Developments in 2016 Texas Land Markets

Clift Land Brokers was well represented at the 27th Annual Outlook for Texas Land Markets in San Antonio in April. As usual, a lot of great information came out of this conference. One highlight was the presentation by Dr. Charles E. Gilliland,  PhD, Research Economist for Texas A & M University Real Estate Center on Texas Land Values. Click here for a copy of that presentation. 

While 2017 1st quarter land values were up statewide 1.8% over 2016 4th quarter, and while other regions showed an increase, Region 1 – TX Panhandle and South Plains Region was down 3.4% over the end of last year. There was too much good information to cover on this forum, so be sure to download Dr. Gilliland’s presentation.

Texas Land Value Trends 2016

Dallam Co Irrigated Farm Sells in Online Auction

There was a lot of excitement around the office this morning as we closed another successful online auction. We had a total of 18 registered bidders with about half of the bids coming in the last 30 minutes of the auction. Online Auctions are becoming more important in the marketing options for selling your farms and ranches.  Five of our registered bidders were from “out of the area”.  These bidders more than likely would not have attended a live auction.  Call Clift Land Auctions for more information about our online auctions. 800-299-5263.

RLI Land Markets Survey

February 14, 2017 (Chicago, Ill.)- Recreational and residential land sales accounted for 50 percent of all closed land transactions between October 2015 and September 2016 according to a newly released Land Markets Survey published by the REALTORS® Land Institute and the National Association of REALTORS® Research Department. Broken down, sales increased at the largest rate for timberland at 5 percent and residential land at 4 percent, with the northeast region of the U.S. leading the way for both types of land. In turn, land prices increased the most for timberland at 5 percent and residential land at 3 percent. During the same period, prices of agricultural irrigated land decreased by 1 percent and non-irrigated land decreased by two percent. This shift from a growth in agricultural lands to a growth in recreational and residential land is likely related to the slump in commodity prices. The survey also took a look at the types of buyers and sellers involved in the transactions. Individual/family were the major buyers and sellers of U.S. land, with the northeast U.S. accounting for the largest share of individual/family buyers (35 percent) and sellers (26 percent). The survey also predicted an average growth of 2 percent across all land types through October 2017, with a 3 percent growth expected in each sector for timber, residential, and greenfield development land. Of all properties bought or sold, mineral rights were conveyed in 68 percent of all transactions, making knowledge in mineral, oil, and property rights a hot topic for real estate professionals. READ ENTIRE PRESS RELEASE

A Positive Take On Land Values

Expect Land Equilibrium

Marcia Zarley Taylor, DTN Executive Editor

LOUISVILLE, Ky. (DTN) — U.S. agriculture could dodge the long-feared collapse in farm real estate prices this commodity cycle, contend economists, lenders and appraisers attending a Farm Foundation meeting this week. But some cautioned the bubble more likely to burst will be used farm equipment values over the next year if profit margins don’t improve.

“Land values haven’t seen near the pullback that everyone predicted,” observed Bruce Sherrick, director of the TIAA-CREF Center for Farmland Research at the University of Illinois. That moderation makes sense, he added, given that farmland investors keep a long-term perspective on value despite blips in day-to-day commodity prices.

“Land investors’ expectations of future income are more like climate, not weather,” Sherrick said. If it rains too much one season, it doesn’t mean the climate has changed, he said, any more than an abrupt correction in commodity prices necessarily undermines farmland values with a 30- to 50-year history of double-digit appreciation.

“The old saying is that economists have predicted nine of the last five recessions,” Sherrick said. “The farmland bubble has been over predicted as well.”

Randy Dickhut, a senior vice president and head of appraisals at Omaha-based Farmers National Company, agreed, describing the market as balanced. After studying recent sales in the more than two dozen states where the company operates, “what we’re seeing in farmland is an equilibrium between buyers and sellers, not a bubble,” he said.  READ ARTICLE

Texas Real Estate Attorney Hammers WOTUS Reg

LandOwner Newsletter Vol 37 Issue 9 May 12, 2016

Texas Real Estate Attorney Hammers WOTUS Reg
A court stay is the only wall standing between landowner property rights and a federal takeover of most of the nation’s land, says Judon Fambrough, an attorney with the Teal Estate Center at Texas A & M University. The result of the waters of the U.S. (WOTUS) regulation enacted by the Environmental Protection Agency (EPA) and Army Corps of Engineers (Corps) means “the Clean Water Act’s jurisdiction now extends well beyond the navigable waters of the U.S. to practically all waters if implemented,” says Fambrough.

