David Chan, FarmTogether - How Do We Make Farmland As An Asset Class More Accessible? | #215

Episode Summary

Executive Summary: The episode explores farmland as an investable real asset and Farm Together’s platform for democratizing access to it. David Chan explains why farmland offers diversification, inflation protection, and both income and appreciation potential, while also detailing ownership fragmentation, deal structuring, risks, sustainability themes, and how Farm Together serves accredited investors through syndications, bespoke accounts, and an emerging secondary market.

Main Topics: Farmland as an asset class (Priority: 5/5): Farmland is framed as a real asset within real estate that can generate both rental income and appreciation, with benefits from inflation sensitivity and demand for food-related commodities. Ownership fragmentation and market structure (Priority: 5/5): U.S. farmland is highly fragmented and mostly owned by families or operator networks; institutional ownership remains a small share, creating both access barriers and opportunities for managers. How Farm Together works (Priority: 5/5): Farm Together sources, diligences, syndicates, and manages farmland investments through SPVs, allowing accredited investors to participate in deals ranging from row crops to permanent plantings. Return profiles and risk management (Priority: 4/5): The discussion compares row-crop leasing with direct operation of permanent crops, highlighting differing cash yield and appreciation profiles, plus risks like leverage, pricing, and acquisition competition. Sustainability and regenerative agriculture (Priority: 4/5): Chan discusses regenerative agriculture, carbon sequestration, carbon credits, and the possibility of future ancillary revenues from environmentally beneficial land management. Investor access, liquidity, and bespoke solutions (Priority: 4/5): The platform serves accredited investors, supports qualified funds, and is building secondary liquidity while also offering bespoke portfolios for larger investors and family offices.

Key Arguments: Farmland deserves a larger role in portfolios because it combines current yield with long-term appreciation, similar to real estate but tied to essential demand for food and commodities. The U.S. farmland market is fragmented, with most land still owned by families; this creates inefficiencies that professional managers and platforms can exploit. Row-crop farmland can provide relatively stable rental income, while permanent crops can produce higher total returns due to operating upside and appreciation. Farm Together adds value by handling diligence, structuring, and ongoing asset management, reducing the operational burden on investors who cannot farm directly. Regenerative agriculture and carbon markets may become meaningful future revenue streams as corporate decarbonization demand grows. Liquidity is limited but improving through planned secondary transactions; the platform is designed for long-term investors rather than short-term traders. Larger investors can use bespoke accounts or 1031 exchanges to build customized farmland exposure without managing multiple small syndications.

Data Points: U.S. farms under 5,000 acres: 70% - Used to illustrate the fragmented structure of American farmland ownership. Institutionally managed U.S. farmland: 2% to 3% - Estimate of the small share owned by professional/institutional managers. Average age of U.S. farmer: About 60 - Supports the generational transfer and estate-planning theme. Typical portfolio allocation to farmland: 5% to 10% - Reference point from university endowment practices. Row-crop cash-on-cash returns: 4% to 5% - Potential annual rental income from leasing annual cropland. Row-crop net returns: 7% to 10% - Estimated achievable total returns including value creation drivers. Permanent planting net returns: 10% to 15% - Higher-return profile for orchards/vineyards and similar long-duration crops. Permanent crop cash yield over life: ~6% average - Estimated average cash yield over the lifespan of a permanent planting project. Turnkey orchard initial cash yield: 9% to 10% - Yield expectation for mature orchards from day one. Leverage in farmland: Low teens debt-to-equity - Current leverage levels in farmland are described as low relative to historical crises. Average investment horizon: 5 to 8 years - Typical timeframe for Farm Together projects. Platform minimum investment: $10,000 to $20,000 - Minimum varies by property and deal structure. Bespoke account minimum: $750,000 stated; closer to $500,000 workable - For custom single-property or portfolio mandates. Current pipeline value: $500 million - Approximate farmland the company says it could acquire if capital were available. U.S. farmland market size: Just shy of $3 trillion - Approximate total value cited for U.S. farmland. Global farmland market size: About $10 trillion - Approximate total value cited globally. Professionally managed U.S. farmland: $50 billion on the high end - Estimate of professionally managed farmland in the U.S. Hazelnut global production share by Turkey: Close to 70% - Used to explain supply concentration and Oregon hazelnut opportunity. Carbon challenge target: 1 trillion tons of CO2e - Reference to the Teraton Initiative challenge involving regenerative agriculture. Almond investor perk: 5 pounds of California almonds - Example of a non-financial benefit provided to investors. Annual management fee: 50 bps to 1% - Fee range depending on deal complexity. Upfront administrative reimbursement fee: About 1% - Charged at close.

Pivotal Quotes: "how do we make farmland as an asset class more accessible beyond university endowments and large pension plans to everyday investors?" — David Chan: Explaining Farm Together’s core mission and market opportunity "I would argue that food, water, and medicine are as close to perfectly inelastic as you're going to get." — David Chan: Making the case for farmland as a defensive, demand-supported asset "If we're doing the farming, something's wrong." — David Chan: Clarifying Farm Together’s model: they invest and hire expert operators rather than farm themselves

Implications: Farmland is positioned as a long-duration, inflation-aware diversifier with growing appeal amid market volatility. Platforms like Farm Together may broaden access, improve stewardship, and create new sustainability-linked revenue streams.