Real Estate

Episode 37: Investing in California Farmland with Brandon Silveira of FarmFundr

Ben Lakoff, CFA
March 15, 2021
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Did you know that Farmland has historically outperformed stocks and bonds with DOUBLE digit total yearly returns over the past four decades?

Brandon Silveira of FarmFundr, crowdfunding farmland investment platform, on all things California Agriculture.

FarmFunder launched in 2019, but Brandon is a very experienced farmland investor. This interview gives you some insight from an experienced farmer’s perspective of some of the trends happening within Farmland investing – specifically in California.

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Show Notes

0:00:00   Welcome and context

0:01:27   What is your background?

0:02:56   How did you launch FarmFundr? 0:06:45  

What locations are you looking for acquiring farmland?

0:08:10   What’s driving the good returns on Farmland in California?

0:13:21   What’s your due diligence process for investing in farmland?

0:18:34   What are the investments available on your platforms?

0:21:40   How participating in operational farming works?

0:24:03   What is the deal flow process like on your platform?

0:27:21   What advantages does crowdfunding give you?

0:28:39   What is your ideal investor for FarmFundr?

0:31:11   What risks do you see with farmland?

0:35:26   What are the liquidity and fees like on your platform?

0:38:05   How can investors be sure that you’re doing your best with farming?

0:40:47   What’s next on your roadmap?

0:45:59   Why banking in agriculture is difficult?

0:48:11   Where can people find out more about you?

Show Links


Farm Finder


Episode Transcript

Ben: [00:00:00] Welcome to the alt asset allocation podcast, exploring alternative investment opportunities available to the everyday investor. Here’s your host Ben Lakoff.

So this conversation was with Brandon Silvera of farm funder, which is a crowdfunding farmland investment platform. So in this conversation, we talk a lot about farmland in general, farmland in California. . And then the types of investments that are available on his platform, farm funder, as well as some of the upcoming developments in farm funder that they’re looking to launch over the next year. Farmfunder is a new platform. They just launched in 2019. They’ve just got there. First deal on the platform, but Brandon is a very experienced farmer that’s been in and around farmland his whole life.

I really think this is an interesting one, gives you a little insight from a farmer’s perspective of what he’s looking at in these steals, how they’re structured, what are some of the risks? What are the, some of the systematic risks to farmland in general? It’s kind of a wide range ranging conversation about a number of things within farmland in general. enjoy it.

Morning everyone. And a warm welcome to Brandon Silvera of farm funder, which is a crowdfunding farmland investment platform, wanting Brandon, welcome to the show morning. How are you? I’m doing really well. You know, it’s sunny out here in California. That’s for sure. I wanted to start when we’re chatting a little bit before, but I wanted to start just with a little bit of your background, especially in regards to farming.

Brandon: [00:01:38] Sure. I’m a fourth generation farmer. I’m based out of the central Valley in California. I’m like my great-grandparents and grandparents were dairy farmers and, and row crop farmers, and everything just kind of evolved into where we’re at today, which is farming and farm land management. And you know, it was just, I it’s, it’s funny because.

When you grow up in ag or on a farm that, you know, there is that thing where you just that’s what you’re going to do. I think you love it or hate it. You either run from the farm or you never leave it. And that’s, that’s kinda where I’m at. Went to went to Cal poly in San Luis Obispo, got an agricultural degree and came back and here I am.

Ben: [00:02:19] Nice. Yeah, actually, oddly enough, my grandfather, I mean, we have farmland in Indiana, but I think I, I would fall into the category of ran away from it. It’s something. oddly enough, now I’m very interested in it from an investment standpoint, but you know, I’m, I’m the type of person that. Because the plumber, when the toilet’s clogged, unfortunately, I’m getting better though, you know?

I’m curious, you, you have some background on your website. You said your farm management company was recognized in 2012 with over 900% growth. It was listed Inc. Magazine’s list of fastest growing companies. The only agricultural company on the list, right? That’s a, that’s a grand feat. Do you want to just talk a little bit about that and how that led you to farm funder

Brandon: [00:03:04] Back, you know, when we were really expanding and starting to invest and buy more and more farmland and more and more farming assets as well as expanding the management and, and and custom farming side of, of doing work for other growers and other other assets You know, we, we, we had great growth.

We got a really good opportunity there. You know, the drought issue, there was a time there where we had some water, right. Cause that plays a big, a big role as far as growth goes at that time, when, you know, what kind of happened was, is we hit this plateau and that plateau was, was was capital it it’s it’s it was seeing a lot of larger deals being done.

