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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Masters in

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Speaker 1: Business with Barry Ritholts on Bloomberg Radio.

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Speaker 2: On the latest Masters in Business podcast, I sit down

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Speaker 2: with Brandon Zick. He is the chief investment officer at

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Speaker 2: Sarah's Farmland Funds, a two billion dollar firm that specifically

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Speaker 2: invests in farms. I know Brandon for a long time,

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Speaker 2: and I've watched this asset class grow. I thought this

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Speaker 2: was really a fascinating conversation. You just have no idea

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Speaker 2: how complex and interesting farmland investing can be. I thought

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Speaker 2: this was fascinating, and I think you will also with

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Speaker 2: no further ado my conversation with Sarah's Farms. Brandon Zick,

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Speaker 2: thanks for having me.

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Speaker 1: Berry.

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Speaker 2: Well, you and I know each other for a long time,

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Speaker 2: and this is long overdue to have this conversation. And

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Speaker 2: the Wisdom Tree acquisition was the perfect excuse. Well, we'll

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Speaker 2: get to that in a moment. I want to start

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Speaker 2: with your background, which is kind of fascinating. You grew

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Speaker 2: up on a dairy and crop farm in northeastern Pennsylvania.

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Speaker 2: How did that farming upbringing shape your attitudes and thoughts

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Speaker 2: about land, agriculture, value and risk?

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Speaker 3: Yeah, that's it's a great question because growing up on

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Speaker 3: a really active family farm, you learn a lot of things,

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Speaker 3: and one of them was I definitely did not want

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Speaker 3: to be a farmer for the rest of my life.

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Speaker 4: We did real work.

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Speaker 3: I was the oldest of six and so and I

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Speaker 3: had great parents who you know, instilled great values with us.

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Speaker 3: But one of those values was the value of hard work.

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Speaker 3: And we spent a lot of time before and after

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Speaker 3: school every day actually running this dairy with our parents.

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Speaker 2: So you're you're up at five five thirty milking cows

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Speaker 2: before school.

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Speaker 3: Yeah, before school. Yeah, for us, it'd be about four

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Speaker 3: point thirty. And with three brothers, usually there's three jobs

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Speaker 3: on a dairy, milking cow's, working with equipment, and then

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Speaker 3: managing manure. And even though I was the oldest brother,

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Speaker 3: I was really good at the third. So that's what

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Speaker 3: I was focused on.

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Speaker 2: Well, shoveling manure prepped you for your jobs on Well,

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Speaker 2: that's right, the obvious, Joe. So let's talk about what

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Speaker 2: led you to Wall Street. You go to Notre Dame,

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Speaker 2: you get a BBA in finance and a concentration in Japanese,

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Speaker 2: which is sort of surprising. What was that career plan

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Speaker 2: originally other than not a farmer.

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Speaker 3: Yeah, when I went to Notre Dame, I just wanted

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Speaker 3: to do something different, and I didn't really know what

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Speaker 3: I wanted to do. But I actually had a friend

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Speaker 3: in my dorm that I said, what are you majoring in?

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Speaker 3: And he said, well, my dad works at Mari Lynch.

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Speaker 3: I think finance. And I said, well, that sounds interesting,

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Speaker 3: and so that's how I started thinking about that. And

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Speaker 3: taking Japanese as a freshman at Notre Dame was really

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Speaker 3: more about just doing something different than the Latin and French.

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Speaker 3: I took at my judge war at Ice School and

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Speaker 3: scrant in Pennsylvania, and they talked to me into doing

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Speaker 3: a study abroad in Japan, and I really fell in

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Speaker 3: love with the country and the culture. And if I

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Speaker 3: had been looking in you forward, instead of reverse, I

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Speaker 3: probably would have taken Chinese or something else that I

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Speaker 3: was looking backwards, and you know, continued on with the

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Speaker 3: Japanese and then was lucky enough throughout my career to

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Speaker 3: be able to spend some time there, not full time,

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Speaker 3: but at least to travel to Japan. And if we

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Speaker 3: ever get to the point that we have Japanese investors.

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Speaker 3: That'd be really exciting too.

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Speaker 2: So first gig right out of school is you become

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Speaker 2: you join the finance analyst program at Lehman Brothers. Was

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Speaker 2: that here? Was that close?

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Speaker 3: Yeah?

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Speaker 4: That was here in New York. Yeah.

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Speaker 3: We started training in one World Trade at July of

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Speaker 3: two thousand and one, and we were eventually in three

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Speaker 3: World Financial Center. And I spent three years at Lehman

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Speaker 3: Brothers and learned a lot of different things, but some

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Speaker 3: of it was I don't know what I want to do,

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Speaker 3: and I had a friend that had moved to Morgan's

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Speaker 3: and that's how I made my way shortly thereafter over

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Speaker 3: there and spent six years at Morgan Stanley in various roles,

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Speaker 3: but I knew I always wanted to be on the

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Speaker 3: buy side. And everyone dreams of being in private equity

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Speaker 3: and how do you get there?

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Speaker 4: And it's a difficult path.

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Speaker 3: And when you think about what are the things that

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Speaker 3: you could be good at or that you have interest in,

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Speaker 3: That's how I kind of looped back around to this

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Speaker 3: agriculture piece because I had a lot of valuation experience

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Speaker 3: at Morgan Stanley and we worked on a number of

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Speaker 3: transactions and I thought, well, how do I apply this

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Speaker 3: to agriculture, And they're just it's not like in every

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Speaker 3: other asset class where there's thirty or forty places and

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Speaker 3: everyone has a fund and you just choose where you

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Speaker 3: want to go. There's actually very few people that invest

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Speaker 3: in agriculture exclusively, and so it was kind of stacking

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Speaker 3: that background of valuation and transaction experience and maybe a

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Speaker 3: rekindled interest in agriculture and farmland, not on the actual

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Speaker 3: labor side, but on the investment side. How do you

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Speaker 3: do this outside of just the big boys like John

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Speaker 3: Deere or Kseih or at the time on Santo or

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Speaker 3: these big egg companies.

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Speaker 4: How do you do it?

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Speaker 3: So that's kind of how I made that path all

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Speaker 3: the way back around.

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Speaker 2: So you prefer spreadsheets to pitch forks and shovels.

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Speaker 4: A little bit.

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Speaker 3: Yeah, Although there are plenty of days in my career

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Speaker 3: now that you get tired of being in the office

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Speaker 3: new side, I'd much rather drive around and look at

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Speaker 3: some of our properties and check in on some of

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Speaker 3: our farm tenants.

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Speaker 2: Well, we're going to talk about the farms and the

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Speaker 2: tenants and what that investment process is like. But I

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Speaker 2: just want to stay with Morgan Stanley for a moment.

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Speaker 2: You're there for six years. You start out really is

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Speaker 2: a grunt and strategic planning, due diligence, valuation analysis, deal

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Speaker 2: negotiation execution. But eventually you become a VP in the

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Speaker 2: investment management division. Is that way you really hone your

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Speaker 2: chops on acquisitions and strategy.

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Speaker 3: Yeah, it was an interesting time to be there within

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Speaker 3: investment management. Morgan Stanley had a mandate to really grow

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Speaker 3: that business, actually on the alternative side. So the plan

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Speaker 3: had been to put together a pretty sizable balance sheet

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Speaker 3: by minority stakes and asset managers, maybe take some asset

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Speaker 3: managers like front Point over completely. And then the Great

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Speaker 3: Financial Crisis happened and we went from a team that

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Speaker 3: was really given the opportunity to use a balance sheet

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Speaker 3: to we were told we need to create a balance sheet.

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Speaker 3: So things that we had bought now needed to be sold.

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Speaker 3: And that was really the impetus for the transaction that

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Speaker 3: sold Van Campen and a handful of other Morgan Stanley

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Speaker 3: equity businesses to Investo. So on that deal, I was

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Speaker 3: actually working more on the sell side of that deal.

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Speaker 3: And when you're selling things, you realize this probably isn't

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Speaker 3: a long term career strategy.

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Speaker 4: Eventually you run out of things to sell, I.

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Speaker 2: Once the seper balance sheet runs down. So you started

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Speaker 2: at Leman, but you got out of there before the

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Speaker 2: financial crisis. You lived through the financial crisis. At Morgan Stanley.

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Speaker 2: The CEO at the time was John Mac Is that right?

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Speaker 4: Oh?

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Speaker 3: When I started, it was Phil Purcell. John Mack came

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Speaker 3: shortly thereafter, and then or came back shortly thereafter, and

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Speaker 3: then during my time there within investment management, James Gorman

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Speaker 3: to take over.

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Speaker 2: I had Mac on the program a couple of years

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Speaker 2: ago after he wrote his autobiography, and really, of all

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Speaker 2: the major brokerage farms, there were a handful of companies

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Speaker 2: that came through the financial crisis balance sheet and reputation intact.

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Speaker 2: Max seems to be the guy that guided Mogan Stanley through,

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Speaker 2: cut that very reasonable deal with Mitsubishi for some much

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Speaker 2: needed capital and came out the other side. And Morgan

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Speaker 2: Stanley is now absolutely one of the biggest broken shops,

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Speaker 2: full service broken shops on the street.

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Speaker 4: Yeah.

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Speaker 3: I mean they've you know, not without peril for everyone

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Speaker 3: at that time, but certainly you know, they were able

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Speaker 3: to navigate, navigate through and away that very few were

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Speaker 3: able to do it as successful as Morgan Stanley was.

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Speaker 2: And at Morgan Stanley, is that why you got your

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Speaker 2: chartered Alternative Investment Analyst credit?

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Speaker 4: Yep, I did that.

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Speaker 3: I didn't have the time to do the CFA also

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Speaker 3: during that time, but yeah, it was something that was

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Speaker 3: slightly different. And you know, I always had interesting commodities

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Speaker 3: and other types of alternatives, not just hedge funds or

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Speaker 3: private equity, so there was it was just a.

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Speaker 4: Way to learn a little more. And I added to

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Speaker 4: the resume.

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Speaker 2: How much did the financial crisis precipitate your saying, Hey,

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Speaker 2: I have skills and I have insights, I'm going back

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Speaker 2: to farmland but from a different perspective.

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Speaker 3: Yeah, well, it definitely started the conversation. And being here

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Speaker 3: in New York, I knew there were very few options

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Speaker 3: for probably investing in agriculture, at least at that time.

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Speaker 3: Even today we don't recommend it, but there are people

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Speaker 3: in the big city on the coasts that invest in farmland.