“If implemented, it would freeze all land use in place at the time of the implementation. That means if you want to make any sort of change in the way you use your land, you will need to file for a permit with the EPA and Corps, which is estimated to take up to three years and cost $250,000 to obtain,” he explains. “If you don’t obtain a permit, you are subject to a fine of $37,500 per day until land is returned to its original use.”  READ article

Unimproved Tracts Bring $4,500+ Per Acre

FOR IMMEDIATE RELEASE March 30, 2016

Unimproved Tracts Bring Over $4,500 per Acre in Auction

In a market thought to be between $3,000 and $4,000 per acre, Clift Land Auctions’ multi parcel auction process pushed the mark higher to average over $4,500 per acre. These unimproved tracts were part of two land auctions held on Tuesday, March 29th, one in White Deer, Texas and the other in Clarendon, Texas. George Clift, ALC, owner of Clift Land Auctions and Clift Land Brokers in Amarillo, Texas said of the auctions, “We had over 120 in attendance at these auctions with active bidding, which attributed to the nice return on the tracts that were sold.  Our experience shows that the multi parcel auction process brings out what the market is on a given day, and that holds true for Tuesday’s auctions.”

To kick off the bidding, Auctioneer Todd Robertson solicited a donation to the City of Groom Ambulance Services. The highest bidder, Plains Land Bank, represented by Stephen Donnell, Senior VP donated $300.00 at the Clarendon auction and another $475.00 at the White Deer Auction to help support this organization. Capital Farm Credit of Pampa, represented by Lance Weaver, VP Relationship Manager, stepped up to match both donations for a total of $775.00. Clift Land Auctions will match the Plains Land Bank donation with another $775.00.

Clift Land Auctions has been in the land auction business for over 13 years, and has sold over 200,000 acres of farms and ranches during that time.  For more information about Clift Land Auctions, the multi-parcel land auction process, and how you can benefit from this marketing option, visit CliftLandAuctions.com or call 800-299-LAND (5263).

It Is Not About Your Equity

by Peter Martin | AgWeb.com

Like most farmers, the bulk of your net worth is likely in the equity of your ground. But you might have discovered a “land rich” net worth, even a sizeable one, doesn’t assure banks will approve a loan renewal.

Generally speaking, ag lenders are cash-flow lenders. Like you, they don’t like low commodity prices. While your net worth is important to them, they’re far more interested in a positive cash flow that allows loan payments to be made as agreed. That’s not easy today. Many of you are struggling to pencil out a breakeven, let alone a profit. And then there are loan payments. As a result, many farmers face troubled loan renewals. Don’t fall for the flawed argument that equity alone will get you through your renewal, but do tout your equity as additional support for your request. READ MORE

Wall St Investors Buying Up Farmland

Wall St Investors Buying Up Farmland

WASHINGTON – For farmers gearing up to harvest millions of acres of land this fall in the face of low commodity prices, the rows or corn, soybeans and other crops have long been viewed as key to their survival.

But increasingly those same acres are drawing the attention of Wall Street investors looking to tap into those fields for profit.

Investors have turned to farmland as part of a sweeping push into physical assets — everything from lumber, hotels and apartments to parking meters, bridges and highways.

Farmland is becoming particularly attractive as the global population increases, the middle class expands and the rate of new farmland available worldwide dwindles. All this, proponents say, bodes well for gradually higher commodity prices that will trickle down to the farm, increasing the value of the land.

“You can build new office buildings. You can build new apartment buildings, but it’s hard to create new farmland out of nothing,” said David Rodgers, senior real estate research analyst with Robert W. Baird & Co. “It’s always been attractive, but I think it has come into focus a little bit … because of how important agriculture is to not only the food base but other components of the global economy.”

The farmland real estate market is valued at $2.5 trillion, with institutional ownership likely responsible for less than 1 percent, according to Bruce Sherrick, professor of farmland economics at the University of Illinois’ TIAA-CREF Center for Farmland Research.

But that small number is poised to grow.

A study released last year by the Oakland Institute, a California think tank, estimated as much as $10 billion in institutional capital is looking to acquire farmland.

And consulting firm Greenwich Associates surveyed 100 fund executives in 2014 and found that a third of respondents said they might invest more in farmland through July of this year. It was the second most popular investment among 13 categories, behind only energy.

That comes as some farmers are already complaining about farmland prices being driven up beyond their ability to turn a profit.

Farmland values in Iowa and other Corn Belt states have soared since 2000, as strong commodity prices (until recently) have boosted the financial coffers of farmers and ranchers, giving them more money to buy land or upgrade equipment. In Iowa, land prices have risen almost 330 percent since 2000, according to Iowa State University.

The growth has captivated a number of investment groups:

  • One of the largest, TIAA-CREF, which oversees retirement assets, started investing in farmland in 2007. It has expanded its investment in the sector and now manages about 1.2 million acres topping $5.5 billion.
  • A pair of real estate investment trusts, Gladstone Land Corp. and Farmland Partners Inc., have gone public since 2013, with another, American Farmland Co., filing for an initial public offering in June.

Dozens of additional institutional investors have plowed millions of dollars more into cropland in recent years.

