August 27, 2024

By Gerelyn Terzo, Global AgInvesting Media

FarmTogether, an investment firm specializing in U.S. farmland, has a new sheriff. Earlier this month, FarmTogether named David Gould, the firm’s former managing director of capital formation, as CEO, replacing outgoing boss Jared Hine, who also previously served as finance chief. Gould’s appointment coincides with the firm’s surpassing of a major threshold — $200 million in AUM — an impressive feat in any economy but especially one riddled with uncertainty.

Gould is no stranger to the capital markets, particularly asset management, where he spent nearly a decade as a portfolio manager for Cargill and Elliott Associates. FarmTogether is looking to harness that experience to further expand its investor base, product offerings and assets across its institutional and retail investor base.

One way it plans to do this is through innovation, including a crowdfunding platform paving the way for accredited investors to participate in the ownership of farmland, including the Great Valley Citrus Grove in Fresno County, California. With a 10-year hold, target IRR of 10.1 percent and net average cash yield of 9.6 percent, this product gives retail investors access to an asset class that has traditionally been out of reach for them.

Given FarmTogether’s ballooning AUM, its strategy appears to be striking a chord with investors. The firm also recently expanded its portfolio to over four-dozen properties across 6,900 acres, eight states and more than 15 crop types. While Gould has only been holding the reins of this dynamic company for a short while, he spent some time with GAI News to share his vision for FarmTogether and the vast opportunity in U.S. farmland.

1.) GAI News: Congrats on being named CEO of FarmTogether! You take the helm with the wind at your sails. How you were able to achieve this type of momentum in an otherwise challenging economic environment with many institutional investors and dry capital on the sidelines?

Gould: Thank you! Our growth over the past four years has been significant, and I’m excited to keep building on this momentum. Despite the challenging fundraising environment over the past few years, we’ve been able to raise capital by offering access to a historically stable, income-generating real asset that is not closely tied to traditional markets. In times of volatility, this type of investment becomes especially attractive. Ultimately, our diverse offerings provide a solution for a wide range of investors seeking the numerous benefits, including impact, that farmland can offer.

The growing demand for real assets, combined with our ability to source and close high-quality deals across different regions and crop types, has allowed us to stay competitive, and we’re well positioned to continue delivering value throughout market cycles.

2.) GAI News: What is driving investor demand for farmland in 2024, especially in light of the volatile broader financial markets and challenges around California farmland?

Gould: The opportunity in the farmland market is immense. Farmland has historically offered a unique combination of stable income and long-term capital appreciation, which makes it an attractive asset for investors seeking diversification away from traditional equities and fixed income, particularly with potential rate cuts on the horizon. At the same time, we’re seeing a wave of farmland ownership transitions, which is opening up opportunities for institutional investors to access high-quality farmland at scale, something that’s historically been difficult in the U.S. market. And, with impact playing a bigger role in investment decisions, farmland aligns well with long-term sustainability objectives, further driving interest.

As for California, in particular, I see a huge opportunity. Dietary shifts toward protein-rich foods like nuts, coupled with a decreasing supply of high-quality land, are driving up farmland values, especially in regions with favorable climates and long production histories, like the Central Valley. Institutional investors, who focus on sustainable practices and water conservation efforts to help mitigate climate risks, are well-positioned for long-term value creation, especially as demand for these high-value crops continues to grow. From a mean reversion standpoint, we believe that today’s historically depressed valuations of tree-nut properties (particularly, almonds, walnuts and hazelnuts) will self-correct as unprofitable farms remove acreage. In the medium term, we expect a meaningful rebound.

3.) GAI News: Can you share more of the dynamic between FarmTogether’s retail and institutional investors?

Gould: While we maintain our strong presence with retail investors through our crowdfunding platform and the Sustainable Farmland Fund, we’re simultaneously working with institutional investors to curate diversified farmland portfolios that fit their investment objectives. The expansion of our product offerings for these investors will involve the development of tailored solutions designed to meet the specific needs of larger allocators in separately managed accounts or other pooled vehicles. Whether retail investor, family office or large institution, we aim to meet an investor where they are.

4.) GAI News: What can you share about FarmTogether’s expansion strategy with you as CEO?

Gould: Our target is U.S. farmland. With over $3.4 trillion in value and only around 2.5 percent penetrated by institutional investors, U.S. farmland remains a ripe arena to find attractive risk-reward opportunities. Diversifying across key farming regions and crop types is central to our strategy, and we’re focused on acquiring properties in climatic regions favorable for our selected strategies. Currently, we’re evaluating properties in our core areas, including the Pacific West (California, Oregon and Washington), the Corn Belt and the Southern Plains, in addition to opportunities in the Mountain, Northern Plains and Southeastern regions.

5.) GAI News: As CEO, what is your vision for the direct investing platform?

Gould: Our crowdfunding platform remains a key component of our overall strategy. My vision is to continue offering retail investors access to high-quality farmland opportunities as we expand to serve a broader range of investors. We remain dedicated to enhancing the crowdfund platform’s features and our firm’s operational capabilities to provide top-tier service to our clients.

6.) GAI News: In light of a 10-year hold on investments, FarmTogether investors are further incentivized through income distributions. Can you share more about the distribution model?

Gould: Our investors typically receive cash distributions through two primary structures: cash rent leases, where farmers pay a fixed rent, and direct management contracts, where income is tied to production. The income generated is distributed to investors based on their ownership shares.

Please note that we’re also interested in pursuing additional income opportunities, like leasing land for renewable energy projects. And while such ancillary revenue can improve the cash-yield of an investment, such value-add improvements can also show up in the final disposition value of the property.

7.) GAI News: How would you describe the impact that FarmTogether is making, both for investors and the U.S. agriculture industry?

Gould: Our focus is on maximizing long-term value for our investors by ensuring that each property we acquire remains productive and profitable. A key part of this strategy is sourcing properties in regions with optimal growing conditions and strong water resources. We also leverage our network of operators to co-locate farms, creating economies of scale and enhancing value across the portfolio.

We also implement advanced management practices, such as adopting technology and data-driven tools, to further boost value at the property-level. At Great Valley Citrus Grove, for example, we’re using advanced irrigation techniques, including drip lines to precisely time fertilizer applications and reduce water and fertilizer usage. Smart irrigation controllers are also being installed to cut water use and power costs. We’re also employing regenerative agriculture by planting cover crops to improve soil health and introducing natural pest control methods like ladybugs and parasitic wasps to reduce pesticide use.

On the tech front, we’re integrating big data and machine learning into our farming operations, allowing us to optimize processes like harvesting and pest management. Predictive analytics will help us anticipate weather changes and market demands, improving crop yield and timing. Additionally, all of our California properties, including Great Valley, use an external service to monitor power usage, allowing us to optimize irrigation schedules based on when rates are lowest.

8.) GAI News: What are your goals as the new CEO of FarmTogether, both short-term and over the next five years?

Gould: My immediate goals are to continue building long-term relationships with institutional partners and help curate a robust portfolio of investment options that align with the needs and requirements of these large-scale investors. Over the next five years, the sky’s the limit in terms of growth based on the strengths of our operational foundation, the team’s deep experience and the abundance of U.S. farmland targets. In the meantime, we remain committed to relentlessly pursuing sustainable results and delivering value to our investors. I look forward to reading this Q&A in five years and see how we’re doing!

GAI News: We’ll check back with you then!

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