Agricultural Real Estate Sales Growing Stronger

Last of a two-part series

Boosted by strong demand for almond orchards, open land with irrigation and growing interest from investors, sales of agriculture properties has been strong, according to Realtors from Century 21 M&M and Associates.

Jeff Titus, Century 21 M&M Real Estate Oakdale

Jeff Titus, Oakdale Office (209) 844-1759 email-jtitus @c21mm.com

“Ag sales are relatively strong, I would say,” said Jeffrey Titus of Century 21 M&M in Oakdale.  “There are people that want to buy cheap and the people selling want top dollar.”

Ag sales also have been solid in the greater Madera area, according to Derrick Upton, a Realtor with Century 21 M&M in Madera.

“It’s going pretty good,” said Upton about his farm sales this year.  “I closed two escrows this month (September). “

Derrick Upton, Century 21 M&M Real Estate Madera

Derrick Upton, Madera Office (559) 675-5921 email-dupton @c21mm.com

Upton said his most recent sales were $1 million for 456 acres of open ground and $800,000 for 53 acres of almonds.

The price of open land often is determined by the availability of irrigation water.  Titus said property in a water district is typically valued from $12,000 to $15,000.  Property with a history of having good source of well water is priced from $3,500 to $6,500.

Smaller dairies, up to 50 acres, often are purchased and then demolished and transformed into open ground.  Popular crops planted on open land include almonds, walnuts, grapes, cherries and olives, said Titus.

Titus said dairy sales are very slow.  “The financing is tough because the dairy industry is in the tubes,” he said.  “The income doesn’t support the price, so banks won’t loan money.”

“Almond ground has gone up from a year ago,” said Upton.  “Last year, you could tell someone it’s $16,000 an acre and they’d fall down.  Now, they’re looking to buy almonds for $16,000.  The price is high right now, it might not be in another month or two.”

Titus said almond growers are not able to produce enough product to meet the worldwide growing demand.

“The almond industry has done a tremendous job in increasing consumption of their product,” said Titus.

The demand for almond orchards has attracted outside investors.

“Almonds are up right now,” said Upton.  “A lot of investors are looking at almonds.  Some of them are afraid of putting money into the stock market.”

Titus, who works the eastern portion of San Joaquin, Stanislaus and Merced counties, said a group of investors has purchased about 3,000 acres of farmland in the Oakdale area the past two years.

A September 19th article in the Los Angeles Times noted foreign investors are putting their money into California farmland.

“In California, investors from countries including Spain, Switzerland, China, Egypt and Iran collectively boosted their holdings 2.5 percent from February 2007 to February 2009 to 1.08 million acres — about 5 percent of the state’s total farmland,” the Times reported.

Upton said a foreign investment group recently purchased 1,200 acres of farmland near Chowchilla for $16.9 million.

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California’s Central Valley Agriculture Properties Rebounding

Last in a Four-Part Series

It’s no question Central Valley farmland prices have been plowed under by the recession.  The question is when agricultural values will rebound.

California’s rich Central Valley farms were not alone in suffering a slump in values.  Values of the nation’s farmland and buildings dropped in 2008 for the first time in 20 years, according to the U.S. Department of Agriculture.  The price of farmland in 2008 slipped 3.2 percent compared to 2009.

Ag lands are typically down about 20 to 30 percent from boom years of 2005-2006, but did not suffer as much as residential properties.

Kevin Johnson - Dixon Office, call - (707)685-3870 email - kevinjohnson @c21mm.com

“Ag is slower, however it’s getting to be more of a stabilized product,” said Kevin Johnson, a Realtor based at Century 21 M&M and Associates office in Dixon.  “It’s not taken the beating of residential property.”

The drop in farm values, hurt by reduced farmers’ profits and less demand, has created ag buying opportunities.

“It looks like there are a lot of bargains out there,” said Bob Sanders, a Century 21 M&M Realtor based in Fairfield.  “With the banks and short sales being flushed out, the prices are at the bottom.”

As an example, Sanders cited a 20-acre farm and house in Arbuckle recently listed for $300,000.   “This was probably close to $600,000 in 2005-2006.  There were six to seven offers on it.”

Linda Green, the broker and manager of Century 21 M&M offices in Dixon and Vacaville, said there have been some signs of an ag recovery.

“Last year was one of the best years for tomatoes,” she said.  “Dixon has a Campbell cannery and we know the price of tomatoes will be down this year, but not too much lower.”

Linda Green - Dixon Office, call 707 678-9211 email - lgreen@c21mm.com

Green said beef and sheep, popular in her area, had a tougher year than row crops.

“It was a bad year for beef and sheep because hay costs were so high,” she said. “If they didn’t have permanent pastures, they had to buy hay.”

Beef, sheep and dairy owners have benefited this year from dramatically lower feed prices and above average rains, which has kept pastures green and growing.

Johnson said ag land prices have leveled and he predicts more sales and activity in the next six to 12 months.  “The biggest problem is availability of money and that goes for every level,” he said.  “I have seen some loosing up of money.”

