Description

Opportunity 

Farmland Partners Inc. (“FPI”) appears as an opportunity to take advantage of the disconnect between its share price and the value of its underlying farmland assets. 

US Farmland Asset Class

US farmland assets are an inflation protected, stock market uncorrelated asset class that while having shown very limited appreciation over the last 5 years (2015-2020 CAGR 1.0%), has historically provided acceptable nominal value appreciation with 1990-2020 and 2000-2020 CAGR of 5.2% and 5.5% respectively.

Farmland Partners Overview

FPI is the largest public farmland REIT in the US, with a portfolio spanning approximately 158,500 acres across 17 states. It is currently diversified across more than 100 tenant farmers who grow more than 26 major commercial crops. Approximately 70% of its farmland portfolio (by value) is used to grow primary crops, such as corn, soybeans, wheat, rice and cotton, and the remaining 30% is used to grow specialty crops, such as almonds, citrus, blueberries, vegetables and edible beans. 

FPI leases its land to independent farmers and uses the proceeds mostly to pay financial obligations on its debt and preferred stock, consistently achieving net income to common shareholders very close to parity.

Given this financial profile, FPI Value creation comes primarily from the appreciation of the land value, which is not reflected in the financial statements as the balance sheet records it at cost.