An almond block on 118 acres with a water allocation I can't underwrite

Get a current well test and a video survey of the casing before anything else. Four years is long enough for water level to drop, for the pump to lose efficiency, and for the casing to develop problems. 900 gpm on paper and 600 gpm in reality changes which years you can farm at all. That test costs a small fraction of your due diligence budget and it's the only way you learn what the primary source actually does.

Also ask who has been farming it and whether they stay. A block like that in transition years is where trees get stressed and never fully recover, and the person who knows what happened in the 0.6 acre foot year is the operator, not the seller.

Underwriting is the whole job for me so let me be blunabout the structure. Your delivery history averages 1.75 acre feet against a nominal 2.4, so the allocation is really about 73 percent reliable on that sample, and two of six years were catastrophic. Model the deficit year as the base case rather than the exception. In a 0.6 year you need roughly 3 acre feet from the well across 118 acres, which is 354 acre feet in a season. Work out whether 900 gpm running the hours you can actually run it gets there, then work out the power cost, because pumping that volume at depth is a five or six figure line by itself.

Then the part you can't underwrite. Groundwater management regimes are state-specific and in some states basin-level allocation frameworks are being implemented on multi-year timelines, so what your pumping is worth in 2030 may be a number that hasn't been set yet. Nobody in this thread can tell you what that number will be, and any seller or broker who does is guessing. What you can do is find out what stage that specific basin's plan is at, whether allocations or fees have been proposed, and whether the parcel has established pumping history that matters under the local framework. That's a conversation with a water attorney in that state, and it is worth the fee relative to 3.24 million.

On your comparison, I think two more small buildings you understand will beat a break-even orchard with unpriced water risk, unless you're buying the water and treating the trees as incidental.

Sextant's last line is the deal. Are you buying trees or buying water? If it's water, the eleventh leaf almonds are a cost center you inherited and you should be pricing the tear-out.

New to all of this so genuine question. What does eleventh leaf mean, and is that old or young for almonds?

@rigging leaf years count growing seasons since planting, so eleventh leaf means the eleventh season. Almonds typically start bearing around year three, hit full production somewhere in the high single digits, and productive life often runs into the low twenties depending on variety, rootstock, and how they've been managed. So eleven is mature and productive with maybe a decade of useful life if it's been treated well, less if it went through those short water years dry.

The stale well test is the cheap fix. The expensive unknown is what those two short years did to the trees. Stressed almonds carry the damage forward in reduced spur wood and you see it in yields for years after. Seller's 2,400 to 2,900 range is a range for a reason, and I'd want the huller receipts by year matched to the delivery history. If the low end of that range lines up with the 0.6 acre foot year, fine, that's explicable. If yields have drifted down since, you're buying a declining block.

Ask me about scope creep and I'll tell you this deal has it built in. Well work, possible pump replacement, irrigation system upgrades if it's still on old drip, and a replant decision inside ten years. None of that is in the 27,500 an acre. On my renovation projects the pattern is always the same: the item you defer during diligence becomes the item that sets your actual basis.

Mostly confused as usual but the seller carry caught my eye. If the seller is willing to hold paper on an asset with unpriced water risk, what does that tell you about how confident he is in getting the full asking price in cash from someone else? I'd want to know how long the block has been marketed.

@vellum seller carry can also just be a tax and timing preference on the seller's side, so I wouldn't read it as distress by itself. It's still worth asking how long it's been listed and whether it's been in escrow before and fallen out. That's the question that answers itself fast.

Cairn, you and I both learn from units breaking, and that's why this one bothers me for you. Multifamily failures are small and frequent and legible. A permanent crop failure is infrequent, expensive, and biological, and you find out two seasons after the mistake. You don't have a feedback loop here yet.

If you still want exposure to this category, the version where you're the landlord and someone else takes the farming risk is much closer to what you already know how to do. It pays less. It also doesn't ask you to become a grower at a distance.

Cairn already knows the answer here. Every reply about the trees is about a cost, and the only argument for the deal is that the water might be worth more later. That's a different investment than the one the broker described.