Q1 2015 Benton County Farm Sales

In the first quarter of 2015 we saw a whirlwind of farm and land activity and to sum up the market in one word…. Adjusting. Lower commodity prices have created some interesting shifts in farmland values. As always, the price per acre is generally a reflection of several factors including (but not limited to):

1) Location
2) Size of the Farm
3) Soil Types
4) Drainage
5) Cash Position / Rate of Return

Top quality land sales remain strong, while lower quality tracts have slipped anywhere from 10-15% versus a few years ago. Overall, there remain very few farms for sale and many buyers in a position to make a purchase. The first quarter of 2015 has been full of activity and interest in Benton County, Indiana farmland from investors & farmers alike. Purdue University’s Land Value Survey reported that back in 2005 farmland prices were in the $3,500 per acre range for top quality land.

An Interview with Murray Wise

Talking shop with the Nationally Renowned Farm Management Pioneer

In the world of farm management and farmland investment, the name Murray Wise is synonymous with high-quality agricultural farmland across the Midwest. For those that are unfamiliar, Murray founded the Westchester Group back in the mid-eighties, managing large land portfolios for investment groups and individual investors. At its peak, and prior to selling the company to TIAA-CREF in 2010, the Westchester group had over $1 Billion of total capital under management.

"It was a pleasure discussing agriculture, farmland real estate sales, land values and more with Murray Wise." - Johnny Klemme  An Interview with Murray Wise murray wise associates farmland johnny klemme

Farmland Industry Pioneer Murray Wise – photo provided

A graduate of Iowa State and armed with an MBA from the University of Illinois, Murray Wise has been recognized for his innovation in farmland sales, auctions and management from a variety of Ag industry professionals. Today he continues to run a thriving business, Murray Wise & Associates, providing real estate financial advisory and investment services.

I caught up with Murray Wise shortly after a short visit to his Champaign, Illinois office. As an industry veteran, his enthusiasm for agriculture and the viability of farmland as one of the soundest investments available was very apparent. While he remained cautious from an operations standpoint, he continually praised farmland real estate as an essential part of the success investor’s portfolio.

  • What is your view and outlook on the Ag industry today?

    “Right now I would exercise a degree of caution by keeping a very close eye on cash flow,” said Murray without hesitation. Worldwide grain commodities are in a time of surplus and commodity price volatility could continue to be common going forward. “I lived through the mid-eighties and I certainly don’t want to see the loss of farmers we endured then,” Wise added.


  • What do you feel is the biggest change or shift in farming operations?

    “Without a doubt, the #1 change is technology. From precision agriculture efficiency to drones, I am excited to see how the farm operation of tomorrow evolves,” said Wise.  “Another interesting shift is the number of young people coming back to the farm with a variety of college degrees. From CPAs to business school graduates, there are many young farmers who are adding a significant set of skills to the family farm toolkit. On a go-forward basis, there is a degree of complexity to farming that requires the ability to adapt. Those that adapt will continue to do very well for themselves,” added Wise.


  • How do you see farm data influencing the future of Agriculture?

    “I am particularly interested in farm data and am keeping an eye on the changes occurring here,” said Mr. Wise with strong concern. “There is a bit of a civil war going on in the farm data space. You have John Deere, Monsanto and a 1,000 other companies who all want to do something for the farmer so they can harvest, store and analyze this data – not because they are being nice, but because there is a dollar value there.” While we can’t predict how farm data might fully affect the Ag industry, it’s an area that we need to continually pay careful attention to.


  • In terms of farm land values, what are you seeing in the land market?

    In Murray’s opinion, “We are in a really unique land market with A and A+ quality land values remaining steady and in some cases higher per acre. On the other hand, B and C quality agricultural farmland has slipped with B land down about 10% and C quality land is down closer to 15-20% in value.” By historical standards, these land values are nearly double of what they were a decade ago. For those considering retirement, today’s market still represents a great time to sell.


  • When making on-farm improvements, where would you invest your dollars?

