1
00:00:02,520 --> 00:00:10,000
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Here's to the farmer,

2
00:00:10,160 --> 00:00:13,840
Speaker 1: the plants, the funerals, and the spring, the turn from

3
00:00:13,840 --> 00:00:16,360
Speaker 1: the green to that harvest honey.

4
00:00:16,800 --> 00:00:20,720
Speaker 2: Hold on all the banker downtown with the guide in

5
00:00:20,880 --> 00:00:23,439
Speaker 2: mon Steed, with handshake the money.

6
00:00:24,200 --> 00:00:28,160
Speaker 1: Have you ever thought about what makes land valuable? It's

7
00:00:28,320 --> 00:00:30,640
Speaker 1: much more than just a place to build a house

8
00:00:30,720 --> 00:00:35,000
Speaker 1: or commercial building or place a farm. Real assets have

9
00:00:35,120 --> 00:00:40,839
Speaker 1: become increasingly popular, accessed through alternatives like private equity funds.

10
00:00:41,400 --> 00:00:44,520
Speaker 1: I'm Barry ritholtzs and on today's edition of At the Money,

11
00:00:44,840 --> 00:00:49,560
Speaker 1: I'm going to discuss alternative land rights investing. To help

12
00:00:49,640 --> 00:00:51,479
Speaker 1: us unpack all of this and what it might mean

13
00:00:51,560 --> 00:00:55,080
Speaker 1: for your portfolio. Let's bring in Brandon Zick. He's the

14
00:00:55,160 --> 00:01:00,440
Speaker 1: chief investment officer at Sarah's Farmland Fund, managing about two

15
00:01:00,480 --> 00:01:05,399
Speaker 1: billion dollars in AG assets. Saras not only looks at farmland,

16
00:01:05,480 --> 00:01:09,839
Speaker 1: but a slew of additional rights that can help monetize dirt,

17
00:01:09,959 --> 00:01:13,480
Speaker 1: as Brandon likes to say. Sarah's was recently purchased by

18
00:01:13,560 --> 00:01:17,840
Speaker 1: Wisdom Tree Investing and full disclosure, I'm also an investor

19
00:01:17,880 --> 00:01:21,880
Speaker 1: in Sarah's through my own personal investing So, Brandon, you've

20
00:01:21,920 --> 00:01:26,000
Speaker 1: been investing in and around farmland for decades. You grew

21
00:01:26,080 --> 00:01:28,759
Speaker 1: up on a farm. What makes this kind of land

22
00:01:29,200 --> 00:01:31,680
Speaker 1: a compelling real asset?

23
00:01:32,360 --> 00:01:34,880
Speaker 2: Well, thanks, Barry. I think when you look at farmland,

24
00:01:34,920 --> 00:01:37,440
Speaker 2: one of the things that's so interesting is just what

25
00:01:38,360 --> 00:01:42,880
Speaker 2: are the optionality buckets that come with land. So when

26
00:01:42,880 --> 00:01:46,040
Speaker 2: we buy farms, generally we're thinking of this is going

27
00:01:46,080 --> 00:01:49,160
Speaker 2: to be a farm for the long term. But when

28
00:01:49,200 --> 00:01:50,880
Speaker 2: you own the real estate, when you own the dirt,

29
00:01:50,920 --> 00:01:54,640
Speaker 2: you have a lot of optionality. Starting with mineral rights.

30
00:01:54,960 --> 00:01:57,280
Speaker 2: That's something that on the family farm I grew up

31
00:01:57,280 --> 00:02:00,760
Speaker 2: at Northeastern Pennsylvania, no one knew what Marcella a shale was.

32
00:02:00,800 --> 00:02:03,680
Speaker 2: But over time there's been a tremendous amount of value

33
00:02:03,720 --> 00:02:07,160
Speaker 2: created through those mineral rights, well above the farmland value.

34
00:02:07,480 --> 00:02:09,400
Speaker 2: And when you think about other things that when you

35
00:02:09,440 --> 00:02:12,720
Speaker 2: buy a farm, in many cases there's timber on the

36
00:02:12,760 --> 00:02:16,600
Speaker 2: property that could be harvested selectively over time. There are

37
00:02:17,240 --> 00:02:19,799
Speaker 2: you know, opportunities to lease outland for hunting and other

38
00:02:20,320 --> 00:02:23,720
Speaker 2: sorts of recreation to generate revenue. And then you start

39
00:02:23,760 --> 00:02:26,480
Speaker 2: thinking about other optionality that can come to.

