Agriculture Equity Investments
We offer what we think is the best way to invest in farm land thru direct ownership. We also directly operate our farms. This is advantageous to us because it increases returns. We are able to acquire these properties through our local knowledge and strategic alliances with local level farmers, appraisers, real estate brokers, and other agriculture related workers. The investor will invest in a LLC that we will form for the investment in the farm property. All the revenues and expenses from the farm investment are received and processed thru the LLC. Then the accounting is posted to a web site for investor access and review on a month basis.
The Risk Management/ Pre-Acquisition due diligence check list is a process that examines each investment opportunity. This considers a wide range of issues , historic yields, soils, water and irrigation pertaining to the proposed investment. Some of the items we consider are as follows:
Investment Strategy/ Barriers to Entry
Most farm markets can be accurately characterized as “thin” due to the low turnover rate. Our evidence points to an annual turnover rate of 1-2%. An investor can own just 4% of the farmland, the rest of the balance at 96% is owned by farms and other close insiders.
Many deals are off market transactions. So a good reputation and local market knowledge are very important. Along with market insight, access to relationships with the industry players is critical to acquiring the best properties. We know how to make the most of this investment opportunity.
Purchasing quality farm properties with good soils, climate, and a quality water supply with the right varieties that the market wants can be quite difficult. The current and proposed government restrictions make existing farms more valuable. The ability to develop new farmland may be severely restricted. Tasks like drilling a new well or getting an allocation of irrigation water will be difficult, if possible at all.
The farming business has a very high fixed cost associated with farming operations. Many farm operators will be sellers of farmland as family estate plan needs require cash. The estate and the contended operation will require too high of an investment for the traditional farm operator. The farms will grow larger as the fixed cost associated with the farming operation acres is allocated over more acres.
Different types of agricultural assets
These crops are planted and harvested annually. Plants like corn and soybeans offer lower risk, and lower returns on investments.
California tree cops generate one of the highest incomes per acre. These have long life spans, typically 25 years or longer, and have historically delivered higher average rate of returns than row crops.
We directly operate the permanent cropland in order to maximize the returns these crops include wine grapes, almonds, walnuts, stone fruits, and citrus.
Permanent planting investment has significant barriers to entry. Prime properties are rarely available for purchase. With additional government restrictions, compounded by reduced water availability, it may be difficult to develop acreage to permanent plantings in the future.
Development properties is the buying of open land that can be developed into an orchard, vineyard, or other income producing crop. We are able to purchase an existing orchard and redevelop it with a new type of tree or new updated varieties. The new orchard will use less water and be substantially more efficient than the older orchard after its removal.This type of investment offers the investor an added development profit.
Day to day to management of each investment in the portfolio is directed by an experienced local farm management company. This company will be farming the same crops in the same areas.
We believe that Citrus trees offer the best diversification in the permanent plantings. One farm can be diversified with several varieties with fruit coming to market over several months giving the farm an opportunity to sell thru several selling windows. This allows for risk mitigation of frost, market, and change in varieties allowing several marketing windows. Other crops can only offer one time marketing.
Many crops have insurance available.
Williamson Act Taxes Application
The Williams son act allows for substantially reduced taxes.
Purchase below Replacement Cost
Almost any permanent crop i.e. almonds, pistachios, wine grapes, or citrus with cash flow is being purchased at less than the adjusted replacement cost. To establish a new orchard, it is best to buy an existing one and tear it out. Developmental pressures are further reducing the supply of land for agriculture.