FarmTogether's Due Diligence Process
How We Select Properties
Any investment is inherently risky and farmland is no different. FarmTogether aims to offer investors deals with the highest quality opportunities across the country. With a plethora of available properties ranging in size, location, crops, and a multitude of other criteria, our due diligence process narrows down the field of possibilities to those demonstrating appealing risk-adjusted returns available on our platform.
We only put properties on the platform that we want to (and do!) invest in ourselves. To make sure that we’re getting those, we use a three-stage process:
- Source the Right Deals
- Conservative Valuation
- Thorough Due Diligence
Source the Right Deals
We source deals from various channels and must filter these down to what meets our target risk, return, and deal size thresholds. We see hundreds of potential investments but only a small percentage meets our investment filters and merit further evaluation. We target investment opportunities appropriately sized for our platform and with crops FarmTogether is an expert in acquiring and managing.
Next, and equally important, is climate and water. Is the property located in a prime production region and does it have the water necessary for long-term production? Our team has experience deploying hundreds of millions of dollars into farmland on the West Coast and are well-versed in the water landscape of the various regions.
Sometimes, all the conditions can be met but the seller's value expectation is too high for us. In these cases, the deal still might be underwritten and modeled, if we think we have room to negotiate with the seller.
Thorough Due Diligence
Once we think the deal is worth pursuing, we’ll dive into the property specifics. At this stage, we’ll take a deeper look at the property fundamentals to model the deal. We look at macro trends, industry trends, trade dynamics, diet trends, historical price and production data, projections, regional dynamics, input costs, labor force, and many other factors to forecast price, yields, and costs, and ultimately the risks and returns of the investment.
If we think the deal is a good fit, we’ll visit the property for an inspection. Our purpose during the trip is to learn the nuances of the property and to see if anything could disqualify the deal. For example, a property might have deferred maintenance that the buyer will have to pay for or a well that needs to be repaired or replaced. We must account for all these minutiae, be able to describe the impact to investors, and determine whether to purchase the property.
For properties we move forward with after our initial models, we’ll conduct extensive due diligence and testing. The purpose is to confirm or adjust our assumptions to further calibrate the model. Some of the due diligence items are below:
- Water - water rights, water quality and pump tests, irrigation efficiency tests, long-term supply projections
- Soil - soil tissue sampling and tests
- Legal - title and ownership
How We Select Operators
We only work with reputable and experienced operators (such as TriNut Farms or Farmland Opportunity). These groups have usually been around for a while and we have a large pool of potential operators we have worked with before from our institutional investing experiences. In some instances, this means we already have a solid partner lined up before we even make an offer on a property. In other cases, we’ll interview and compare across multiple managers considering factors such as fees, reputation, and proximity to the farm.
FarmTogether Offers Exclusive Off-Market Farmland Deals
We apply a thorough process with quantitative and qualitative factors such that we can be confident that what’s available on FarmTogether’s platform are only quality properties with desirable risk-adjusted returns. Beyond just providing access to farmland, we’re offering farmland we believe to be the most attractive investments in the space.
Interested in farmland investments? You can check out our most recent offerings here.
Disclaimer: FarmTogether is not a registered broker-dealer, investment adviser or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.