40
00:02:26,840 --> 00:02:29,679
Speaker 1: Well, before we go to other optionality, let's spend the

41
00:02:29,680 --> 00:02:31,680
Speaker 1: little time with each of those. So when you say

42
00:02:31,720 --> 00:02:35,240
Speaker 1: mineral rights and you're referring to Marcella shale, which is

43
00:02:35,400 --> 00:02:39,919
Speaker 1: natural gas made accessible by fracking, you're not giving up

44
00:02:39,960 --> 00:02:47,240
Speaker 1: the farm. Because of the fracking technology, those natural gas

45
00:02:47,240 --> 00:02:50,880
Speaker 1: companies and oil companies can access that from a single

46
00:02:50,919 --> 00:02:54,040
Speaker 1: point in the corner of the farm without disrupting the

47
00:02:54,040 --> 00:02:57,760
Speaker 1: farm land. And they could go literally miles down to

48
00:02:57,880 --> 00:03:03,520
Speaker 1: access how signa in how valuable are those natural gas leases?

49
00:03:03,919 --> 00:03:06,880
Speaker 2: Yeah, so it depends on the area specifically. But yeah,

50
00:03:06,960 --> 00:03:09,960
Speaker 2: the great thing is that you're not strip mining a property.

51
00:03:10,240 --> 00:03:12,080
Speaker 2: To your point, you can access it from a corner

52
00:03:12,080 --> 00:03:14,280
Speaker 2: of the property or even lease it without any service

53
00:03:14,320 --> 00:03:16,560
Speaker 2: intrusion on your property. They have to access it from

54
00:03:16,600 --> 00:03:20,280
Speaker 2: a neighbor's property who would allow that. And then in

55
00:03:20,320 --> 00:03:23,720
Speaker 2: the Marcella's shale region, you had land that probably would

56
00:03:23,720 --> 00:03:26,760
Speaker 2: have transacted almost any acre for fifteen hundred to two

57
00:03:26,800 --> 00:03:30,160
Speaker 2: thousand dollars an acre and then it was generating four

58
00:03:30,280 --> 00:03:32,839
Speaker 2: or five thousand dollars per acre and revenue per year.

59
00:03:33,000 --> 00:03:33,960
Speaker 1: Wow, so it's a lot.

60
00:03:34,120 --> 00:03:37,839
Speaker 2: So that's completely changed. So even with within our portfolio,

61
00:03:38,240 --> 00:03:41,320
Speaker 2: you don't see any farms purchased in Pennsylvania because of

62
00:03:41,360 --> 00:03:44,440
Speaker 2: the Marcellus and Utica shale, there's so much cash flowing

63
00:03:44,480 --> 00:03:47,200
Speaker 2: around that land just isn't available at an attractive price

64
00:03:47,440 --> 00:03:48,640
Speaker 2: from a farmland investment.

65
00:03:49,080 --> 00:03:51,560
Speaker 1: Let me ask you a naive question about this. How

66
00:03:51,600 --> 00:03:56,880
Speaker 1: do I, as a farmer maintain my mineral rights if

67
00:03:56,880 --> 00:04:01,040
Speaker 1: the adjacent farm is sucking the natural gas out of

68
00:04:01,080 --> 00:04:05,320
Speaker 1: the ground, doesn't mind natural gas then flow into that vacuum.

69
00:04:05,480 --> 00:04:06,480
Speaker 1: How do you manage around that?

70
00:04:06,720 --> 00:04:09,480
Speaker 2: Yeah, so they try to put them together into units

71
00:04:09,560 --> 00:04:12,200
Speaker 2: so that that doesn't happen. And there are rules around

72
00:04:12,240 --> 00:04:14,880
Speaker 2: what you can and can't do, especially with these as

73
00:04:14,920 --> 00:04:17,680
Speaker 2: opposed to vertical wells that would be on one property,

74
00:04:17,720 --> 00:04:19,880
Speaker 2: and depending on where it was on the property, you

75
00:04:19,960 --> 00:04:22,960
Speaker 2: might actually be extracting from the neighbors without paying them.

