Ceres Partners CIO Brandon Zick on How Private Equity Invests in Farmland

Episode Summary

Executive Summary: Barry Ritholtz interviews Brandon Zick, CIO of Saras Farms, about how farmland became an institutional asset class. Zick traces his path from dairy farming to Wall Street to farmland investing, and explains why Midwest row-crop land offers income, inflation protection, diversification, and hidden upside through better management, irrigation, and optional land uses like solar, wind, and data centers.

Main Topics: From farm upbringing to Wall Street and back to farmland (Priority: 5/5): Zick describes growing up on a dairy/crop farm, learning hard work and risk firsthand, then moving through Lehman and Morgan Stanley before returning to agriculture as an investor. Why farmland is a distinct real asset (Priority: 5/5): He explains that farmland is not just real estate but a productive asset with scarce supply, nearly zero vacancy, and ownership fragmented among families, trusts, and heirs rather than institutions. Return drivers: rent, appreciation, and alpha (Priority: 5/5): The discussion breaks down farmland returns into rental yield, long-term land appreciation, and additional value creation from active management, capex, and higher-best-use decisions. Risk management and why the Midwest matters (Priority: 4/5): Zick emphasizes soil quality, water availability, infrastructure, and competitive rental markets as reasons the Midwest is preferred, while contrasting U.S. transparency with international land risk. Optionality beyond crops: solar, wind, mineral rights, and data centers (Priority: 4/5): He details how farmland can produce incremental or transformative value through energy development, mineral rights, hunting leases, timber, and especially data-center demand near power and water. Technology and sophistication in modern farming (Priority: 4/5): The interview highlights precision agriculture, GPS-guided equipment, variable-rate inputs, drones, satellite data, and remote irrigation control as major productivity gains. Institutional growth and manager selection (Priority: 5/5): Zick argues farmland investing is still inefficient and manager-dependent, favoring experienced operators who can source small deals, manage tenants, and find underpriced opportunities.

Key Arguments: Farmland is an attractive real asset because it combines current income, inflation linkage, diversification, and long-term appreciation rather than relying on one return driver. The best farmland strategy is active ownership of row-crop land in the Midwest, where rental markets are deep and water/soil conditions support lower risk. Institutional ownership is still tiny relative to the addressable market, leaving room for skilled managers to aggregate fragmented holdings and create alpha. A major source of alpha is operational improvement: irrigation, drainage, better tenant selection, and negotiating rents based on highest and best use. Farmland’s value can be enhanced by non-agricultural uses such as wind, solar, hunting, timber, mineral rights, and future data-center development. The asset class is relatively inefficient, so investing success depends more on picking the right manager than on buying passive beta. Technology is improving farm productivity quickly, and the best operators are those using precision agriculture, remote monitoring, and data-driven input decisions. Leverage is used conservatively in farmland because the asset is stable but illiquid; discipline and patience matter more than aggression.

Data Points: Saris Farms AUM at entry: $30 million - Zick joined the firm in 2010 when it was a very small farmland manager. Saris Farms current size: $2 billion - The fund grew from a tiny platform into a large specialized farmland investor. Row-crop rental yield target: 4% to 5% gross annually - Typical gross rental yield range on the firm’s portfolios. Target purchase income return: 4.5% to 5.5% - Income underwriting target when buying farms. Target total net return: 8% to 10% net through a cycle - Expected all-in farmland return target including rent and appreciation. Historical farmland appreciation: About 6% annualized - Chicago Fed data referenced for long-run land price appreciation. Midwest family-farmer land ownership: About 40% of real estate - Zick’s estimate of farmland owned by active family farmers in the Midwest. Institutional farmland ownership: About 3% - Institutional ownership of farmland today, including large endowments and foundation investors. Farm tenants: 170 tenants - Number of different farmers renting from Saras Farms. Portfolio acreage: 170,000 to 180,000 acres - Scale of the farmland portfolio discussed during the interview. Properties owned: Over 500 - Total number of farm properties aggregated over time. Typical lease term: 3 years - Standard lease length for row-crop farmland. Higher-revenue specialty-crop lease term: 8 to 10 years - Longer leases for potatoes, processing tomatoes, mint, and similar crops. Cap rate for Midwest land: 1.5% to 2.5% - Typical market cap rates for Midwest farmland transactions. Data-center land price range: $100,000 to $300,000 per acre - Indicative prices for land near large AI/data-center developments. Average portfolio cost per acre: About $8,000 - Average acquisition cost across the farmland portfolio. Wind turbine footprint on a 700-acre farm: About 20 acres total - Wind infrastructure uses only a small portion of the acreage. Solar revenue uplift: 3x to 5x income over option period - Potential uplift from converting farmland to solar rather than agriculture. Family estate tax exemption example: About $15 million per spouse - Current estate-tax discussion contrasted with much lower past thresholds. Public auctions attended annually: 200 to 300 - Volume of farmland auctions monitored by the firm.

Pivotal Quotes: "There's a lot of people that are good at it. Whatever you think you're good at, there's someone that's better at it for sure." — Brandon Zick: Advice to young professionals about network-building and humility in investing. "There's no black box here to what we're doing. It's really a blocking and tackling strategy." — Brandon Zick: He explains that farmland investing is disciplined, operational, and transparent rather than algorithmic. "We think we're in an inflationary environment for the long term. So we think this is an asset that works well." — Brandon Zick: His core view on farmland as an inflation hedge and long-duration asset.

Implications: Farmland is increasingly a sophisticated, manager-driven asset class with real inflation protection and hidden optionality. As data centers, energy, and technology reshape land use, skilled operators can extract more value from scarce U.S. farmland.