If asked the question “What’s a piece of ground you would love to own?” most growers could probably picture it. Maybe it’s a neighboring farm or rented land that’s been in the family for decades.
But if that land came up for sale tomorrow, would the capital to purchase it be readily available?
Farmers have plenty of equity in their land, but it’s not easily accessible and could lead to them losing out on that sale. This is a problem the team at Fractal – a U.S.-based farmland financing platform – has set out to solve.
“I’ve had so many farmers that say, ‘We need to double in size, or we need to increase by X number of acres’,” says Ben Gordon, Fractal co-founder. “But when you do the math to see the capital it will take to do that, there isn’t a clear plan.”
To help create that growth plan, Fractal pairs farmers wanting to expand their operations with hands-off investors who recognize the value of farmland.
Farmers Stay in the Driver’s Seat
Fractal purchases minority ownership – up to 45% - in a piece of high-quality cropland selected by the farmer. These acres must be owned and operated by the farmer.
As for the investors, they leave the decision-making up to the one who knows the land best.
“Farmland is a great investment, and farmers are best positioned to manage that investment,” says Gordon.
“We raise capital from outside investors in a big pool and then we find the farms. Investors don’t own a single access to a single farm – they own a portion of a pool.”
With the money from the investment, the farmer can purchase new assets needed for the operation such as land, storage, etc.
The Details
The investment is for a 10-year term. After the first two years, the farmer can buy out Fractal’s ownership at any time. They can also renew the investment once it ends.
In exchange for the investment, the farmer pays an annual premium. This fee can be discounted by implementing regenerative practices on the land such as cover crops and no-till.
Gordon shares that while Fractal may not be a fit for everyone, he hopes it will provide an option to families hoping to keep their farm operating for years to come.
“I’m hoping that we are one small part of a bunch of great legacies and great operations being able to continue,” Gordon says.