76
00:04:23,320 --> 00:04:26,520
Speaker 2: With these horizontal wells to go underneath, there are requirements

77
00:04:26,560 --> 00:04:29,200
Speaker 2: that you have to be paid. You do see an

78
00:04:29,200 --> 00:04:32,839
Speaker 2: interesting dynamic in Pennsylvania and New York where it's not

79
00:04:32,920 --> 00:04:34,560
Speaker 2: allowed in New York State, but if you own a

80
00:04:34,560 --> 00:04:37,520
Speaker 2: farm on the Pennsylvania side of the highway there that

81
00:04:38,160 --> 00:04:41,240
Speaker 2: you're definitely generating a lot of revenue. And there could

82
00:04:41,240 --> 00:04:43,240
Speaker 2: be an argument that maybe some of that's coming from

83
00:04:43,240 --> 00:04:46,960
Speaker 2: across the way, but that's where regulation probably doesn't really

84
00:04:46,960 --> 00:04:48,360
Speaker 2: meet up with the reality.

85
00:04:49,040 --> 00:04:52,560
Speaker 1: So let's talk about some other sorts of leases that

86
00:04:52,720 --> 00:04:58,159
Speaker 1: farmland can generate revenue from. You mentioned hunting. What do

87
00:04:58,200 --> 00:04:59,760
Speaker 1: you put up a gate and charge people on the

88
00:04:59,800 --> 00:05:03,719
Speaker 1: way in? How do you charge fees for hunters and

89
00:05:03,760 --> 00:05:07,400
Speaker 1: other recreational users if you own a couple hundred or

90
00:05:07,400 --> 00:05:09,440
Speaker 1: a couple of thousand acres of prime land?

91
00:05:09,640 --> 00:05:11,800
Speaker 2: Yeah, so usually typically it's in the off season when

92
00:05:11,800 --> 00:05:14,359
Speaker 2: the crops are off the field. But hunting in the

93
00:05:14,360 --> 00:05:16,800
Speaker 2: Northeast and the Midwest is something that I didn't grow

94
00:05:16,839 --> 00:05:18,640
Speaker 2: up doing, but you know, it's a way of life

95
00:05:18,640 --> 00:05:20,400
Speaker 2: for a lot of people. And everyone wants to have

96
00:05:20,440 --> 00:05:23,320
Speaker 2: a specific place that they can go to to hunt,

97
00:05:23,320 --> 00:05:25,360
Speaker 2: their own land, a private place to hunt. And if

98
00:05:25,360 --> 00:05:28,040
Speaker 2: you don't own land, that comes through the rental market,

99
00:05:28,080 --> 00:05:30,799
Speaker 2: and there is a robust rental market. When you drive

100
00:05:30,880 --> 00:05:35,000
Speaker 2: through rural areas, you'll see posted signs on trees saying

101
00:05:35,080 --> 00:05:38,440
Speaker 2: this is like you're not allowed no trespassing. Typically it's

102
00:05:38,520 --> 00:05:41,520
Speaker 2: landowners or hunters who are paying for those rights who

103
00:05:41,560 --> 00:05:45,640
Speaker 2: are posting that. And yeah, we go through third parties

104
00:05:45,640 --> 00:05:48,760
Speaker 2: that will require insurance. There's a lease being paid, and

105
00:05:48,800 --> 00:05:52,000
Speaker 2: once someone's paying and paying for the insurance, they're enforcing

106
00:05:52,040 --> 00:05:54,520
Speaker 2: the boundaries such that we don't have to which is great.

107
00:05:54,839 --> 00:05:58,719
Speaker 1: Let's talk about other leases renewable energy. I know you

108
00:05:58,760 --> 00:06:02,240
Speaker 1: guys are big with wind turbines. The President may not

109
00:06:02,400 --> 00:06:05,320
Speaker 1: love those, but farmers sure hacks seem to like it.

110
00:06:05,720 --> 00:06:08,840
Speaker 1: What are the economics of putting up a wind turbine

111
00:06:08,880 --> 00:06:09,359
Speaker 1: on a farm?

112
00:06:09,680 --> 00:06:12,520
Speaker 2: So wind has been around now for quite a while.

