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Investment Strategy


Ranchland Investments I, LP seeks to provide competitive risk-adjusted returns from ranchland acquisitions and operations, while promoting ecological health and conservation.

With the recent economic downturn, a rare opportunity exists to buy ranches at an attractive rate relative to their productive value. Land and ranching operations offer an asset-backed investment platform that may provide both immediate cash returns and long-term asset growth, while also acting as a hedge against inflation. As a non-correlated asset class with respect to stocks and bonds, professionally managed ranchland investments may also enhance portfolio diversification and overall yields when combined with traditional investment vehicles. Carrus offers a particular advantage by providing highly experienced personnel, sophisticated systems, and access to immediate opportunities.

 

                                    Projected Unlevered IRR:                       7-10%  

                                    Project Cash Yield:                                2-5%                

                                    Term:                                                    10 years

 

Why Ranching?

Ranching provides the investor with a rare combination of asset appreciation, a current income stream, a hedge against inflation, and non-correlation to other asset classes.  In addition, because the ranching industry is so highly fragmented, sophisticated participants operating at scale may obtain superior results.    

Current returns will be generated from core agricultural enterprises (livestock and crop production), as well as complementary enterprises (recreation, hunting, fishing, conservation, energy, etc.). Current income will be partially offset by depreciation on infrastructure, cattle and equipment. In addition, capital appreciation is projected to accrue over the term of the investment.

Why Carrus?

Carrus principals have more than 110 years of agricultural and natural resource management experience managing some of the largest and most diverse ranches in America, including 300,000+ acres in Nebraska, ∼300,000 acres in Florida, 200,000+ acres in Utah, and 120,000+ acres in Montana. Their investment record includes above average returns from ranch properties, livestock, and other agricultural assets. Carrus will source deals, complete acquisitions and dispositions, and manage operations.

Carrus has consistently improved ranch productivity while simultaneously improving wildlife habitat for both game and non-game animals such as deer, elk, sage grouse and prairie dogs. Carrus recently executed a Memorandum of Understanding with The Nature Conservancy,[1] which provides Carrus with access to TNC staff for collaboration on rangeland and grassland investment opportunities.

Why Now?

Current market conditions suggest now is a compelling time for diversified ranchland investments as "We still face a situation of declining supplies and improving global beef demand, which should continue to be supportive to higher calf prices and cow-calf profitability."[2]  The result is that "Gross incomes for farming and livestock operations will be record high," and "Farm and ranch land values are poised to increase significantly during the next two to three years”.[3]  With lengthy reproductive cycles preventing a short-term increase in supplies, Ranchland Investments will be well-positioned as a major participant in this industry.

Investors are aware of the pre-inflationary environment created by recent U.S. monetary policy and agricultural land has historically proven to be an excellent inflation hedge. Moreover, investors wary of or over-allocated in commercial or residential real estate should welcome a real estate alternative with values tied directly to the livestock and crops the land produces.

Conclusion

Ranchland Investments I, LP is uniquely positioned to deliver competitive risk-adjusted returns in an asset class that combines an inflation-hedging asset-backed investment platform with immediate cash returns and long-term asset growth.

This is not an offer to sell securities. Investments in Ranchland Investments I, LP have not been and will not be registered under the Securities Act of 1933 or any state securities laws and may not be offered or sold absent an applicable exemption from such registration requirements.  In order to participate, investors must be an “accredited investor” as defined under the Securities Act.

 

Please direct inquiries to Dan Dygert at dygert.dk@carruslandsystems.com or 435-787-2211


[1] THE NATURE CONSERVANCY DOES NOT AND WILL NOT ENDORSE ANY INVESTMENT IN THE COMPANY OR GUARANTEE THE FINANCIAL PERFORMANCE OF THE COMPANY, AND DOES NOT MAKE ANY REPRESENTATIONS REGARDING THE TAX BENEFITS OR THE TAX TREATMENT TO BE OBTAINED BY ANY PARTY TO ANY PARTICULAR CONSERVATION TRANSACTION.

[2] CattleFax Trends, Mid-January 2012.