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Speaker 3: And I had a very close friend from Notre Dame

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Speaker 3: that at the time was running private equity at Notre

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Speaker 3: Dame's endowment, and I had contacted him and said I'm

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Speaker 3: interviewing with a few of these firms that invest in farmland,

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Speaker 3: so groups like John Hancock and UBS that had existing

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Speaker 3: funds or separate account businesses that would invest in US

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Speaker 3: or global farmland. And I asked him, have you guys

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Speaker 3: underwritten them, have you invested with them, have you talked

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Speaker 3: to them? And he was very frank and he said, generally,

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Speaker 3: we don't think you get paid for the risk involved

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Speaker 3: with investing in land and the duration that you need

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Speaker 3: to hold it.

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Speaker 4: But he said, let me introduce you to it.

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Speaker 3: There's another Notre Dame guy that he started something really small.

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Speaker 3: He's got very few assets, but he's investing in farmland.

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Speaker 3: And that's how I met our founder, Perry Beef, through

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Speaker 3: my friend Tim Dozol, who's now the CIO of Notre

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Speaker 3: Dames and Dowman actually runs the whole shop. So he's

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Speaker 3: had a very successful career and one of the best decisions,

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Speaker 3: at least from my standpoint, that he made was putting

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Speaker 3: Perry and I in touch.

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Speaker 2: It's amazing how these random introductions through various networking groups

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Speaker 2: and alumni groups really can lead to some interesting outcomes.

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Speaker 2: When you joined Sarahs in twenty ten thirty million dollars.

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Speaker 2: I mean that's a that's a small single brokerage account.

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Speaker 2: What were you thinking joining a firm that tiny?

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Speaker 3: You know, that sounds a lot like what my wife

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Speaker 3: was asking me at the time too. Why are we

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Speaker 3: doing this and what are we doing? And it was

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Speaker 3: interesting there were Perry had thirty million in assets, I

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Speaker 3: think it was seventeen million in equity and we didn't

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Speaker 3: charge on the debt. So he said, I can afford

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Speaker 3: to pay you something. It won't be much, but it'll

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Speaker 3: be something. And I talked to my wife, Aaron, and said,

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Speaker 3: I think this would be a great opportunity, and she

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Speaker 3: kind of echoed some of the things that people I

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Speaker 3: worked with at Morgan Stanley when I.

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Speaker 4: Said, well what do you do if this? Yeah, what

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Speaker 4: do you do if this fails?

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Speaker 3: And of course no one knew anything about what we

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Speaker 3: were going to do, but they said, well what if

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Speaker 3: it fails? I said, well, if it fails, there's two

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Speaker 3: things that give me confidence. One is I'll know it

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Speaker 3: there's only you know, it's a very small shop. It's

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Speaker 3: not like some trader in Singapore is going to blow

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Speaker 3: us up overnight. I'll know it's not working, either the

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Speaker 3: investments are bad or we're not raising money. And the

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Speaker 3: second was there's going to be a great skill set

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Speaker 3: developed here that even if it doesn't work, the worst

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Speaker 3: thing I can do is just move back to New York.

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Speaker 3: And now I've got a differentiated thing on my resume.

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Speaker 3: So you know, we started there. We moved in December

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Speaker 3: of twenty ten to South Bend, Indiana. It's not a

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Speaker 3: great weather trade really, even in New York December is

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Speaker 3: not great, but South Bend it's much worse.

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Speaker 2: That's like zero and a lot of snow.

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Speaker 4: It's cool.

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Speaker 3: Yeah, there was a lot of snow as the moving

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Speaker 3: truck was moving in. But it's been great and we

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Speaker 3: started to really build that momentum. And you know, just

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Speaker 3: being in on the ground floor of a company with

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Speaker 3: a founder who has a vision is you know, you

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Speaker 3: can't ask for anything more.

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Speaker 2: So farmland is a real asset. It's different from traditional

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Speaker 2: real estate assets. You think of offices, multifamily, warehouse, there's

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Speaker 2: so many different single family homes. What is it about

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Speaker 2: farmland that makes it such a unique investment opportunity?

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Speaker 3: Yeah, I mean there's a few things that go into

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Speaker 3: it that just make this market different, and I don't

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Speaker 3: personally think you have to have grown up on a

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Speaker 3: farm to know anything about farmland or agriculture. But it

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Speaker 3: is a very you know, it's a very people person

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Speaker 3: business because these are the types of properties that we

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Speaker 3: believe you have to rent directly. We don't use just

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Speaker 3: property managers to go out and do it. But in

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Speaker 3: farmland there hasn't really been an institutional roll up. So

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Speaker 3: in office, in manufacturing and distribution centers and cold storage,

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Speaker 3: everything's been rolled up over time into big institutions. And

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Speaker 3: probably the most similar to farmland when you think of

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Speaker 3: what is the underlying asset would be timber, and back

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Speaker 3: forty years ago Jeremy Grantham and others started a huge

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Speaker 3: kind of move of taking the end users of timber

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Speaker 3: and handing their assets that they're going to use as

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Speaker 3: part of the end product two investors. But in farmland,

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Speaker 3: the end users don't own the land. So the groups

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Speaker 3: like John Deere and Monsanto and Mosaic and EIGHTM they

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Speaker 3: might either sell into agriculture or buy products out of it.

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Speaker 3: But the land, while it is the true means of production,

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Speaker 3: it's usually owned by others, not these big corporations. So

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Speaker 3: particularly in the Midwest. You'd say that active family farmers

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Speaker 3: like that farm I grew up on, own about forty

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Speaker 3: percent of the real estate. Institutional investors today own about

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Speaker 3: three percent, and that includes the largest investors like the

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Speaker 3: Mormon Church, the Bill and Melinda Gates Foundation, groups like

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Speaker 3: Cyrus that might own between a couple hundred million to

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Speaker 3: three or four billion in assets. But you just don't

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Speaker 3: have these big other groups that own land. It's a

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Speaker 3: very disperse ownership group made up of estates, trusts, non

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Speaker 3: farming heirs that have owned this for generations and two

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Speaker 3: or three generations previously they were actively farming the ground.

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Speaker 3: They went to college and did other things. But there's

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Speaker 3: zero pretty much zero vacancy in US farmland.

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Speaker 2: Zero vacancy. That's amazing.

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Speaker 3: Every farm that can be farmed is farmed every year.

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Speaker 3: And you lose farmland every year in the US because

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Speaker 3: of things like development and conservation and in parts of

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Speaker 3: California maybe lack of water aridity that they take farms

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Speaker 3: out of production to transfer water to other properties. So

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Speaker 3: you have this group of this total pile of farmland

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Speaker 3: in the US that gets smaller every year. You have

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Speaker 3: farmers that understand this is a scale game. They want

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Speaker 3: to grow. So it's an interesting dynamic for investors to

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Speaker 3: come into the space because it's not as if if

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Speaker 3: you decided tomorrow Berry that you wanted to farm one

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Speaker 3: hundred thousand acres. You could buy all the equipment, the seed,

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Speaker 3: the fertilizer, the chemicals, and you could find the labor

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Speaker 3: to do all of that. But what you wouldn't find

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Speaker 3: is one hundred thousand available acres to go farm.

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Speaker 2: It's that small amount of acreage comes up each year.

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Speaker 3: Yeah, it's very well, it's just not up. There's not

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Speaker 3: a jump ball every year for it. It's all occupied

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Speaker 3: and even most farmers. And I'll use the Midwest as

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Speaker 3: an example because growing up in the Northeast, farmland was

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Speaker 3: much different. There wasn't quite as a robust a rental

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Speaker 3: market in the Midwest, which is one of the reasons

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Speaker 3: we've focused on that is there's a very robust rental market,

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Speaker 3: and we want to rent land. So we want not

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Speaker 3: just one or two large farmers who will provide us

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Speaker 3: with a rent indication or a rent bid. We want

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Speaker 3: the opportunity to have ten or twenty different farmers and

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Speaker 3: these are all we work with across the board one

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Speaker 3: hundred and seventy different farm tenants today, and all of

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Speaker 3: those farm tenants rent our land, they own land, and

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Speaker 3: they rent a lot of land from other people. So

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Speaker 3: that actually becomes kind of a long term proprietary deal

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Speaker 3: sourcing network for new acquisitions. So we feel like we

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Speaker 3: are doing the institutional roll up. If we decided we're

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Speaker 3: only going to do deals of twenty five or fifty

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Speaker 3: million in size, there's not a lot of deals to

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Speaker 3: do every year, and certainly in the Midwest.

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Speaker 2: Mostly smaller family farms, regional farms that occasionally come up

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Speaker 2: when the next generation sides, we don't want to farm

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Speaker 2: this the way mom and dad and grandpa did. We're

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Speaker 2: going in the big city.

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Speaker 3: Right, And even a lot of what they've already made

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Speaker 3: that decision, in some cases a generation to go, but

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Speaker 3: they still own the land. It's been more of not

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Speaker 3: a financial asset, but more like a family asset. And

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Speaker 3: what you tend to see and taxes drive a lot

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Speaker 3: of behavior in every industry. In agriculture, it's pretty meaningful

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Speaker 3: because if you have this one very large real estate asset,

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Speaker 3: people usually wait to get that step up in basis

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Speaker 3: and then they're saying, well, now is the time we're

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Speaker 3: going to sell, regardless of market conditions. We don't want

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Speaker 3: to pay the tax going back three, four or five

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Speaker 3: generations to a cost basis of nothing. So there are

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Speaker 3: kind of unique time periods of maybe twenty twelve and

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Speaker 3: of twenty twelve was an example where there were some

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Speaker 3: new tax things coming up, a higher long term capital

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Speaker 3: gains tax, the Obamacare investment tax, and there was at

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Speaker 3: least a discussion around that, a state tax exemption being

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Speaker 3: reduced from I think at the time it was at

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Speaker 3: four and a half or five and a half million

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Speaker 3: per spouse down to a million. So that drove some

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Speaker 3: real behavior at the end of twenty twelve from people saying,

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Speaker 3: we want to sell this before the taxes go up.

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Speaker 3: Usually folks just wait until they get that step up

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Speaker 3: in basis and then they're going to sell it.

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Speaker 2: And today a family or what is it, fifty to

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Speaker 2: twelve used to be twelve million exemption for states, I

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Speaker 2: think it's up to close to fifteen.

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Speaker 3: Yeah, per spouse, per spouse significantly larger. So any discussion

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Speaker 3: around a reduction in that, which obviously things get being

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Speaker 3: permanent and I'll use air quotes around permanent because everything changes.