113
00:06:12,560 --> 00:06:17,039
Speaker 2: You've seen thirty years worth of wind farm construction, and

114
00:06:17,080 --> 00:06:19,920
Speaker 2: it's very incremental in nature to the farm, but it

115
00:06:19,920 --> 00:06:22,960
Speaker 2: could add anywhere from twenty to forty or fifty basis

116
00:06:22,960 --> 00:06:26,279
Speaker 2: points of income depending on the property, which and it

117
00:06:26,320 --> 00:06:28,120
Speaker 2: takes up a very small footprint.

118
00:06:27,680 --> 00:06:29,480
Speaker 1: So you're still farming. You just have a couple of

119
00:06:29,520 --> 00:06:30,719
Speaker 1: big turbines in the corner.

120
00:06:30,800 --> 00:06:33,760
Speaker 2: That's exactly true. So you know, I think when people

121
00:06:33,839 --> 00:06:36,240
Speaker 2: started doing it, they thought, well, this is essentially free

122
00:06:36,279 --> 00:06:38,840
Speaker 2: money as long as you're fine with looking at wind turbines,

123
00:06:38,839 --> 00:06:41,640
Speaker 2: which some people like, some people don't. But it was

124
00:06:41,680 --> 00:06:45,279
Speaker 2: incremental and it was meaningful enough to farmers because they

125
00:06:45,279 --> 00:06:48,479
Speaker 2: were still farming those properties. The thought process around that

126
00:06:48,520 --> 00:06:50,960
Speaker 2: has changed a little bit. They're much more difficult to

127
00:06:51,000 --> 00:06:54,760
Speaker 2: permit now because not only do they take up a

128
00:06:54,839 --> 00:06:57,599
Speaker 2: huge footprint, A large wind farm could take up a

129
00:06:57,720 --> 00:07:01,440
Speaker 2: very large footprint, so anywhere from twenty to thirty thousand acres.

130
00:07:01,520 --> 00:07:04,520
Speaker 2: There's a lot of neighbors involved there, and there's also

131
00:07:04,960 --> 00:07:08,159
Speaker 2: people who fight those wind farms on behalf of migratory birds.

132
00:07:08,240 --> 00:07:11,640
Speaker 2: So I think they're much more difficult to permit now.

133
00:07:12,000 --> 00:07:15,000
Speaker 2: What you tend to see on the solar side, which

134
00:07:15,040 --> 00:07:18,640
Speaker 2: is significantly different, is much higher impact on the land,

135
00:07:18,800 --> 00:07:21,680
Speaker 2: So they're taking up the majority of the footprint, so

136
00:07:21,720 --> 00:07:24,600
Speaker 2: you're not continuing the farm, so the revenue has to

137
00:07:24,600 --> 00:07:27,360
Speaker 2: be not just incremental, has to replace the farm income

138
00:07:27,680 --> 00:07:30,240
Speaker 2: and be transformational. So what you tend to see on

139
00:07:30,280 --> 00:07:33,200
Speaker 2: the solar side is revenue that could be anywhere from

140
00:07:33,240 --> 00:07:37,440
Speaker 2: three to five times the total return of farmland plus wind,

141
00:07:37,520 --> 00:07:40,200
Speaker 2: so it's much more meaningful, and you can also do

142
00:07:40,240 --> 00:07:42,720
Speaker 2: it on a much smaller footprint. So whereas you might

143
00:07:42,720 --> 00:07:46,160
Speaker 2: need those twenty or thirty thousand acres for wind for solar,

144
00:07:46,240 --> 00:07:48,360
Speaker 2: you can do it on fifteen hundred to twenty five

145
00:07:48,400 --> 00:07:52,120
Speaker 2: hundred acres, so many fewer neighbors, maybe just one landowner.

146
00:07:52,280 --> 00:07:57,840
Speaker 1: Huh really really interesting? Another naive question migratory birds and

147
00:07:58,960 --> 00:08:03,880
Speaker 1: wind turbines. How hard would it be to embed you're

148
00:08:03,920 --> 00:08:08,280
Speaker 1: generating electricity, to embed some form of light, even something

149
00:08:08,320 --> 00:08:12,680
Speaker 1: in a range that's specific to birds that maybe doesn't

150
00:08:12,720 --> 00:08:16,280
Speaker 1: disturb humans or planes, or even just put a little

151
00:08:16,400 --> 00:08:21,480
Speaker 1: high frequency sound c you know, you're spinning these blades

152
00:08:21,520 --> 00:08:25,480
Speaker 1: through the air. Should be interested easy to generate some

153
00:08:25,520 --> 00:08:27,640
Speaker 1: sort of noise, and I know there are lots of

154
00:08:27,640 --> 00:08:31,640
Speaker 1: frequencies that don't disturb humans. The dogs aren't gonna like it.

