Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
.svg)
Farmland has long been a stable hold of value that’s attractive for long-term investors. However, until recently, the only way to invest in farmland has been to purchase a farm. This has made investing in agriculture off limits to anyone who didn’t have both the capital required to purchase the farm and the knowledge to operate it. Today, there are a variety of ways to invest in farmland, most of which have emerged within the last decade.
Below is an overview of some of the main ways in which individual investors, family offices, and institutional investors can invest in farmland.
Farmland REITs provide an indirect route to agricultural investment by allowing individuals to invest in shares of companies that own and manage farmland. Investing in farmland REITs offers the best liquidity of all the options since the REITs are traded on public exchanges. REITs are also a way for a retail investor to get immediate diversification across a large swathe of agricultural assets. For example, a U.S. farmland REIT may own almond farms in California, row crop ground in Indiana, & citrus in Florida.
One of the drawbacks of investing in a REIT is that they have some legal requirements around distributions that may not align with your particular investment and tax strategy.
Another is due to the fact that they don’t operate the farms they own. Most REITs have long-term tenants in place to operate their farms. The REIT’s income stream is the farmer’s rent. This reduces the REITs direct exposure to operational risk and commodity price fluctuations (although they’re still indirectly exposed through the tenant who, in the worst case, may end up unable to pay rent). However, it also means that the REIT isn’t fully in control of the farming practices used on their land. The tenant’s incentives aren’t always perfectly aligned with the REIT’s, which can lead to the tenant making decisions to maximize the profitability of the farm in the short term even if that leads to long-term degradation of the land.
A couple examples of Farmland REITs:
Another option are the various crowdsourcing agricultural investing platforms that have gained popularity in the last few years. Like REITs, these platforms don’t operate the farms they purchase. They partner with farmers to manage each of their offerings and generate returns to investors through the rents the farmers pay and appreciation of the underlying asset.
Unlike REITs, these platforms typically allow investors to pick the farms or agricultural companies they invest in. This means an investor can build their own portfolio of farmland investments based on a particular strategy. A couple examples:
Investor “A” is focused on immediate cash flow, so she builds a portfolio of agricultural investments on these platforms that have distributions beginning shortly after the deal closes.
Investor “B” is seeking long-term appreciation and minimizing taxes, so he invests in a handful of permanent crop development deals.
The main tradeoff for the ability to pick from a wide-range of farmland or Ag-business offerings is liquidity. Investments in farmland REITs are as liquid as any other stock that trades on a major exchange. Investments on these Ag crowdfunding platforms are less easy to liquidate.
Some of the most popular Ag investing platforms:
This is the traditional and most hands-on approach for investors to invest in farmland–purchasing a farm and managing it directly (or through a third-party farm management company). However, this path is rife with challenges, including the need for extensive farming expertise and operational knowledge–or without that, the associated risks of outsourcing that can significantly impact returns.
This approach also offers the least amount of diversification of all the options. Directly owning a farm means that a large chunk of capital is tied to the results of that single asset.
Investing in a hybrid farm owner and operating company is the least common way to invest in agriculture but is the niche in which Gold Leaf Farming fits. We overlap in a variety of ways with the other farmland investing options but offer (in our opinion) several key advantages:
Real Farm Expertise. We do the farming. No tenants, third-party farmers, etc. Our team is in the field on all our farms every single day.
Narrow crop focus. Different crops take different skill sets. We know we can’t be good at farming everything, so we focus on crops in which we have expertise and where the long-term supply and demand characteristics are compelling.
Sustainability as a fundamental. We use precision irrigation on all our farms, pay our Farm Operators living wages and provide great benefits, farm thousands of acres organically, connect farms to surface water districts to minimize groundwater use, and much more.
Diversification within our crops. Investing with Gold Leaf is an investment in multiple almond, pistachio, and dates farms, spread across >700 miles of the Western U.S. This protects the investor from isolated weather events or other localized risks.
Predictable Liquidity. We issue distributions multiple times per year and mark the portfolio value at year end. This allows investors to transact at that value and have liquidity options.
Transparency. We issue quarterly reports on how each farm is performing, annual letters that summarize the previous year as well as what we’re seeing in the macroeconomic environment. We are available to speak with investors and often have them visit our farms for a closeup look (and fun experience).
The downside of investing with this type of farming company is that you’re unlikely to get as wide of a multi-crop diversity that is available through the REITs and crowdfunding platforms. It’s rare to find a single farming company that operates across the whole of the U.S. and welcomes outside investors.
If you’d like to learn more about investing in agriculture in general or are interested in partnering with us as we continue to build a new kind of farming company, please reach out to us at investors@goldleaf.ag.
