Brandon Zick, Ceres Partners - The Market Is $3 Trillion And Institutional Investors Own About 3% Of That | #319

Episode Summary

Executive Summary: Brandon Zick of Cirrus Partners discusses farmland as a long-duration, income-producing, inflation-hedged asset class. He explains why the firm’s Midwest/Great Lakes focus, active management, water-rich geography, and tenant-first underwriting support returns, while also highlighting rising commodity prices, COVID’s limited impact on row crops, solar and development optionality, and growing interest from institutions and individuals.

Main Topics: Farmland market backdrop and recent performance: Zick explains how farmland shifted from a period of flat-to-down land values to a more favorable environment driven by higher corn and soybean prices, supply disruption, and strong global demand. Cirrus Partners’ strategy and growth: The firm uses an evergreen, active-management model focused on aggregating farms over time, rather than a finite private equity-style fund, and has grown past $1 billion in assets. Underwriting, tenant selection, and valuation discipline: Investment decisions begin with the farmer-tenant relationship, local agronomy, and realistic rent assumptions; the firm emphasizes discipline over asset gathering. Water scarcity and geography as key investment factors: Cirrus prioritizes water-rich regions, especially around the Great Lakes, and sees water availability as a long-term driver of farmland value and a constraint in the West. Non-farm monetization opportunities: The conversation covers solar leases, wind, billboards, cell towers, development, wetlands mitigation, and mineral/resource value as ways to enhance returns without depending on them upfront. Sustainability and value-add improvements: Cirrus adds irrigation, drainage, and storage, and participates in sustainability standardization efforts while framing these improvements as practical yield/risk enhancements. Ag-tech and private investments beyond farmland: Zick describes separate private investments in greenhouse production, water filtration, and other ag-tech businesses that align with long-term agricultural and water themes.

Key Arguments: Farmland is attractive because it combines income, diversification, and inflation protection with historically low correlation to traditional markets. The firm’s edge comes from an institutional roll-up strategy that aggregates smaller farms and improves them, rather than chasing large one-off deals or sale-leasebacks. Water availability is more important than paper water rights; owning land in water-rich regions offers embedded optionality and resilience. COVID was largely a non-event for row-crop production because the sector is mechanized and inputs remained accessible, though specialty crops were more affected. Commodity price strength materially improved the farmland outlook; higher grain prices support both rents and values. Tenant quality matters more in farmland than in many other real estate asset classes because farmers care who owns the land they operate. Solar and other non-farm uses can meaningfully increase land value, but Cirrus underwrites farms to cash flow as farms first. Farmland should be managed actively; passive owners often fail to capture productivity gains or optional land-use upside. Rising tax uncertainty can create meaningful deal flow as non-farming owners sell to avoid potential capital gains, estate, or basis changes. Technology and sustainability practices are helping farmers increase yields, reduce risk, and improve operational efficiency. Data Points: Assets under management: $1 billion+ - Cirrus crossed the billion-dollar mark at the end of the first quarter. Investment history: 13 years - Brandon Zick says the firm has been investing for just over 13 years. Acres under management: 150,000 acres - Approximate total acreage assembled across 10 states. States in portfolio: 10 states - Portfolio footprint concentrated in the Midwest, lake states, and other water-rich areas. Farmers worked with: 126 farmers - Tenant network used in underwriting and long-term pipeline generation. Portfolio acreage farmed by tenants: 250,000 acres - He says these farmers farm Cirrus’s 250,000 acres and also rent 650,000 acres from others. Institutional ownership of U.S. farmland: About 3% - Zick cites this as the estimated high-end share owned by institutional investors. Owner-operator share: About 40% - Estimate of farmland owned by family farms / owner-operators. Farmland market size: $3 trillion - Used to argue that one large buyer cannot move the overall market much. Annual farmland turnover: About 1% - Zick says only a small portion of farmland changes hands each year. U.S. crop export share: About 40% - He notes the U.S. exports a large share of its crops, so global trade matters. Global grain supply buffer: 6 to 8 weeks - He says global stocks are thin, making prices sensitive to disruptions. Commodity price change: 40% to 50% higher - Corn and soybean futures are described as materially above prior levels. Typical success rate at auctions: 1 out of 13-14 farms; now 1 out of 20-25 - Success rate declines when prices are strong, reflecting valuation discipline. Target cash-on-cash return: 5% on land; 10% on value-add projects - Cirrus’s underwriting hurdle for acquisitions and improvements. Historical land appreciation: Just under 6% annually over ~50 years - He cites Chicago Fed data on long-term farmland appreciation. Solar exposure in portfolio: ~20% under solar options - A meaningful share of the portfolio has solar option agreements. Solar rent uplift: 3x to 4x - Solar leases are expected to pay multiples of traditional farm rent. Wind assets: 13 turbines - Example of ancillary income from non-farm uses. New purchases last year: Just over $80 million - Annual deployment in the most recent year discussed. Year-to-date deployment: About $15 million - Current-year purchases mentioned as of the interview date. Historical annual deployment range: $50 million to $120 million - Average capital deployed by the strategy each year. 2012 Q4 purchases: $44 million - He points to tax-policy-driven selling as a major source of deal flow. Portfolio crop mix: Roughly one-third corn, one-third soy, one-third specialty/other - Current mix described, with specialty crops expected to grow. Lockup period: One year plus Sept. 30 notice date - Effectively about a 15-month lockup for new investors. Legacy land loss: 17% of arable land over 50 years - USDA statistic cited to show land conversion pressure.

Pivotal Quotes: "There is no cheap beta. There's no index that someone can invest in and pay very little fees and actually have exposure to the asset class." — Brandon Zick: Explaining why farmland investing requires active manager selection and disciplined underwriting. "We'd rather be in an area, again, if you're an ag-focused investor, be in an area that has water because nothing's growing without it." — Brandon Zick: On why Cirrus prioritizes water-rich geographies over paper rights or speculative upside. "The tenant actually cares who the landlord is." — Brandon Zick: Describing why farmland differs from commercial real estate and why the farmer relationship is central.

Implications: Listeners should see farmland as a selective, actively managed real-asset allocation rather than a passive commodity proxy. The sector’s appeal rises with inflation, commodity strength, and tax uncertainty, while water access and tenant quality remain critical to long-term returns.