155
00:08:31,720 --> 00:08:36,080
Speaker 1: But is that really that difficult of a problem to solve.

156
00:08:36,640 --> 00:08:39,240
Speaker 2: It seems like it hasn't been solved yet, so someone

157
00:08:39,320 --> 00:08:41,080
Speaker 2: might be on it. But this could be an idea

158
00:08:41,120 --> 00:08:41,360
Speaker 2: for you.

159
00:08:43,000 --> 00:08:48,360
Speaker 1: That's my gift to the wind farming and land owning community.

160
00:08:48,640 --> 00:08:50,679
Speaker 1: Just put a couple of reflectors up on the edge

161
00:08:50,720 --> 00:08:53,720
Speaker 1: of the blades and the birds will be able to

162
00:08:53,800 --> 00:08:57,320
Speaker 1: be able to see it. So we've talked about solar,

163
00:08:57,320 --> 00:09:00,960
Speaker 1: we've talked about winds. What about projects like biogas? Is

164
00:09:01,000 --> 00:09:04,160
Speaker 1: that a significant source of potential revenue.

165
00:09:03,920 --> 00:09:06,280
Speaker 2: As a landowner? Maybe not as much, but we have

166
00:09:06,960 --> 00:09:10,599
Speaker 2: farm tenants that own dairy farms that they have anaerobic

167
00:09:10,640 --> 00:09:14,880
Speaker 2: digestors that are great for them. They can use some

168
00:09:14,920 --> 00:09:16,920
Speaker 2: of the waste product from the cows and turn it

169
00:09:16,960 --> 00:09:19,680
Speaker 2: into green energy, so that's and sell it back into

170
00:09:19,679 --> 00:09:21,400
Speaker 2: the grid. So that's something we've seen a lot of

171
00:09:21,440 --> 00:09:26,200
Speaker 2: in states like Wisconsin, Ohio, Michigan, New York State. And

172
00:09:26,440 --> 00:09:29,040
Speaker 2: I think that'll continue to grow because it seems like

173
00:09:29,080 --> 00:09:31,720
Speaker 2: the dairy industry is continuing to grow. More cows means

174
00:09:31,720 --> 00:09:32,920
Speaker 2: more opportunity.

175
00:09:32,679 --> 00:09:38,240
Speaker 1: And this is a very heavy protein cycle of how

176
00:09:38,240 --> 00:09:41,480
Speaker 1: people are consuming food, less sugar and carbs, a whole

177
00:09:41,520 --> 00:09:44,160
Speaker 1: lot more protein, or at least that's what it seems like.

178
00:09:45,720 --> 00:09:49,800
Speaker 1: You mentioned timber. I know that there's a very specific

179
00:09:49,960 --> 00:09:56,880
Speaker 1: form of agricultural husbandry with harvesting trees, planting. It's a

180
00:09:57,160 --> 00:10:01,720
Speaker 1: very long term process. You're thinking in cycles of ten, fifteen,

181
00:10:01,800 --> 00:10:04,240
Speaker 1: twenty years. How significant is timber.

182
00:10:04,960 --> 00:10:08,360
Speaker 2: So, timber is a huge asset class, specifically you know

183
00:10:08,400 --> 00:10:12,240
Speaker 2: in parts of Canada, northern Michigan and then in the southeast.

184
00:10:13,080 --> 00:10:17,560
Speaker 2: It's huge in terms of hardwoods and pulp woods that's

185
00:10:17,600 --> 00:10:21,120
Speaker 2: been in an institutional asset class or investment class for

186
00:10:21,160 --> 00:10:23,360
Speaker 2: a long time now. And you tend to see these

187
00:10:23,440 --> 00:10:28,080
Speaker 2: really large owners owning hundreds and hundreds of thousands of

188
00:10:28,080 --> 00:10:31,760
Speaker 2: acres selling to those very large end users. So that

189
00:10:31,920 --> 00:10:34,480
Speaker 2: is a little bit of a different beast, and it's

190
00:10:34,480 --> 00:10:37,959
Speaker 2: a very well developed investment structure where you tend to

191
00:10:38,000 --> 00:10:41,040
Speaker 2: see maybe a little more nuances around some of the

192
00:10:41,160 --> 00:10:44,680
Speaker 2: very high value hardwoods, so black walnuts and things like that.

