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FarmTogether Review 2021: Is This Platform Right for You?

Before you invest with this crowdfunding platform, here are the benefits and risks you should know.


[Updated: Apr 15, 2021 ] Feb 26, 2020 by Matthew DiLallo
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FarmTogether

3.8 / 5 stars

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Summary

FarmTogether's crowdfunding platform is one of the few ways accredited investors can get exposure to farmland as an asset class. With decent returns and low fees, it is a compelling choice for those looking to diversify their portfolios.

3.8 / 5 stars

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Highlights
    • Invest in unique asset class with low fees and relatively low minimums
    • One of the few platforms offering ESG investments
    • For accredited investors only

Bankruptcy Protection 9/ 10

Deal Flow 7/ 10

Deal Transparency 3/ 5

Diversified Fund Options 3/ 5

Due Diligence 8/ 10

Ease of Use 9/ 10

Fees & Commissions 8/ 10

Investment Minimums 4/ 5

Investor Resources 9/ 10

Leadership 4/ 5

Non-accredited Investor Offerings 0/ 5

Platform Financials 4/ 5

Skin in the Game 3/ 5

X Factors 4/ 5

Total 75 / 100

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What is FarmTogether?

FarmTogether is a real estate crowdfunding platform that specializes in agricultural real estate offerings like farmland. The deals it has offered are long-term investments, intended to take five or more years to complete. It's only open to accredited investors at this point, though management says they intend to eventually offer investments suitable for non-accredited investors in the future.

The platform also offers excellent educational content for investors. It covers a variety of topics on farmland investing via many forms of content, including blogs, videos, webinars, infographics, and an informative white paper on farmland investing. That makes it a great resource for all investors who are interested in learning more about farmland investing.

Summary: Is FarmTogether a good investment?

For the past several decades, farmland has made for one of the best risk-adjusted investment classes in the U.S. Farmland has, as a category, delivered better returns than nearly every kind of asset, including precious metals, stocks, bonds, and other real estate classes over the past 30 years.

It's also proven one of the safest real estate assets, since food demand increases every year as the population rises, and the supply of farmland steadily dwindles as more of it is developed for other commercial uses.

Adding farmland to a diversified portfolio can increase an investor's returns while reducing volatility. For example, a traditional 60/40 portfolio (60% stocks and 40% bonds) has historically produced average annual total returns of 8.15% over the past 30 years with a standard deviation (a measure of portfolio volatility) of 10.68%. Adding farmland can increase the total return to 8.61% while reducing the standard deviation to 9.04%. Meanwhile, adding farmland to a portfolio along with real estate has yielded a 8.46% total return with an 8.62% standard deviation.

When we combine those realities with the FarmTogether platform, its mission, and its management, our expectation is that FarmTogether should be an excellent place for investors to profit in the years to come.

There's a caveat: FarmTogether is a relatively new platform that's only funded a few deals, so it's likely to be a few years before we have hard evidence that it’s a successful platform for investors. But its founders and executive team have a history in agriculture (ag) investing and finance that we expect will serve investors well.

What are FarmTogether's pros and cons?

Pros

  • Unique asset class with a great return profile: Farmland has an excellent track record of strong returns and minimal losses.
  • Management that knows agriculture: Management has a track record in ag finance, particularly fruit and nut trees, citrus, and grapes, and partners with a successful developer and operator in row crops.
  • Low investing minimums: Starting at $15,000, farmland deals on FarmTogether often have much lower minimums than other commercial real estate deals on other platforms.
  • Low fees: Farmland deals tend to be less complex, without the big construction budgets and operating fees of other commercial real estate projects. Because of that, FarmTogether’s fees are lower than the industry average.
  • Diversified fund option: FarmTogether offers investors the option to participate in a diversified fund.
  • A wide variety of investment choices: FarmTogether’s deal flow has included a mix of permanent and row crop opportunities. It has also offered two organic redevelopment opportunities.
  • Easy to use platform: FarmTogether has streamlined its accreditation process and implemented a new investor dashboard to more thoroughly track offerings and investments.
  • Socially responsible investing:
    • Partnership with Terraton and Indigo to invest in and develop carbon-negative farm operations.
    • Becoming signatory to UN Principles of Responsible Investment for Farmland Investing.
    • Founding team and executives are majority female and people of color.
    • Partnered with Leading Harvest and enrolled 100% of its acreage in its Sustainable Farmland Management Standard.

Cons

  • Accredited investors only: At this stage, FarmTogether is only open to investors worth $1 million or more (excluding their primary residence) or who earn at least $200,000 per year.
  • Limited track record of results: FarmTogether is a relatively new platform that has a limited operating history. Because of that, along with the long-term nature of farmland investing, it doesn’t have any fully realized deals.

Use of debt can increase risk: Some of its real estate offerings use debt to help fund the project. While this leverage can enhance returns, it also adds additional risk if the farm's operations fail to generate adequate cash flows to service the debt.

Is FarmTogether legit? How strong is it?

FarmTogether has raised millions of dollars from a number of angel and venture capital investors since founding. It has also successfully closed several farmland transactions since its formation.

Management

FarmTogether was founded by Artem Milinchuk, who is its CEO and the largest investor in the company. Mr. Milinchuk has more than a decade of experience in farmland and agriculture, specifically on the finance side. FarmTogether has a number of other executives with agribusiness finance and investing experience, as well as experts in building and managing the technology infrastructure investors use to access the FarmTogether platform.

In addition to running the company and setting its vision, FarmTogether executives also invest in every deal offered on the platform. We view this alignment with investors and extra skin in the game as a positive.

