Farmland Partners’ core business is purchasing high-quality farmland then leasing that land back to farmers at the highest possible rents – thus deriving returns for company investors through income revenue and asset appreciation.
But buying and renting farmland isn’t our only source of funds. We also manage farms on behalf of third-party landlords through our subsidiary Murray Wise Associates (MWA). The more than 47,000 acres managed coast to coast creates additional value for FPI shareholders through management fees and helps diversify revenue.
We recently sat down with Eric Sarff, MWA’s President, to discuss this part of the business.
Q: When some people hear “farm management,” they associate it with running a farm. But FPI’s farm management portfolio isn’t about operations. Can you explain the business?
Sarff: Farm management is where we’re acting as a fiduciary of the landowner and are responsible for overseeing the management of their asset. We typically oversee all aspects of the property, including the lease negotiations with farm tenants, accounting, rent collection, farm-level data collection, and oversight of farm fertility.
Q: Who is your typical farm management client?
Sarff: They range from institutional and high-net-worth investors to retired farmers who no longer have the time or ability to stay on top of management. We also do a lot of work for absentee owners who have inherited a family farm, and don’t want to sell, but also don’t have the experience to oversee the leasing of the property themselves.
Q: There’s been growth in FPI’s farm management business lately. How do you go about attracting new farm management clients?
Sarff: First and foremost, we make sure our clients and people in farming communities know what services we offer. A person we have direct contact with may not need farmland management, but they may know someone in the future who will. We’ve added multiple new clients recently through referrals of existing clients, which is always rewarding. We’ve also developed close relationships with wealth advisors and attorneys over the years, and those relationships have led to several referrals.
Q: In what areas of the country do you typically manage farms, and are there different challenges in different geographic locations?
Sarff: The bulk is in the Corn Belt region, but we have a successful track record of managing farms from Colorado to North Carolina, which is one thing that sets us apart from most farm management companies that are regional. The biggest challenge with a national footprint is identifying local customs and finding quality tenants. In some areas, virtually all leases are cash rent leases and in other regions they may be used to a crop share structure. We take the vetting of tenants very seriously, so when we go into a new region, we spend a considerable amount of time visiting with potential tenants. When we partner with a tenant and a client, we want it to be a long-term relationship, so we do our due diligence.
Q: Does the management business ever lead to other opportunities?
Sarff: It can be a great pipeline for other business. It’s common for clients, especially investors, to seek out additional properties to add to their portfolio. In those cases, we’ll assist on due diligence and help them acquire the farm. And with additional managed acres comes more tenants to work with. Often those tenants will have access to off-market purchasing opportunities where the farmer is seeking an investor to buy the farm and the farmer can continue to operate it. This can be a good pipeline of prospects for existing clients and investors like FPI. Occasionally a management client will need to liquidate a farm. Our sales team is nationally recognized as one of the preeminent auction and brokerage firms, so we’re able to offer those services as well.
Note: This article contains Forward Looking Statements.