You know, we’re, we’re, you know, we have pension funds and we have the investment groups and private equity funds coming in and doing very large deals, you know, 10, $20 million at a time. And there was this, there was this gap, you know, kind of where we were at, where we had these really great pieces of property that were.

You know, a 160 acres, whatever it was that the investment money wasn’t going there, but we saw a need for you know, we saw a great opportunity for good returns in, in that, you know, that size. So. At the time, you know, back then I think 2012 is when they, when they came out with the jobs act and right about 2010, I was looking into this I kind of, you know, said to myself what, you know, what can we do?

And with the jobs that came out and I, I read about it. I said, okay, this has really has a fit for agriculture that I don’t think anybody would have recognized, you know, at the time. And I said, okay, this is going to be cool. And what I did is I kind of, I kind of watched what the commercial industry was doing and how they were raising up private equity and some of the larger sites like, like fun rise and Realty mobile needs these, these pioneers of that, that industry.

And right about 2014, I decided, no, this is. Do this and started building out the website started buying assets to put on the on the platform and developing these assets because, you know, one thing I didn’t want to do is, is, is, is developed this and we’re going to be good for investors. So to start off, I wanted to you know control the investment to make sure that it was planted correctly, you know, make sure that these, these foreign land assets four are done.

Right. So. You know, that that’s kind of what brings us here today. I can’t believe it’s 2020. But the, you know, the idea really came in 2015. I think we even incorporated in 2015 or 16 and and, and was building the site out and we officially launched last year in 2019. So that’s, that’s where farm funder is today.

Ben: [00:05:50] Awesome. Well, congrats on the official launch and it sounds like you’ve been okay. Working through the details of this for quite some time.  yeah. Job well done. I definitely want to get into pharm funder itself. A lot of, you know, the history and the types of deals on it. But before going there, talk a little bit more about farmland, these assets that you with the farm management company, are you strictly operating within?

California within a certain region or is this more of an national?

Brandon: [00:06:19] So currently we’re in California. The, the, the site, our that we have right now is pre-funded deals that we have found the deal and put on the side. We are going to open the platform up to other farmers to apply and we’ll, we’ll vet those farmers to see if we have a good deal for our investors.

And, and, and pair those farmers and investors up. And at that point we’re going to open it up to the United States the Midwest and, and in different different growing regions. Currently we’re, we’re focused on California which, you know, we have we have we have our issues in California but we have the best returns here and we really do have good returns as far as a foreign land goes.


Ben: [00:07:00] So that’s where we’re at.

Yeah. I would imagine the land prices are relatively higher here than some other places, but what’s driving the, the, the good returns in a place like California, and then thinking a little bit more long-term. , In the last 50 years, farmland has had like three down years.

It’s super, real resilient, less correlated all of these things, but I do know that. Soil and water are such big factors in a farmland investment and California, like you said, there was a drought a couple of years ago, but California just seems like over a 20 year period. I would imagine that water is going to be a big issue here.

How do you think through this when you’re investing in the California region specifically?

Brandon: [00:07:48] Well, what makes California amazing is, is. We don’t have that monsoon, right. So we just don’t have that weather in the summertime. We, we, we get we’ve got our rain in the winter and, you know, the, the fall, winter and spring, and we’re able to hold that snowpack up in the mountains and use that water through quite an amazing intricate canal system for our surface water.

And so. Our growing our soil types here in the central Valley, as well as not having those, those summer rains is just amazing. So there’s a direct correlation between you know, the price of these soils here, the price of this land and return on investment. So there’s a reason why, you know open land here is, you know, may go for $25,000 an acre with, with good water stock and good soils.

Because return on investment is, is high compared to you know, if you’re going to go to other States where you’re, you’re looking at water you know, rain, water, and different things like that. You’re, you’re limited to corn or soybeans and alfalfa. And in certain commodities like that, where w with here, we plant a lot of nut crops.

We have a lot of stone, fruit, citrus lemons, you know as well as vegetables. So there’s a lot of options for your investment here. So I, you know, I think that’s what really drives the California investment the price of these, these investments to, to be so high.

Ben: [00:09:09] Okay. And talk to me a little bit more about these sorts of crops here.

I think I’ve read that like row crops, they fluctuate a little bit more like these more permanent crops that take forever to ramp up because it’s a, it’s a full tree growing these sorts of things, but I would imagine. You know, it’s, it’s more consistent. And then suddenly if you have a drought and you lose lose a lot of these crops, it’s, it’s very detrimental for returns.

Is that, is that somewhat accurate way, way far off?

Brandon: [00:09:38] Well, you’re going to plan a permanent crop or a a vineyard or orchard or some sort in an area where, you know, you have consistent water. You’re going to have consistent well, water and good surface water So, you know, that that’s where you may plan a road crop in an area where your, your water is more volatile.

