Pulse: Agricultural Land REITs Key Consideration to Grow Portfolio

Last month, the LANDTHINK Pulse posed the following question to our audience: Would you invest in an agricultural land REIT (real estate investment trust)?

Our informal online survey revealed that 61.72% of respondents are willing to invest in an agricultural land REIT, an alternative investment that has quickly taken root.  A REIT, or real estate investment trust, is a type of security that owns or finances various types of real estate with the capital provided by investors. Investors buy shares, and reap the returns generated from the properties. There are many different types of REITs that specialize in different types of property; an agricultural land REIT allows average investors to become shareholders in income-producing cropland held by a REIT.

With a rising global demand for food and a need for a steady supply of cropland, three farmland REITs emerged: Gladstone Land Corp. (LAND), Farmland Partners Inc. (FPI), and American Farmland Co. (AFCO). These publicly-traded REITs rent the farmland right back to the farmers, who is responsible for paying the property-related expenses (under a triple net lease). Although farm sector profitability is experiencing  a decline, farmland values have been holding up very well. As a general rule, farmland prices remain stable and respond slowly to fluctuations in commodity prices and Mother Nature’s whims.

The LANDTHINK audience strongly expressed their opinion on their willingness to place their money into an agricultural land REIT. The majority of our audience, 61.72% of respondents, indicated “YES”, saying that investing in an agricultural REIT was a relevant consideration. Only 38.28% answered “NO”, saying they would not consider investing in an agricultural land REIT.

Investing in farmland through a REIT offers many benefits. Agricultural REITs provide diversification, by allowing investors to buy part of multiple farms across different geographical areas, and farmland REITs typically bring impressive dividend yields. Those saying “NO”, likely think the benefits don’t outweigh the risks, and as with any type of investment, ag REITs do not come without risk. Because farmland REITs are a relatively recent development, they are prone to low trading volumes, which can mean lack of liquidity. It is imperative for would-be investors to seek the advice of an attorney and tax professional before making the decision to invest in any type of REIT.

Here are the final results:

• 61.72% said YES, they WOULD invest in an agricultural land REIT
• 38.28% said NO, they WOULD NOT invest in an agricultural land REIT

Thank you to everyone who participated and shared the Pulse with friends and connections in the land industry.

LANDTHINK is seeking a sponsor for the December LANDTHINK Pulse and months thereafter. The holiday season has arrived and people are spending more time online. There’s no better time than now for land brokerages to sponsor the Pulse question and get noticed by buyers and sellers. Pulse sponsorships are offered on a first come first serve basis and are subject to certain limitations. If your business would be interested in sponsoring next month’s December Pulse question, please contact us soon.

Do you have a suggestion for next month’s Pulse question? Submit your question here and we might choose yours!

Should states require a new boundary survey when land changes ownership? We would like to know your opinion! Click here to answer the November Pulse question.