Invest in farmland with Farm Together and gain exposure to one of the most stable asset classes over the last 50 years, with some of the highest yields. Farmland is notorious for a steady income and relatively low volatility. FarmTogether aims to diversify your portfolio while providing cash flow and hedging your inflation risk.
Farmland is an increasingly popular addition to foreign and institutional investors’ portfolios. Population increase, decreasing farmland supply, and changes in global food consumption are behind the growth in this asset class.
Investing in a Difficult Environment
During a recent interview on Yieldtalk, FarmTogether Founder and CEO Artem Milinchuk discussed the challenging investing environment where inflation is a growing concern. He argued that historically farmland moves along with inflation, therefore creating a good hedge for investors.
Another interesting point Milinchuk brought up was the fact that Covid reminded us all that “safe” investments are not always as safe as they appear. He gave the example of one year ago, investing in a Manhattan apartment was considered one of the safest investments you could imagine. Who would ever have predicted the events of the last year where millions of people would rather live out of the city due to a global pandemic.
A second investment regarded as “safe” was commercial real estate, specifically office space. The steady performance of office space over the last ten years would lead you to believe that it’s a solid and safe investment.
Fast-forward almost one year after the pandemic, and you can make a case for an investment in office space sounding as risky as anything going forward.
An Enormous Market
While FarmTogether is not the only company offering “fractional farm ownership” in today’s growing investment landscape, Milinchuk believes there’s plenty of room for competition in a highly fragmented market such as farmland.
Milinchuk says the size of the U.S. farmland market is roughly $2.5 trillion, with only 2% of that owned by any sort of institutional-type investor. Of the remaining 98%, 60% is held by owner-operator families, and roughly 40% is owned by individuals who do not operate the farmland. This equates to farmland being almost entirely owned by individuals of some sort.
Exposure and Flexibility for the Smaller Deals
What Farm Together brings to the table is additional options when it comes to farmland investment. When you don’t have the funds to purchase an entire farm, you are left out in the cold. If you search for more liquid-type investments listed on a stock exchange, your options are only a few. And these major players typically will only give you exposure to the mega-sized farm deals.
With most farms in the small and mid-sized category, farm together allows access to these markets and fills a void. A crowd-funded purchase of a small or mid-size farm was not possible on a large scale before companies such as Farm Together, and now you have a new option.
Why Invest with Farm Together
One of the advantages Farm Together offers is focusing on highly targeted markets. They have an experienced best-in-class management team that focuses on the very best locations. The company believes it can purchase land at a discount because of its strong financial backing. They also specialize in direct negotiations to reduce broker fees for lower purchase prices. Farm Together also has strategic partnerships with a leading farmland and investment management company to assist in deals.
Farm together carefully curates a set of investment opportunities by a team of professionals from the agricultural industry. They estimate 9 – 12% of total returns with a 4 – 6% cash yield. They currently handle over 80,000 acres under management, with more than 70 years of experience on their team of managers. Fractional investment in farmland is becoming more popular as numerous companies have entered the space such as AcreTrader, Steward, and Cultivate Farms. Invest in Farmland with Farm Together, and a minimum investment of $50,000.
Farm Together Current Investment Offerings – Row Crops Farm
Farm Together features four properties that have closed to investors and one property which is currently offered. The current offering is called Row Crops Farm, targeting $1.2 – $2 million total deal size. The internal target rate of return is 8 – 10%, with a cash yield of 3 – 5%. They plan to hold the investment for seven years, and the minimum investment for a single investor is $40,000.
The expected payout schedule will be made from rent paid by the farmers renting the land minus the Farm Together expenses. These expenses include taxes, liability insurance, and administrative costs. A breakdown of the Farm Together fees the company collects is 1% of the investment amount for a one-time expense reimbursement fee. The company collects 1% of the investment amount for an annual management fee and an additional 10% of capital gains one-time fee at the sale.
This deal features a complete summary and overview with value drivers and a comprehensive media video in the webinar on the website. They include a full financial summary and a detailed ownership structure.
The last feature included in this particular deal is the risk and mitigants section, which I found interesting. The first risk they include is not finding tenants to rent the land. The second risk detailed is harvest failures, adverse weather events, and low crop prices. The risk of farmers defaulting on their rent payments is also a concern. They mitigate this by extensive due diligence on the farmers they work with.
Additional risk profiled on this offering is the potential of Farm Together going out of business. Finally, the last major cause of concern would be if Farm Together was unable to exit the deal by not having potential buyers of the property.
The company has closed deals in Merced County, CA, Iowa County, WI, Washington state, and Henderson County, IL. Full details of past and present opportunities are detailed on the company website.