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.
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