Denver-based real estate investment trust (REIT), Farmland Partners, has made its initial investment into permanent cropland with the purchase of 125 acres of blueberry land in Michigan for $1.2 million in cash. The purchase prices averages $9,600 per acre compared to the historical average of $6,000 to $8,000 per acre that the company has paid for row cropland. This farm is expected to provide an annual rental income equal to between 8% and 10% of its purchase price, and the deal is expected to close in the third quarter of this year.

 

Since its float in April 2014, Farmland Partners has experienced rapid growth, increasing its portfolio from less than 8,000 acres to more than 70,000 today. As of June 30, the company’s portfolio consists of 121 farms totaling 71,139 acres across the states of Illinois, Nebraska, Colorado, Kansas, Arkansas, Louisiana, Mississippi, South Carolina, North Carolina, Virginia, and Michigan; producing a variety of crops including corn, wheat, soybeans, rice, sunflowers, milo, cotton, edible beans, and blueberries.

 

Although permanent cropland offers the potential for higher returns, it brings with it an elevated level of risk due to its lack of flexibility in responding to market conditions – unlike row crops that can alter sowing as market conditions dictate.

 

“Having built a 70,000-acres plus portfolio of row crop farms in 10 states, we are comfortable gradually adding higher return and higher risk specialty crop properties, which, when blended into our portfolio, should enhance returns without materially increasing volatility,” said Paul Pittman, CEO of Farmland Partners in a company release.