November 20, 2020

The FarmTogether Investment Process & Philosophy

by Sara Wensley

Director, Growth and Marketing

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The FarmTogether Investment Process & Philosophy
FarmTogether's Daybreak Organic Pear & Apple Orchard - Crowdfunding Property
Our team employs an academic approach to investing. We developed our disciplined investment philosophy by investing for some of the largest and most innovative institutional funds in the world, such as Prudential and Ontario Teachers’ Pension Plan.

Data-driven, proprietary technology-enabled decision making.

Our team employs an academic approach to investing. We developed our disciplined investment philosophy by investing for some of the largest and most innovative institutional funds in the world, such as Prudential and Ontario Teachers’ Pension Plan. Together our team has deployed over $1.2B of capital into agriculture.

Learn more about our team of seasoned veterans here.

Investment Process

Our investment process starts with the global macro view. We take into account water availability, climate change, structural regional trends, regulatory landscapes, and long-term trends in improvement in agricultural yields.

After that, we dive deep into the end markets for the farm products we target. For example, for almonds, we will analyze supply, demand, consumer preferences, marketing, regulations, and new product development to arrive at a view for the long-term trends in the industry and how this may influence end prices.

Property Analysis

The next stage of our process is property analysis. FarmTogether currently incorporates 87 data sets from public, private and proprietary data sources. We then apply our proprietary technology and investment expertise to zero in on the best investment opportunities in our target geographies and crops. For example, in California alone, we are ranking 200 water districts based on the history of allocations, weather, new riparian rights legislation (the Sustainable Groundwater Management Act “SGMA”), infrastructure and last-mile availability. We then select the districts and counties that are not only sustainable for the long-term but also provide the right risk-reward investment opportunities.

We filter for opportunities with clear value creation drivers through improvements, such tiling, drainage, adding a secondary water source,  or transitioning a property to a specialty label, such as certified organic. We are also testing and developing a comprehensive playbook of advanced agtech solutions that can further improve the performance of our farms.

Due Diligence

As we identify specific farmland opportunities, we then look at all the due diligence items relevant to the specific farm. Our 100-point checklist makes sure no stone is left unturned. This checklist includes soil, leaf, water, capital improvements, title, local legislation, depth of the supporting farming ecosystem, cost of inputs, farmworker wages, and many more. We work with experienced local due diligence providers and growers to get a hyperlocal understanding of the property and the surrounding area.

Overall, our team continuously evaluates thousands of opportunities, and we only select a few to recommend to our clients. We are proud of our unwavering commitment to a disciplined and conservative investment philosophy.

Farmland Sourcing

We plan to acquire high quality farmland that offers an attractive risk-adjusted balance of current returns and appreciation potential. We believe our management team’s deep understanding of agribusiness fundamentals and insight into factors affecting the value of farmland allow us to identify properties consistent with our investment criteria.

We believe the following factors are important in the selection of farmland:

•        Soil Quality—Soil quality is a fundamental determinant of farmland productivity and therefore of its value. In considering farmland for purchase, we take soil quality into consideration to determine whether the farmland is attractively priced. In general, we focus on farmland with average or better-than-average soil.

•        Water Availability—Appropriate water availability is an essential input to farming and key consideration in determining the productivity and value of farmland. We seek to acquire farmland where water availability through precipitation and irrigation meets the agronomic needs of the crops expected to be grown. As part of our acquisition due diligence process, we evaluate properties for water availability and any associated ground or surface water rights. Where appropriate, we may also invest in irrigation infrastructure to improve the productivity of properties we own. Occasionally we may acquire farmland at prices that more than compensate us for any potential reduction in water availability, which, in the future may result in a shift to different crops or production systems.

•        Robust and Competitive Tenant Environment—We expect to focus on farmland located in areas characterized by a robust and competitive tenant environment, with a relatively large population of experienced farm operators as potential tenants.

•        Market Access—Due to the higher costs of road transportation, the location of primary crop farmland relative to points of demand (e.g., grain elevators, feedlots and ethanol plants) or access to low-cost transportation (e.g., river ports and rail loading facilities) determines the premium or discount in farm-gate commodity prices compared to the general market prices (also known as “basis”), and therefore is one of the factors that impacts its value. We focus on acquiring primary crop farmland in areas with substantial farming infrastructure and low transportation costs, including markets with access to river and rail transportation.

•        Climate—Crops have particular climatic growing requirements. As such, we seek to acquire properties in regions with climates conducive to the expected crops. We believe that diversification within and across core farming regions and crop types provides significant annual and long-term risk mitigation to our investors.

The FarmTogether Advantage

In terms of sourcing properties with the above characteristics, we use both off-market and public channels to gain access to properties. Relative to competitors, we have a number of advantages that allow us to win with these two channels, including a strong online presence, established relationships with experienced operators on the ground, and AI-driven identification.

Interested in Learning More About Farmland as an Asset Class?

Click here to see farmland's historical performance, visit our FAQ to learn more about investing with FarmTogether, or get started today by visiting ways to invest.

Disclaimer: FarmTogether is not a registered broker-dealer, investment advisor 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.

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