Farmland competition is getting tougher thanks to new competition from large investment firms, an investigation by Reuters found. Farmland offers two attractive benefits for the firms: There is an increased demand for global food production and investors want the reliable value appreciation of farmland.
The Reuters investigation focused on two investment firms:
Manulife Investment Management – A global wealth and asset management company based in Toronto, Canada. The firm falls under the umbrella of Manulife Financial.
Nuveen Investment Management -- An American asset manager based in Chicago, Illinois. It is a subsidiary of the financial planning firm, TIAA.
First, some background on the companies before we get into their plans. The two firms have substantial assets and they have both had some financial challenges.
Manulife IM manages $746 billion in assets, according to Pensions & Investments. Earlier this month, the company also reached a deal with CQS, a London-based credit firm, which adds $13.5 billion in assets.
RELATED: Read more about the Manulife IM and CQS acquisition in Pensions & Investments here.
Manulife also confirmed that it is in the process of cutting 2.5% of its workforce. A company spokesperson said the reductions include staff in the wealth and asset management unit across offices in the United States, Canada, Britain and Asia. This Reuters article details the job cuts.
Nuveen, which celebrated its 125th anniversary this year, lists $1.1 trillion in assets. Last October the company announced that it would purchase Europe’s largest private lender, Arcmont Asset Management for $1 billion. The Financial Times has details (subscription required).
Nuveen is now dealing with some financial uncertainty. Part of the company’s assets include real estate in New York. WeWork, a coworking startup company, filed for bankruptcy. The filing puts doubt into how much money Nuveen can recoup from WeWork’s unpaid leases agreements.
However, with assets pushing nearly $2 trillion combined, those financial challenges for Nuveen and Manulife IM could be minor.
Farmland purchases could be an expanding –and presumably, financially secure – part of their growing portfolios.
“Investment funds have become voracious buyers of U.S. farmland,” the Reuters’ piece described. The two companies’ funds now own more than a million acres, Reuters found. And while that is a “small slice” of the overall farmland in the U.S. (nearly 900 million acres), it represents a heightened pace of acquisitions since the 2008 global financial crisis, according to Reuters.
The purchases, while a potential positive economic force for land values, also could present financial hurdles for smaller farmland owners looking to expand or those looking to buy into the agricultural space.
RELATED: Manulife IM has also been buying forests. The plan is to focus on prioritizing carbon sequestration rather than wood production. This Wall Street Journal article explains the plans.