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Speaker 3: But yeah, that when you have this one significantly large

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Speaker 3: asset that the tax taxation on that will dictate how

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Speaker 3: they move it sometimes.

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Speaker 2: Huh, really fascinating. Coming up, we continue our conversation with Brandon,

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Speaker 2: chief investment officer of Sarah's Farms, discussing how he helped

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Speaker 2: grow the fund from thirty million dollars up to two billion.

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Speaker 2: I'm Barry Ridults. You're listening to Masters in Business on

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Speaker 2: Bloomberg Radio. I'm Barry Dults. You're listening to Masters in

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Speaker 2: Business on Bloomberg Radio. My extra special guest this week

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Speaker 2: is Brandon Zick. He's chief investment officer of Sarah's Farms.

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Speaker 2: They are a specialty fund investing in farms and farmland.

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Speaker 2: So let's talk a little bit. We were discussing earlier

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Speaker 2: how farmland generates revenue, and we're going to go into

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Speaker 2: great detail with that, but I want to explain to

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Speaker 2: investors what farmland gives them exposure to what are you

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Speaker 2: getting when you buy a chunk or a bunch of

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Speaker 2: different farms.

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Speaker 3: Yeah, so farmland, and I'll focus more on Midwest row crops,

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Speaker 3: but row crops generally are annual crops because there are

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Speaker 3: a few different buckets.

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Speaker 2: And when you say row crops, I think corn, wheat, barley.

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Speaker 3: Yeah, vegetables, annual crops the crops that are planted every

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Speaker 3: year you rotate, as opposed to permanent crops, and really

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Speaker 3: it's a complete distinction.

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Speaker 4: Permanent crops would be things like wine.

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Speaker 3: Grapes, pecans, almonds, pistachios, blueberries, things like that, where your

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Speaker 3: exposure is not just to dirt, which is what row

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Speaker 3: crops really is. Like our asset is dirt, and there's

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Speaker 3: optionality around what you can plant there. Your exposure in

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Speaker 3: permanent crops is more specific to a specific crop and

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Speaker 3: in some cases also a very specific variety. So if

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Speaker 3: you had red delicious apples and they're out of favor

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Speaker 3: and people want honeycrisp apples, then while you own apples,

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Speaker 3: you don't own the prime asset. And so we've focused

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Speaker 3: on most exclusively on row crops and wrote and we've

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Speaker 3: done that for a few reasons. One is we think

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Speaker 3: it's much less risk, but it also hits on the

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Speaker 3: investment objectives of farmland we think more cleanly. So some

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Speaker 3: of that is current income, a positive correlation with inflation,

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Speaker 3: diversification and a portfolio non correlation, and then also an

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Speaker 3: appreciating capital asset. So our asset is primarily dirt, so

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Speaker 3: there's a little bit depreciation you can take around things

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Speaker 3: like if there's buildings or grain storage bins or irrigation equipment,

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Speaker 3: but primarily our asset is just dirt and it's appreciating

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Speaker 3: over time. And the reason for that is a few things.

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Speaker 3: The Chicago Fed has data going back almost seventy years

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Speaker 3: that'll say that farmland has averaged about six percent price

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Speaker 3: appreciation during those seventy years on an annualized basis.

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Speaker 2: Is that real net of inflation or before flave.

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Speaker 4: That's total, that's gross.

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Speaker 3: So if you look at what compose it, what makes

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Speaker 3: up that, it's really just inflation plus gains and productivity.

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Speaker 3: So every time there's new technology, whether it's seed genetics

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Speaker 3: or fertilizer technology or equipment technology, anything that can create

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Speaker 3: more yield on a farm, in theory, that return should

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Speaker 3: fall to the landowner, or at least a portion of

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Speaker 3: it should fall to the landowner, not just to the operator.

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Speaker 3: So if you're an active manager, we feel like you'll

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Speaker 3: capture some of that. If you're a passive owner of

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Speaker 3: land that doesn't understand, well, what is the land actually producing?

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Speaker 3: What should I be generating in rent? How do I

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Speaker 3: capitalize that into a land value? Maybe you don't, but

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Speaker 3: if you look back over time, that capital appreciation has

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Speaker 3: been about six percent and it's really just though maybe

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Speaker 3: there's been a little bit of cap rate compression, but

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Speaker 3: it's more around gain some productivity and then just CPI inflation.

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Speaker 2: Let's talk about inflation. I was reading last week that

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Speaker 2: beef prices are at record highs. For many types of investors,

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Speaker 2: especially fixed income, inflation is really a big challenge to

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Speaker 2: navigate around it. Sounds like with farm land, inflation isn't

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Speaker 2: necessarily a bad thing. How do you think about rising prices,

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Speaker 2: especially in the supermarket, and what that means to the

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Speaker 2: properties you owt?

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Speaker 3: Yeah, So within agriculture, inflation comes two ways. So if

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Speaker 3: you're an operator, if you're a farmer, inflation's real because you're.

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Speaker 2: Pan morph seed, fertilizer, chemicals.

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Speaker 3: Equipment, wages, wages, everything that gets baked into growing that crop,

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Speaker 3: Inflation plays a part in it. As the landowner, the

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Speaker 3: actual dirt has a very positive correlation with inflation over time,

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Speaker 3: So I'm not going to say we love inflationary environments,

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Speaker 3: but this is an investment that's built for inflationary environments.

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Speaker 4: And the way that we.

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Speaker 3: Think about how global central banks treat, you know, the

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Speaker 3: way they do business. We think we're in an inflationary

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Speaker 3: environment for the long term, so we think this is

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Speaker 3: an asset that works well with that.

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Speaker 2: This is a good hedge against rising prices.

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Speaker 4: That's right.

439
00:23:01,000 --> 00:23:04,359
Speaker 3: And we've you know, back when rates were extremely low,

440
00:23:04,480 --> 00:23:07,440
Speaker 3: a lot of our investors used farmland or used cyrus

441
00:23:07,480 --> 00:23:12,280
Speaker 3: as an inflation subs or a fixed income substitute, something

442
00:23:12,280 --> 00:23:15,720
Speaker 3: that's positively correlated with inflation. Even with rates being higher,

443
00:23:16,200 --> 00:23:19,199
Speaker 3: I view farmland more as a tips like thing, and

444
00:23:19,240 --> 00:23:20,840
Speaker 3: we haven't seen much appreciation that.

445
00:23:21,680 --> 00:23:26,240
Speaker 2: What is the yield on farmland as investor? And where

446
00:23:26,240 --> 00:23:28,639
Speaker 2: does that yield come from? Is it rent? Is it

447
00:23:28,720 --> 00:23:31,280
Speaker 2: sale of property? Is it other elements?

448
00:23:31,680 --> 00:23:36,479
Speaker 3: Yeah, so the gross rental yield on our portfolios range

449
00:23:36,520 --> 00:23:39,159
Speaker 3: between four and five percent a year. Now, when you

450
00:23:39,200 --> 00:23:41,320
Speaker 3: think about if you look at the index, so there's

451
00:23:41,760 --> 00:23:45,000
Speaker 3: non investable indices that are out there, or if you

452
00:23:45,040 --> 00:23:48,160
Speaker 3: look at the Chicago Fed or some of the large

453
00:23:48,240 --> 00:23:50,600
Speaker 3: land grant universities, they'll put out a lot of data

454
00:23:50,640 --> 00:23:53,520
Speaker 3: around what cap rate to do farms trade at, because

455
00:23:53,760 --> 00:23:59,919
Speaker 3: while there's no Indiana farmland go on Bloomberg yet, there

456
00:24:00,000 --> 00:24:02,879
Speaker 3: there are a lot of public transactions that happen and

457
00:24:02,920 --> 00:24:06,200
Speaker 3: will attend two to three hundred public auctions a year,

458
00:24:06,600 --> 00:24:10,159
Speaker 3: and there'll be an attorney's offices vfws. These are on

459
00:24:10,200 --> 00:24:12,679
Speaker 3: a random Tuesday night at six o'clock, someone's selling one

460
00:24:12,720 --> 00:24:15,680
Speaker 3: hundred and twenty acres of farmland and we track where

461
00:24:15,680 --> 00:24:19,280
Speaker 3: does this sell versus our reserve price? We know what

462
00:24:19,440 --> 00:24:22,200
Speaker 3: rent we could earn on that property. So what implied

463
00:24:22,280 --> 00:24:26,000
Speaker 3: caprate is land selling at. Generally speaking, in the Midwest,

464
00:24:26,359 --> 00:24:29,680
Speaker 3: in the Chicago Fed seventh District, land trades at one

465
00:24:29,720 --> 00:24:31,560
Speaker 3: and a half to two and a half percent, and

466
00:24:31,600 --> 00:24:34,800
Speaker 3: your buyer is typically a neighboring farmer, so that's their

467
00:24:34,840 --> 00:24:38,480
Speaker 3: strategic investment they're making, and that farmer may take the

468
00:24:38,640 --> 00:24:42,840
Speaker 3: landowner rental return and they're operating return and compress them

469
00:24:42,840 --> 00:24:46,680
Speaker 3: together to justify whatever price they're paying. But we try

470
00:24:46,720 --> 00:24:48,399
Speaker 3: to target that four and a half to five and

471
00:24:48,400 --> 00:24:51,280
Speaker 3: a half percent when we purchase a farm, and that'll come.

472
00:24:52,280 --> 00:24:54,440
Speaker 3: It'll all come exclusively in terms of rent. That's what

473
00:24:54,520 --> 00:24:57,720
Speaker 3: we're underwriting. But then the total return will be that

474
00:24:57,840 --> 00:25:00,960
Speaker 3: mix of rental income and then a preciation over time

475
00:25:01,000 --> 00:25:04,359
Speaker 3: and appreciation can be that beta that I referred to

476
00:25:04,400 --> 00:25:07,200
Speaker 3: that you know Chicago Fed data that says six percent

477
00:25:07,240 --> 00:25:09,600
Speaker 3: a year on average. But then there's alpha that we

478
00:25:09,640 --> 00:25:11,919
Speaker 3: can add and a lot of that is because the

479
00:25:11,960 --> 00:25:14,880
Speaker 3: people that are selling farms are usually not active farmers.