[3] CattleFax Outlook 2011 Executive Summary, February 2011.

 

Carrus implements a well-defined and disciplined investment strategy that draws upon the experience and sophistication of our Management Team.

The heart of our investment strategy is to acquire ranchlands with significant conservation values that allow us to operate at scale in the livestock industry with diversified operations.  As an investment in agricultural real estate, we hold appreciating assets that also act as a hedge against inflation and exhibit low correlation to traditional investments. By operating at scale with diversified operations, we are able to generate reliable operating income, and the participation in conservation transactions accelerates the return of capital, lowers our cost basis, and provides landscape scale conservation benefits.

Western US ranchland can generate competitive risk-adjusted returns given the right acquisition, operational management, and disposition strategies.  Our experience suggests that profitable ranches tend to be characterized by an intensive business-oriented approach and attention to biological health of the land.  Carrus further believes that the current environment presents an attractive opportunity to invest in working cattle ranches.  Ranching has lagged behind crop farming in terms of consolidation and enterprise management.  Carrus intends to increase ranch profitability by bringing operations to scale, applying intensive range management practices, diversifying operations, and professionalizing management across all enterprises.

A favorable risk-return profile for agricultural land is generated by a combination of the following key attributes:

                -      Asset Appreciation

                -      Current Income

                -      Inflation Hedge

                -      Low Correlation

Asset Appreciation

The value of agricultural real estate across the 17 western U.S. states grew at a compounded rate of 5.75% between 1950 and 2010.  Typical Western ranches include a mix of agricultural land types and are often augmented by federal, state and private leases.  Carrus is confident that the national and international demand for agricultural, energy, and other resources generated on pastureland will continue to grow in the near-term and into the future, boosting demand for and the associated value of productive ranchlands.

Productive Pastureland Is a Dwindling Resource

Agricultural land makes up approximately 40% of total U.S. land acreage, and has a total value of $1.8 trillion.  That said, it is a shrinking resource: The U.S. agricultural land base declined by over 61 million acres, or 6.5%, between 1997 and 2007, and pastureland has experienced a similar trend.  Agricultural land has historically been converted to higher value-per-acre residential and commercial property as towns, cities and suburbs expand.  This growing scarcity is one factor driving stable growth in agricultural land values.

Rising Demand for Non-Agricultural Ranchland Products and Services

Interest in non-food products and services generated on ranchlands – biofuels, other energy resources, hunting and fishing opportunities, protected areas for open space and wildlife conservation – is putting additional strain on the diminishing supply of U.S. pastureland.  Effectively integrating energy, recreational, and conservation land use demands into agricultural production will be part of Carrus' strategy.


Ranch Operations Generate Current Returns

Total U.S. agricultural production is approximately $300 billion annually; cattle operations contribute $61 billion, or one-fifth of the total. Average cash yield for western beef cattle operations was 3.1% in 2002 and 2007 based on USDA censuses.  Net farm income is projected to remain strong.

The United Nations predicts food production must double by 2050 in order to feed the growing global population.  This places a burden on existing agricultural operations to increase production, and pressure to convert natural space to agricultural use.  In addition to continued population growth, rising income in developing countries is shifting tastes towards a Western palate, which includes more meat than traditional diets.  U.S beef production and consumption have fallen slightly in recent years (-1.7% and -0.9%, respectively, 2006-2010), but U.S. beef exports and export market share have both doubled between 2006 and 2010.  Carrus believes that these factors, combined with extremely tight beef cattle supplies, will continue to increase the value of ranch products in the global marketplace.

In our experience, yields are higher on large ranches (>500 head of cattle) as a result of economies of scale on grazing/land costs, labor, and other factors of production. 

Agricultural Land Is A Reliable Inflation Hedge

Land has historically been viewed favorably as an inflation hedge.  Similarly, breeding livestock and their offspring are food production units and/or eventual food sources, for which market values may fluctuate in the short term, but which ultimately increase in price with inflation.


Agricultural Investments Have Low Correlation To Other Investments

Historically, agricultural real estate has had low correlation with both stocks and other common investments, such as T-bills, traditional REITs, and corporate bonds.