Green said the early rebound is starting with smaller farm properties.  “ We don’t have a lot of people selling farms like in 2006,” she said.  “We just have small listings.  None of the big stuff.”

The recovery of farm values should pick up steam by 2012 and hopefully by 2011, said Green.

Bob Sanders - Fairfield Office, call - (707) 330-5194 email - bsanders@c21mm.com

Fairfield’s Sanders is a little less optimistic about when ag properties values will be strongly rebounding.

“That’s going to be a while,” he said.  “Maybe 2013 or 2014.  You’re talking three or four years away.”

Farmlands values, like residential properties, are cyclical in nature, according to Sanders.

“It’s an 11-year cycle and 2005 was top,” he said.  “Right now we’re right in the middle.”

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Low Milk Prices and Hard Times Hurting Central California Dairys

While California is the home of “happy cows,” the state’s dairies are less than delighted about high production costs, low milk prices, and falling property values.

After the boom times of 2005 and 2006, the fortunes of dairy owners took a dive the following years when milk prices sank.  Add to the drop in income was a jump in feed costs, climbing fuel prices and a generally slumping economy.

Larry Matos, President/Broker, email - lmatos@c21mm.com

“The overall (weak) economy has spilled over to the ag sector,” said Larry Matos, president of Century 21 M&M and Associates and a partner in a family dairy.

Matos said with the dairy business down, values of dairy properties and milking cows also dropped at least 30 percent.  “Not as severe as residential property, but it’s been soft,” said Matos.

Century 21 M&M is the largest ag real estate company in the Central Valley, said Matos.  He also noted the 20-office firm is licensed by the state to sell milk pool quota, which can be sold by a producer to another producer.

Just years earlier, banks were freely loaning money to dairy owners wanting to expand and develop their plants.  Suddenly, with the dairy slump, loans were scarce and terms were tough.

“Banks gave them large credit lines with blank checks,” said John Melo, CEO of Century 21 M&M, about the quick financial transition.  “To now pulling the plug.”

Derrick Upton, Madera Office call - (559)675-5921 Dupton@c21mm.com

Derrick Upton, a farm specialist at the Century 21 M&M office in Madera, said many dairies had used their cows as collateral on their loans.  When times became difficult and loans defaulted, the banks called in the collateral.

“Many dairies are milking the banks’ cows,” said Upton.  “I foresee a lot of dairies and dairy land going up for sale in the future — flooding the market.”

According to Western United Dairymen in Modesto, at the abyss of the dairy slump, a dairy milking 1,000 cows was losing an estimated $100,000 a month.

Such financial instability is largely the reason 109 dairies in California closed their barn doors last year.  The Central Valley accounted for 56 of the closures.

With the closures came opportunity for surviving dairies to expand, said Will Amador, an ag specialist based at the Turlock office of Century 21 M&M.  He noted it is tough to qualify for a dairy loan.

Will Amador, Turlock Office Call (209)633-1831 Email - wamador@c21mm.com

“Banks probably look at them closer than anyone right now,” said Amador.  “Banks won’t loan you money unless the dairy is in compliance with its waste management plan.”

In addition to finances, dairy owners also are in a fight on another front.

“Right now, farmers, particularly in California, are coming under an aggressive movement by environmentalists, who are not qualified to make the claims they’re making,” said Amador.

Dairy owners fight back — against such groups as the Humane Society of the United States and People for the Ethical Treatment of Animals — by supporting such associations as the West United Dairymen, said Amador.

“They are assessed money to educate consumers in regards to being in compliance,” he said. “They’re spending their own money and it’s very expensive for them.  It’s a never ending public relations campaign.”

Clarence Oliveira, Turlock Office (209) 988-5254 Coliveira@c21mm.com

There is a light at the end of the milking barn.  Feed costs are down.  Corn, for example, is now selling for about half of the $325 a ton peak in late 2008.  Industry observers also are predicting a rebound in milk prices by midyear.

“It’s still kind of hard to tell,” said Clarence Oliveira, a Century 21 M&M Realtor and dairy expert in Turlock, about the projected recovery.  “The later part of this year is what the conversation has been.”

NEXT FRIDAY: The future of agriculture

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Century 21 M&M Leads the Valley in Ag Sales

Second in a four part series.

Green acres is the place to be.  Farm livin’ is the life for me.  Land spreadin’ out so far and wide.  Keep Manhattan, just give me that countryside.” — Theme song to the Green Acres TV series.

Green acres is the place to be, as long as you can get financing.  Financing often is a deal killer when it comes to agriculture purchases.

Will Amador Turlock Office(209)633-1831 wamador@c21mm.com

“All the agriculture sales transactions are contingent on financing,” said Will Amador, a nine-year veteran ag specialist Realtor at Century 21 M&M and Associates in Turlock.

Amador, who has brokered and bred cattle for the past 35 years, said a single, large transaction in 2009 pushed him to a great year in ag sales.

