Farmland Partners Inc. (FPI) has announced the sale of 862 acres of farmland in White County, Arkansas, for $3.7 million. The sale yielded an approximate gain of 24% over the net book value. The land was sold to a local farmer who planned to grow cotton. In addition, FPI will retain the current solar energy option payments on the tract and a 30% interest in future revenue if the renewable energy project enters construction during the option period.
Luca Fabbri, FPI’s President and CEO said the company is “always willing to entertain strong offers for existing properties in our portfolio.” The sale will allow FPI to capture asset appreciation for its shareholders and redeploy capital. After the transaction, the company’s footprint in Arkansas totals nearly 12,000 acres. This sale is another example of FPI’s strategy to sell non-core assets, improve the quality of its portfolio, and focus on prime farmland acquisitions.
Over the past decade, the farmland real estate sector has experienced significant evolution, with several factors driving the market. One of the significant factors is global population growth, which has increased the demand for food and, in turn, the demand for farmland. In addition, the agricultural sector has also witnessed technological advancements that have improved farming efficiency, making it more productive and cost-effective. As a result, more investors have been attracted to the sector, leading to increased demand for farmland and, consequently, a rise in land prices.
However, the rise in land prices has raised concerns about farmland affordability for farmers, mainly small-scale farmers. The high prices have made it challenging for them to acquire land or expand their farming operations, making it difficult to compete with large-scale farmers. Moreover, the high prices have led to the consolidation of farmland ownership, with more large-scale farmers acquiring more land, leading to the decline of small farms. This trend has led to increased criticism of the farmland real estate sector. Some argue that it has become a speculative market, with investors purchasing land for capital gains rather than for farming purposes.
Photo by Federico Respini on Unsplash
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