This month, UBS AgriVest is expected to close on the purchase of 19,255 acres of mostly irrigated cropland in Texas’ northern High Plains. The deal is estimated at $40.5 million, or $2,133/acre.

UBS AgriVest is buying its Texas land from Wexford Capital, a Greenwich, CT-based hedge fund manager that is liquidating a near 49,000-acre portfolio of cropland in Nebraska, Texas, Oklahoma and Kansas. In 2009, Wexford said it aimed to “build the Walmart farming operation of the world.” Now the firm says it sees more compelling investment opportunities outside agriculture.

Wexford paid around $95 million for its farmland in 2007 and 2008. If pending sales are completed, the firm appears poised to pocket $64 million in gross capital gains on its five-year land play. Market observers are watching whether other institutional investors will follow Wexford’s lead and harvest their capital gains.

UBS AgriVest Farmland Fund is a seven-year-old private real estate investment trust (REIT) that invests in U.S. farmland. The fund’s current portfolio is concentrated in the Mississippi Delta (Arkansas, Mississippi and Louisiana), California, the Mountain States (Colorado, Idaho and Arizona) and Georgia. Farm properties are leased to farmers who grow vegetables, corn, cotton, soybeans, strawberries, rice and apples. As of Sept. 30, the fund held 46 properties valued at $284 million.

The fund is managed by UBS AgriVest LLC, a Hartford, CT, unit of Swiss banking giant UBS. The fund’s 27 investors are mostly pension funds ranging from the Sonoma County Employees Retirement Association and the Orange County Employees Retirement System in California and retirees of the Town of Manchester, CT, to the Anchorage Police & Fire Retirement System and the Army and Air Force Exchange Service.

The fund has generated a net annual average total return of 10.3% since its June 2006 launch. That lags the 13.4% annual return of the NCREIF Farmland Index, a gross return (before management fees) benchmark of all U.S. farm properties owned by pension funds. Still, the UBS AgriVest fund’s performance is more than double the stock market’s 4.6% return over the same period, as measured by the S&P 500 Index.

Mike Fritz is editor and publisher of Farmland Investor Letter. Reach him at m_fritz@charter.net or visit www.farmlandinvestorcenter.com.