Th there’s a, there’s a lot of different reasons and soil types and different things for different plantings. Especially when you start talking about geographical area sometimes lettuce crops, you grow better on heavier soils in certain areas, but you know, we’re growing processing.

There’s a, there’s a lot of variables, but you’re really looking at, you know, where the, where the good returns are coming right now or from, from permanent permanent plant deans. So it’s, it’s, it’s find the right piece of property. Make sure that has long-term. Sustainable water. And that’s, that’s kinda what everyone’s going through right now is, is where’s this going to be because we have new rules and we have new laws and regulations that are starting to change the dynamics of what’s going to happen with our water situation here.

So. You’re starting to see, you know, hotspots pop up where you’ve got some, some, some really expensive ground that is appreciating rapidly. And some, some areas where the water it may not have any surface water where it’s starting to appreciate quite rapidly because there’s, there’s so many unknowns in the next decade, 15 years.

So. There’s, there’s a lot of different variables, but you know, one thing I would say with California, it’s it’s we’ve got good water.

Ben: [00:11:10] Nice. It actually cut out. Right. When you said that you said there’s one thing I’d say about California and then it cut out.  I missed it. What did she say?

Brandon: [00:11:18] Oh, I said, there’s one thing I’d say about California.

It’s water, water, water.

Ben: [00:11:23] Okay. I missed the first one, but that’s okay. Well, I mean, so as I say, just saying before we started, like, I just moved out here and I literally asked somebody, I was like, does it actually rain here? Like I been here for three, four months and I haven’t seen a single rain, you know, hardly even a cloudy day.

But yeah, apparently it rains, you know, during certain times and the rest of the year, it’s just beautiful like this. , I’m curious with any sort of investment, it’s always difficult, right? Because you’re trying to project what the future looks like, and you’re making this, this assumption of what it is, and then investing in quarter accordingly.

But with something like farmland that has so many variables and you’re investing for such a longer period of time, if you could just walk me through high level, the due diligence process that you go through for these new properties, obviously water is top, you know, One, two and three on that list. But if you could just walk through the process you use higher level of course.

Brandon: [00:12:21] So I, I think the process just depends on what we’re offering to the investors. And, and. You know, if we’re looking at an eight year, whole, a seven year hold tenure, hold, something like that. You know, a lot of times we’re, we’re looking at producing trees that are already producing that has some sort of upside so the, the trees are young.

And they’re going to appreciate, you know, very well till we sell at peak performance. Or if we’re developing something from scratch and going to sell it at a full production. That’s another option. Or if you’re looking at a, we have a program called a foreign finder, and that’s basically for, for people who want to invest a large amount of money into a farm, we will go out and find that farm for them, develop it for them.

And it will be more of a personal, you know, type situation. So w you know, we’re working on stuff right now between a million and $10 million that’s to, to, to develop some pretty large tracks and large, large orchards. So depending on what those, you know, what, what we’re going to offer will be a different due diligence, right?

So always soil soil and water the two most important things we’re looking at you know, we, we want to sell it if there’s a pistachios or an almond crop you know, we want to make sure that the soil and the water is going to be good for the, the remainder of this, this investment period.

If we’re looking at a really long or an investment group wants to hold onto it for the next 20, 25 years, then we’re looking at you know, What are we going to plant? What’s the water situation? Like, what do we think it’s going to be like in 15, 20, 30 years, if we pull these trees out, or if we switch crops, what can be planted thereafter?

What, what is the next thing that we can do for this investment and this, you know the soil to have an investment into the next generation, or to make sure that the land. Is going to still hold its value at that time. And, and the best way I think I can explain that is you can plant pistachios and some very poor soil and you can get some of that soil at a fairly good price, and you can have a a hundred year orchard right there.

If the price stays good, right? Well, if in 30 years or 20 years, the prices of pistachios drop and we decided we we’d like to plant a new crop, what crop can you plant in that poor soil? Probably not a lot, you know, so, you know, so we try and think about, you know, hold periods. You know, what, what, what is the ideal situation and crop for that long of a hold period where that shorter hold period.

For example, right now we have an almond offering on our on our platform. And this is an orchard that we’re going to exit at peak production. And we’re going to try and get through, you know, seven, eight, nine years of very high production. It’s in full production now. And, and so we’re not looking at what’s going to happen 25 years in the future.

