Getting up-to-date and reliable data on farmland values can be tough. Probably the best known and most used of the information sources out there is the National Council of Real Estate Investment Fiduciaries (NCREIF) Farmland Index. Released on a quarterly basis, NCREIF is often used by investors to measure the performance of farmland in the US.
NCREIF, and other farmland value data providers such as the Federal Reserve Bank of Chicago, USDA and estate agencies, tend to obtain the data they need through data submissions and surveys. In NCREIF’s case, these are gathered from a pool of Qualifying Data Contributing Members: “investment managers that manage or own institutional real estate that qualifies for inclusion in the NFI, with a market value of at least $50 million held in a fiduciary setting”. Other data providers might survey farmers and agribusinesses too.
But there is now another farmland indexing method on the market that real estate veteran Paul Kanitra has brought to the table with his new platform Peak Soil Indexes (PSI).
PSI uses “observable, recorded, arms-length transactions” to structure its indices using publicly available data. Kanitra would not reveal where he collects the data from, but argues that it help to produce indices that are “impervious to the whims of a survey”, he told AgFunderNews. The indices also differ from others in the market as they provide monthly readings (versus quarterly) and will even move to produce weekly values in due course, according to Kanitra.
“A survey can be as specific as desired, can be created to very exact specifications and can determine who will provide input in the valuation,” he told AgFunderNews. “But it’s just an opinion and not a real transaction. Opinion surveys generally provide accurate pricing, but can be suspect and often determined by parties who may benefit from the outcome. We just believe this is more reliable and better for marketplace development.”
Furthermore, Kanitra adds, the transactions that the index provider includes are “arms-length” deals; i.e. they do not include any transactions between family members or parties with a relationship. “The buyer and seller are independent and each acting for their own best interest,” he said. “Each wants the best possible price for themselves.”
Transactions in the index will remain in the index for no more than 60 days and the indices will be 60 day running averages, according to a press release.
After launching its first Iowa Farmland Value Index in February, Peak Soil Indexes has just announced the release of indices for two new states — Minnesota and Indiana.
Kanitra is planning to expand the platform to include a Wisconsin index in October and another six or seven major agricultural producing states next year.
“These are genuinely usable indexes for derivative product development,” he said in a statement. “They succeed in standardizing the commodity, are accurate, transparent and timely. Their purpose is not constrained to being but a historical reference point.”
Unsurprisingly, Kanitra’s background is in real estate and investment. He has been working on these indices for the last six years prior to which he was the founder of Piedmont Select Properties, a micro-cap commercial real estate fund, and an investment advisor to a global fixed income hedge fund. He has also managed arbitrage portfolios at ING Capital Markets, Marine Midland Bank and Metropolitan Securities in New York City.
NCREIF told AgFunderNews that it does not perform surveys, but gathers “actual financial data for each property” included in the index.
The index provider is understood to be expanding into Australia where agriculture investment veteran Frank Delahunty, managing director of F&L Delahunty and former manager of the Sustainable Agriculture Fund, is leading the initiative. Delahunty announced the initiative at Agri Investor’s recent conference in Melbourne, where he dismissed claims that obtaining data from farmland investors in Australia would be tough.
Have any news or tips? Email [email protected].
