Jim Taylor and Tyler Jacobs were invited by Angelo Robles to speak at a meeting of Single Family Offices at the beautiful Carneros Inn in Napa Valley. Single Family Offices are increasingly ubiquitous as wealthy families are setting them up to manage and diversify their investment portfolios as well as manage their personal affairs.
Jim had an opportunity to speak on his favorite subject – Investment Quality Rural Real Estate (IQRRE). He began by defining IQRRE as real estate whose value comes from qualities that are intrinsic to it. These are enduring qualities that will always have value regardless of what happens in the world.
He had an opportunity to compare rural land to the offerings of previous presenters who talked about more traditional investment real estate like office buildings and apartments. Key differences include the fact that farms and ranches do not depreciate nor do they become obsolete and they have a 55-year history of appreciating at around 6% per year. In addition, while we can build an unlimited number of apartments and office buildings, they simply are not making any more land. Quality rural land will always have value and, by the way, has a zero vacancy rate.
There will always be tenants for farms and ranches and, while returns are modest compared to the double digit returns promised from leveraged apartments and office buildings, we were able to show that annual cash returns will more than carry investments in operating farms and ranches.
The audience of families and their advisers was made to order for IQRRE. Quite apart from appreciating the concept of having a portion of the family wealth invested in a hard asset that will support itself and appreciate over the years, the intangible benefits derived from the joy and pleasure of ownership and of having a place for the family to gather and to introduce the next generation to nature and to the tangible benefits of production agriculture is immeasurable.
The message was well received and, despite some persistent rain showers, everyone appreciated the understated elegance of the Carneros Inn and the many opportunities to enjoy the Napa Valley which is truly the wine capital of the USA.