Our plan is to sell that orchard at full production to somebody who wants to buy an existing you know, Allmand, orchard, and, and, and, you know, exit at that, at that particular time. So. There’s there’s like you said, there’s a lot of variables, but it’s really deal specific. So, but that’s, that’s kind of, you know, where we’re at, what are the if all those things are in line, what is our purchase price and what what’s going to be the return on the investment and you know, there’s some really cool stuff.

As far as. Appreciation, you know, and what kind of appreciation you take with some of these crops and at different times, so will that help the investor, you know, will it will it help for their tax situation? We put all that out there and if it, you know, hopefully it’s enough information that worked for somebody they invest.

Ben: [00:16:08] Yeah, that makes a lot of sense. And I’ll definitely link up farm finder. That’s a, that’s a really neat service. It sounds like an A-la-carte. You know, this is the type of farm I’m looking for. This is the amount I’m looking to deploy, and then you help connect those dots. Right. Really, really cool service.

Most of the deals on the platform, you went live about it in 2019. Are most of these developed from the ground up or purchasing existing crops? Like what’s kind of the mix of the investments on the planet.

Brandon: [00:16:42] So, so right now we have a developed orchard that, that we developed and we’re selling now into its fifth year.

So we’ll we’ll heat. We’ll, we’ll hit max maximum production. Next year, you know, that six, seventh year we’re really gonna hit our maximum production for the next 10, 15 years. And, and so this is an established orchard that should have a good cash yield yearly. Our next project is a pistachio development where we’re actually developing a open piece of land into a pistachio orchard, and we’re going to hold onto it for five years and then sell right about the time these possessions start to produce.

And, and, and there will be a, you know, there won’t be a cash yield, but you’re going to have a huge appreciation Pistachio, which was extremely hard to find right now they’re in high demand. The prices are the highest they’ve ever been currently. If you can even find one on the market, if it’s on the market, there’s usually a water issue or something of the sort.

But so so this is going to be a development type situation. So it’s just kind of, you know, I always look around at different pieces of property. You know, what’s for sale. What, what can we acquire at what price and try and put something. What I, what I want to avoid is, is putting someone on the platform that is a similar to like a lease back situation.

If you buy a piece of property, lease it back to a farmer. And that rate is, you know, 2% 3% cash yield. And then you do you realize the appreciation when you sell. Well, that’s great. And it’s a safe investment. And I do believe farmland is going to appreciate over that over the long haul, but I’m really looking for something a little bit better.

You know, something as a farmer, where would I put my money? And I want to find something that’s going to have a higher return. If it doesn’t have a cash yield I’m looking at, you know, huge appreciation by the development side of it. And if it does have a cash yield, you know, I want it to be 8% plus.

Well, I hope for it to be 8% plus and then still get, you know, a little bit of appreciation out of it. So that that’s kinda how I look at things for the platform.

Ben: [00:18:54] Okay. And, and that makes sense. I’ve talked to a couple of these other platforms and that most of them are at least back, right.

You’re making like the farmers just leasing it from you and that at the end, you make a portion from the land appreciation. With farm funder, you’re actually participating in the upside associated with the crops themselves. And then you mentioned No cash yield. How maybe if you could just walk through like how participating in the operational results works and, and what those look like.

Brandon: [00:19:26] Yeah, so the first part is, yeah. So w w what, what we would do is where are you going to farm that orchard for the investors? So they can realize that that additional return on investment or we’re going to find a qualified farmer to farm it for them investors.

So they get to see that return on investment instead of doing the lease back. More risk. There is more risk. If you have a bad crop, there’s a chance you’re not going to make any money. You know, that that’s always a possibility compared to at least back. But I think when it comes to this type of farming, so that’s why we’re offering it this way.

And as far as the the pistachio Del development with no cash yield, So you’re looking at, you know, you’re going to buy an open piece of ground. You’re going to put pistachios in it and we’re going to develop it over those those years five years with no crop. So the trees are just growing nothing’s happening.

And what you’re seeing is a large appreciation over that five years Until we think the orchard is going to be worth you know, say 34, 30, $5,000 an acre, and we’re buying property for, you know, $12,000. So that’s, that’s, that’s where we’re, you know, That’s how we’re we’re we’re doing it, that the investor does not get a cash yield and your one, two, three, four, it’s when we sell the orchard that they will be cashed out.

You know, think of it like you, you, you bought open piece of land or you’re going to build apartments on it, but it just takes you five years to build the apartment. You know, that’s, that’s sort of

Ben: [00:20:53] makes how it is, you know, I mean, all of these, right. And ultimately farmland investing is a subset of real estate. You can do, you can draw a lot of similarities in different ways. Obviously infinitely more complicated with dealing with water and soil and something that’s planted, all of these things. I’m curious. How, how do you manage deal fo like what’s the process like to find investible assets for the platform itself?

