TIAA-CREF’s Farmland Plans for its $2 Billion Warchest

TIAA-CREF, the New York City–based asset manager with $487 billion in assets under management, has announced that it has completed fundraising for a new $2 billion investment company — TIAA-CREF Global Agriculture LLC — which will buy farmland in the U.S., Australia and Brazil. It will be managed by an affiliate, Teachers Advisors.

While TIAA-CREF will not say who its investors are, two large Canadian investment managers have announced commitments to the fund: the British Columbia Investment Management Corporation (Bcimc), with C$91.1 billion ($89.1 billion) in assets under management, which did not disclose the amount of its investment; and the Caisse de dépôt et placement du Québec, with C$159 billion in AUM. The Caisse said in an emailed response that it was investing $250 million, noting that “this is our first direct private equity investment in farmland,” and also, its first investment with TIAA-CREF. Last May, the Second Swedish Pension Fund, known as AP2, announced a $250 million commitment, not long after TIAA-CREF started fundraising in April.

TIAA-CREF will say only that its own investment in its new company represents a significant stake. There is also a handful of other institutional investors whose investments have not been disclosed, says Jose Minaya, TIAA-CREF’s head of global natural resources and infrastructure investments.

TIAA-CREF started investing in farmland in 2007 via a relationship with the Westchester Group of Champaign, Illinois, an agricultural asset manager, Minaya says, noting that in October 2010, TIAA-CREF acquired an 85 percent controlling interest in the company.

Minaya says that at this point, about 25 percent of that $2 billion has already been invested. With that $2 billion and with its other investments in agriculture, TIAA-CREF now has “north of $4 billion” in this category, he says. TIAA-CREF’s holdings now include more than 400 farms totaling 600,000 acres, including a small number of farms in Central and Eastern Europe that were acquired on a separate basis.

With this company, the emphasis is on the U.S., Australia, and Brazil because “we look to invest in the major grain exporting regions around the world,” Minaya says, adding that such grain-producing land is also “a big water play from our point of view. When you’re shipping corn or beans to China, essentially, you’re shipping water,” he says.

TIAA-CREF is not looking to buy the land and flip it. Rather, it intends to be a long-term owner with a “20-plus year view,” Minaya says. “There are lots of ways to make money on farmland,” he says, by “owning, operating, or taking what comes off the land — the dirt to dinner table approach — but the lowest on the risk spectrum is to buy the land and lease it back to the farmer.”

Minaya is not sure what TIAA-CREF will do next in terms of agricultural investments. Right now “our focus is completely on deploying that capital [from the investment company], and I’m not looking to guess what we may do next,” he says.