“It runs counter to what I think certainly has historically been a major component of America’s policy toward agriculture, which was that we were better off if the land was in the hands of the people that farmed it,” Drake University law professor Neil Hamilton said. “Creating opportunities to fund farmland ownership and creating opportunities for people to become farmers are still major parts of what we do” through government programs, he said.

Farmers have grown increasingly concerned that real estate investment trusts, pension plans and other farmland investors lack the close ties and direct knowledge of what it takes to maintain the property and implement necessary conservation measures to preserve it. They also worry their involvement has the potential to shut out local farmers by outbidding them when land goes up for sale.

In Corning, Ia., farmer Ray Gaesser said an investment group purchased a parcel of land down the road from his corn and soybean farm last year and rented it to someone living more than 100 miles away.

The renters paid more than the going rate to work the land, he said.

“It did put a young farmer out of business,” said Gaesser, who said the producer he knows no longer looks to agriculture as his primary source of income. “I think my biggest concern is they don’t care so much about the land. They care more about the investment.”

Justin Dammann, a 35-year old corn and soybean producer from Essex, Ia., said local ownership of farmland also is good for the community because it keeps more of the profits and tax revenue in the hands of local residents. He said a law restricting corporate ownership of Iowa farmland has been good for the state and its producers.

“We farm this land, and if we are profitable that money goes back into our own farms, into our own communities, into our own schools, into our own churches,” Dammann said. “If an investment company from New York comes out and buys land in Iowa and they make profits in that land, those profits go out of state and they are not realized here.”

Proponents of corporate land ownership contend the owners still need to rent the land to a local farmer who’s knowledgeable about taking care of the operation.

Their involvement also offers a path for an older farmer — the average age has increased to 58 according to the Agriculture Department — who may want to take advantage of high land prices or knows that when he retires he might not be passing the operation to another family member.

In addition, institutional investors downplay the willingness to overpay for the property, cautioning that paying more to buy the land eats into future potential profits.

“I think it’s an unfortunate and somehow easily propagated myth that the nature of the buyer impacts the price in a way that is negative to the asset,” Sherrick said. “I’ve never seen it become less efficiently operated when somebody who has more than one farm in a fund acquires more farms.”

Iowa, along with a handful of other predominately Midwestern states, have taken steps to keep corporations off the farm.

Iowa passed its law in 1975, and has since updated it to prevent corporate entities other than one established by a family farm from having more than 25 people who are shareholders or acreage topping 1,500 acres.

However, individual investors in the United States are not banned from buying land for themselves in the state.

Iowa Attorney General Tom Miller, who worked on the law when he was a lobbyist for the Iowa Farmers Union in the 1970s, defended the measure and said the state has no plans to repeal it.

“We don’t know how much corporate ownership would have been had there not been a law, but clearly there would have been some and maybe a considerable amount,” said Miller. “I think this has been a good law and has been healthy for Iowa, healthy for farmers and the farm community.”

Farmland Partners Chief Executive Paul Pittman, who grew up in a farm family and graduated from the University of Illinois with a degree in agriculture during the 1980s farm crisis, called corporate ownership restrictions in Iowa and other states “unfair” and said they remove a buyer who could help prop up land prices when they are falling.

He pointed out that land prices in Illinois, which allows corporations to buy acres and where Farmland Partners is an investor, have not fallen as much as in Iowa during the recent downturn.

“I can’t, for the life of me, figure out why somebody thinks it’s a good public policy to keep school teachers and factory workers and police officers and firemen from pooling their money and buying farmland, but if you’re a Forbes-list guy you can buy anything you want,” Pittman said.

Farmland Partners focuses on establishing long-term relationships with its tenants and plans to hold the land it buys indefinitely. Farmland went public in April 2014, owning 38 farms with 7,300 acres.

It has aggressively expanded its reach to 122 farms covering close to 72,000 acres, growing corn, soybeans, wheat and cotton — along with permanent crops such as blueberries. The real estate investment trust plans to double the size of its portfolio annually during the next few years.

“The land itself is the tortoise in the tortoise-and-hare race. It gradually continues to get more valuable,” said Pittman, who remains a part owner of a 13,000-acre corn, soybean, alfalfa and cattle farm. “Land never is, never was, never will be a get-rich-quick asset. People who think they are going to flip in and flip out of those assets and time the market, they’re going to get burned.”

Sherrick said it is becoming easier for the average person to participate in land ownership, through funds that hold farmland. The investor could soon have more options.

He said a person could choose, for example, whether they want a fund that focuses on Midwest row crops or the West Coast where farmers grow nuts, tomatoes, lettuce, berries and other fruits and vegetables.

“It’s just the beginning, and (investing in farmland) is probably going to be here for a really long time,” said Sherrick.

Contact Christopher Doering at cdoering@gannett.com or reach him at Twitter: @cdoering