Crowdfunding for Agriculture

Agriculture is a broad, ever changing field. The agricultural system is rapidly advancing to keep up with its global consumers, mainly by evolving technology to increase yields and profits. From GPS tracking devices navigating tractors with centimeter accuracy to drones checking calves in the middle of the night, technology has changed the game. A more slowly evolving factor in agriculture has been access to finance. New options, such as equity crowdfunding for agriculture, have emerged for producers to get their farm up and running, or keep their farm afloat.

Equity crowdfunding is the process by which people invest in an early-stage company not listed on a stock market, in exchange for an ownership interest in that company. If the company does well, the shareholders will profit, and if the company fails shareholders could lose some or all of their investment.

Choosing the Best Crowdfunding Option

Small scale or hobby farmers looking to raise smaller amounts of money might investigate donation-based crowdfunding. In donation-based crowdfunding, people who wish to support farm projects contribute money without much of a reward expectation besides the gratitude of the beneficiary or project creator. There are many popular donation-based crowdfunding platforms, such as GoFundMe that have supported small farms. Barnraiser is a site where donors can contribute money to small scale farmers for the social benefit and, in return, receive an incentive like a t-shirt or opportunity to tour the farm. Kiva is another site that helps farmers in developing countries with small injections of capital in the form of a micro-loan.

On the other hand, farmers who need to raise more significant amounts money to fund the launch or growth of their project can pursue equity crowdfunding. The JOBS Act of 2012 eased security regulations to legalize equity crowdfunding and allows platforms to list deals in a wide variety of investments, for example, investing in agricultural opportunities. Often, these companies go on to raise money from angel investors or venture capitalists. Two of the most popular equity crowdfunding platforms in the U.S. are Realty Shares and Seedrs. Realty Shares allows people to invest in turnkey real estate deals, such as apartment buildings. Seedr is more like an angel capital platform, which provides investors access to startup companies.

Generally, the investors in a crowdfunding project are passive, limited partners while the land-owner is the active partner, making all the decisions to include what to grow, when to plant, and where to sell the harvest, or pay a manager to do these things.

Crowdfunding for Agriculture as an Alternative to Traditional Banking

Crowdfunding for Agriculture

Now, why wouldn’t landowners just go to the bank and get a traditional loan to start up their business? There are many factors that go into this decision, including the landowner’s financial status, the desired mix of debt and equity, and the potential profitability of their farm or ranch.

Fortunately, farms aren’t nearly as leveraged as they were during the 1980s farm crisis, which saw many people lose their land. But leverage always adds an element of risk, as well as the potential for increased returns. Bringing in equity investors via crowdfunding enables a landowner or producer to realize economies of scale and reduces the risk of foreclosure during commodity downturns.

According to the United States Department of Agriculture’s Economic Research Service, beginning farmers are more likely than established farmers to have at least a four-year college degree. Put yourselves in the shoes of those young legacy farmers right out of college. For most people, coming out of college involves stepping into the “real world” and realizing they’re: 1) broke, and 2) in loads of debt from student loans. Debt financing is most likely the only option to choose from for young farmers to begin, but how many banks will let a young adult take off with a $500,000 loan to start their row crop operation while still drowning in student loan debt?

Other beginning farmers may not be coming right out of college, but they could be growing products that take several years to produce revenue; for example, tree crops. These farmers won’t see a profit from their investment for years. Imagine using your life savings plus a huge loan to open a restaurant, only to have to keep the place dust free and running smoothly with no customers for five or six years before you can open the doors and see a profit from your hard work. That’s the reality that new orchard growers deal with in terms of turning profit after years of hard work and care.

Then, there are those farmers who are current land owners who want to trade some of their land for cash to pay bills. Unfortunately, agriculturalists work with an element named Mother Nature who decides how much rain she wants to give, or not give, the crops, so some years may be better than others. Disease is another major risk. Thankfully, crop insurance can mitigate some of these uncontrollable events but, in the end, most of the money is coming out of the farmer’s pocket to stay afloat in hard times. On the opposite side, sometimes business is booming and farmers want to expand an existing operation. It’s like a mini start over financially but they have their practices established and just need the funds to keep up with the growing demand.