How FarmTogether works: How are investments sourced?

Investors who use FarmTogether are buying a stake in an operating farm. FarmTogether's management has expertise in fruit, nut, and citrus trees and works with a partner, Farmland Opportunity, on row crop farms.

The way it works is simple: FarmTogether identifies investment opportunities, then puts them through its vetting process to determine if the combination of the crop, valuation of the farm, and the capabilities of the prospective operator -- either a contracted commercial farmer or a tenant lessee -- meets its standards. FarmTogether also identifies opportunities to invest in the farm to raise its value, such as adding additional infrastructure or converting it to organic or carbon-reducing practices.

If an opportunity meets its expectations, FarmTogether negotiates a deal with the seller and lists the offering on its platform, including all relevant legal documents and financial targets as well as the targeted hold period. Once the deal is funded and closes, investors will earn a cash yield, paid from the farm's cash flows during the term of ownership, which is often going to be more than five years before the farm is sold, with the expectation being that it will be sold at a profit, particularly if capital improvements or changes in farming practices to raise its value are made.

Who can invest with FarmTogether?

Although management says they do intend to offer appropriate investments for non-accredited investors at some point in the future, for now, their platform is only open to accredited investors.

What is the minimum FarmTogether investment?

FarmTogether says the minimum investment you will see on its platform is $15,000 for a standalone deal, but it's not always the case for every deal.

What are FarmTogether's fees?

FarmTogether charges investors two fees:

  • A one-time, up-front expense reimbursement fee.
  • An annual management fee.

These fees can vary by deal. For example, a pistachio orchard deal that closed around the time of this review had a 2% up-front fee and a 1.5% annual management fee based on the fair market value of the property. Meanwhile, another similar deal for a pistachio orchard had a 2% up-front fee and a 1% annual management fee, both based on the total deal size.

In addition to FarmTogether's fees, its partner deals may have additional fees. For example, a recent partner deal also included a 10% share of the profits to be paid when the farm is sold. Another deal with a contracted farm operator listed an annual on-site per-acre management fee.

Overall, FarmTogether aims for its fees to be lower than the industry average. However, the key is to take the time to study every deal before you invest and make sure you understand the fee structure.

FarmTogether's returns: What should you expect?

None of FarmTogether’s deals have come full circle yet since farmland is a long-term investment and the platform didn’t close its first deal until late 2019.

However, farmland as an asset class has an excellent track record of delivering both very strong returns and minimal losses. Further, FarmTogether's management team has experience finding profitable farmland investments and has worked with top operators to deliver profitable cash flows from those farms, and that bodes well for the deals it lists.

Lastly, FarmTogether's asset management fees come from the cash flows generated by the farm's operations, and its executives invest alongside investors in every deal. That means the company -- and its executives -- have real skin in the game and are financially aligned with investors. That also bodes well for profitable deals.

Those factors should give investors confidence that FarmTogether’s deals will deliver on its targeted returns. At the time of this review, the platform had closed 16 deals. It had a target IRR between 7.1% and 15% and net equity multiples of 1.4 times and 7.4 times.

When (and how) can you sell FarmTogether investments?

Farmland is a long-term investment. Because of that, the targeted holding period of FarmTogether’s offerings have ranged from five to 12 years.

However, FarmTogether has started rolling out a secondary liquidity market for its investors. It completed its first successful pilot test in early 2021. While that program allows investors to gain some liquidy if they need their capital before an investment goes full cycle, they should go into each investment planning to hold for the duration.

Going mobile: Is there a FarmTogether app?

Like most other real estate crowdfunding platforms, FarmTogether doesn't have an app. However, it does have an excellent mobile-optimized website, giving users the same features and capabilities as its desktop site. Rest assured, you can create and access your account, review and make investments, and access your portfolio from a smartphone or tablet just as well as from your desktop or laptop.

FarmTogether risks: Is FarmTogether safe to invest with?

When you invest on FarmTogether, you own a stake in the farm itself, through a separate legal entity -- typically an LLC -- and not a stake in FarmTogether. That means if FarmTogether were to get in financial trouble or become insolvent, your farmland investments would not be at risk. Additionally, FarmTogether isn't a farm operator, so any interruption in its operations wouldn't have a direct impact on any of the farms you invest in.

However, since it acts as the asset manager, there would likely be some interruption -- temporarily -- to a few things for investors, including access to reporting or documentation, the payment of distributions, or communications with the farm operator, since FarmTogether plays a key role in managing those things. There are some protections in place to limit this impact, with each deal including a survivorship plan for ongoing administration.

The biggest risk for investors in farmland real estate deals is the farm not producing sufficient results. This can be caused by a litany of things, including:

  • Pests or disease.
  • Drought.
  • Catastrophic weather.
  • Mismanagement by the operator.
  • Low commodity prices.

Or -- most common -- some combination of the above. Whether it's bad luck or bad farm management, if a farm doesn't generate expected cash flows, investors may not earn the expected distributions.

In a worst-case scenario, a farm may even need to be sold off if things are bad enough -- and potentially at a loss. It's unlikely with well-vetted deals and qualified operators, but it happens. And if there's debt involved, those losses can be compounded in a worst-case scenario.

The lesson? Make sure you do your due diligence. Understand the financials for any deal before you invest, and consider if the risks fit within your personal risk profile.

With all that said, there's a lot to like about FarmTogether and what it offers investors. Farmland is not an asset class that many people have ever had the chance to invest in, but its risk and returns profile, along with its prospects going forward, should have it on your radar.

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