US’s first organic farm REIT, based in Evanston Illinois can’t come at a better time when organic farming and consumer demand for organic product are becoming more popular, in part because organic farmers can help set the price and value of organic produce.
Sound Benefits
The benefits of organic farming are manifest. Practices such as soil-building, crop rotations, reduced chemical pesticide intervention all contribute to sustainable soil formation and structure, and increased soil biodiversity. Consumers eat healthier food and produce and benefit from eating product that is less exposed to harmful pesticides.
Organic farms generate $558 in profit per acre, almost three times the $190 from conventional farming, according to one study. Consumer demand for most organics is outpacing production growth, says another.
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“Many younger farmers are looking for funding, says Miller, noting 72 percent of his private-equity firm’s farmers are millennials. “The big guys don’t operate there,” he says, noting his average farm purchase is between 100 and 120 acres. “It’s hard for family farmers to find funding to buy parcels of small to medium size. We are reactive to farmers looking for a specific piece of land. It’s their business, and they come to us with a specific opportunity they want to finance.”
A small group of 10 original investors has grown to 250—from 34 states and Canada and Great Britain—who converted their limited-liability company and began offering what they say is the first organic family farm real estate investment trust in the U.S. on Jan. 1, says Kevin Egolf, CFO of Iroquois Valley.
The Iroquois Valley Farmland REIT public benefit corporation, based in Evanston, includes 32 farms across nearly 4,500 acres in Michigan, Maine, New York, Kentucky, Montana, West Virginia, Illinois and Indiana; 73 percent of that acreage has transitioned into certified organic land. It has some $30 million in assets, with 41,500 shares valued at $568 per share, Egolf says. Compared to other private farmland funds and REITs that focus on conventional farming, Iroquois is small.
In 2015, a little more than 2 million farms were left in the U.S., and 14,861 certified organic farms with 5.3 million acres—up from 12,941 farms and 4.8 million acres in 2008—according to the USDA. While the number of certified organic farms in Illinois increased to 218 in 2015 from 50 in 2008, the number of acres decreased to 27,275 in 2015 from 35,887 in 2008.
Iroquois partners say that bodes well for the company’s prospects as demand increases. “They aren’t making more farmland,” says Arne Lau, Iroquois chief operating officer. “We will always need food, and sustainable farming practices are critical.”
