by Monte Nevitt
One of the significant points made in this year’s Urban Land Institute conference held yesterday is that banks have cheap money available for land deals but no one appears to qualify. The bank’s dilemma? They can’t find credit-worthy borrowers. The downturn has left so many of yesterday’s landowners upside down in the greater Phoenix market that the previous players don’t qualify for loans today. It is ironic that the patient and disciplined farmer, who decided to stay on the sideline during the irrational exuberance that was displayed during the last boom is the very individual who is now going to his lender to qualify for the loan to buy back the farmland.
Strong commodity prices, coupled with depressed land values leave today’s farmer with an opportunity to leverage to increase the production and revenue, to address loan payments, to replace aging equipment, or to expand the size of the operation through purchase. In some cases we see dairy farmers buying land, not so much because of a desire to expand – but rather to shore up acreage on which to raise hay to bring their feed cost down.
Ninety five percent of the last thirty five land deals done in Pinal County were closed by farmers or ag related entities.
An article in last Friday’s Phoenix Business Journal highlighted the use of leverage in today’s favorable ag climate to expand and to improve the agribusiness bottom line.
Of particular note in this article is that the Journal highlights a farm purchase in which Scythe & Spade played a key role. The opportunity presented itself for a purchase and expansion onto 1,000 acres in the south Coolidge market. The deal would require a 30 day close. It also required two separate appraisals, a bridge loan of $5.4 million, preparation of material, due diligence, and budgets for a loan underwriting committee, shared well and ditch agreements????, opening and closing escrow, all in a 30 day time period!
Scythe & Spade was able to open its files and due diligence binders, plot in and pull down GIS maps on the property, update budgets, provide materials to appraisers, loan officers at M&I, and to the buyer, coordinate a 1031 exchange, and close escrow by the 22nd of December. In short – the seller , the buyer, the lender, the appraiser, the neighbor/partner, and Scythe & Spade all ended up looking good on the deal.
Take home point: because of Scythe & Spade’s ability to coordinate the deal, this farm family was able to seize a unique opportunity, come to alevel of comfort on a very shortened feasibility, acquire a loan from a cooperative BoM/Harris Bank, and be poised to take advantage of a forgiving commodity market going into 2012 on an expanded acreage.
Recent Comments