480
00:25:15,200 --> 00:25:18,679
Speaker 3: I mentioned these are estates trust, non farming airs, and

481
00:25:18,720 --> 00:25:21,480
Speaker 3: there's some low hanging fruit in terms of capex that

482
00:25:22,200 --> 00:25:25,120
Speaker 3: a farm land investor can do to decrease the risk

483
00:25:25,200 --> 00:25:29,040
Speaker 3: of a crop growing and also increase the yield. So really,

484
00:25:29,920 --> 00:25:32,440
Speaker 3: you know, a common thing that we do is add irrigation,

485
00:25:33,480 --> 00:25:37,080
Speaker 3: and that irrigation will help us increase the yield, decrease

486
00:25:37,119 --> 00:25:39,679
Speaker 3: the risk for the tenant, and increases our rent. But

487
00:25:39,800 --> 00:25:42,879
Speaker 3: also we can capitalize that increased rent into a higher

488
00:25:42,960 --> 00:25:45,480
Speaker 3: land value over time. So if we can find those

489
00:25:45,480 --> 00:25:48,440
Speaker 3: opportunities to do the capex, that's our bread and butter.

490
00:25:48,720 --> 00:25:51,000
Speaker 2: I'm going to say something that sounds a little ridiculous,

491
00:25:51,080 --> 00:25:57,040
Speaker 2: but you're a gram DoD valuation investor into farmland. Is that?

492
00:25:57,359 --> 00:25:58,400
Speaker 2: Am I getting this right?

493
00:25:58,800 --> 00:25:59,080
Speaker 4: Yeah?

494
00:25:59,200 --> 00:26:01,600
Speaker 3: I mean there's no black box here to what we're doing.

495
00:26:01,680 --> 00:26:05,240
Speaker 3: It's really a blocking and tackling strategy. And we encourage

496
00:26:05,240 --> 00:26:08,040
Speaker 3: all of our investors when they when they're contemplating this,

497
00:26:08,359 --> 00:26:12,120
Speaker 3: or even on an annual or bi annual basis, come

498
00:26:12,160 --> 00:26:14,680
Speaker 3: out and look at these properties and see what we're doing.

499
00:26:14,720 --> 00:26:17,240
Speaker 3: And we have folks that have, you know, trade, they've

500
00:26:17,240 --> 00:26:19,320
Speaker 3: been trading their entire career, and they'll come to a

501
00:26:19,359 --> 00:26:22,640
Speaker 3: farm auction and say, well, you were underwriting the same

502
00:26:22,640 --> 00:26:25,160
Speaker 3: rent on two properties across the street from each other.

503
00:26:25,560 --> 00:26:28,280
Speaker 4: One sold for X, one sold for two X. How

504
00:26:28,320 --> 00:26:29,040
Speaker 4: does that happen?

505
00:26:29,359 --> 00:26:32,480
Speaker 3: And it's just who wanted which one and how In

506
00:26:32,520 --> 00:26:35,800
Speaker 3: some in some cases or instances, the way in which

507
00:26:35,880 --> 00:26:39,439
Speaker 3: the farm is being sold is inefficient. The rental market's

508
00:26:39,440 --> 00:26:42,480
Speaker 3: completely inefficient. So there are times that we've bought properties,

509
00:26:43,119 --> 00:26:46,040
Speaker 3: in some cases from other institutional investors and we've doubled

510
00:26:46,040 --> 00:26:48,520
Speaker 3: the rent on day one, not because we wanted to

511
00:26:48,600 --> 00:26:52,480
Speaker 3: charge an uneconomic rent, but because the farmer was willing

512
00:26:52,520 --> 00:26:56,240
Speaker 3: to pay that rent for that land, and the active

513
00:26:56,280 --> 00:26:58,840
Speaker 3: management that the previous owner was using was either not

514
00:26:59,040 --> 00:27:01,560
Speaker 3: very good or not that act. So that's where we

515
00:27:01,640 --> 00:27:04,600
Speaker 3: think we do a really good job of just identifying

516
00:27:04,960 --> 00:27:08,359
Speaker 3: where can we add alpha? And then again, it's not

517
00:27:08,440 --> 00:27:11,399
Speaker 3: a black box. This is really just ticking and tying

518
00:27:11,400 --> 00:27:12,200
Speaker 3: and blocking into.

519
00:27:12,280 --> 00:27:16,440
Speaker 2: So let's talk about that alpha. You talked about rental

520
00:27:16,520 --> 00:27:20,000
Speaker 2: income and appreciation and sale of land. But I recall

521
00:27:20,040 --> 00:27:24,040
Speaker 2: a conversation we had years ago up in Maine where

522
00:27:24,359 --> 00:27:29,680
Speaker 2: you described all these additional ways that professional farmland management

523
00:27:30,440 --> 00:27:34,639
Speaker 2: generates improved economics. And some of the notes I took

524
00:27:35,480 --> 00:27:42,000
Speaker 2: mineral rights, solar and wind farm easements, additional land use.

525
00:27:42,119 --> 00:27:45,520
Speaker 2: How do you take farmland that for centuries has just

526
00:27:45,560 --> 00:27:49,560
Speaker 2: been producing crops and find ways to improve the economics?

527
00:27:49,960 --> 00:27:52,960
Speaker 3: Yeah, and you know, investing in the US is a

528
00:27:53,040 --> 00:27:55,640
Speaker 3: key part of this, because the landowner has a lot

529
00:27:55,640 --> 00:27:57,359
Speaker 3: of rights that in other parts of the world you

530
00:27:57,440 --> 00:27:59,720
Speaker 3: just don't have. So mineral rights here in the US

531
00:27:59,800 --> 00:28:01,840
Speaker 3: that the surface owner generally.

532
00:28:01,440 --> 00:28:02,800
Speaker 2: Owns them all the way down right.

533
00:28:02,920 --> 00:28:05,480
Speaker 3: Yeah, and in some cases those rights have been severed

534
00:28:05,960 --> 00:28:08,600
Speaker 3: one hundred years ago. And in certain parts of the

535
00:28:08,600 --> 00:28:10,879
Speaker 3: Midwest and out west you don't own mineral rights.

536
00:28:11,240 --> 00:28:14,000
Speaker 4: We like to own them. It's kind of funny.

537
00:28:14,040 --> 00:28:16,400
Speaker 3: The family farm I grew up on in northeastern Pennsylvania,

538
00:28:16,440 --> 00:28:19,280
Speaker 3: growing up, no one knew what Marcella's shale was, but

539
00:28:19,359 --> 00:28:22,320
Speaker 3: everyone in Susquehanna County has made more money pumping gas

540
00:28:22,400 --> 00:28:25,040
Speaker 3: than they ever did milking cows. And it was really

541
00:28:25,480 --> 00:28:28,439
Speaker 3: seeing that in the early two thousands that as we

542
00:28:28,520 --> 00:28:31,960
Speaker 3: buy land, you think, well, how do you maximize the value?

543
00:28:32,000 --> 00:28:34,960
Speaker 3: These are real assets. They have to be actively managed,

544
00:28:35,280 --> 00:28:39,800
Speaker 3: something as simple as harvesting timber that's really low hanging fruit,

545
00:28:39,880 --> 00:28:44,400
Speaker 3: doing select cuts, renting farms out for recreation, or hunting. Frankly,

546
00:28:44,440 --> 00:28:46,560
Speaker 3: if you don't rent it out, someone will hunt that

547
00:28:46,600 --> 00:28:49,360
Speaker 3: property anyway without insurance and without paying you anything.

548
00:28:49,400 --> 00:28:50,240
Speaker 4: So you might as well.

549
00:28:50,120 --> 00:28:53,000
Speaker 3: Get insurance and get paid for it. So Perry had

550
00:28:53,240 --> 00:28:55,920
Speaker 3: Perry veth our founder. He had been doing that long

551
00:28:56,000 --> 00:28:59,560
Speaker 3: before in parts of Indiana and Illinois, generating mineral rights.

552
00:29:00,240 --> 00:29:03,480
Speaker 3: But the way that he structured our Vehicle was really

553
00:29:03,520 --> 00:29:06,600
Speaker 3: beneficial to some of these long term value options because

554
00:29:06,800 --> 00:29:08,960
Speaker 3: I think when he was starting serious in two thousand

555
00:29:08,960 --> 00:29:11,360
Speaker 3: and seven, most of the people that he worked with

556
00:29:11,400 --> 00:29:14,000
Speaker 3: at the time and friends of his in private equitieset

557
00:29:14,040 --> 00:29:16,680
Speaker 3: just set up a typical draw down fund and get

558
00:29:16,720 --> 00:29:17,720
Speaker 3: it invested.

559
00:29:17,360 --> 00:29:18,600
Speaker 2: As opposed to perpetual.

560
00:29:18,680 --> 00:29:20,280
Speaker 3: Yeah, at the end of eight or ten years just

561
00:29:20,320 --> 00:29:23,320
Speaker 3: sell them all off. He decided that an evergreen fund

562
00:29:23,400 --> 00:29:26,520
Speaker 3: really fit the asset class better because most of the

563
00:29:26,600 --> 00:29:28,960
Speaker 3: farm tenants were working with they want to farm this

564
00:29:29,000 --> 00:29:32,000
Speaker 3: property for ten, twenty thirty years, and that's kind of

565
00:29:32,000 --> 00:29:33,920
Speaker 3: the way they're thinking in terms of how they grow

566
00:29:33,960 --> 00:29:37,160
Speaker 3: their business, and being able to own the property for

567
00:29:37,240 --> 00:29:39,160
Speaker 3: that long makes a lot of sense if you have

568
00:29:39,520 --> 00:29:41,920
Speaker 3: less ease that want to rent that way. And if

569
00:29:41,960 --> 00:29:44,560
Speaker 3: you think of who are the ultimate over time, who

570
00:29:44,560 --> 00:29:46,880
Speaker 3: are going to be the ultimate investors in this asset class,

571
00:29:46,920 --> 00:29:49,480
Speaker 3: It's going to be folks that have very long dated

572
00:29:49,520 --> 00:29:54,080
Speaker 3: either goals or liabilities. So in Endowment's foundations, trust infrastructure funds,

573
00:29:54,120 --> 00:29:57,480
Speaker 3: insurance companies. So having this long dated asset where you're

574
00:29:57,480 --> 00:30:00,920
Speaker 3: not forced to churn or forced to have these transaction

575
00:30:01,080 --> 00:30:04,720
Speaker 3: cost is really important. And what we found later on

576
00:30:04,840 --> 00:30:08,760
Speaker 3: too was some of the optionality around farm So wind

577
00:30:08,800 --> 00:30:10,840
Speaker 3: has been around for a long time and that's kind

578
00:30:10,880 --> 00:30:14,560
Speaker 3: of a mildly incremental increase in revenue on why you.