Brandon: [00:21:26] So we, we have, we have some deals and found off-market deals and we, I, I do believe 2021, we’re going to start our, our opening our platform up to two other farmers. But right now it’s just, it’s just we’re, we’re dealing with other farmers we’re dealing with real estate agents. We’re dealing with You know, word of mouth type situations.

We’re, we’re kind of scouting the area, looking for you know, pieces of property that could be You know, a good investment. That’s, that’s, that’s how it works currently. And that’ll change as our, in our investor pool goes up. So we wanted to make sure that we have enough investors to do a deal that uh, you know, within a certain amount of time for a farmer that comes on our platform But, you know, if the role of home kind of right now is if there’s something listed out there for sale there it’s either overpriced or there’s, there’s probably some sort of issue, you know, that’s, that’s, that’s underlying.

Ben: [00:22:30] Yeah, this is, this is why it’s so important that this due diligence process, right? Like you don’t want to be.

Brandon: [00:22:35] Yeah. Well, one thing, one thing that I, you know, I’ve always wanted farm funder to be, and, and, and you know, I’m kind of proud to say, it’s, we don’t have venture capital and outside investors in this, and we don’t ever want to be put into a situation to where.

We have to put a deal and we have to have deal flow because we have to offer something to investors and we have to keep this you know, the beast, you know, fed. Right. I don’t want to be in that situation because I don’t believe that’s I don’t, I just don’t think that’s good all around. I would much rather be a, a boutique type of crowdfunding platform where our deals are good and.

Our investors are happy. And if we don’t have good deals, we don’t put them on the platform. You know, that’s, I think that’s better in the long run and me being a farmer first, I, I feel more comfortable doing that. So that’s where we’re going to be.

Ben: [00:23:27] Well, and the investors will appreciate it longer term, right?

The worry is that , the, like you said, there’s not a lot of properties, quality properties for, for sale, and these are longer term investments, so you’re not gonna, you’re not gonna realize that a lot of them were duds for the next five years probably. On a lot of them.

Brandon: [00:23:47] Right! Yeah. It’s like you know 2012, 2010 to 14.

If, if, if I had $200 million, it wouldn’t have been enough, but yeah, you know, it, it right today, if I had $200 million, two vests, it’s going to, it would be very hard to find the right assets at the right price to get the right return. You know, I think these deals are, are smaller and harder to come by, which.

I’m going to believe it or not. There’s probably a good area for for us as a crowdfunding site to be in, because we can do these small.

Ben: [00:24:24] Does crowdfunding get you into that? I mean, access to capital. You have more capital to go into these deals, but what other benefits does this allow you to have.

Brandon: [00:24:34] I think, I think dealing with a lot of individual investors that, that want to put in, you know, a hundred thousand here or 50,000 or 150,000 a year, it’s a lot different than dealing with the institutional investor that says okay, well, we like your underwriting process in what you’re doing here.

Here’s $5 million, you know, then it’s like, okay, well $5 million in this year track over here, you know, how would we, we manage that So I think it helps by, by being able to deal with just a more appealing piece of property that wouldn’t be appealing for pension funds.

Ben: [00:25:11] Yeah. That makes a lot of sense.

Speaking to the investors that are listening. You know, and in my mind, it’s more of a passive investor that wants diversification. That’s fine holding it for 10 years, but what are the, what’s the ideal investor look like for a platform like farm funder? What expectations should they have? What walk me through like the perfect kind of investor on your platform?

Brandon: [00:25:36] I think, I think the perfect investor is, is, has to realize that farming I think a lot of investors really like that monthly cashflow that they would get from a, a hard asset, like a commercial real estate or multi-family or something like that. And I think they have to realize that you know, you’re, you’re looking at a yearly payout.

As far as, you know, once a year, we’re going to harvest our crops and we’re going to get paid out and that amount is going to fluctuate. And, and, and part of that, you know, I guess the, the the, the learning process that, that the investor has to learn that when we do a budget and we have a you know, we’re, we’re, we’re shooting for a 13% return on an asset.

Almonds are a lot of times on again, off again year. So you’re looking at 18%, then you’re looking at a 12%. Right. So I think it’s just, you know, it’s an investor that realizes. That’s how it works with farming. We have a bad bloom, it got cold. The crop got rained on when all the bees were trying to pollinate.

So production’s down this year, but because production’s down demand, it was up the next year. Then we have a good bloom. Right. You know, so there’s, there’s all these little variables that, you know, if, if the investor knows, Hey, this is, this is a long-term hold. You’re gonna, you know, you have to get through these short-term cycles.

