By Neil Thapar, Food and Farmland Attorney //
If you don’t follow investment trends, you may not know that one of the hottest investment opportunities in recent years is land, specifically farmland. Many investors, weary of investing in the stock market in a post-Great Recession era, are seeking alternative, stable investment opportunities. Farmland values have historically increased at a steady rate. As an added bonus, investors can also profit from whatever agricultural activities take place on the land. The flood of investment over the last several years means that agricultural land itself is being treated more and more like a profitable financial asset, instead of a productive natural resource. In a decade where both the average value of farmland and age of farmers have hit all-time highs, increased Wall Street ownership of farmland threatens a just transition by furthering principles of profit maximization, financialization of land, and absentee ownership.
Land grabs, the controversial acquisition of large parcels of land by governments or corporations, are nothing new in the United States. Beginning with settler colonialism and the Dawes Act, continuing through the Civil Rights era, all the way through to today’s large-scale corporate and institutional investment portfolios, the United States has a long history of land grabbing, particularly from Native communities and communities of color. What is new is the increasing involvement of individual investors in these land grabs through their participation in Real Estate Investment Trusts, or REITs. Previously focused on housing tracts, apartment complexes, and shopping malls, REITs are increasingly being created to facilitate the transfer of large amounts of wealth directly into centralized farmland ownership to do one thing: make money. You may never have heard of a REIT before, but everyone interested in creating a just and equitable food system should become familiar with these troubling investment tools. Here are three reasons why.
Farmland REITs put profit over principle. As an investment tool, the primary goal of a REIT is to generate a profit for its investors. This means that all other considerations, including the needs of farmworkers, farmers, soil health, surrounding community, and watersheds are secondary to the profitability of the asset, if they are considered at all. Farmland REIT managers see themselves as participants in a global food economy, which also means that they are likely to shift cropping practices and employment practices based on global market demands instead of responding to local needs.
Farmland REITs treat land as an asset in a portfolio instead of a natural resource in an ecosystem. As terrestrial beings, we have an inherent connection to land that, through place-based ownership or stewardship, can foster the growth and expression of our highest and best selves. When that connection to the land is taken away, as it has been forcibly done to Native peoples through settler colonialism, to Black people through enslavement and Jim Crow, and to many peasant farming communities in Central America, Southeast Asia, and Africa through international trade agreements – the social, economic, and ecological consequences are devastating. REITs are legal entities that are the real-world results of an economic and legal system that not only allows, but incentivizes, the commodification of land as a financial asset. One REIT manager put it this way, “the idea for the [American Farmland] Company was based on noting that U.S. farmland property values have generally been increasing over the long term….”
Farmland REITs recreate feudal relationships between landowners and land stewards. REITs acquire land, often from active farmers, then re-lease the land back to the farmer as a tenant on short-term leases, averaging 2-3 years for row crops and 5-8 years for orchards. If you were a farmer, would you invest in equipment, soil health, or water quality and conservation if you might be evicted in a few years? The result for farmers is that they have no incentive, let alone control, to invest in sustainable practices like crop rotation, cover cropping, no-till cultivation, native hedgerows, or other long-term cultivation practices that enhance soil quality, water retention capacity, and pollinator habitat. The result for the community is the loss of healthy local food production, exploitation of local human and agricultural resources, and wealth extraction by absentee landlords.
"There’s a reason I’m a landlord and not a farmer.” - Paul Pittman, CEO, Farmland Partners, Inc.
Farmland REITS know this, and in fact, are betting on it as a profitable strategy. The CEOs of these REITs, by their own words, understand and take pride in their status as landlords. Paul Pittman, CEO or Farmland Partners, Inc., a REIT with over 150,000 acres in its portfolio, says “there’s a reason I’m a landlord and not a farmer.” One reason might be that most REITs require their tenants to pay the entire year’s rent up front, in cash, before spring planting. So, at the same time that farmers need cash to purchase inputs and hire workers and before they’ve even sown a crop, let alone sold anything, they are expected to pay the entire year’s rent. Or, as David Gladstone, CEO of Gladstone Land Corporation, a REIT with nearly 34,000 acres in its portfolio, puts it, “[Y]eah, well the farmer takes on most of the risk, obviously.”
This exploitation of land and labor that investor-based land ownership deploys is why farmland REITs are so dangerous to the future of our food system, rural economies, and the land commons. Farmland REITs are essentially betting on a formula of increasing global food demand and shrinking availability of farmland to generate profits for their primarily wealthy investors. While most REIT investors are wealthy individuals, some REITs are also publicly traded, which means that ordinary people’s investment and retirement accounts may also be invested in a farmland REIT as part of a portfolio. Many of us wouldn’t know if this was the case unless we very carefully scrutinized each investment we made - something that is very important but not very easy to do.
Farmland REITs, public and private, continue to grow. According to Pittman, “this can be a multi-billion-dollar business, and that is our goal.”
Well, we have a different goal. Tune back in next week to read the second part of this blog. We’ll focus on existing and emerging principles and legal tools for community-based land acquisition and management models around the country. From community land trusts to real estate investment cooperatives to worker-ownership, these are the mechanisms that will help us start to grab the land back.
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