Raising Money Takes Money

Private equity firms and farmland real estate investment trusts commonly pool money from outside investors to purchase large portfolios of income producing agricultural assets. These capital raises typically involve hundreds of millions of dollars and require thorough knowledge of Securities and Exchange Commission regulations. Crowdfunding uses the same basic model, just on a smaller scale more appropriate for many producers.

Chris Rawley, CEO of Harvest Returns, an online crowdfunding marketplace for agricultural investments launching in 2017, sees an under-served middle market for agriculture finance.

“Because we’ve already done the legal and regulatory legwork and built a base of investors interested in ag, we can be a cheaper source of capital for producers who would like to raise anywhere from a few hundred thousand to a few million dollars,” Rawley explains. “We allow farmers to bring in equity investors, which keeps their debt to asset ratios lower, reducing the risks to the grower from events that might normally result in a farm foreclosure.”

The Harvest Returns platform draws investors interested in agriculture together with a wide assortment of investment agriculture products. With as little as five thousand dollars, these investors are able to own interests in farms, timberland, or orchards in different parts of the world, each with their own risk/return profile. Landowners and sophisticated investors are familiar with the benefits of investing in agriculture. Now there are ways for the average American to put a portion of their investment portfolio towards agriculture, arguably, the world’s most important industry.

American farmers need every cutting edge solution they can get today, on the production side and on the financial side. Increasingly, they’re competing not just with the farm in the next state and county, but with farms in Brazil, Russia, and other emerging countries. The agricultural industry, especially producers, must evolve to fit with today’s globalized marketplace.

This article originally appeared in the 2017 Summer Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

About the Author: Allison Spence is the Digital Media & Marketing Specialist for Harvest Returns. A majority of her professional experience is in agricultural journalism and digital marketing with an emphasis in strategic communications writing.

Teaming Up To Transform Your Real Estate Business

“If you want to go fast, go alone. If you want to go far, go together.” – unkown

What is the best way to achieve the highest level of success in your land brokerage career? The answer to that question varies greatly depending on your definition of success. Many brokers would like to see an increase in income earned, number of transactions closed, quality agents hired or retained, or any combination of other metrics used to define success. There are many definitions of success that do not have their own column in your firm’s P&L sheet, such as: spending more time with family, creating a steady stream of income, or dominating your local market. Figuring out the best way to achieve those goals is a real challenge for real estate salespeople.

“If you want to succeed, buckle down and work harder. You need to make more calls, set more appointments, and spend more time in front of decision makers.” This is good advice, but at a certain point in your career it becomes unproductive to pour yourself into more of the same. You can reach a plateau where spending more hours at work does not yield the desired results. In economic terms, this concept is called “The Law of Diminishing Returns.”

In 2013, my co-worker, Robert King, ALC, and I candidly discussed our goals for the year and how our numbers were tracking to date. Robert shared how his goal for the coming year was to increase the size of his average transaction to raise his total commissions earned. At the time, Robert was closing forty land transactions per year and was one of the top producers for Southeastern Land Group. The next year, he and Randall Upchurch teamed up and formulated a plan to increase their business and target a market segment that was largely under-served in Alabama. They focused on marketing and selling poultry farms across the state.

Poultry is the leading agricultural product in our state, and both Robert and Randall had previous experience with poultry operations and real estate brokerage. In 2014, they formed PoultrySouth to focus on marketing poultry farms. It took only two years for Robert to not only increase his commissions, but he was also able to more than double them as a result of teaming up with Randall. This is a perfect example of how two REALTORS® Land Institute members can partner to totally transform their business.

Randall is grateful the partnership has worked so well and, as he recounts their success, he does not take it for granted. “By working together the past three years, Robert and I have helped our clients close twenty-five poultry farms for a total of about fifty-five million dollars in sales. We currently have six pending farm deals, and are working on others.” Robert explains the upside of their partnership this way, “The benefit of two minds working through the issues of real estate transactions is a multiplying effect, not merely additive.” King continues, “Having slightly different perspectives focused on the same goal is a win-win for agents and clients. Additionally, we have seen the unexpected benefit of being able to multiply our effective handling of listings. Randall and I could probably only manage twenty-five or thirty listings apiece. Together we are able to handle one-hundred or more listings, while providing good service to our clients.”

