Artem Milinchuk, FarmTogether - Everything Pointed Towards This Massive Democratization of Alternative Investing | #353

Episode Summary

Executive Summary: The episode explores Farm Together’s mission to democratize farmland investing for accredited investors. Artem Millenchuk explains why farmland is attractive for long-term portfolios: resilient returns, inflation hedging, scarce supply, and climate-linked demand. The discussion covers deal sourcing, underwriting, fees, risks, sustainability standards, investor access, and future expansion into more states and countries.

Main Topics: Farm Together’s origin and mission (Priority: 5/5): Artem traces the company back to his institutional investing background and his belief that farmland should be a mainstream alternative asset. Farm Together was built to provide direct, passive access to farmland for smaller accredited investors and institutions alike. Why farmland is attractive as an asset class (Priority: 5/5): The conversation makes the case for farmland as a long-duration, real-asset investment with stable returns, low correlation, and inflation protection. Artem contrasts it with traditional stocks and bonds and argues it belongs at the core of portfolio construction. Deal sourcing, underwriting, and geography selection (Priority: 4/5): Artem explains how Farm Together chooses farms based on country, crop, water rights, operator quality, domestic market strength, and price. The firm prioritizes U.S. farmland, especially permanent crops and regions with reliable water and strong property rights. Investor onboarding and platform mechanics (Priority: 4/5): The episode walks through how investors sign up, review deal materials, attend webinars, invest online, and use vehicles like IRAs and 1031 exchanges. It also explains accreditation requirements, minimums, and the staged deal-release process. Risk management, leverage, and liquidity (Priority: 4/5): The discussion covers operational risks, water risk, insurance, modest leverage, and the company’s effort to create secondary liquidity. Artem emphasizes that the firm underwrites conservatively and avoids stranded-asset scenarios. Sustainability, climate change, and future expansion (Priority: 4/5): Artem discusses how climate change affects farm location and water strategy, plus sustainability standards such as Leading Harvest and carbon credits. He also outlines plans for more states, more crop types, international expansion, and an eventual diversified farmland fund or REIT.

Key Arguments: Farmland is a rare long-duration asset that historically offers resilience, attractive returns, and low correlation to traditional markets. Inflation protection is a major benefit because farmland sits upstream of food, feed, fuel, and fiber pricing and has historically outperformed equities in high-inflation periods. Water rights and property rights are among the most important underwriting factors; without reliable water, farmland can become stranded. The best opportunities are often in permanent crops and in regions where the U.S. has structural advantages and strong domestic or export demand. Farm Together’s model is designed to be accessible, with online sign-up, educational materials, staged deal access, and the ability to use retirement accounts or 1031 exchanges. Sustainability is not a marketing overlay; it is built into the underwriting process through third-party standards, climate analysis, and operational improvements. The business can offer both passive income and appreciation, while modest leverage can improve returns without creating excessive risk. A future secondary market and diversified fund structure would improve investor flexibility and broaden access.

Data Points: U.S. farmland acres: 900 million acres - Artem cites this to show that even the largest owners control only a tiny share of the total market. Bill Gates farmland ownership: ~230,000 acres - Used as an example of large-scale ownership still being a very small fraction of U.S. farmland. Cropland lost to urbanization: ~4.8 acres per minute - Mentioned in the episode intro to illustrate the supply squeeze on farmland. Farmland return (NCREIF Farm Index): ~11% annual average return - Artem cites long-run institutional farmland performance from 1992 to 2020. Farmland risk (standard deviation): 6.8% - Used to compare farmland volatility favorably against stocks, real estate, and REITs. Sharpe ratio: 1.19 - Presented as evidence of strong risk-adjusted returns for farmland versus other asset classes. Long-run farmland price appreciation: 5.9% annually - Artem references this as a broad historical average for land appreciation. Target net IRR: 7% to 12% - Farm Together’s typical target net annual return range for investors. Raw crop target returns: ~6% to 7% - Lower-risk raw crop deals tend to fall toward the lower end of the target range. Water risk screening: Six-sigma stress test approach - Artem says they want confidence water remains available even under extreme scenarios. Accredited investor threshold: $200K individual income, $200K couple, or $1M net worth excluding primary residence - Current SEC-based access requirement for platform investing. Typical minimum investment: $15,000 - Standard minimum for individual farm offerings. Management fee: ~1.5% annually - Farm Together’s fee charged on deal size. Administrative fee: ~2% at close - One-time fee charged when the deal closes. Performance fee: ~5% of net operating income - Used to align Farm Together’s incentives with investor outcomes. Leverage: Under 40% LTV - Typical leverage level used in permanent crop deals. Agricultural loan rates: ~3.5% to 4.5% - Artem describes this as attractive financing used in some deals. Hold period: 10 years, with two one-year extensions - Standard planned holding period for deals before attempted sale. Portfolio scale to date: ~30 deals - Artem says the platform has offered about 30 farms. Recent capital raise on one farm: $12 million in equity - A recent deal was oversubscribed and sold in two 48-hour windows. Company funding raised: ~$9 million - Artem says this is the total raised to date at the company level.

Pivotal Quotes: "Farmland is almost unique in that." — Artem Millenchuk: Explaining why farmland fits long-term liability matching for institutions and patient capital. "We have to invest in water infrastructure." — Artem Millenchuk: Discussing California water constraints and the necessity of reliable water access for farmland. "This is not GameStop." — Artem Millenchuk: Describing farmland as a long-term, not-speculative, asset class and contrasting it with short-term trading mania.

Implications: The episode frames farmland as a serious inflation hedge and portfolio diversifier, but one that demands patience, water diligence, and strong operators. It also suggests farmland investing may become more accessible through funds, secondary markets, and broader geographic expansion.