193
00:10:44,760 --> 00:10:47,840
Speaker 2: But that's something that I don't think is really scalable

194
00:10:48,240 --> 00:10:51,040
Speaker 2: the way that some of the large timber investments currently are.

195
00:10:51,440 --> 00:10:55,760
Speaker 1: What about various conservation programs and things like carbon credits,

196
00:10:55,960 --> 00:10:57,240
Speaker 1: how significant are those?

197
00:10:57,640 --> 00:10:59,680
Speaker 2: Yeah, So, I mean there was a lot of noise

198
00:10:59,720 --> 00:11:04,880
Speaker 2: around carbon sea questration and credits associated with that maybe

199
00:11:04,880 --> 00:11:07,640
Speaker 2: two or three years ago, and we took a hard

200
00:11:07,640 --> 00:11:09,839
Speaker 2: look at it because we own so much real estate

201
00:11:09,880 --> 00:11:14,600
Speaker 2: and the idea of regenerative ag being great for the

202
00:11:14,679 --> 00:11:17,000
Speaker 2: land and being able to benefit from that with a

203
00:11:17,040 --> 00:11:20,280
Speaker 2: payment cycle was very interesting to us. What we found

204
00:11:20,480 --> 00:11:24,000
Speaker 2: was the strings attached, and in many cases farmers were

205
00:11:24,040 --> 00:11:26,360
Speaker 2: already doing a lot of these practices. The people that

206
00:11:26,400 --> 00:11:29,880
Speaker 2: we worked with, they were already using cover crops. The

207
00:11:30,000 --> 00:11:32,000
Speaker 2: question is can you get paid for that in a

208
00:11:32,040 --> 00:11:35,960
Speaker 2: way that doesn't attach strings that jeopardize things later on.

209
00:11:36,240 --> 00:11:37,400
Speaker 1: What are cover crops.

210
00:11:37,720 --> 00:11:40,760
Speaker 2: Cover crops would be so once your crop is harvested,

211
00:11:41,240 --> 00:11:44,880
Speaker 2: you're planting a second crop there to prevent erosion, to

212
00:11:44,920 --> 00:11:48,640
Speaker 2: maintain nutrients in the soil. So winter wheat. When people

213
00:11:48,679 --> 00:11:51,360
Speaker 2: plant wheat, generally that is a cover crop that they're

214
00:11:51,400 --> 00:11:55,080
Speaker 2: deciding in the spring. Did it winter over well enough

215
00:11:55,200 --> 00:11:56,960
Speaker 2: that they're going to harvest it or are they going

216
00:11:57,000 --> 00:11:59,240
Speaker 2: to just leave it there and then eventually kill it

217
00:11:59,280 --> 00:12:02,840
Speaker 2: and plant another crop into it. But it helps prevent erosion.

218
00:12:02,920 --> 00:12:06,400
Speaker 2: Soil erosion helps maintain nutrients and moisture in the soil.

219
00:12:06,800 --> 00:12:10,880
Speaker 2: So cover cropping is a great form of regenerative egg

220
00:12:11,360 --> 00:12:15,079
Speaker 2: or sustainable agriculture that's been around for a long time.

221
00:12:15,080 --> 00:12:17,559
Speaker 1: And if they don't harvest it. And we talked to

222
00:12:17,600 --> 00:12:20,520
Speaker 1: earlier about some of the shows I watched, like Clarkson's

223
00:12:20,520 --> 00:12:24,880
Speaker 1: Farm and Harry's Farm, they just essentially run the combine

224
00:12:24,880 --> 00:12:26,920
Speaker 1: through a ShredIt and then.

225
00:12:27,240 --> 00:12:29,559
Speaker 2: Yeah, they can till it under put it right in there, and.

226
00:12:29,520 --> 00:12:31,680
Speaker 1: That becomes a resource for the next crop.