The financial success of the partnership at PoultrySouth has opened doors for Robert and Randall to add cattle to their personal herds and each have purchased additional acreage for their family farms. The benefits from their business have overflowed into achieving goals for their families and farms. They are the perfect example of how real estate teams are supposed to function.

How do we achieve the positive outcomes we desire in our careers? One way is to align yourself with like-minded people. The power that comes from working together to achieve a common goal cannot be overstated. Fletcher Majors, an ALC from Alabama, has done a great job fostering an atmosphere of cooperation at Great Southern Land, both internally and with outside agents. In early 2015, Fletcher and three of his agents worked tirelessly to help one of their clients sell 6,477 acres in forty-five different tracts to thirteen different buyers in a single bid sale. Calvin Perryman, an ALC who works with Fletcher, explains why they believe in the team approach, saying “We often use a teamwork approach on special projects as well as everyday listings and appraisals. We believe having multiple opinions and ideas along with additional boots on the ground helps us better serve our clients.”

Each winter, nature demonstrates the power of teamwork when we see the V-shaped formations of geese as they fly south from Canada to warmer climates. The flock is able to survive by travelling great distances with maximum efficiency because of the cooperation of all the individuals. Each member of the flock benefits from the cooperative efforts of the group. This collaborative effort only works because each individual is clear on the objective, their responsibility, and they expend the effort to achieve the desired result.

There are many ingredients to creating a great team, but there are three essential elements that this article seeks to address. In order to form a great partnership, you must ACT like a team.

Agreement- “Can two walk together unless they are in agreement?” This question was posed by Amos, a shepherd turned prophet, that lived about 750 B.C. This question is still relevant millennia later. For a partnership to be effective, the partners must hold a common vision and agree on implementation of their strategy. The objectives must be clear so that everyone knows what they are working toward and how they will achieve the desired result.

Communication- Operation without communication leads to frustration. Sharing frequent updates, addressing problems jointly, and asking accountability questions helps ensure that the partnership stays on track. No member of the team should blindly assume that everyone has the most recent information or is acting on it. There will be hiccups in every partnership, but as a mentor often told me, “Communication covers a multitude of sins.” Receiving information makes people feel important and in the loop, so, be sure to share all that is appropriate with your teammate to increase the chances of mutual success.

Trust- The single most important ingredient to a well-functioning team is trust. Working with people that you know unquestionably have your best interest at heart frees you to focus on the challenge before you, and not on defending yourself from the people around you. Trust is very difficult to manufacture or bestow, and is generally built gradually and methodically through shared experiences. Trust breeds loyalty. Loyalty begets a willingness to work hard and take risks together. Working hard and taking calculated risks together is the formula most successful entrepreneurs use to achieve their goals.

RLI’s 2016 ALC-to-ALC Networking Award was recently presented to three ALCs from Hertz Real Estate Services in Iowa. ALCs Kirk Weih, Troy Louwagle, and Kyle Hansen teamed up to close a $12,263,100 transaction on 998 acres. This size and type of transaction requires that teammates have a lot of trust. Kyle’s advice for creating this type of success is, “Remember why you are working with another broker. It isn’t because they provide the highest referral or pay the best commission; it is because they can provide the best service to you and your client. We are in business to provide the best product and experience possible. To do that, you need to work with the best brokers possible. That’s why I like to work with Accredited Land Consultants and agents that I trust. That is what our clients deserve.”

A quick search in the “Book” category on Amazon.com for “Team” returns about 310,000 entries. With that much written on the topic, the best this article can hope to do is highlight a few essentials to creating positive teamwork for land brokers. There are dozens of free resources on teamwork available at the National Association of REALTORS® website. We face a challenge when we take a competitive vocation and ask individual agents to work together; however, good brokers know this is the formula for long term success.

“Our industry is unique in that it helps to have salespeople that are fiercely competitive, and yet be able to work well as a team. In many land brokerage companies, the agents are independent contractors and not traditional employees. In that type of relationship, you mandate only what is necessary and encourage your group as much as you can,” says Dave Milton, ALC and President of Southeastern Land Group. Dave adds, “For agents to succeed in this business, brokers have to do all you can to create an atmosphere of trust that leads to a strong team. The best way to help new agents launch their career is for them to team up with someone more experienced. Hiring the right kind of people is the best way to ensure buy-in from existing employees and protect the continuity of your team.”