579
00:30:14,480 --> 00:30:17,480
Speaker 2: Can put a wind farm up on a farm, but still.

580
00:30:17,520 --> 00:30:19,920
Speaker 3: You continue to farm it. Yeah, on a seven hundred

581
00:30:19,960 --> 00:30:23,200
Speaker 3: acre farm. We have one in western Indiana has seven

582
00:30:23,240 --> 00:30:26,480
Speaker 3: wind turbines, they might take up twenty acres total between

583
00:30:26,480 --> 00:30:28,080
Speaker 3: the turbine and the roads. The rest of it we

584
00:30:28,120 --> 00:30:31,440
Speaker 3: continue to rent, so that rent from those wind turbans,

585
00:30:31,640 --> 00:30:34,840
Speaker 3: it's incremental. It might increase twenty or thirty basis points

586
00:30:34,840 --> 00:30:38,080
Speaker 3: over your farm rent, so we'll take it, but it's

587
00:30:38,120 --> 00:30:40,880
Speaker 3: not going to change your life. When we started doing

588
00:30:40,920 --> 00:30:45,400
Speaker 3: things like solar so solar, instead of seeing twenty or

589
00:30:45,400 --> 00:30:48,840
Speaker 3: thirty basis points, you're seeing on an option period maybe

590
00:30:48,920 --> 00:30:50,200
Speaker 3: a three to five x.

591
00:30:50,160 --> 00:30:50,840
Speaker 4: The income reach.

592
00:30:51,040 --> 00:30:53,960
Speaker 3: Really, so if you think back to we're buying land

593
00:30:54,000 --> 00:30:55,200
Speaker 3: at a four and a half to five and a

594
00:30:55,240 --> 00:30:58,440
Speaker 3: half percent income over the course of five years during

595
00:30:58,480 --> 00:31:00,360
Speaker 3: an option period, if it were to go to and

596
00:31:00,440 --> 00:31:04,880
Speaker 3: now we're generating fifteen to twenty twenty five percent annualized income.

597
00:31:05,200 --> 00:31:07,080
Speaker 3: So we like that, but in that case, it's taking

598
00:31:07,080 --> 00:31:09,719
Speaker 3: the whole footprint of the land. And if when we

599
00:31:09,800 --> 00:31:13,080
Speaker 3: buy a farm, we're just underwriting it as an agricultural property,

600
00:31:13,120 --> 00:31:16,120
Speaker 3: farm rents capex, what type of return do we think

601
00:31:16,160 --> 00:31:18,680
Speaker 3: we can earn over time, and we're targeting kind of

602
00:31:18,720 --> 00:31:21,920
Speaker 3: that eight to ten percent net through a cycle on farmland.

603
00:31:22,320 --> 00:31:24,440
Speaker 3: But then once we own the property and as you

604
00:31:24,520 --> 00:31:28,200
Speaker 3: aggregate properties over time. Maybe we started with a couple

605
00:31:28,280 --> 00:31:31,080
Speaker 3: hundred acres ten or twelve years ago, but now in

606
00:31:31,120 --> 00:31:33,560
Speaker 3: a township, we now own two thousand acres and it's

607
00:31:33,640 --> 00:31:37,960
Speaker 3: just been all of these incremental bolton acquisitions. Now that

608
00:31:38,040 --> 00:31:41,239
Speaker 3: has probably more interest from some of the developers on

609
00:31:41,280 --> 00:31:43,600
Speaker 3: the solar side or for other things too that can

610
00:31:43,640 --> 00:31:47,040
Speaker 3: be even much higher revenue or value, But we always

611
00:31:47,080 --> 00:31:49,640
Speaker 3: fall back on if it's just a farm, that's what

612
00:31:49,720 --> 00:31:52,920
Speaker 3: we underwrote, and we're happy with that, and we'll continue

613
00:31:52,920 --> 00:31:55,600
Speaker 3: to aggregate those properties over time. We have over five

614
00:31:55,680 --> 00:31:58,920
Speaker 3: hundred today. There are years where we'll do thirty or

615
00:31:58,960 --> 00:32:02,600
Speaker 3: forty closing or transactions to invest eighty or one hundred million.

616
00:32:03,000 --> 00:32:07,000
Speaker 3: Most institutional investors would never do that, but we've really

617
00:32:07,040 --> 00:32:09,280
Speaker 3: decided that that's where you can add a lot of

618
00:32:09,320 --> 00:32:12,840
Speaker 3: alpha on the acquisition side by doing these boltons at

619
00:32:12,840 --> 00:32:15,640
Speaker 3: a discount to what that Like you said, it's a

620
00:32:15,760 --> 00:32:19,680
Speaker 3: very finance worthy strategy. It's just being applied to an

621
00:32:19,720 --> 00:32:21,320
Speaker 3: asset class that usually don't see it.

622
00:32:21,480 --> 00:32:24,680
Speaker 2: You mentioned leases. When I think of a lease, I

623
00:32:24,720 --> 00:32:27,640
Speaker 2: think of either an apartment lease for a year or two,

624
00:32:27,840 --> 00:32:31,160
Speaker 2: or my office lease here in New York for ten years.

625
00:32:31,520 --> 00:32:37,840
Speaker 2: How long does the average farmer lease their land for

626
00:32:38,000 --> 00:32:41,400
Speaker 2: or lease your land for if they want to farm

627
00:32:41,440 --> 00:32:41,800
Speaker 2: a crop.

628
00:32:42,240 --> 00:32:44,680
Speaker 3: Yeah, so we try to target three to five year leases,

629
00:32:44,720 --> 00:32:48,080
Speaker 3: and I'd say three is the overwhelming majority. Given that

630
00:32:48,440 --> 00:32:51,360
Speaker 3: our farms are mostly growing row crops. You can see

631
00:32:51,360 --> 00:32:54,080
Speaker 3: three years on the Board of Trade. You have transparency

632
00:32:54,120 --> 00:32:56,960
Speaker 3: to wear our prices. So farmers if they want to hedge,

633
00:32:57,480 --> 00:33:00,320
Speaker 3: if they want to think about selling apart to their

634
00:33:00,320 --> 00:33:03,360
Speaker 3: crop into the future, they can do that and we

635
00:33:03,360 --> 00:33:05,440
Speaker 3: can all agree, okay, over the next three years, this

636
00:33:05,560 --> 00:33:08,480
Speaker 3: is what that rental income will be. But when you

637
00:33:08,560 --> 00:33:12,760
Speaker 3: think about other like across a farmer's portfolio, I mentioned

638
00:33:12,800 --> 00:33:16,400
Speaker 3: they own land and they intend to own that forever,

639
00:33:16,720 --> 00:33:18,640
Speaker 3: you know, that's how they think about it. And they

640
00:33:18,680 --> 00:33:21,000
Speaker 3: rent our land and those are usually three year leases,

641
00:33:21,560 --> 00:33:23,479
Speaker 3: but then they rent a lot of land from other people.

642
00:33:23,880 --> 00:33:26,520
Speaker 3: Those other people, even if a farmer's been operating that

643
00:33:26,640 --> 00:33:30,000
Speaker 3: land for thirty years, it's usually thirty one year leases.

644
00:33:30,680 --> 00:33:33,640
Speaker 3: So making decisions because the land owner, I'm not going

645
00:33:33,680 --> 00:33:36,600
Speaker 3: to say they're not sophisticated, but they're unwilling to do

646
00:33:36,640 --> 00:33:38,520
Speaker 3: a multi year lease because they want to have the

647
00:33:38,560 --> 00:33:40,760
Speaker 3: optionality to sell the property free and clear of a

648
00:33:40,840 --> 00:33:43,320
Speaker 3: lease if they decide they want to sell it. So

649
00:33:44,000 --> 00:33:46,200
Speaker 3: usually when farmers look to us, they're saying, well, we

650
00:33:46,280 --> 00:33:49,520
Speaker 3: want to add a new combine or a tractor, or

651
00:33:49,520 --> 00:33:53,320
Speaker 3: make these overhead or hiring or infrastructure decisions. They actually

652
00:33:53,400 --> 00:33:55,480
Speaker 3: view a three year lease as a long term lease.

653
00:33:55,720 --> 00:33:58,600
Speaker 3: In the farmland space, we have some leases that'll go

654
00:33:59,200 --> 00:34:02,719
Speaker 3: eight or ten years if they're growing more specialty crops.

655
00:34:02,720 --> 00:34:05,480
Speaker 3: So we have about twenty percent of our portfolio that

656
00:34:05,560 --> 00:34:09,440
Speaker 3: generates higher revenue because they're growing things like potatoes for

657
00:34:09,600 --> 00:34:14,839
Speaker 3: potato chips, processing tomatoes. The kind of highest quality mint

658
00:34:14,960 --> 00:34:16,840
Speaker 3: you can grow in the world is in the Midwest,

659
00:34:16,840 --> 00:34:19,920
Speaker 3: so we grow that on our properties, and that requires

660
00:34:19,960 --> 00:34:23,960
Speaker 3: a more diverse rotation and a longer planning for the farmer.

661
00:34:24,080 --> 00:34:26,840
Speaker 3: So we'll allow a longer lease in those instances. And

662
00:34:27,080 --> 00:34:29,200
Speaker 3: we allow that because they're paying us a stronger rent.

663
00:34:29,360 --> 00:34:33,160
Speaker 2: Huh. Really kind of fascinating. I want to talk about scale.

664
00:34:33,280 --> 00:34:36,799
Speaker 2: You mentioned boltons and a lot of things. I'm kind

665
00:34:36,840 --> 00:34:42,640
Speaker 2: of fascinated by the scale. And the question I wanted

666
00:34:42,680 --> 00:34:47,640
Speaker 2: to ask is, are each farm that comes up for sale,

667
00:34:47,719 --> 00:34:52,359
Speaker 2: do they have the same or different value for different acquires,

668
00:34:52,800 --> 00:34:55,600
Speaker 2: Like I'm going to assume if you're the adjacent farm,

669
00:34:56,120 --> 00:34:58,719
Speaker 2: that next form might be more valuable. You spend a

670
00:34:58,760 --> 00:35:01,799
Speaker 2: lot of money on combine and tractors. Hey, if you

671
00:35:01,800 --> 00:35:04,400
Speaker 2: can use it on five hundred acres instead of three hundred,

672
00:35:05,200 --> 00:35:09,360
Speaker 2: your cost par acres should go down. Of course, what's

673
00:35:09,440 --> 00:35:12,560
Speaker 2: the impact on scaling up? And what's a big farm?

