How local knowledge, OZ tax incentives, and a commitment to its core principles have helped LandFund Partners create jobs and promote biodiversity through strategic investments.
The JTC Americas Impact Medallion Program recognizes impact fund managers and industry stakeholders who embrace best practices in security, transparency, and compliance. In this series, we’ll showcase Impact Medallion recipients and how they’re leading the way on Impact.
Much of the dialogue around Opportunity Zones has focused on real estate construction in urban areas and whether certain tracts should qualify, but this often obscures the good OZ can do for rural communities. OZ funds have the potential to transform rural areas and promote sustainability and renewable energy, all while offering solid returns for investors. In some areas, OZ tax incentives are already being used to encourage investment in worthwhile projects that benefit both investors and society at large.
LandFund Partners is an experienced, institutional-quality investment manager that acquires farmland properties in the Mississippi River Valley. The LFP Soil Enrichment Fund is an open-ended fund focused on acquiring high-quality row crop farmland that meets strict investment guidelines, making operational improvements and leasing the land to top-tier farmers through LFP’s proprietary network of potential tenants. LFP uses regenerative farming practices and works to enhance the value of its portfolio by making irrigation improvements, enriching soils, generating carbon credits, and exploring wind, solar, and water rights agreements.
We spoke with President and COO Chris Morris about LandFund’s Soil Enrichment Fund, the importance of data in evaluating regenerative farm practices, and why crop diversity is a crucial component of their strategy.
Those looking at Opportunity Zones from outside the industry may associate the program more with urban commercial real estate than with farmland. Can you explain what makes LandFund’s projects different from other OZ investments, and how they can benefit communities?
Morris: The investments we make in farmland have attractive stand-alone returns irrespective of tax treatment. The tax benefits provided by the Opportunity Zone regulations further enhance our ability to drive value for investors and augment those already strong returns. Our investments differ from other Opportunity Zones in urban areas because instead of constructing new buildings, we are reinvesting in the soils and making capital improvements on the farmland such as irrigation systems and grain bins to help our farmers be more productive. Both the improvements and the more productive farmland assets help create jobs and increase incomes in rural communities.
The LFP Soil Enrichment Fund has a broad range of projects – according to your website, 21 properties across three states growing 12 different crops. What are the benefits of that kind of diversity for the fund’s portfolio?
Morris: Soil Enrichment Fund now owns over 31,000 cultivated acres of high-quality farmland with abundant groundwater. Crop diversity is an important underwriting characteristic in our acquisition strategy. We only pursue farmland that has the ability to grow several different crops. The ability to grow a diverse range of crops is key in attracting tenants to lease our farmland. This is an important characteristic that farmers look for because it allows them to rotate their planting schedule across more crop types to take advantage of fluctuations in commodity futures prices. Additionally, rotating crops replenishes soil nutrients and keeps the ground healthy.
Regenerative farming is something many investors based in urban areas might not know much about. Can you explain how these practices are beneficial for the environment as well as enhancing the value of the land?
Morris: Regenerative farming practices are broadly defined as cultivation techniques that enrich and improve the long-term health of the soils on which they are utilized. These practices include cover cropping, reduced or no tillage, reduced pesticide and fertilizer use, and other practices that tend to increase carbon content and organic matter of the soils. Healthier soils are proven to increase crop yields and reduce farm input costs over the long-term. Changing a farm’s practices to regenerative techniques can lead to verifiable reduction of greenhouse gas emissions. Farming in this manner also allows farmers to produce climate-friendly crops that can potentially be sold at a premium, allowing the Fund the possibility of additional revenue streams.
LandFund has partnered with AgriCapture, a climate tech company, to help capture on-farm data. We track historical farming practices as well as current practices to help estimate current greenhouse gas emissions from each farm. AgriCapture assists the Fund in determining best regenerative farming practices by property and tenant to increase soil organic matter to create higher yields, reduce input costs and decrease greenhouse gas emissions.
With an open-ended fund, you have the potential to add many more properties to your portfolio in the future. What’s the key to scaling while holding onto your commitment to only investing in properties that meet your standards?
Morris: The growth opportunities are tremendous. While we would like to grow and scale in the future, we are not required to grow, which we believe is essential in allowing us to continue to be thoughtful in our due diligence process. Thanks to the open-end fund structure, we are able to be patient and are not pressured to make acquisitions or deploy capital into sub-par deals. We plan to stick to our core investment thesis and continue to make offers at favorable prices for assets with crop diversity, plentiful groundwater resources, and strong tenant bases.
One hurdle rural investments must overcome is that investors from coastal urban centers might not be familiar with areas like the Mississippi River Valley. How do you help investors stay connected so they can feel confident in a project’s progress even if they aren’t making regular site visits?
Morris: Intimate knowledge of the Mississippi River Valley is a key differentiator of LandFund’s approach to farmland investing. Our vertically integrated farm management team sits in the region, which allows us to provide investors with timely updates about our farming activities. Collectively, our farm management team brings decades of local farming experience. We have spent decades following the farmland trends and building a network of relationships with farmers, consultants, and advisors in the region.
Some of the ways we keep our investors informed about what is happening on our farms include drone flyover videos of the properties during planting and harvest season, site visits, and quarterly investor letters. One such flyover video is hosted on our website www.landfundpartners.com.
JTC has been the leader in Opportunity Zones fund administration since the program’s inception, with purpose-built solutions built on industry-leading technology, including a 24/7 investor portal and social impact reporting. To learn more about JTC’s solutions for OZ funds, visit our Opportunity Zone page.