A wise writer of antiquity once observed, “Two are better than one for they get a good return for their labor.” My hope is that by hearing other brokers involved with RLI share stories about the success they have had by teaming up, that you will find new ways to foster teamwork in your land brokerage business. “If you want to go fast, go alone. If you want to go far, go together.” Here’s wishing you all the best as you “Go together!”

This article originally appeared in the 2017 Summer Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

Jonathan Goode, ALCAbout the author: Jonathan Goode, ALC, is an active member of the REALTORS® Land Institute. He is a Co-owner of Southeastern Land Group, LLC (SELG) and is the Responsible Broker for the company in Mississippi. He is passionate about helping people buy and sell land.

Washington D.C. land real estate

The Four New Realities of Washington, D.C.

Usually I give a brief update on land real estate public policy issues of interest to REALTORS® Land Institute (RLI) land professionals and the landowners they serve.

However, the election of Donald Trump to the highest elected political office in the land has scrambled the usual political dynamics of Washington, D.C. – the rule-book has been thrown out and we are in uncharted waters.

Given the unusual political environment we find ourselves in today, I thought it might be helpful to identify some of the factors that now make up the new reality of Washington, D.C., and how these factors might impact land real estate public policy issues that land agents and landowners care about. So here they are, the four new realities of Washington, D.C.:

  1. New Administration. The Trump Administration was elected to achieve several big priorities: immigration reform; comprehensive tax reform; construct a wall on the southern border; and repeal and replace Obamacare. Smaller items on the agenda include reforming existing trade agreements and repealing Dodd-Frank. The Trump Administration is still finding its way on how to achieve its policy priorities, but eventually, they will find their footing. When they do, tax reform could be the issue they turn to for a legislative win.  Of all of these issues, tax reform could pose a threat to RLI’s most important legislative land real estate public policy issue: preserving the 1031 Like-Kind Tax Exchange for landowners and investors.
  2. New Congress. While the Republicans have captured both the House and Senate, they did so with small majorities and increased ideological polarization. Practically speaking, this is a recipe for legislative gridlock as congressional leaders discover it is difficult, if not impossible, to cobble together enough members to pass legislation. However, this could work in RLI’s favor.  While legislative stagnation means that some bills RLI members might support don’t get passed, it also means that other bills, such as tax reform that harm 1031s, might never see the light of day.
  3. Executive Order (EO) Governance. A recent trend for presidents is to issue Executive Orders when they are unable to achieve their policy agenda in Congress. This occurred quite often during both the Clinton and Bush Presidencies, then, accelerated quickly during Obama’s presidency. Trump has used them even more frequently to achieve early momentum on some of his key policy goals. While EOs are limited in scope because they only impact activities of the federal government and not broader corporate or social institutions, they can be used in a targeted way to achieve a specific result.  One recent EO directed the EPA to begin the process to rescind and replace the controversial and damaging Waters of the U.S. (WOTUS) regulation. If Trump does nothing else as President, rescinding WOTUS will help land owners and real estate agents more than anything else.
  4. De-regulatory Environment. President Trump has made it clear to all the federal regulatory agencies that they need to establish a process for reviewing and rescinding unnecessary or antiquated regulations. This has also been the subject of several EOs as well. While deregulation of the private sector is an important goal, this strategy has limitations as well.  First, the process for repealing a regulation is cumbersome and time-consuming.  Second, these only apply to regulations that originated in the federal agencies.  For example, the WOTUS and the Clean Power Plan regulations were initiated by the Environmental Protection Agency (EPA), without any statutory direction from Congress, so they can only be repealed by the EPA.  Regulations implemented under the direction of Dodd-Frank or the Affordable Care Act were initiated under the congressional authority, so they can only be repealed or modified by Congress.  Deregulation will unburden land real estate agents and their clients as well as help spur innovation and economic development.

This article originally appeared in the 2017 Summer Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

Riggs, Russell - NAR Government AffairsAbout the author: In his position with the National Association of REALTORS®, Russell Riggs serves as the RLI’s Government Affairs Liaison in Washington, D.C., conducting advocacy on a variety of federal issues related to land.