The Legacy
If agricultural land is to remain productive through ownership succession....
Unlike the way traditional Private Equity (PE) Funds conduct business, Agland's purpose driven mission real estate (RE) project investment companies are exclusively and specifically chosen for both purpose potential and strategic prioritization. Direct qualified investor participation is specifically tailored and investors are specifically chosen to fit a specific agricultural land investment project.
An agricultural land seller has only two options. Either the seller is purpose driven or wishes to maximize proceeds. With no legacy or community driven purpose, it serves no propose to engage with Agland Capital. The land will be sold to the highest bidder and the land's conservation values, including the cultures and economies of working agriculture will either be significantly diminished or be destroyed.
If there is desire of an agricultural or family legacy however, AgLand Capital is the only clear choice to make it happen. Acquisitions incorporating a seller's desire to protect family and land legacy is where Agland shines. Consequently, AgLand will not engage in RE offerings that that have no legacy or purpose component to the seller’s motivation, whether structured or integral to the seller’s choice of buyer.
Timing Transparency
Agland Capital is not a PE Fund and does not consider a RE deal as a commodity. There’s no lack of capital available to Agland's purpose mission, but there are timing challenges in competing with PE funds sitting on committed capital. Capital managed by Agland is 100% employed all the time with no dry powder. So, Agland’s purpose driven RE acquisition takes longer to assemble than traditional PE funding, sometimes taking 8 to 12 months longer to structure a deal.
AgLand's investments can be structured to perform when sellers are motivated to build a legacy and in so doing choose to accept a longer escrow. With a legacy component, 10 months doesn't typically matter to a seller's motivation. Without a seller’s motivation constrained by legacy or purpose however, Agland takes its experience and expertise elsewhere, and in our grief, the heritage and productivity potential of that land will be probably be gone forever. Why? Because of the Agricultural Challenge.
The Agricultural Challenge
The challenge is this: in all but extraordinary circumstances, traditional sources of investors’ return to capital diminish natural agricultural productivity and resilience. Long term productivity takes a back seat to rapid returns.
Not since the mid-1970s has present value of future agricultural returns been in equilibrium with land market value. The disparity between marginal returns from capitalized agricultural income and market demand driven value is pure speculation. No-one is making any more of 'it', and the basic dynamic of mouths per acre is obvious to everyone.
Traditional extensive farm or ranch investments have no substantial return on investment potential from agriculture without significant changes tailored by highly practiced professionals. Land-based agricultural startups are only able to cover operational overheads at best. Even the most skilled and seasoned farmers and ranchers with professionalized strategic planning, governance and continuity of generational management are not likely to earn more than 3% on decades-old book value, let alone new book value.
This speculative RE value disparity is markedly exacerbated by the current two decade-long ag-private equity (PE) buzz emanating from the San Francisco Bay Area's and New York’s financial centers. Of course the buzz is not emanating from the protective hive, with an evolutionary will directed at the good of the community. Rather, it’s the illusion of green gold; in the form of demand for non-industrialized food and the romance of back to the land and Eat Local agriculture.
In our lust for it we will destroy it.
So, we're in trouble. Agricultural PE capitalized startups with no seasoned expertise at the basement level have two probably outcomes; 1) they will either fall flat and fail, or 2), will abandon their agricultural illusions, and turn to RE liquidation.
In order to attract PE investors, returns are defined in short term dividend and revenue innovation strategies. What are these traditionally?
Open space experiential, recreational and educational enterprise innovations, including:
equestrian experience and guest ranching
hunting
non-hosted camping, vacation rentals and timeshare
zip lines
motor ATV snow machine, jet or air-boat recreation
Natural History touring and lecturing including youth group, public and charter-school clients, etc.
RE appreciation growth exit strategies.
Speculative RE value reduction through conservation easements (CE)s.
Agriculture enterprise innovation, including management intensification and vertical integration.
Of these, only #s 3 and 4 have potential for mitigating speculative value. None of the alternative open space recreational and educational revenues of # 1 have any significant impact on mitigating the cost of capitalizing speculative land value. #2 only intensifies the problem with no regard for sustaining productive ecological systems including agriculture.
Finally, agriculture enterprise innovations hold great promise. The smart money is going this way. But, exactly like agricultural PE capitalized startups with no seasoned expertise at the basement level, attempts at vertical integration and intensified management will die a bloody but thankfully rapid death.
Conservation Easements
Although CEs have great potential if done right, they are rarely so done. In California, like the I-90 corridor out of Seattle, Spokane and Coeur d'Alene, all of Western Montana, the Willamette Valley, and the front Range of Colorado and Wyoming, political power resides in an affluent population wholly severed from knowledge of the complexity and cyclical and elemental nature of agriculture: in complete ignorance of the author Wendell Barry's 'Husbandry', which described the simple truths of the necessity of experience and practice. These geographies have a collective delusion of how a working-lands CE can function. Consequently, speculative value reductions with the use of CEs have rarely been used with positive effect for agricultural and community resilience.
CEs have been and continue to be very effective at providing a return capital payout to investors. But, CEs have evolved into the mechanism behind the motivation for land trusts to have a controlling interest in cool land, and for investors to get their money back, both in ignorance and disregard for the consequences of the details in the deed. Often working lands are rendered unto poorly managed public parklands, even when funded with capital intended by public programs for working agriculture and community resilience. CEs cannot be effective for working agriculture when the architect of most perpetual CE restrictions conveyed in the West possess inept understandings of the complexities of agriculture and forestry. A CE with misplaced dictates of management sacrifices the potential of agricultural-ecological balance, productivity and efficiency potential, and husbandry, is forever.
What's left?
These are the current potentialities for providing returns to shareholder investors while protecting the Gift of Good Land.
Investment opportunities with a purpose mission, including creating a new pioneer investor stories, and the opportunities to contribute to land heritage and legacy.
Conservation Easements tailored with the skill and expertise of generational practice and a nurturing vision for our successors.
Business innovations in management intensity and vertical integration, with the skill and expertise of generational practice in the basement and energy at the helm.
These things are not easy. To make a purpose -investment in agricultural land takes more skill, hard work and grit than can be communicated. It can’t be done without moral integrity, generational agricultural practice in the basement and pure inspiration and energy at the helm. It will not be worth the hardship and difficulty unless on-mission purpose is at the core of our motivation. Agland Capital has lived the hardship, emerged on the right side of it, and not only embraces that core, Agland Capital created it.