Lease buybacks, REITS keep ag land growing
MANATEE -- The concept of the sale-leaseback is nothing new in the commercial real estate market.
Having gained a good deal of popularity during the real estate investment trust boom before the Great Recession and again during the current recovery, this investment vehicle is pouring cash into local businesses. It's a popular move particularly among local medical businesses.
This year, the founder of Fort Myers-based 21st Century Oncology sold several buildings and space the clinics occupy in Manatee County to REIT Carter Validus. The clinics continue to lease the space, but the millions of dollars earned in the transaction goes, directly or indirectly, to the business' bottom line.
Lately in Manatee County, another industry has been raising capital through sale leasebacks. Farms, which are some of the largest land holders in the county, are selling off acreage to investors that specifically target agricultural land as an investment opportunity. Last October, organic strawberry grower Wish Farms sold off 808 acres in Duette for $14 million to a Virginia agricultural REIT. The farm promptly signed a 20-year lease with the buyer.
The farm's executive vice president, J.C. Clinard, said the cash windfall would be invested in more farmland and other "growth opportunities." For any business in need of capital -- and that would be all of them -- building up a big cash balance certainly qualifies as one of those opportunities.
The same investor deepened its connection with Wish Farms early this year when it bought more acreage the company cultivates in Duette, though this time from a pair of sisters who inherited it and who were leasing it to the strawberry operation. Wish Farms will now lease the land from the new owner.
Last month, bankruptcy troubled tomato grower Grainger Farms sold almost 1,000 acres near Myakka City to a Boston agricultural land investor for $6.8 million. While officials with the two companies did not comment on the deal or whether a leaseback was involved, the revenue generated could go toward maintaining farming operations. Grainger has asked that the bankruptcy court to allow it to use its cash collateral toward paying its expenses while it continues operating under a Chapter 11 structure.
In a county where open lands are typically gobbled up by developers for housing subdivisions, deals like these keep farmland productive and available for crops. That's important for an area that has probably been known longer for its fruit and vegetable production than for gated neighborhoods. Because once a farmer harvests the last crop off a piece of land and decides to grow houses, it's the last harvest that land will ever see.
Matt M. Johnson, Herald business reporter, can be reached at 941-745-7027, or on Twitter