    “I am a fanatic of tile drainage. In the last five years, I would venture to guess that per acre owned, I have installed more acres of pattern tile than any other person in the Midwest,” said Wise with quite a bit of seriousness. He went on to say that his own farms have good outlets and pattern tiling from ‘fence to fence’ on 50 or 60 foot centers has been one of the best investments in productivity he has made. Murray went on to say that, “Tiling is an asset that will pay for itself over and over and if you don’t have it, your loss in income (from yield you could be getting with tile) will be greater than the cost of installation.”


  • What’s your # 1 challenge in the farmland real estate business?

    “There’s very little land for sale. We have less land for sale today than when I first started in this business 39 years ago. There are very few sellers of land and many buyers in a strong cash position.” Murray went on to say this to investors of farmland, “We are in a time period where the alternative investments to farmland may not make sense. If you are in a well-capitalized position, buying another tract of agricultural land could be a very sound move.”


We covered a lot of ground in our conversation, from the hard work it takes to be successful in Agribusiness, to the common traits of successful people – being smart, reputable, and being yourself.

One pattern remained clear when speaking with Murray Wise, farmland investment in today’s real estate market leaves no room for carelessness. Proper due diligence on location, drainage, soil types and rainfall are all key drivers in the successful purchase and sale.

About the Author

An Interview with Murray Wise Johnny Klemme Geswein Farms for sale

Husband, Father & Author

The Back Forty is regular column written by Published Author & Purdue Graduate Johnny Klemme. His reporting, interviews with Ag Experts and more can be found at www.PrairieFarmland.com/blog

 

Investing in Transitional Land

How the Principles of Timing, Tax-Advantages & Financing Multiply Your Profits

Sometimes referred to as the “donut,” transitional land typically refers to agricultural land or wooded property that is transitioning to a higher and best use such as municipal development, residential development, or commercial / industrial development. The investment into farmland or undeveloped land requires proper due diligence and typically thinking with a long-term strategy. The estimated value and price per acre of farmland or undeveloped land in the transitional market is varied and in today’s market covers a wide range.

  • Factors Affecting Land Values

    Land real estate can increase and shift in value for a variety of reasons. Typically these include a change in zoning, installation or expansion of roads, city utilities and the proximity effect of a new development.


  • Transition Periods

    When land goes from a non-use to a use or from limited-use to a higher and best use, there are increases in value. Owning land in this transitional period is vital to a higher multiplier of profits.


  • Tax Benefits

    There are several tax advantages your investment into transitional land will have. Taking advantage of these benefits is key to real estate investments. Whether you are leveraging your purchase, utilizing a 1031 exchange for capital gains, or considering the variety of deductions to a hedge against inflation – transitional land represents one of the best opportunities for profits when appurtenances that qualify for depreciation are taking into account.


  • Knowing the Right Buyers

    One of the most important factors in realizing higher profits is working with the right buyers at the right time. Whether they are investors, developers, builders, businesses or the end-users of the land, consulting with a land brokerage firm and land advisor with a network of these buyers is another key to success.


  • Financing Techniques

    While every buyer of investment land and transitional land has a unique set of financial circumstances, there are many nuances to financing that factor into greater resale profits. From prepaid interest and interest only financing, savvy transitional land investors are very successful at pyramiding the profits from a land investment into greater and greater profits.


All said, the major emphasis on transitional land investment should be timing. A great first step is to build a relationship with those that are knowledgeable in the local land real estate market. Keep in mind that your land broker regularly works with buyer and sellers who have a successful track record in long-term planning to realize transitional land profits.

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transitional land invesment Investing in Transitional Land Johnny Klemme Geswein Farms for sale

Husband, Father, Author, Land Broker & Advisor

Professional Land Broker & Advisor Johnny Klemme is a Published Author & Purdue Graduate

His reporting, interviews with Land & Real Estate experts, an advisory column and more can be found at www.PrairieFarmland.com/blog