“I did $37 million in real estate.  It was good year,” he said.  “I project to hopefully do $20 million this year, and hopefully I can duplicate what I did last year.”

Larry Matos, President/Broker, email - lmatos@c21mm.com

While ag land values did not drop as much as residential properties in this latest slump, financing farm and ranch lands can be much more difficult, according to Larry Matos, president of Century 21 M&M.

“Banks are not as confident as they once were,” said Matos.  “They’re requiring more and more documentation.”

In addition to a buyer’s financials, Matos said banks also want to examine a property’s past production figures and documentation showing all state regulations are met.

“It’s been very challenging right now,” said Will Amador about the lending environment.  “The banks really scrutinize the buyer as far as loan to value, particularly with the dairy industry.”

Banks are requiring buyers to make down payments ranging from 30 to 50 percent when purchasing agricultural properties.  Many farmers can negotiate better terms with local banks and ag lenders they have worked with in the past.

Nick Von Flue Madera Office (559) 675-5921 Nvonflue@c21mm.com

Derrick Upton MaderaOffice (559)675-5921 Dupton@c21mm.com

Ag specialists Nick Von Flue and Derrick Upton, both based at the Century 21 M&M office in Madera, have been working with Nebraska State Bank.  The pair said Nebraska State Bank would loan up to $6,000 an acre, with 30 percent down.

To make a make a deal work, Amador said at times some creative financing is needed. “You may have to get the seller to carry back a second (mortgage),” he said.

The second mortgage, said Amador, typically is amortized over 20 years with the loan due in five years.

Another financing tactic to lower monthly payment is to work with the lender. “You might need to speak to the bank and go interest only for one year,” said Amador.

Getting the right financing package is the key to purchasing agricultural property.

“The main thing about financing is the buyer really has to do his homework before he tries to acquire a new property,” said Amador. “It’s no different than getting pre-qualified for a house.”

NEXT FRIDAY: The challenges of dairies

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Agriculture Property Sales in Central California

First of a four part series.

With agriculture such a big business in California, it’s only natural that ag and ranch sales within the state’s 75,000 farms and ranches, also is a huge business.

According to the California Department of Food and Agriculture, farming in 2007 accounted for $36.6 billion in gross cash receipts.

Century 21 M&M and Associates, with its 20 offices located throughout the heart of the state’s richest farmlands, is No.1 in agricultural sales for Century 21 nationwide.

“We have Realtors that specialize in selling agriculture properties,” said Larry Matos, president of Century 21 M&M and Associates.  “We’re the largest agriculture real estate company in Northern and Central California.”

Larry Matos, President/Broker, email - lmatos@c21mm.com

Larry Matos and partner and CEO John Melo, both come from farming backgrounds.  Matos and his family own and operate a dairy and also farm walnuts.

Derrick Upton, Madera Office call - (559)675-5921 Dupton@c21mm.com

Derrick Upton, based out of the Century 21 M&M Madera office, is typical of the firm’s farm specialists.  Derrick has years of hands-on experience in farming.

“I’m farming almonds right now. And I’ve done custom farming,” said Upton.  “I don’t know how you can sell agriculture, not being a farmer.  You need to know the lingo.  You need to know if the soil is good or not.”

He also knows farmers and their typically no-nonsense ways.  Derrick said many farmers wanting to sell, won’t list their property.

“They want you to just bring them a buyer,” said Upton.  “They don’t want a sign up and people driving through their farm and bothering them.”

Nick Von Flue Madera Office, call- (559) 675-5921 Nvonflue@c21mm.com

Derrick Upton has teamed up with fellow Madera associate Nick Von Flue, who handles the paperwork and contracts.  Von Flue previously was active in residential properties.

“I’ve done both and it’s easier to be in farms and ranches,” he said.  “This is what they (the farmers) owe, and this is what they want.”

Nick Von Flue also said when selling an agricultural property, potential buyers often are easy to find.

“I go to each neighbor and say, ‘are you interested in it?’”  It doesn’t hurt to ask,” he said.  “Fifty percent of the time, a neighbor or someone in the proximity of it is going to buy it.”

Clarence Oliveira, Turlock Office (209) 988-5254 Coliveira@c21mm.com

Clarence Oliveira is based in Turlock and is one of the Century 21 M&M’s top Realtors.  He estimates agriculture accounts for 25 percent of his business and said knowledge is the key to closing ag transactions.

“First and foremost it’s knowledge,” Clarence said. “You have to understand what a farmer farms and how they do it.  With residential, it’s pretty straight forward.”

Oliveira said he also has credibility with his agricultural clients, as he owns two almond orchards and has family members in the dairy business.

The price of agricultural properties did not drop as much as residential homes during the recent realty slump.  On average, he said ag lands were down just 20 to 30 percent.

Oliveira, who projects to sell 20 to 30 agricultural properties this year, said he has 10 listings ranging from 20 acres of row-crop land with a house for $450,000 to 320 acres of almonds in Hickman offered at $4.8 million.

NEXT FRIDAY: Financing agricultural properties

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