Investing in U.S. land is an asset class that has grown in popularity in recent years. And, it’s not just for Americans.
Recently, Bloomberg reported Chinese billionaire Chen Tianqiao, founder and CEO of Shanda Interactive, is one of the largest non-American U.S. land owners. Including Americans, Tianqiao is the 82nd-largest U.S. landowner.
Specifically, he attained that status by acquiring 198,000 acres of Oregon timberland in 2015 for $85 million. According to the Bloomberg article, only Canada’s Irving family supposedly owns more. In fact, the New Brunswick family owns 1.2 million acres of Maine timberland right next door.
However, non-Americans owning U.S. land is a controversial matter. However, it also can be a profitable long-term investment, with U.S. cropland appreciating by 8.1% in 2023. In the four years since 2020, it’s increased by 33%.
As they say in real estate, they’re not building more land.
So, you can be a version of the Chinese entrepreneur. Let’s examine three ways to invest in U.S. land for much less than $85 million.
Texas Pacific Land (TPL)
Texas Pacific Land (NYSE:TPL) has gained 136% over the past five years. It has almost doubled the return of Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). However, that performance has come with significant volatility, suffering significant corrections in 2021 and 2023.
In June 2020, the company made my list of 10 names with significant cash on their balance sheets. It still operated as a trust, switching to a corporate structure in January 2021.
Essentially, TPL makes money in a variety of ways. Those include oil and gas royalties, commercial leases, land sales, and providing water services to oil and gas operators. Because it’s so tied to oil and gas, it tends to follow in stride whenever oil prices fall. Over the last year, it’s lost 27% of its value.
In Q3 2023, TPL had revenue of $158.0 million and a net income of $105.6 million. For the nine months ended Sept. 30, 2023, its revenues were $465 million, with $292.5 million in net income. The quarter’s numbers were lower than Q3 2022 because of lower oil and gas volumes and prices.
It owns 868,000 acres of land in West Texas, mainly in the Permian Basin. This is the area where a significant portion of American oil is produced. TPL has many ways to make money from its land. However, they’re mostly tied to the oil and gas industry. That is the main reason it entered the water business in 2017. Currently, they account for 32% of its overall revenue.
If you want to own land, TPL is an excellent indirect way.
Farmland Partners (FPI)
Farmland Partners (NYSE:FPI) went public in April 2014, selling 3.8 million shares. It used the proceeds to pay down debt and future land purchases.
At its IPO, the internally managed real estate investment trust (REIT) owned 38 farms in three states, encompassing 7,300 total acres. Today, it owns or manages 178,000 acres across 20 states with more than 100 tenants and 26 crop types. Its property’s gross real estate book value is $1.1 billion, about double its current market cap.
The ample opportunity lies in the institutionalization of farmland.
“Farmland is one of the largest commercial real estate sectors, ~$3.4 trillion(3), with the lowest institutional ownership,” according to the REIT’s November 2023 presentation.
Like every other business in America, farming is going through a succession crisis. The older generations are trying to pass on their farms to responsible owners. Farmland Partners is one of these responsible buyers.
In August 2023, for example, Farmland Partners paid $11 million for a farm in Louisiana with 1,523 acres, or $7,223 per acre.
If you want an asset that’s uncorrelated to equities, farmland would be it.
Amplify Inflation Fighter ETF (IWIN)
Lastly, if you want to invest in farmland and other asset classes that benefit from inflation, the Amplify Inflation Fighter ETF (NYSEARCA:IWIN) is the way.
IWIN is actively managed by Amplify Investments LLC, with sub-advisor Toroso Investments LLC handling the investment strategy and portfolio selection.
“The Fund seeks to identify securities of companies positioned to benefit from inflationary pressures. In periods of favorable economic and financing conditions, rising demand for land, rental income, or raw materials may increase the revenues of certain companies without a corresponding increase in expenses,” states the ETF’s summary prospectus.
IWIN only got its start in February 2022, which is the reason it only has $8.6 million in net assets.
The ETF currently has 58 holdings. The top three asset classes by weight are Miners (37%), Land (17%), and Home Builders (16%). Approximately 40% of the portfolio is large-cap stocks, 28% mid-caps, and 32% small caps.
Farmland Partners (2.10% weight) and Texas Pacific Land (1.60%) are held by IWIN. The other big farmland REIT is Gladstone Land Corp. (NASDAQ:LAND), which has a 1.57% weight.
Not only is IWIN an easy way to bet on land and other inflation fighters, but it should give you a few more names of large landowners in which to invest.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