674
00:35:12,760 --> 00:35:15,160
Speaker 2: Is one hundred acres big? Is a thousand acres big?

675
00:35:15,440 --> 00:35:16,840
Speaker 4: Yeah? I mean it's all relative.

676
00:35:16,920 --> 00:35:20,239
Speaker 3: But to your point about are there different values for

677
00:35:20,280 --> 00:35:24,239
Speaker 3: different buyers. Absolutely, even if two buyers both intend to

678
00:35:24,320 --> 00:35:28,239
Speaker 3: farm it, there are absolutely differences in how someone will

679
00:35:28,320 --> 00:35:31,080
Speaker 3: value it. In some cases on the same land, that

680
00:35:31,200 --> 00:35:33,320
Speaker 3: comes down to what crop do you intend to grow?

681
00:35:33,880 --> 00:35:37,000
Speaker 3: So I had talked briefly about specialty crops, but if

682
00:35:37,040 --> 00:35:40,040
Speaker 3: you're if there's a farm in northern Indiana with irrigation,

683
00:35:40,160 --> 00:35:42,719
Speaker 3: that comes up. If the tenant we're looking at wants

684
00:35:42,719 --> 00:35:45,080
Speaker 3: to grow corn and soybeans, they're going to be able

685
00:35:45,080 --> 00:35:47,520
Speaker 3: to pay us one rent. If the tenant we're talking

686
00:35:47,560 --> 00:35:52,600
Speaker 3: to would grow popcorn and processing tomatoes or potatoes, they

687
00:35:52,600 --> 00:35:55,120
Speaker 3: can pay us almost double this rent on the same land.

688
00:35:55,520 --> 00:35:58,080
Speaker 3: So when we look at farmers we're trying to identify

689
00:35:58,160 --> 00:36:01,840
Speaker 3: which farmer can generate the high revenue, has a strong

690
00:36:01,960 --> 00:36:05,080
Speaker 3: balance sheet, operates with the least amount of risk so

691
00:36:05,080 --> 00:36:07,320
Speaker 3: that our rent will be paid every year in the spring.

692
00:36:07,760 --> 00:36:11,440
Speaker 3: But there's it's really important when you look at land

693
00:36:11,440 --> 00:36:14,200
Speaker 3: to determine what's the highest and best use, even just

694
00:36:14,280 --> 00:36:17,560
Speaker 3: on the agriculture side. So when you think of every

695
00:36:17,600 --> 00:36:19,920
Speaker 3: farmer would love to have thousand acre blocks of land

696
00:36:19,920 --> 00:36:22,800
Speaker 3: in the Midwest, that's hard because the history of ownership

697
00:36:22,840 --> 00:36:23,080
Speaker 3: was the.

698
00:36:23,040 --> 00:36:25,160
Speaker 4: Homestead Act, so it's forty acre blocks.

699
00:36:25,520 --> 00:36:28,400
Speaker 3: So within our portfolio, we have forty acre farms, and

700
00:36:28,400 --> 00:36:30,759
Speaker 3: we don't love doing those transactions, but if we can

701
00:36:31,040 --> 00:36:34,040
Speaker 3: bolt them onto an existing property with an existing lease

702
00:36:34,120 --> 00:36:36,800
Speaker 3: and the same farmer, that's kind of a no brainer.

703
00:36:37,120 --> 00:36:40,080
Speaker 3: But our largest farms in southwestern Georgia. It's seven thousand

704
00:36:40,160 --> 00:36:43,560
Speaker 3: contiguous acres, so that's about ten square miles in one piece.

705
00:36:43,600 --> 00:36:46,560
Speaker 3: It's all irrigated and the history of ownership there is

706
00:36:46,640 --> 00:36:50,399
Speaker 3: plantations out west, the history of ownerships ranches, so these

707
00:36:50,520 --> 00:36:53,839
Speaker 3: larger tracts of land, you tend to see more institutional

708
00:36:53,880 --> 00:36:57,759
Speaker 3: investment in those areas along with permanent crops, and there's

709
00:36:57,800 --> 00:36:59,839
Speaker 3: a lot of reasons. People will tell you it's around

710
00:37:00,120 --> 00:37:03,360
Speaker 3: scale and efficiency. In some cases, I think it's just

711
00:37:03,400 --> 00:37:05,040
Speaker 3: you can write a bigger check. If I need to

712
00:37:05,040 --> 00:37:07,880
Speaker 3: deploy fifty million at once, I can do it better

713
00:37:07,880 --> 00:37:10,600
Speaker 3: in those areas because the farms are just bigger, where

714
00:37:10,719 --> 00:37:12,640
Speaker 3: it's a permanent crop that it's one hundred or two

715
00:37:12,719 --> 00:37:15,840
Speaker 3: hundred thousand dollars an acre, so I can deploy capital

716
00:37:15,840 --> 00:37:19,040
Speaker 3: more quickly. For us, it's harder to gain that scale,

717
00:37:19,320 --> 00:37:22,080
Speaker 3: but it really starts with that tenant network. So those

718
00:37:22,320 --> 00:37:25,359
Speaker 3: one hundred and seventy farmers we work with today, they

719
00:37:25,400 --> 00:37:27,799
Speaker 3: farm our one hundred and seventy thousand acres or one

720
00:37:27,840 --> 00:37:31,040
Speaker 3: hundred and eighty thousand acres. They own collectively about two

721
00:37:31,080 --> 00:37:33,560
Speaker 3: hundred and fifty thousand acres that I don't expect they

722
00:37:33,560 --> 00:37:36,440
Speaker 3: will sell, but that's kind of what they own. But

723
00:37:36,520 --> 00:37:39,120
Speaker 3: they rent over seven hundred and fifty thousand acres from

724
00:37:39,120 --> 00:37:42,000
Speaker 3: other people, and those other people are those estates, trust

725
00:37:42,160 --> 00:37:45,040
Speaker 3: non farming airs. And when those folks want to sell,

726
00:37:45,160 --> 00:37:47,680
Speaker 3: usually they don't have a public auction. Usually it's a

727
00:37:47,680 --> 00:37:51,080
Speaker 3: private transaction. The first person they call is their farm tenant.

728
00:37:51,520 --> 00:37:53,800
Speaker 3: And while we would love if our fund was closed.

729
00:37:53,840 --> 00:37:57,400
Speaker 3: We would love to see prices just continue to escalate

730
00:37:57,520 --> 00:37:59,160
Speaker 3: up forever, you know.

731
00:37:59,120 --> 00:37:59,680
Speaker 4: Over the time.

732
00:38:00,040 --> 00:38:01,520
Speaker 2: They're also on both sides.

733
00:38:01,680 --> 00:38:02,920
Speaker 4: Yeah, we like cycles.

734
00:38:02,960 --> 00:38:05,480
Speaker 3: So when farmers have really strong balance sheets, like in

735
00:38:05,520 --> 00:38:08,400
Speaker 3: twenty twenty one and twenty twenty two, they were probably

736
00:38:08,400 --> 00:38:11,520
Speaker 3: not passing on as many of those purchase options to us.

737
00:38:11,960 --> 00:38:14,399
Speaker 3: But now we've we're in our third year of lower

738
00:38:14,440 --> 00:38:17,879
Speaker 3: commodity prices. Farmers have to be careful about how much

739
00:38:17,920 --> 00:38:20,960
Speaker 3: working capital they're going to liquidate to go buy a

740
00:38:21,000 --> 00:38:23,960
Speaker 3: long term masse. And if it's a very strategic farm

741
00:38:24,000 --> 00:38:25,560
Speaker 3: to them, they're going to try to buy it very

742
00:38:25,600 --> 00:38:28,200
Speaker 3: close to home. But if it's something they're willing to

743
00:38:28,280 --> 00:38:31,319
Speaker 3: travel for and they're currently farming, and as much as

744
00:38:31,360 --> 00:38:33,799
Speaker 3: they'd like to grow their acres to that point about

745
00:38:33,800 --> 00:38:36,399
Speaker 3: efficiency you mentioned, they don't want to lose acres. So

746
00:38:36,719 --> 00:38:40,000
Speaker 3: if a farmer farms five thousand acres, if one of

747
00:38:40,000 --> 00:38:43,240
Speaker 3: their landlords who owns five hundred cells and they don't,

748
00:38:43,480 --> 00:38:45,840
Speaker 3: they're either not able to buy it or someone that

749
00:38:45,880 --> 00:38:49,160
Speaker 3: we're partnering with them on. If they're not able to

750
00:38:49,160 --> 00:38:51,440
Speaker 3: buy it, then they just lose those acres and they

751
00:38:51,440 --> 00:38:55,280
Speaker 3: immediately become over capitalized, every other acre becomes more expensive

752
00:38:55,320 --> 00:38:58,720
Speaker 3: to farm, and so they think about it in terms

753
00:38:58,719 --> 00:39:02,520
Speaker 3: of protecting acres and growth. When you say, well, why

754
00:39:02,520 --> 00:39:04,680
Speaker 3: would they partner with someone like us? So when we

755
00:39:04,719 --> 00:39:07,319
Speaker 3: look at farms that would make sense to add to

756
00:39:07,360 --> 00:39:09,680
Speaker 3: the portfolio, in some cases we'd pay a little more

757
00:39:09,719 --> 00:39:12,920
Speaker 3: because it's a strategic farm that's close by, but we

758
00:39:12,960 --> 00:39:16,319
Speaker 3: say no. Probably twenty nine times out of thirty, we're

759
00:39:16,360 --> 00:39:18,960
Speaker 3: at a public auction. The hit rate is low, and

760
00:39:19,040 --> 00:39:21,920
Speaker 3: while we'd like that to be higher. That's the investment discipline.

761
00:39:21,960 --> 00:39:25,240
Speaker 3: We will lose sometimes by forty or fifty percent above

762
00:39:25,280 --> 00:39:26,080
Speaker 3: our reserve price.

763
00:39:26,160 --> 00:39:30,640
Speaker 2: Back to Graham Dot absolutely you mentioned ranch ranching. We've

764
00:39:30,640 --> 00:39:33,880
Speaker 2: been mostly talking about farming. When I think of ranches,

765
00:39:34,000 --> 00:39:37,719
Speaker 2: I think of cattle farms, horse farms, sheep. What do

766
00:39:37,840 --> 00:39:41,160
Speaker 2: these ranchers do? How much of the assets you own

767
00:39:41,360 --> 00:39:44,480
Speaker 2: are ranches versus farms? Whereas there're a mix, Some do

768
00:39:44,560 --> 00:39:45,520
Speaker 2: a little bit of both.