227
00:12:31,760 --> 00:12:34,720
Speaker 2: Yeah, exactly, more nutrients in the soil. So when we

228
00:12:34,880 --> 00:12:37,680
Speaker 2: looked at those carbon credits, we thought, well, the land

229
00:12:37,800 --> 00:12:40,560
Speaker 2: is the only means of production for generating this credit,

230
00:12:41,000 --> 00:12:43,800
Speaker 2: the landowner and the farmer should probably get a bigger

231
00:12:43,840 --> 00:12:46,960
Speaker 2: portion of the credit than the person who's transacting, and

232
00:12:47,000 --> 00:12:49,320
Speaker 2: in a typical Wall street where that's not how it works.

233
00:12:49,360 --> 00:12:53,359
Speaker 2: So we have not been a big mover on the

234
00:12:53,400 --> 00:12:56,360
Speaker 2: carbon sequestration side because we don't think it's a real

235
00:12:56,440 --> 00:13:00,440
Speaker 2: benefit to landowners financially. Now maybe from an agronomy standpoint,

236
00:13:00,679 --> 00:13:02,199
Speaker 2: but if they're doing it anyway, you don't need to

237
00:13:02,240 --> 00:13:05,400
Speaker 2: sign a contract. So as we think about that, you know,

238
00:13:05,520 --> 00:13:10,760
Speaker 2: conservation in terms of payments, you need a special structure

239
00:13:10,800 --> 00:13:13,079
Speaker 2: to really benefit from that. There are folks that sell

240
00:13:13,120 --> 00:13:16,280
Speaker 2: conservation easements. That's not something we do, but there is

241
00:13:16,559 --> 00:13:18,840
Speaker 2: a group around that. One of the things that we've

242
00:13:18,880 --> 00:13:23,520
Speaker 2: taken a harder look at is wetlands banking because when

243
00:13:23,520 --> 00:13:26,280
Speaker 2: there's development going on, specifically in the Midwest, a lot

244
00:13:26,280 --> 00:13:30,439
Speaker 2: of industrial development, Departments of transportation, as they expand highways,

245
00:13:30,440 --> 00:13:34,839
Speaker 2: there's always wetlands to mitigate. So there are a number

246
00:13:34,880 --> 00:13:38,160
Speaker 2: of developed markets for creating a wetlands bank and then

247
00:13:38,200 --> 00:13:41,600
Speaker 2: selling credits into that for development, and that's something we've

248
00:13:41,640 --> 00:13:43,720
Speaker 2: been taking a hard look at. In states like Michigan,

249
00:13:43,720 --> 00:13:44,319
Speaker 2: and Wisconsin.

250
00:13:44,480 --> 00:13:49,600
Speaker 1: Huh. Really interesting. Let's talk about the use case for farmland.

251
00:13:49,640 --> 00:13:54,359
Speaker 1: That is the single biggest shocker to me. Artificial intelligence.

252
00:13:54,840 --> 00:13:57,720
Speaker 1: What's going on with these big data centers that seem

253
00:13:57,760 --> 00:13:59,199
Speaker 1: to be popping up everywhere.

254
00:13:59,640 --> 00:14:02,920
Speaker 2: Yeah, I mean they seem to really be targeting areas

255
00:14:02,960 --> 00:14:06,760
Speaker 2: with great power resources and capacity on the grid on

256
00:14:06,800 --> 00:14:10,280
Speaker 2: the electric side, natural gas lines or natural gas fired

257
00:14:10,320 --> 00:14:14,400
Speaker 2: power plants close by, fiber optic networks that are close by,

258
00:14:14,559 --> 00:14:18,160
Speaker 2: and then access to water for cooling, whether it's groundwater

259
00:14:18,280 --> 00:14:21,480
Speaker 2: or otherwise. And it seems like in the Midwest there's

260
00:14:21,480 --> 00:14:23,760
Speaker 2: been a huge push into this. So the old rust

261
00:14:23,760 --> 00:14:27,120
Speaker 2: belt is done and there's new manufacturing coming in, and

262
00:14:27,240 --> 00:14:30,960
Speaker 2: data centers seem to be the highest value that's being built.

