Howard Halderman David Martin Adam Gore

Farmland Investors/Owners Types of Investors: - Individuals - Corporations - Private Equity Funds - Pension Funds - Other Institutional Investors

September 2011 » Solid Returns ˃Farmland viewed as a “blue-chip” stock ˃Strong capital value growth (5% CAGR in US) ˃Steady dividend (cash) income (3-4% ROI) ˃Nearly zero vacancy rate » Inflation hedge ˃Farmland positively correlated to inflation » Good portfolio diversification ˃Farmland returns negatively correlated to other investments.

Execution The Challenge is Execution: 1)Investment Thesis and Parameters 2)Acquisition Strategy 3)Management of Assets 4)Reporting 5)Mark to Market Valuation

Execution Hire the Right Professional(s) Who Will: 1)Develop the Investment Thesis & Parameters 2)Develop and Execute Acquisition Strategy 3)Manage Your Assets 4)Report 5)Perform Mark to Market Valuations

Capital Improvements What Should an Investor Consider: 1)Value Add Strategies 2)Improvement Enhances Value of the Farm 3)Improvement Increases Income Potential 4)Improvement Reduces Risk 5)Improvement Improves IRR while Reducing Risk

Capital Improvements What Projects Make Sense: 1)Irrigation (Flood/Land Leveling and Center Pivot) 2)Drainage 3)Grain Storage 4)Farm Headquarters Enhancements 5)Improvements that Add Value to Production

Capital Improvements Financing: 1)Equity 2)Leverage (if cost of debt less than ROI) 3)Combination 4)Joint Venture with Producer/Partner

Capital Improvements Project Manager Execution: 1)Research Improvement Need and Thesis 2)Develop Investment Recommendation 3)Present Plan 4)Secure Bids – Recommend Partner 5)Oversee Project Development (GC) 6)Provide Interim Reports and Final Summary

Adam Gore Data based out of Louisiana.

» Process for raising or lowering the elevation of certain areas in a field to allow irrigation. ˃Most common form of irrigation method in the Delta. ˃“Zero Grade” +field is perfectly level throughout. +Better suited for rice where a constant flood is preferred. ˃“Graded” +0.1 to 0.2 in. change in elevation every 100 to 200 ft. +Allows the water to move more quickly to end of the field. +Improves draining of the field. +Better suited for corn, soybeans, milo, and cotton.

» Size of project determined by yards of dirt per acre. » Dirt buckets ˃Typically yards » Laser Levels ˃Used to measure elevation of different places in the field.

» Increases productivity of the land. » Improves drainage. » Usually leads to higher land rent. » Increases demand of farm, attracting more quality tenants. » Increase in future land values » Decreases some production risk.

1 acre= 500 yards leveled Cost per acre Fuel ($1.30/ yd at $4/ gal) $ 650 Survey $ 20 Land Preperation for dirt buckets $ 10 Drainage Pipe $ 35 Site Prep, Clearing, and Ditching $ 100 Irrigation Pipeline $ 175 Irrigation Risers $ 25 Irrigation Pumps $ 75 Management Fee $ 25 Total$1,115.00

Dry Land Rent (per ac.) $ 90 Irrigated Rent (per ac.) $ 160 Net Increase $ 70 Annual ROI6.3%

Dry Land SoybeansIrrigated Soybeans Yield (bushels per ac.)3060 $ per bushel $ Total Revenue $ $ Owner's Share ($/ac.) $ $ Annual ROI=8.74%

Rice Irrigated Soybeans Dry Land Soybeans Yield (bushels/ ac.) $ per bushel $ 6 $ 13 Total Revenue $ 936 $ 780 $ 390 Owner's Share ($/ac.) $ 234 $ 195 $ 98 Annual ROI=3.50%12.24%

Before Development After Development Dry Land FMV $ 1,750 Total Land Investment $ 1,750 $ 2,865 Cash Rent $ 90 $ 160 Cap Rate5.14% FMV based on Cap Rate $ 1,750 $ 3,111 Value Increase $ 246

David Martin Data based out of Central Indiana.

» Buried corrugated tubing. » A way to get water off a farm quicker. » Runs at a.2% grade. » Can drain ft on both side of tile, depending on soil type, depth and width of tile.

» Reduces risk. » Decreases the chance of losing vital fertilizer. » Increases productivity. » Allows earlier entry. » Increases value of the farm. » Allows for better micro- organism activity.

Pattern TileSpot Tile

» Evenly drained. » In a year with above average rainfall, removes water quicker. » Earlier field entry. » Less compaction during planting.

» Lower cost. » Can be installed after planting or after harvest. » Quick results if limited on capital expenditures.

Pre- TilePost Tile

Pre- TilePost Tile

Grain Storage Considerations

» Avoid selling grain at seasonally low harvest prices » Quicker transportation of grain from the field to storage facilities » Allows the grower to harvest grain at higher moisture and condition the grain on the farm without receiving a discount from commercial elevators » Marketing Flexibility

*USDA-AMS Creswell, NC $.20 / bushel basis improvement from October to February. High year of $.50 improvement.

USDA Average Monthly Corn Price

» Storage Investment -- $3.50 / bushel ˃Income Improvement (Basis) – Oct. to March -- $.20 per bushel ˃Income Improvement (Market Carry) -- $.16 per bushel ˃Income Improvement (Commercial Charges) -- $.20 per bushel ˃Operating Cost – Interest --($.15) per bushel ˃Operating Cost – Facility Operation --($.15) per bushel +Net Return $’s / Bushel --($.26) per bushel +7.5% Return on Investment

» New or Used » New Considerations ˃Location – proximity to Utilities ˃Improved or 80,000 pound road ˃How to elevate – mobile auger or grain leg ˃Drying system – independent dryer vs. in bin drying ˃Necessary CFM – ¼ to 1 CFM per bushel depending on region and purpose ˃Unloading and loading capacity ˃Cost - $2.50 / bushel to $4.00 / bushel depending on region, crop, and capacity. » If Used Storage – Cost, condition, sufficient CFM, size, Location & drying capacity +Used cost -- $0 to $2.50 per bushel