A Guide to Sustainable Farmland Investing
by David Miller, co-founder and CEO, Iroquois Valley Farms
We at Iroquois Valley Farms are pleased to announce a new corporate entity as we begin our 11th season of operations. In 2007 when we started the company, our idea was simple –growing healthy foods on organic soils would be good business. We are now setting the table for the next decade. Incorporating everything we have learned, we recently reorganized into a new public benefit corporation, Iroquois Valley Farmland REIT, PBC to further scale our commitment to connect investors and family farmers in the field of sustainable agriculture. Currently, we are raising funds for new farm leases and mortgages that are national in geographic focus. We already have investments in 13 states (including contracted investments) and a pipeline to significantly expand the company.
There are two private offerings currently available to accredited investors: our REIT equity shares and our short-term fixed income option “Soil Restoration Notes”. We expect a non-accredited offering prior to yearend. This is still a new asset class for most investment portfolios. It is important therefore to get started on the right foot. We realized early on that we needed to educate our investors and advisors on the basic economics of our business. As such in 2011 when we started to scale the company, we created a “Guide to Sustainable Farmland Investing”. This guide still has broad relevance even in today’s impact investing markets. Here’s an updated version of that guide:
1. A Real Asset. Farmland is a non-depreciable real asset with an income upside. Most investors are likely under-allocated to this combination food/farming/health sector or not invested at all. We focus on the highest and best use, organic and specialty food production.
2. Don’t Buy Blind. We offer an existing portfolio of farmland with experienced farm families – not a promise to purchase into a blind pool. Our farmland investments (over 40 in total) are already under lease or mortgage agreements on economic terms and accruing revenue. Benefit from our successful ten-year history of operations.
3. Natural Appreciation. Where can one invest in an asset that naturally increases in productivity and value over time? Organic farmers say that it takes 10 years or more to return the soil to its natural fertile state. Properly managed organic farms become more productive every year. Our original investors (ten year history) have seen double-digit annual growth in share price.
4. Growth and Income. In addition to the natural appreciation of the real asset, investors also receive upside income exposure to the tenant’s farming business. Our most common lease structure limits the downside rental rate while allocating a portion of farm revenue in good years to the company. Our mortgage business provides important income and enhances credit quality. Our farmland investment portfolio (about 70% owned and leased acres is coupled with 30% mortgage assets) could be characterized as both growth and income.
5. Stock for the Next Generation. We are a next generation investment with over 70 percent of our leased land under contract to Millennials. We are also providing mortgage financing to young farmers. We started our Young Farmer Land Access Program in 2012 to focus on the next generation of farmers. To date, we have funded $18 million under this program.
6. Carbon Benefits for the Climate. Our focus on living, organic soils, and diverse crop rotations using hayfields, cover crops, woodlands and pastures, help to sequester more carbon back in the soil where it came from. While not paid directly for this yet, carbon farming is an increasingly important public benefit provided gratis by our farmers.
7. Diversify Your Egg Basket. Everyone knows this agricultural adage. On a regular basis we are buying farms in multiple counties and states, with diverse business plans, different farm families, varied markets and distinct soil types. We average into the highs and lows by ongoing purchases and mortgage appraisals. How risky is your investment basket?
8. Farmland is Illiquid? Sustainable farming is a long-term investment by the farmer and investor. However, by building a private company (now a REIT) with broadly held equity ownership, we are building liquidity year by year through an expanded investor base. With over 300 equity holders and note issuances, we are currently planning for a non-accredited offering later this year that will impact thousands of new clients. Shareholders accrue redemption rights after a seven-year vesting. We envision a public offering in a few years.
9. Generational Stability. Our most common tenant legacy is four generations — that is almost 100 years of family homesteading in one county. They usually have parents and grandparents still farming. We are sustaining family farmers with generations of experience and securing the healthy soils that will feed our children.
10. Grass Roots Capital. The Jobs Act of 2012 increased the mandatory conversion to a public company from 500 investors to 2,000. We are a young company with a growing investor base, now in 35 states and DC. We are geared to have thousands of investors and engage the public to enter an asset class historically closed to them. We consider it a socially just endeavor.
11. 10-Year History of Balancing Risks and Rewards. Our farm tenants minimize operating losses with crop diversity, crop insurance and long-term lease tenures. The company offsets land price volatility with functional and geographic diversity, ongoing acquisitions and growing productivity. Leverage is managed to maintain a positive cash flow. Our 10-year track record is available for public view (see our Key Financial and Operating Statistics Report).
Read about the other 9 parts to Sustainable Farmland Investing from IVF here - http://www.greenmoneyjournal.com/june-2017/a-guide-to-sustainable-farmland-investing-healing-people-and-the-planet/