769
00:39:45,600 --> 00:39:46,520
Speaker 4: Some can do both.

770
00:39:46,960 --> 00:39:50,880
Speaker 3: Not our farm, so our portfolio is exclusively farming, not

771
00:39:51,080 --> 00:39:54,480
Speaker 3: ranching acres. You tend to see those ranching acres, you know,

772
00:39:54,520 --> 00:39:57,200
Speaker 3: if you think of what's the highest and best use

773
00:39:57,440 --> 00:40:00,200
Speaker 3: if you could grow amongst row crops, even corn the

774
00:40:00,280 --> 00:40:04,439
Speaker 3: highest revenue, then soybeans then we I mean cotton would

775
00:40:04,440 --> 00:40:07,279
Speaker 3: be up there as well. But as you look kind

776
00:40:07,320 --> 00:40:10,479
Speaker 3: of down the value cycle, ranching would be very low

777
00:40:10,640 --> 00:40:13,440
Speaker 3: because you're you're just not generating much rent. So it's

778
00:40:13,520 --> 00:40:16,480
Speaker 3: more marginal land that's used for that or larger tracks

779
00:40:16,480 --> 00:40:19,720
Speaker 3: of land. Typically, Like one of the big farmland owners

780
00:40:19,760 --> 00:40:22,160
Speaker 3: is the Mormon Church. They're also one of the five

781
00:40:22,239 --> 00:40:24,600
Speaker 3: largest cattle feeders in the country, so they own a

782
00:40:24,600 --> 00:40:27,279
Speaker 3: lot of ranch land, so they're actually raising.

783
00:40:27,120 --> 00:40:29,160
Speaker 2: Cattle and then sending it to their own cattle.

784
00:40:29,320 --> 00:40:31,960
Speaker 3: Yeah, and they'll graze the cattle and then eventually, you know,

785
00:40:32,000 --> 00:40:34,520
Speaker 3: take that all the way to market. That's the type

786
00:40:34,520 --> 00:40:37,319
Speaker 3: of vertical integration you'll see in some areas and row

787
00:40:37,360 --> 00:40:40,320
Speaker 3: crops you just don't see that. We like to identify

788
00:40:40,360 --> 00:40:42,640
Speaker 3: tenants we're working with that if they have a dairy,

789
00:40:43,160 --> 00:40:45,399
Speaker 3: so they need the land to feed the cows, they

790
00:40:45,400 --> 00:40:48,880
Speaker 3: need the land for their nutrient management program. Those tenants

791
00:40:48,880 --> 00:40:51,360
Speaker 3: are willing to pay more for farms if it's a

792
00:40:51,400 --> 00:40:54,480
Speaker 3: strategic farm that's close by because they can't travel.

793
00:40:54,120 --> 00:40:54,960
Speaker 4: All over the place.

794
00:40:55,320 --> 00:40:57,560
Speaker 3: But a lot of our tenants they might have a

795
00:40:57,600 --> 00:40:59,520
Speaker 3: home base that kind of looks like the center of

796
00:40:59,520 --> 00:41:03,240
Speaker 3: this table, and the radius that they'll travel. Being willing

797
00:41:03,239 --> 00:41:06,160
Speaker 3: to farm, they'll rent in these other areas if they

798
00:41:06,160 --> 00:41:09,919
Speaker 3: can find enough acres to have scale, because ultimately, every

799
00:41:09,920 --> 00:41:11,759
Speaker 3: time a son or daughter wants to come back to

800
00:41:11,800 --> 00:41:15,680
Speaker 3: the farm to help increase that family business, you can't

801
00:41:15,719 --> 00:41:17,839
Speaker 3: just slice the pie more ways. You have to grow

802
00:41:17,920 --> 00:41:20,440
Speaker 3: the pie. And I mentioned earlier the amount of total

803
00:41:20,440 --> 00:41:23,000
Speaker 3: acres in the US is going down every year. And

804
00:41:23,040 --> 00:41:26,680
Speaker 3: in the Midwest you don't have problems of aridity or erosion,

805
00:41:27,080 --> 00:41:29,200
Speaker 3: but you have a lot of development pressure coming in.

806
00:41:29,280 --> 00:41:33,320
Speaker 3: The cities are expanding, manufacturings expanding, So there are acres

807
00:41:33,320 --> 00:41:36,520
Speaker 3: that farmers lose for those reasons every year.

808
00:41:37,239 --> 00:41:43,160
Speaker 2: So it seems absurd to talk about farmland and artificial intelligence.

809
00:41:43,680 --> 00:41:45,839
Speaker 2: But there are two different ways I want to go

810
00:41:45,920 --> 00:41:51,160
Speaker 2: with this. The first is these giant data centers they

811
00:41:51,200 --> 00:41:55,640
Speaker 2: pay a lot more. They are a higher spending buyer

812
00:41:55,800 --> 00:42:00,799
Speaker 2: or renter than say someone growing row crops. What's relationship

813
00:42:00,840 --> 00:42:05,240
Speaker 2: between farmland and AI and big infrastructure investing.

814
00:42:05,920 --> 00:42:09,640
Speaker 3: Yeah, I mean we're seeing it firsthand now in the Midwest.

815
00:42:09,680 --> 00:42:14,080
Speaker 3: The amount of additional building that's happening around data centers

816
00:42:14,160 --> 00:42:17,520
Speaker 3: is unbelievable. And the amount of capital that's being invested

817
00:42:17,520 --> 00:42:22,239
Speaker 3: in these areas like Ohio, Indiana, Michigan, Illinois around data

818
00:42:22,239 --> 00:42:25,440
Speaker 3: center development, it's really staggering when you think about it.

819
00:42:25,480 --> 00:42:28,959
Speaker 3: So there's just outside of South Indiana two very large

820
00:42:29,000 --> 00:42:31,880
Speaker 3: data center projects that I think each is investing between

821
00:42:32,000 --> 00:42:35,160
Speaker 3: nine and eleven billion on these data centers. And the

822
00:42:35,200 --> 00:42:38,040
Speaker 3: real estate price, even if it's I think our average

823
00:42:38,080 --> 00:42:41,320
Speaker 3: cost per acre across our portfolio is about eight thousand dollars.

824
00:42:41,640 --> 00:42:44,239
Speaker 3: You see data center prices anywhere from one hundred to

825
00:42:44,280 --> 00:42:45,480
Speaker 3: three hundred thousand dollars in.

826
00:42:45,520 --> 00:42:48,160
Speaker 4: A twelve at least, if not more.

827
00:42:48,239 --> 00:42:49,920
Speaker 2: And who are these? Who are the companies that are

828
00:42:49,960 --> 00:42:51,879
Speaker 2: these big buyers? All the big names we know.

829
00:42:51,880 --> 00:42:53,440
Speaker 4: Yeah, it's the big ones that are out there.

830
00:42:53,480 --> 00:42:56,799
Speaker 2: I think you see a little Microsoft. Who else is.

831
00:42:57,680 --> 00:43:02,680
Speaker 3: Groups like Amazons, Like what you're finding now is a

832
00:43:02,760 --> 00:43:05,600
Speaker 3: lot less hoteling space for data centers and they're all

833
00:43:05,680 --> 00:43:08,440
Speaker 3: single user and it seems like they're going after the

834
00:43:08,480 --> 00:43:12,520
Speaker 3: best locations, which would be large tracts of land close

835
00:43:12,560 --> 00:43:15,560
Speaker 3: to infrastructure. So you want natural gas, you need three

836
00:43:15,600 --> 00:43:18,920
Speaker 3: phase power with capacity on the line. You need fiber

837
00:43:18,960 --> 00:43:22,160
Speaker 3: lines or rail access to run fiber. You need water,

838
00:43:22,560 --> 00:43:25,959
Speaker 3: and while there are multiple ways for cooling water, whether

839
00:43:26,000 --> 00:43:27,879
Speaker 3: it's closed loop or open loop, is a big part

840
00:43:27,920 --> 00:43:31,120
Speaker 3: of all of it. So what you tend to find

841
00:43:31,160 --> 00:43:34,160
Speaker 3: are a lot of these old rust belt areas, but

842
00:43:35,360 --> 00:43:38,200
Speaker 3: kind of virgin farmland is the best candidate for it,

843
00:43:38,600 --> 00:43:42,080
Speaker 3: and you have these single users that are going after

844
00:43:42,160 --> 00:43:46,200
Speaker 3: that land. So in our portfolio, we've aggregated large properties

845
00:43:46,239 --> 00:43:47,680
Speaker 3: over time, and there seems to be a lot of

846
00:43:47,719 --> 00:43:51,040
Speaker 3: interest around that because it's just there are very few

847
00:43:51,120 --> 00:43:52,920
Speaker 3: of these places where you can do it. It's not

848
00:43:53,080 --> 00:43:56,160
Speaker 3: like even a distribution center that next to every exit

849
00:43:56,200 --> 00:43:59,400
Speaker 3: on the highway you could justify putting one there. You

850
00:43:59,520 --> 00:44:03,640
Speaker 3: need all the energy and water infrastructure and fiber infrastructure,

851
00:44:03,640 --> 00:44:06,680
Speaker 3: and you need capacity. So every new and there aren't

852
00:44:06,680 --> 00:44:08,960
Speaker 3: a lot of new natural gas fired power plants that

853
00:44:09,000 --> 00:44:11,600
Speaker 3: get built, but when one gets built, it seems like

854
00:44:11,640 --> 00:44:15,640
Speaker 3: a logical kind of co user of that power would

855
00:44:15,680 --> 00:44:16,040
Speaker 3: be one of them.

856
00:44:16,080 --> 00:44:18,200
Speaker 2: I was gonna say, what about colocation where you just

857
00:44:18,320 --> 00:44:21,960
Speaker 2: run ant gas line and build your own electrical facility

858
00:44:21,960 --> 00:44:23,480
Speaker 2: adjacent to one of these power plants.

859
00:44:23,520 --> 00:44:25,799
Speaker 3: I feel like some of that is definitely happening and

860
00:44:25,840 --> 00:44:28,720
Speaker 3: will continue. I mean, ultimately some of these data centers

861
00:44:28,760 --> 00:44:30,880
Speaker 3: will all be powered by modular nukes.

862
00:44:31,040 --> 00:44:33,400
Speaker 4: When when you get down to it, you need is

863
00:44:33,400 --> 00:44:34,680
Speaker 4: that what we're talking potentially?

