TIAA-CREF Asset Management manages a wide range of assets spanning a variety of portfolios. Learn more about how we implement our innovative investment strategies through these short case studies from around the globe.
WITH JOSE MINAYA, MANAGING DIRECTOR, NATURAL RESOURCES AND INFRASTRUCTURE INVESTMENTS
Land is a key resource in the agricultural production chain, and while world food, stock feed and bio-fuel demand is increasing, the global supply of arable land is shrinking.*
This imbalance underscores the investment logic of TIAA-CREF’s strategic acquisition, and responsible management, of prime agricultural land around the globe.
Through an extended network of dedicated agriculture and investment professionals, and working with established local partners, TIAA-CREF currently has a portfolio of farmland valued at approximately $2 billion*, comprising properties across the United States, Australia, Europe, and South America.
In every acquisition, TIAA-CREF’s agricultural investment team professionals consider farm-specific investment criteria. These factors take account of regional and micro-climate factors, including weather variability and soil types; the strength of local infrastructure and tenant market; water availability and sustainability; crop returns; environmental and social impacts, the potential for future operational growth; and capital gains.
Through a joint venture with Cosan, the world’s largest grower and processor of sugarcane and ethanol, TIAA-CREF has developed Radar, an entity with the mission to identify and acquire agricultural properties with strong investment potential across Brazil, a nation with 390 million hectares* of available arable land.
Brazil is attractive in terms of agricultural land assets because it is in a climatic region that supports two annual crops — sugar and soy — while land prices are lower than those of countries with similar land characteristics.
To increase the productivity of acquired properties, Radar establishes strategic partnerships with leading agricultural operators.
Cosan’s expertise in sugar production is an example of the operational efficiency of these properties, with sugar mills largely fuelled by waste material from the sugar crop and leading the world in standards of production.
The acquisition of Brazilian farmland by Radar, on a scale that an organization like TIAA-CREF can execute, has assisted agricultural operators and farmers to grow their operations, make improvements to the land, conserve resources, and acquire new technology. Because of good working relationships between the organization and the farmers leasing the property, TIAA-CREF properties typically meet high standards of production efficiency and sustainability, and are improved as capital assets by careful investment.
As responsible investors, TIAA-CREF, through Radar, has been involved in socially beneficial initiatives ranging from assisting with title disputes, to providing better housing for workers and raising the standard of Occupational Health and Safety. This not only benefits the farmer tenants and the land value, but also creates jobs and enhances the quality of life in the surrounding communities.
Given Brazil’s crop dominance of sugar, it is also one of the world’s most significant producers of Ethanol. Some 15 percent of all energy in Brazil comes directly from sugarcane, while all motor vehicles in that country run on ethanol bio-fuel. Sugar-based ethanol is more efficient to produce than the corn-based fuel made in the U.S., and is designated by the EPA as an advanced biofuel due to its over 60 percent reduction of total life cycle greenhouse gas emissions.
As the world embraces a lower carbon footprint, the demand for ethanol is increasing, and Brazil is one of the largest exporters of this fuel to the United States. It’s a virtuous cycle of investment.
Jose Minaya, Managing Director of Natural Resources and Infrastructure Investments for TIAA-CREF, invests significant time on the ground at the investment sites in Brazil, working with local farmer tenants and finding ways to invest capital for long-term returns.
“We take a long-term investment horizon; every asset we buy in our farmland portfolio is with a 20 to 30-year view,” said Minaya.
Brazil farmland is an important part of TIAA-CREF’s agricultural thesis, because the organization invests in the main grain-exporting regions of the world. Brazil is one of those regions, and it offers the organization diversification in terms of crop and climate. The country’s climate, with the rainfall and soil profile, allows for two crops per year, compared to the United States, where one crop per year is produced. Brazil is a robust area for farmland, and since there is a lot of arable land in an economy that lacks infrastructure, land in Brazil is typically cheaper than in the United States. This combination makes for a potentially profitable asset in which there is room to continually increase investments.
Given Brazil’s attractive economy and the ability to produce sugarcane at such a low cost, Brazilian sugar-based ethanol is the lowest cost produced ethanol in the world. The ethanol is very productive — yielding food, fuel, and electricity — and the sugarcane pulp is burnt in furnaces to produce steam for electricity turbines.
TIAA-CREF’s involvement in Brazil benefits both the local communities and helps meet the global demand for alternative energy and food. Brazil is the world’s largest producer and exporter of sugar and the second largest producer of ethanol. For the local community, the organization brings capital into the area, which provides more employment, better housing, food, more sustainable farming practices, and an increased investing interest in the area.
“With an investor like TIAA-CREF, with long-term responsibility goals, you’re going to attract the capital and resources that will improve the properties and region—farmers start copying sustainability practices and other companies are then attracted to the region,” added Minaya.
TIAA-CREF works to get the best-in-class operators and properties so the organization can teach the tenant farmers best practices and get on-the-ground ideas from the operators.
“We’re the well-capitalized entity investing in quality resources, which is just good business. It’s the outlook that we’re [TIAA-CREF] going to be working with the farmers for a very long time,” said Minaya.
TIAA-CREF takes an opportunity-driven, global approach to agricultural investing. Global diversification and exposure to the major grain-producing regions of the world is key to the firm’s strategy — Brazil is one of those regions.
* All estimates are in accordance with reports from 2010
TIAA’s Agriculture investments are just one of many investments of TIAA’s General Account, an account solely owned by TIAA that is not available to individual investors and whose performance is not directly allocated to any specific contract or obligation. TIAA’s General Account invests in a broad range of diversified investments to support TIAA’s contractual guarantees and business operations.
Past performance is not indicative of future results. The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.
Daily oil usage is expected to rise to over 100 million barrels of oil equivalent (BOE) by 2030 1; so, the market for oil, coal, natural gas, and alternative energy sources is steadily increasing.
Anticipating the economic momentum of sustainable food production, TIAA-CREF has established a portfolio of strategic agricultural assets in some of the world’s most productive areas. The organization has acquired more than 400 farms located across the U.S., Australia, Brazil, and Eastern Europe.
In the TIAA-CREF agriculture portfolio, social responsibility goes hand-in-hand with global investing. The organization’s analysts recognize the value of international investing in socially-responsible and environmentally-friendly ways. This idea pervades many of the organization’s investment decisions.
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Past performance is not indicative of future results. The information on this website should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.
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