested in Graincorp. Archer Daniels tried to buy Graincorp, but it was denied by the Australian govt late last year.
But, back to the question at hand, I'll definitely take a look but probably wouldn't be something I'd back up the truck for or anything.
Several brokers on Wall Street even did IPOS of horse farms 30 years ago- the ultimate lunacy- selling them during the market's peak before they plunged by 70-100%. I never heard of even one broker refunding commissions to badly burnt retail investors. Farming just isn't like Coca Cola or Wal Mart. If you're still tempted, volunteer to work for a few days on a serious farm. Farming is a hard way to make money and Wall Street isn't its friend.
Chinese have recently bought over 40 dairy farms in New Zealand, a wise move for them.
Be extra sceptical if a salesperson calls you with exciting predictions that the IPOs' hog and corn farms in Missouri can be converted into oceanfront resorts.
Howdy,
Very interesting. Before you pull the trigger, explore the Federal tax implications of signing away the development rights. Basically, you take a tax credit on the difference between the assessed value in a developed vs. undeveloped state. Last I heard was you could spread the tax break over 5 years. Please check to see what alternative this might provide. I read of one woman that bought up the lots across from her new house and signed over their developments rights. I have an old battle axe of a friend that signed over the rights to her family 90 acre farm to a conservation trust. She still owns it but it can't be developed beyond what it is as a family farm.
Around here, mid-Michigan, that is also the nut with big family farms - taxes. Parents die and the kids can't pay the taxes and have to sell some, if not all off. The other issue is that for most farmers, their land is their retirement and they want to sell it to a developer for the big dollar, while those folks that just moved to the country, either in a small sub or a 5-10 lot across the road, want it to stay a farm. Cripes, on Martha's Vineyard they have a excise tax on all real estate transactions that goes into an historical preservation trust that actually did buy the last working dairy farm. They have a development rights trust on Old Mission peninsula near Traverse City to save the old orchards.
good luck,
rono