263
00:14:30,960 --> 00:14:33,600
Speaker 2: And it's being built at scale by a number of

264
00:14:33,640 --> 00:14:37,000
Speaker 2: different players out there now. And it just seems as

265
00:14:37,080 --> 00:14:40,440
Speaker 2: though land that you might have said ten years ago,

266
00:14:40,480 --> 00:14:42,640
Speaker 2: well that was not the best land because it has

267
00:14:42,640 --> 00:14:45,840
Speaker 2: a transmission line running through it. Now that's like being

268
00:14:45,880 --> 00:14:47,880
Speaker 2: right next to the exit on the interstate. It's a

269
00:14:48,000 --> 00:14:49,480
Speaker 2: huge bonus for that land.

270
00:14:49,760 --> 00:14:53,560
Speaker 1: And when you say big players, I'm thinking Microsoft, Google, Amazon,

271
00:14:53,600 --> 00:14:55,040
Speaker 1: who are the big players in this space?

272
00:14:55,120 --> 00:14:57,800
Speaker 2: Yeah, those are the groups as well as meta that

273
00:14:57,840 --> 00:15:01,120
Speaker 2: they have a seems like a real thirst for these

274
00:15:01,160 --> 00:15:05,040
Speaker 2: single user data centers, and they tend to target the places.

275
00:15:06,080 --> 00:15:07,960
Speaker 2: Those groups tend to target the places that are the

276
00:15:07,960 --> 00:15:10,120
Speaker 2: most attractive, and they're the most aggressive and trying to

277
00:15:10,120 --> 00:15:13,440
Speaker 2: put them under contract. Even where we're based in South Bend, Indiana,

278
00:15:13,480 --> 00:15:16,320
Speaker 2: there's two very large data center projects going on now,

279
00:15:16,600 --> 00:15:20,040
Speaker 2: one by Amazon one by Microsoft that are transforming the area,

280
00:15:20,120 --> 00:15:21,720
Speaker 2: and I don't think they'll be the last ones.

281
00:15:21,960 --> 00:15:26,720
Speaker 1: So there are a variety of different land use options

282
00:15:26,760 --> 00:15:30,640
Speaker 1: that can either generate revenue or drive appreciation. Did I

283
00:15:30,880 --> 00:15:32,800
Speaker 1: forget any do we miss anything? Those are a lot

284
00:15:32,800 --> 00:15:33,520
Speaker 1: of different things.

285
00:15:33,720 --> 00:15:38,320
Speaker 2: Yeah, those are the big ones. And traditional manufacturing distribution centers.

286
00:15:38,480 --> 00:15:40,640
Speaker 2: These are things that have been happening at least in

287
00:15:40,680 --> 00:15:44,480
Speaker 2: the Midwest now for generations and it just continues so

288
00:15:44,600 --> 00:15:47,960
Speaker 2: the more that the economy continues to grow. That's one

289
00:15:48,040 --> 00:15:50,640
Speaker 2: area where maybe farmland is a little more levered to

290
00:15:50,680 --> 00:15:53,520
Speaker 2: the economy for some of these non farm uses because

291
00:15:53,560 --> 00:15:56,440
Speaker 2: of that, and these tend to be multiples of anywhere

292
00:15:56,480 --> 00:16:00,440
Speaker 2: from five to ten to twenty x farmland value, so

293
00:16:00,480 --> 00:16:02,960
Speaker 2: it can be very meaningful in the market.

294
00:16:03,200 --> 00:16:06,040
Speaker 1: So to wrap up, there are a number of things

295
00:16:06,040 --> 00:16:09,040
Speaker 1: that make land valuable. Sure, it's a place to build

296
00:16:09,080 --> 00:16:12,080
Speaker 1: a house or a commercial building, or to farm to

297
00:16:12,160 --> 00:16:17,160
Speaker 1: grow crops, but real assets have become increasingly valuable due

298
00:16:17,200 --> 00:16:23,080
Speaker 1: to things like water rights, solar winds, mineral rights, and

299
00:16:23,200 --> 00:16:28,080
Speaker 1: now artificial intelligence data centers. It's a fascinating development and

300
00:16:28,400 --> 00:16:31,200
Speaker 1: they ain't making any more land, so this is likely

301
00:16:31,320 --> 00:16:35,680
Speaker 1: to keep staying popular in the future. I'm Barry Ritolts.

302
00:16:35,880 --> 00:16:39,200
Speaker 1: You've been listening to At the Money on Bloomberg Radio

303
00:16:40,880 --> 00:16:47,640
Speaker 2: Farmable