You know, as long as they understand that, that adds a really good fit.

Ben: [00:26:59] Zooming out a bit like structural, systematic risks to farmland in general. Just backing up, I’m bullish on farmland, just supply and demand, right? Like population growth is wild and they’re not making any more farmland.

But then I started thinking through things like aeroponics or where new land that wasn’t previously farmable is suddenly farmable or trends like lab grown meat and these sorts of things. What systematic risks do you see to this? Investing in farmland. It’s a sure thing consistent for the next 10 years thesis.

Brandon: [00:27:40] Yeah, that’s that’s a great question because there’s so many different things that, that that’s happening. That’s what we call it, fake meat. And then, you know, with vertical farming, being able to farm a lot of these greens in such a small area with such a little water with zero soil you know, these types of of things are, are great.

And I think are going to be necessary to increase our Our demand the demand that, that that’s coming, because what we’ve, what we’ve seen is we’re starting to see the food demand grow a little bit more than what we’re able to increase our yields. So I, and these are not exact numbers, but, you know, the food demand was growing at, at that at 2%.

But our yields were going up at 2%, you know And around that area, we’ll, we’re, we’re starting to see that yield plateau where we’re not able to increase these and have these big jobs. But the demand is still continuing. And, and what makes me excited mostly about farm land is that a lot of people like organic GMOs are, you know, have this sort of taboo you know, People don’t like them which by the way, I think, I think they’re necessary to increase you know, the production to keep people fed.

But I think you’re going to see the same thing where it sounds like a good idea of growing meat in the lab and it might taste the same. But it’s just not the same. And I think there’s going to be a perception of, of all these I’ve already read. Quite a few different negative articles, even on vertical farming and, and how they’re doing things without soil and whatnot.

It’s it’s, I do think that the traditional way of farming land and, and, and, and, and good sustainable practices are, are, will stand the test of time. So I don’t think any of these, these, these small developments are really going to affect good old fashion farming. And that’s, that’s my personal opinion that if I’m wrong, I’m wrong, but I don’t know.

Ben: [00:29:37] These things are very difficult to forecast out. Right.  Who does with climate change and all of these things, right.

Brandon: [00:29:44] I would say if, if I, the biggest. You know for, for farming, the biggest thing that could really upset it our, our, our land prices or whatnot is if you saw, you know, someplace like Africa w you know, really the government stabilize and see a huge amount of infrastructure invested in that, that could.

Certainly you know, change things. But it hasn’t changed in a hundred years and I just don’t see it happening. I mean, not anytime soon.

Ben: [00:30:17] Wait, so this would change it because suddenly they would be able to start farming and producing crops. And this would throw off the whole supply of farmed goods.


Brandon: [00:30:29] yeah, yeah, absolutely. I think there’s some good soils. I think there’s good opportunities you know, on that. You know, in that area and it’s just you can’t invest money into an area that is unstable. And I think that’s I just don’t see enough infrastructure happening to really change what we already have in place.

So I would say that’s a big water, right? That would be the only thing I can really see. No.

Ben: [00:30:55] Well farm funder 2.0, if there’s anybody listening out there that has great connections in Africa and is willing to do a more high risk farming, Bradshaw, Africa reach out to one of us and maybe we’ll tell you you’re crazy, but you never know the, the investments on your platform.

I have two questions, one liquidity. If an investor invests in like this almond farm and then do they have any access to liquidity before the end of the holding period? That’s the first question. And then the second question is about fees on these investments on the platform itself.

Brandon: [00:31:35] So not a lot of liquidity.

So usually, you know, if you invest in this, it’s structured in an LLC and you become a member of that, LLC. And, and, you know, once you’re in, you’re in there were some extenuating circumstances where you really needed to get out money out. I would do a couple things. I would talk to the other investors and see if anybody else wanted to buy that out.

And we would do our best to try and help you get out. But no promises. I mean, it just, you know, that is the one thing that everyone to hold as far as fees go, our first offering is a 15% fi on, on the on the crop and the, and the proceeds of the crop. And that’s you know, over the life of the, the orchard is the standard.

As far as what the capital raise would be. If we were to charge a one and a half percent fee right around there, and our, our second deal is structured as a one and a half percent fee on the On the capital that’s raised.

Ben: [00:32:33] Okay. The difference that 15% is each, how does that work? I put a thousand dollars, that thousand dollars goes into this investment.

And if it produces a hundred dollars worth of return, you take 15, I get 85 every year sort of thing. Right.

Brandon: [00:32:51] That’s correct.

Ben: [00:32:53] Okay. And it works out roughly the same is what it sounded like. Yep. Okay. And then you touched on something. Each individual investment through the platform is structured as an LLC.

