On Thursday, June 28th, 2018, members of Young Professionals in Agriculture joined for a peer learning session at Peoples Company. YPiA member, Brad Hayes, spoke to the group about land values, real estate trends, and walked the group through a few different real-life case studies.
Brad has been with Peoples Company for 4 years and serves on the Appraisal team as a Certified General Appraiser. Peoples Company is a full-service land real estate firm. They provide land brokerage, land management, land appraisal, and land investment services. The Peoples team jokes that it is the 3 D’s keeping them in business: Death, Divorce, and Debt!
Iowa makes up 35.7 million acres. When the US government made the Louisiana Purchase in 1803, the value of Iowa’s farmland was approximately $1.3 million. The government then sold the land off at $1.25 per acre between 1838-1860.
Today, Iowa’s farmland equals 30.7 million acres and is valued at $7,326 per acre according to Iowa State University research. As an asset class, Farmland represents about ~$225 billion. Can you believe that 82% of all farmland in Iowa is owned debt free?! 53% of all farmland is rented. Farmland values are affected by several different factors, some of those are: taxes, interest rates, commodity prices, and cap rate expectations (Cap Rate = income/asset value i.e. $300 rent on $10,000 acre land equates to a 3% cap rate). Land values peaked in 2013 and have continued to decline in recent years.
Brad believes land values will continue to soften over the next few years. He also believes investors will remain on the sidelines in the market place as 80% of land is purchased by farmers.
Overall, Brad provided YPiA members with very insightful information. The evening concluded with a social at the Other Place. 24 members were in attendance.