A private equity farming giant with more than 1,500 acres of land in Fresno and Tulare counties and 8,600 acres statewide declared bankruptcy Monday.
Even with “extremely favorable water rights and competitive water costs,” Redwood City-based Trinitas Partners could not keep up with high borrowing costs and consistently low almond prices, according to bankruptcy filings.
The firm owes $190 million in secured and unsecured debt. The company filed for Chapter 11 bankruptcy in the Northern District of California.
The land has not yet hit the market, but Doug Phillips, president of Schuil Ag Real Estate, said it’s likely to come on soon. With the recent collapse of Prima Wawona, another investment firm, a lot of ag land is coming on the market at once.
But, with farmers across the board facing issues of higher operating costs and lower profits, the question of who will buy the thousands of acres coming online remains.
“It’s always sad to see another farming entity go down this path,” Phillips said. “I think it speaks to the tough situation that a lot of growers are in right now when it comes to low crop pricing, high farming costs, high interest rates, water uncertainty, and other factors out there.”
Almond Farming Investment Attracted Institutional Investment, Including UC System
Trinitas Partners began buying land in the Central Valley in 2015. It focused on land with superior water rights and young almonds, making the orchards more valuable for long-term growth, according to court filings.
The firm has holdings across California including:
3,095 acres in Solano County
3,218 acres in Contra Costa and San Joaquin counties
1,543 acres in Fresno and Tulare counties
The firm also owns a 754-acre olive ranch, which isn’t part of the bankruptcy filing.
A third of Trinitas Partners’ holdings have riparian rights, giving them direct access to surface water. Even during severe drought, the firm had sufficient water for all of its orchards and obtained it at comparative bargain rates.
“Advantages in the Debtors’ cost-of-production, and the Debtors’ sustainability practices, the Debtors were well-positioned to become profitable ventures,” the court petition read.
Trinitas gathered largely institutional investors to form the investment fund TAAP IV. They spread the company out among 19 different LLCs. Investors included the University of California Regents and Makena Holdings, an investment company representing more than 50 endowment and foundation clients.
Water Availability Not Enough to Save Farming Giant From Low Almond Prices
Lowered almond prices caused significant drops in revenue. Since the pandemic, oversupply and difficulties exporting have led to collapsed almond prices. Court documents put the average price of almonds at $1.74 per pound. In recent years, almonds reached as high as $4 a pound.
What’s more, the firm’s investment strategy led them to younger orchards. The average age of their trees is under 5 years old, two years before being ready for full production. That meant lowered production numbers couldn’t fund operations.
With the need to fertilize and spray, maintaining the trees cost more than they were getting from them.
“Non-bearing acreage only takes expenses, right?” Phillips said. “It’s not generating income yet.”
In November 2022, the company received a $168 million loan from Rabo Agrifinance. While $130 million of that loan was on a fixed rate, the remaining $38 million was a floating rate. Rising interest rates increased the cost of that debt service.
After the Federal Reserve hiked interest rates, the cost to borrow followed. By Feb. 6, Rabo Agrifinance had declared the debt in default.
“As a result, the Debtors’ quarterly interest payment obligations have increased significantly in the 15 months since the Loan was made and are now TAAP IV’s largest expense category,” documents stated.
$27 Million of Unsecured Debt Owed
The firm still owes about $159 million to Rabo Agrifinance. Beyond that, the firm also owes $27 million to various companies. Bankruptcy documents outline 30 companies with the largest claims. Another document contains 107 pages of names of companies with outstanding claims to Trinitas.
Madera-based The Almond Co. has the largest claim with $9.2 million in trade debt.
Fresno-based The Harvesting Group has a $4.9 million debt claim.
Court documents state that the firm has “almost no cash during a critical period in the almond-growing season.”
Trinitas Bankruptcy Comes as Prima Wawona Puts Its Land on the Market
Stone fruit giant Prima Wawona declared bankruptcy in October 2023. While the company had few almond holdings — focusing more on peaches and nectarines — that means tens of thousands of acres are flooding the ag real estate market.
Prima Wawona is not related to Clovis-based Wawona Frozen Foods.
Prima Wawona has 16,000 acres being sold, and finding buyers will be a challenge.
“There’s a lot of land on the market currently and likely hitting the market soon,” Phillips said. “There’s only so many buyers out there, so there’s a good chance that will have an effect on land values with much more property on the market than there are available buyers.”
Over the past decade, institutional buyers like pension funds and insurance companies have been bullish on farm land. But that’s changed recently.
Phillips says he’s already seen purchasing from institutional investment buyers slowing down.
Phillips thinks most of the land coming on the market will be parceled out and sold to local growers. Many local growers are facing the same problem that Trinitas did, Phillips said. So it will come down to who has the money to buy.
“I could see it going out to local growers in the area,” Phillips said. “But again, they are also in the same position that Trinitas is in. It just puts everyone in a tough position.”
Trinitas’ Related Company Bought Major Hawaiian Ag Land
In 2019, one of Trinitas’ subsidiaries, Pomona Farming, purchased 41,000 acres of former sugarcane land under the name Mahi Pono and repurposed it for diversified ag use. The land cost $262 million, or roughly $6,400 an acre, according to the Maui Times.
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Law 360 | 20 February 2024
