By Michelle Pelletier Marshall, Global AgInvesting Media
Over 100 years of management expertise in fixed income investing, fund management, capital allocation, underwriting, servicing, and workouts are behind the strength of new venture Lending Acres, LLC (Lending Acres), an alternative lending platform for American agriculture businesses. This creative company is a joint venture between ARMOUR Capital Management LP (ARMOUR Capital), the external manager of ARMOUR Residential REIT, Inc. (NYSE: ARR) and an investment advisor registered with the Securities and Exchange Commission, and Jitin Singhal, and Bobby Roy. Lending Acres will work with borrowers to solve their short-term and long-term financing needs, whether that be through bridge loans, debt restructuring loans, acquisition loans, or other custom offerings. Lending Acres also offers investors exposure to the sector through two limited life debt funds.
“We’ve put together a team that can bridge the financing gap in the agricultural space, providing a wide array of customized solutions to borrowers, while also bringing investment products to institutional investors that they traditionally wouldn’t have had access to,” said Singhal, CEO and chief credit officer of Lending Acres. He further explained that Lending Acres’ competitive advantage is not only its experience, but the enormous amount of data – compiled from various sources over several years – that it uses in its business.
With financial and operational backing from ARMOUR Capital, Lending Acres is seeking to provide financing for mid-to large-size farms (1,000 acres or more) with a focus in the $3 million – $20 million debt range, and with an average loan expected to be around $7 million. “We perform significant due diligence on every loan and use the data to guide our lending perspective,” said Singhal, noting that the strength of ARMOUR Capital in bringing in-depth knowledge and expertise of the capital markets, the investors, and mortgage-related securities is expected to be of substantial benefit for Lending Acres’ clients.
GAI News spoke to Singhal, and included input from Bobby Roy, president and CIO of Lending Acres, to get more details about this new venture and why it’s taking off in today’s ag economy.
1). How does the focus on delivering scalable processes and procedures that yield the most reliable results with the least amount of risk to suit your particular clientele?
We are using the latest data mining technologies to get information in the hands of the underwriters so that they can make faster decisions on loans, which means capital is deployed prudently and efficiently. With the funds that Lending Acres manages, investors can have more transparency into what we are doing, and they are earning better risk-adjusted returns. This is possible through our extensive data capabilities. We have spent years gathering that data from a multitude of sources, and with our numerous machine learning models and synthesized analysis, we are able to attain predictable and profitable outcomes. Our models and historical data allow us to measure risk in a way that we can align with the return for investors. We feel this is a competitive advantage as it is not something that is done very well (or at all) in this market.
2). You noted that this is giving investors an opportunity that they don’t currently have access to – please explain.
We are creating this asset at scale and because of our research, data analytics, and AI behind us, we can scale our assets very quickly for investors to deploy significant amounts of capital. Our target investments will range from $5 – $10 million on farms of 1,000 acres and above. The delivery of this promise is paramount and allows an efficient deployment of capital for investors.
Another highlight is that our loans are customized (bespoke), which allows us to structure the transactions to align with both the borrower and our funds’ interests. We’re not a one size fits all. We can craft a product for the investors that also works for the borrowers for a win-win outcome.
3). What changes have you seen in the ag economy/market over the last couple of years that have reinforced the need for these alternative lending services?
Borrowers have become more sophisticated, and they have a lot of information at their disposal. So, they are seeking not only faster and more efficient lending, but the ability to optimize their relationship with the lender in search of the best wholistic outcomes. This phenomenon can be observed in residential mortgages – they used to be done in 45 days, now, some are closing in 15 days. This more sophisticated borrower demands lenders to adapt with the times. At Lending Acres, we have established our products and services to be on the forefront of these speed and flexibility demands with the data to support it. We also are up to date with the tighter regulatory framework on lenders, and understand the benefit of bringing in alternative investors to meet these requirements.
CAPTION: A sample of the deep dive analytics that Lending Acres undertakes. The chart above shows how the collateral value may evolve over time as the collateral seasons (continued to be owned by the borrower).
4). One of the biggest benefits of working with Lending Acres is its goal to close loans as quickly as 30 days. Please explain the benefits of this, and other customer service and management strategies of the company that are key for those seeking these agriculture loans.
We strive to close loans in 30 days because it’s really important for borrowers to get the money as fast as they can. That’s a very critical need for them – sometimes it’s a crucial moment where they have to harvest, or they need some cash for infrastructure or equipment. These are business operations where cash flow is key. Our strong relationships with appraisers and our data mining capabilities help us speed up this process and close loans more quickly. This is also in the best interest of our investors since they can deploy funds sooner to start accruing returns on their investment.
Also, we provide longer amortizations on our loans, with no or very little fees for pre-payment and flexible credit terms. To our advantage as well, is the rising cost of farmland values, which often makes traditional lenders hesitant to provide the larger loans, and that is where alternative lenders like us come in.
5). Please explain how investors can gain exposure to this sector through your two limited life funds.
Investors have two options to get exposure to our loans: First through Lending Acres’ managed funds, and second, through direct loan sales for investors who can’t invest directly in our funds. Lending Acres acts as the originator and servicer for all loans.
Right now, Lending Acres is starting to look at loans, and while we are focused on U.S. agriculture and launching with the Americas, Canada, and Mexico, we are not restricted to these geographic areas and can certainly engage in international markets.
Those wishing to learn more can connect with Singhal or Roy via email, or engage in-person at the upcoming Global AgInvesting 2023 conference in New York.
This article shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of any securities of Lending Acres or its funds in any state or jurisdiction in which such offer, solicitation or sale would be unlawful, prior to registration or qualification under the securities laws of any such state or jurisdiction.
ABOUT JITIN SINGHAL
Jitin Singhal is CEO and chief credit officer for Lending Acres, LLC. He also is president and CEO of EJ Financial Corp. (a Registered Investment Advisor). Singhal is a serial entrepreneur in the investor finance and technology domain. He works to inform strategic decision making with data-driven insights and strategic roadmaps that integrate the efforts of all functional lines of business. Past positions with Farmer Mac and Freddie Mac have seen Singhal manage a $10 billion portfolio of agricultural and rural utility loans, as well as a portfolio of $3 billion-$4 billion of fixed income securities.
ABOUT BOBBY ROY
Bobby Roy is president and CIO of Lending Acres, LLC. He has over 18 years of experience as a structured finance professional with deep knowledge and experience as an institutional portfolio manager and investment banking executive. Roy has held multiple senior investment leadership and advisory roles at large asset managers and investment banks.
– Michelle Pelletier Marshall is contributing editor and author for HighQuest Partners’ GAI News and Unconventional Ag, and managing editor for its WIA Today blog. Additionally, she is the company’s Senior PR/Media Manager. She can be reached at marshall@highquestpartners.com.
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