If you know, farm funder is a, is a young company. If you dissolve or go away, that investment would remain as a separate. LLC for this almond farm, for example. Yup.

Brandon: [00:33:19] Yeah. So all the investors was still on the if, if, if we dissolve farm funder, all the investors would still own the LLC and own that property.

And we would just hire another farm manager to manage that property for them.

Ben: [00:33:35] Okay. And then. It sounds like you, you are doing the farming, the farm management itself. As an investor in the farm at how can I be ensured that you are charging your fair rate to actually do the farm management itself of the farm?

Brandon: [00:33:53] So what I do is I look at the geographical area of where we’re at. If it’s close enough for us to do the management you know, I look at what other companies are charging as far as fees and make sure that we are the same or lower. And if we’re not in the GBR geographical area for us to farm it, then we will find the farm manager and hire them to manage the, you know, the farm.

But there, you know, there’s, there’s a There’s a certain amount of of money. It takes to bring an almond crop to harvest. And it, it all is right in that, that, that same area. So it would be pretty easy to, to see what our fees are. Plus. Transparent, as far as quarterly reports of what we’re charging as far as cultural costs or growing costs and fertilizers is that sort of input costs or aren’t marked up or anything like that.

We’re just covering the cost of a attractor going and harvesting it, making sure that it’s done correctly and that you know That price is covers the cost of owning that tractor or whatnot. Cause you know, we don’t, we don’t have any depreciating assets in this. There’s no tractors or employees, you know, in this, this investment.

Ben: [00:35:06] Okay. And then farm funder platform itself. I mean, how many deals have gone through the platform or any stats you can share with me?

Brandon: [00:35:16] So, this is the first deal we put on the platform that we launched. So we will close this month by the 31st. So this is our first deal, but we currently farm over 3000 acres and, and, and do custom work and other, other things on about a little over 20,000 acres.

So. We we’re very familiar. And as you know, not to mention our R off platform the last 15 years. So as far as the platform goes, this is our very first deal.

Ben: [00:35:49] Awesome. Well, best of luck, closing it out. We’re recording this August 6th, but this, this will be released by the time you’ve closed. Early congrats.

Thank you. I’m curious with farm funder, I mean, it sounds like you mentioned in 2021, it will be open to farmers, but what other key, big changes roadmap are you really looking forward to.

Brandon: [00:36:14] That’s that’s the biggest part for me is, is opening up to farmers and pairing these investors. You know, we really want to get our investor base up, but we really want to get people interested because there’s, there’s like a lot of There’s the opportunities that you wouldn’t really think of unless you were a farmer, right?

I guess. So I’ll give you an example. You’re a farmer, you farm 300 acres and it’s been in your family for 150 years. Right? Well, the property across the street came up for sale and it’s a great deal. And the farmer knows you and you can get it at a discounted rate. You can get it cheaper than market value.

And the bank says, you have to personally guarantee your family’s farm. But that’s been in there for 150 years and you may not want to take that risk. What if you lose it and you lose your family’s farm, right? I mean, that’s always a possibility. So what’s great is, you know, you can, you can come in and get these investors to invest in that property and have a, have a structured buyout at a certain amount down, you know, down the road.

To where the investors make a great return and the farmer who’s familiar with that ground. Cause he’s been farming there forever. His whole life can conform that ground and not take on as much risk all at one time. I just think that those types of opportunities are going to help the family farm There’s there’s going to be a lot of risk.

You know, there’s not a lot of capital in agriculture as it is. Banking is hard. The underwriting process is tough. I mean, as some of these older guys get out of the banking industry that were great underwriters that know a lot about ag the newer generation may not be as in tune with, with, with.

You know, the underwriting process. So I just really think that there’s, there’s an opportunity for this additional capital and these investors to make money. And these, these farmers to have this avid option, you know, it may not be what they go with, but it’s all, it’s an added option for, you know, to have a platform like this, to help these farmers viable.

And, you know, in these times, I mean, it’s, you are going to see In the next few years, you’re going to see a lot of, of consolidation. The, the family farm will get bigger. I mean, that is inevitable. And if you don’t grow correctly, you’re going to see a lot of these guys getting out and you’re going to see a lot of people get out just because it’s too hard.

It’s too hard to sustain. And, and if we make this type of platform and this type of opportunity and capital available to these farmers, It could be a game changer. And I really hope it is because being a family farm and growing up in a family farm, I’ve seen it change. And you know, I don’t want to see the family farm go away.

Ben: [00:39:04] Yeah. And we’re, we’re kind of on that, that crucial tipping point, right? The average age of farmers owning farmland would X percentage of farmland is like 65 years old or something. And a lot of their kids or somebody like me who wants to live in California instead of. You know, in the middle of nowhere, Indiana and farm on my farm.

Brandon: [00:39:25] And, and a lot of things have changed, you know, in the old days you know, the, the, the child that was farming that ranch would eventually get the ranch, but that’s not really the same. Any more, you know, when you’re dealing with assets that have appreciated and are now worth a hundred million dollars, you don’t just give it to one guy.

Right. So there’s, there you go. It’s yours. Good. Right. So, you know, when, when you have to buy out siblings and take on that debt or that risk, it’s an, also an opportunity for these farmers to say, Hey, listen, I’ve been farming the same ground in my family or. 35 years. I have to buy my sister out. I need to raise X amount of capital and I can make this, you know, this return on investment work for your investors.

And if they pass our due diligence says what a great way to keep everybody. No farming.

Ben: [00:40:18] So absolutely. And I mean, don’t forget the investors, right? Because it’s actually a gigantic value to them that, that the stock markets are crazy. There’s no yield anywhere. You’re looking for some uncorrelated non-correlated asset.

It’s not like it’s not like philanthropy if I’m not just giving you money because they love this you know, Farmland and the family sort of thing. It’s, it’s a great, consistent source of returns that looks differently than other investments.  That’s also very important. I’m curious, you had mentioned banking within ag is very difficult and that there’s not a lot of capital in farmland in ag.

I’m curious. Why is that the case?

Brandon: [00:40:58] Risk, mostly I think, you know, 70% loan to value on this apartment complex, then someone takes a second out of it, brings it up to 90% loan to value. And then you know, some, some crazy person comes in and puts that extra 10% up. Right. You see those mezzanine style, right. Debt gets stacked. That doesn’t really happen.

You know, in the, in the ag world because of the fluctuation of crops. So. You’re, you know, you, you don’t have a set like in, in multifamily, you know, your renters are going to pay 20,000 a month. Right. And maybe the rent goes down and it, you know, but there’s just. You know, it’s more structured and in the, the, the farming world, it’s, you know, it’s 20,000 you know, or, you know, 200,000 that year in profit and the next year it’s you know 38,000 in the next year after that, it’s a 252.

So that, that fluctuation keeps a lot and leaves, leaves, you know, just less people that want to deal with that. I, you know, there’s, there’s. There’s not a lot of banks that are going to have an ag department that says, okay, I know we have a, a good team who can underwrite this type of fluctuation. Right. So that’s why I think we just don’t have the capital that you would see in other investments, but people willing to take on, you know, there’s there’s, I wouldn’t even say that much risk.

It’s just, it’s just more work.

Ben: [00:42:26] It’s not as clean cut, right? Actually. More perceived risk. Might my, grandpa’s going to love this interview because he was in farm lending forever. This is kind of be great. Brandon really appreciate you taking the time. Can investors find out more about you about your platform?

Where do you want me to send them?

Brandon: [00:42:43] Send him to the website first. It’s farm F a R M F U N D So there’s no E in there. If they have any questions it’s [email protected] and we’ll answer them and do our best to, you know, Navigate through this crazy world.

Ben: [00:43:04] Awesome. Well, I think you guys are providing a lot of value and I’m really excited to share this with my audience, but thanks so much for coming on today.

There you have it. That was with Brandon Silvera of farm That was a great conversation about a number of different things within farmland. I also have a few other podcasts on farmland in general. I’ve done interviews with farm together, an acre trader, which. Also are these agriculture crowdfunding investment platforms.

Very interesting to see the different types of deals that are showing up on these platforms, the different type of platforms themselves. Yeah. All of these are, are, you know, as a result of the 2012 jobs act and trying to give you exposure to these farmland investments, that previously were pretty difficult.

If not impossible to get into, if you didn’t know the right people. This is an interesting new category of investment and farmland. Something that, you know, I’ve known about for a long time, but thinking about it from an investor standpoint is something very different. Hopefully you enjoyed the conversation.

Don’t forget to like, or subscribe to the videos, follow us on social media, all of these things. I’m always open to your feedback. Please send me a message. If you have anything to say at all, I’m happy to see those. And if you have any other platforms that you’d like me to reach out to interview on this podcast, please let me know.

No, I’m happy for those recommendations as well. Have a great day. Thanks.

Ben Lakoff is an entrepreneur and finance professional. He has developed strong global finance experience through 10 years of international assignments in the US, Brazil, Afghanistan, Southeast Asia, Czech Republic and through the award of his Chartered Financial Analyst (CFA) certification.