864
00:44:35,000 --> 00:44:37,920
Speaker 3: Yeah, I mean the idea of when a data center

865
00:44:37,960 --> 00:44:40,680
Speaker 3: is going in or even a big manufacturing facility. Sometimes

866
00:44:40,680 --> 00:44:44,279
Speaker 3: you'll see colocation of solar, and while solar has a

867
00:44:44,280 --> 00:44:47,239
Speaker 3: lot of benefits, it's not going to power something like that.

868
00:44:47,239 --> 00:44:49,919
Speaker 3: That's more just I think for credits to sell into

869
00:44:49,960 --> 00:44:52,720
Speaker 3: the grid. I mean, we have three mile island potentially

870
00:44:52,760 --> 00:44:55,759
Speaker 3: coming back on, so there's a lot of different options.

871
00:44:55,800 --> 00:44:58,719
Speaker 3: And I think across states like New York State, they've

872
00:44:58,760 --> 00:45:01,800
Speaker 3: closed down, some nuclear facilities are consolidated.

873
00:45:02,239 --> 00:45:05,160
Speaker 2: Well sure them never opened here. They spent billions over

874
00:45:05,200 --> 00:45:10,480
Speaker 2: twenty years. There was no escape route. Bid islands are

875
00:45:10,480 --> 00:45:13,799
Speaker 2: not great places for nuclear facilities. But you know, you

876
00:45:13,840 --> 00:45:16,800
Speaker 2: see countries like France ninety plus percent of their power

877
00:45:16,800 --> 00:45:19,080
Speaker 2: generation comes from nuclear.

878
00:45:19,160 --> 00:45:21,720
Speaker 3: Right, And the hard thing when you think about power,

879
00:45:21,760 --> 00:45:24,600
Speaker 3: I mean I kind of laugh. I had two siblings

880
00:45:24,600 --> 00:45:26,360
Speaker 3: that both went to Cornell, so I've been to Ithaca

881
00:45:26,440 --> 00:45:28,319
Speaker 3: quite a bit. We own farms in upstate New York,

882
00:45:28,800 --> 00:45:31,680
Speaker 3: and every time I drive from our farms there down

883
00:45:31,719 --> 00:45:34,399
Speaker 3: to our family farm in northeastern Pennsylvania. You'll drive through

884
00:45:34,400 --> 00:45:36,960
Speaker 3: parts of New York State that we'll say no industrial.

885
00:45:37,040 --> 00:45:39,720
Speaker 3: You'll see signs that say no industrial, soular, no wind farms,

886
00:45:39,719 --> 00:45:43,200
Speaker 3: no fracking, no nuclear, but they all turn on their lights.

887
00:45:43,480 --> 00:45:48,480
Speaker 3: So we have this really perverse view out there that

888
00:45:49,160 --> 00:45:51,000
Speaker 3: you could call it nimbiism, you can call it whatever

889
00:45:51,040 --> 00:45:53,680
Speaker 3: you want, but we need more of everything.

890
00:45:53,440 --> 00:45:54,399
Speaker 2: More power for sure.

891
00:45:54,480 --> 00:45:56,719
Speaker 3: Yeah, if you look at a there's a few great

892
00:45:56,760 --> 00:45:58,680
Speaker 3: grafts out there that show kind of the history of

893
00:45:59,680 --> 00:46:02,880
Speaker 3: con umption for power and the same amount of coal

894
00:46:02,920 --> 00:46:05,440
Speaker 3: that's been used throughout history.

895
00:46:06,120 --> 00:46:07,879
Speaker 4: This year will be the year that the most coal

896
00:46:08,000 --> 00:46:08,440
Speaker 4: is used.

897
00:46:08,640 --> 00:46:11,040
Speaker 3: The most peat that's ever been burned or wood is

898
00:46:11,080 --> 00:46:14,800
Speaker 3: happening this year, the most oil produced or burned, natural gas.

899
00:46:14,960 --> 00:46:17,279
Speaker 3: The only energy source that's ever gone down really is

900
00:46:17,360 --> 00:46:20,920
Speaker 3: nuclear and that was out of the out of regulation.

901
00:46:21,320 --> 00:46:22,960
Speaker 2: Is there's a lot of fears around it.

902
00:46:23,160 --> 00:46:25,120
Speaker 3: And so if you look at what do we need,

903
00:46:25,120 --> 00:46:27,840
Speaker 3: there's no energy in my opinion, there's no energy transition

904
00:46:27,960 --> 00:46:30,320
Speaker 3: that whatever happens is we need more of everything.

905
00:46:30,800 --> 00:46:34,400
Speaker 2: So that's really fascinating. I saw a chart I forget

906
00:46:34,480 --> 00:46:39,759
Speaker 2: where the biggest producer of solar energy in the United States, Walmart,

907
00:46:40,239 --> 00:46:44,720
Speaker 2: all their distribution centers, all their superstores, especially in the South.

908
00:46:45,200 --> 00:46:47,600
Speaker 2: They just say, we have dead space on the roof

909
00:46:47,800 --> 00:46:51,399
Speaker 2: loaded up with solar, and they're not only subsidizing their

910
00:46:51,400 --> 00:46:54,600
Speaker 2: own power consumption, they're getting credits for selling it back

911
00:46:54,600 --> 00:46:55,160
Speaker 2: to the grid.

912
00:46:55,480 --> 00:46:57,600
Speaker 3: Yeah, I think it makes a ton of sense, especially

913
00:46:57,600 --> 00:47:00,440
Speaker 3: if you're building greenfield when you can. Actually it's tough

914
00:47:00,480 --> 00:47:03,279
Speaker 3: to retrofit things for solar. And even when we look

915
00:47:03,280 --> 00:47:06,680
Speaker 3: at farmland that goes to the idea of these little

916
00:47:07,160 --> 00:47:10,560
Speaker 3: community solar gardens, I don't think is very scalable. You

917
00:47:10,640 --> 00:47:13,719
Speaker 3: tend to see more industrial sized solar fields, and it's

918
00:47:14,080 --> 00:47:17,200
Speaker 3: you know, from the landowner standpoint, or the farmers standpoint,

919
00:47:17,680 --> 00:47:20,200
Speaker 3: or the the If a farmer is the owner, you

920
00:47:20,239 --> 00:47:22,520
Speaker 3: know they're interested in the highest and best use. So

921
00:47:23,080 --> 00:47:25,840
Speaker 3: what you tend to see is we have farm tenants

922
00:47:25,880 --> 00:47:28,359
Speaker 3: that they sell land for development all the time. They

923
00:47:28,600 --> 00:47:32,400
Speaker 3: you know, these farmers are very sophisticated, they're CEOs. This

924
00:47:32,480 --> 00:47:35,879
Speaker 3: has been happening for generations where someone will sell land

925
00:47:35,920 --> 00:47:38,360
Speaker 3: that's close to town for a very high price and

926
00:47:38,400 --> 00:47:41,279
Speaker 3: then they'll move twenty miles farther out and buy three

927
00:47:41,280 --> 00:47:43,560
Speaker 3: times the amount of land and set up shop there.

928
00:47:43,600 --> 00:47:47,480
Speaker 3: So while the idea of a farmer moving always seems,

929
00:47:47,760 --> 00:47:50,000
Speaker 3: you know, really hard to believe, this has been happening forever.

930
00:47:50,040 --> 00:47:53,600
Speaker 3: The western suburbs of Chicago have extended and extended and extended.

931
00:47:54,080 --> 00:47:56,319
Speaker 3: And farmers are you know, I consider them dumb as

932
00:47:56,360 --> 00:47:56,840
Speaker 3: a fox.

933
00:47:56,960 --> 00:48:00,359
Speaker 4: Like they'll they'll sell for see that as a farmer, Yeah,

934
00:48:00,520 --> 00:48:02,080
Speaker 4: I know, it's it's interesting.

935
00:48:02,120 --> 00:48:04,480
Speaker 3: They'll sell for a very high price, and when that

936
00:48:04,520 --> 00:48:06,680
Speaker 3: development doesn't happen, they'll buy it back for less and

937
00:48:06,760 --> 00:48:08,680
Speaker 3: they'll wait for the next round of development and sell

938
00:48:08,719 --> 00:48:09,120
Speaker 3: it again.

939
00:48:09,560 --> 00:48:10,560
Speaker 2: So that's funny.

940
00:48:10,680 --> 00:48:12,719
Speaker 3: So, you know, some of the competition we see when

941
00:48:12,760 --> 00:48:16,640
Speaker 3: we're buying farms, it's not just farmers that had profitable years.

942
00:48:16,760 --> 00:48:19,720
Speaker 3: It's farmers that have ten thirty one exchange money because

943
00:48:19,760 --> 00:48:22,120
Speaker 3: they sold land to a data center.

944
00:48:21,920 --> 00:48:24,239
Speaker 2: Or they have like three years to reinvest before they

945
00:48:24,239 --> 00:48:25,359
Speaker 2: get hit with taxes something.

946
00:48:25,440 --> 00:48:28,400
Speaker 3: Yeah, it's about eighteen months and they've identify properties, but

947
00:48:28,840 --> 00:48:31,200
Speaker 3: they have to go out there and reinvest it and

948
00:48:31,320 --> 00:48:34,200
Speaker 3: kind of like like to keep their cost basis. And

949
00:48:34,719 --> 00:48:38,080
Speaker 3: farmers are really good at you know, figuring their way

950
00:48:38,120 --> 00:48:40,520
Speaker 3: around these tax codes, and you know, good for them.

951
00:48:40,560 --> 00:48:42,759
Speaker 3: And I think that's a lot of the competition we

952
00:48:42,800 --> 00:48:45,720
Speaker 3: see are ten thirty one buyers because there's just big

953
00:48:45,760 --> 00:48:47,280
Speaker 3: dollars getting thrown around.

954
00:48:47,400 --> 00:48:49,680
Speaker 2: They have no choice, they have to get deployed otherwise.

955
00:48:49,719 --> 00:48:51,520
Speaker 4: Yeah, and they want to continue to buy farm land.

956
00:48:51,560 --> 00:48:54,480
Speaker 3: And a lot of farmers, I mean it's really interesting

957
00:48:54,520 --> 00:48:56,600
Speaker 3: when you talk to them and you'd say, well, what's

958
00:48:56,640 --> 00:48:59,160
Speaker 3: your dream scenario. And one of our tenants who sold

959
00:48:59,200 --> 00:49:01,839
Speaker 3: some land to a solar company and they were selling

960
00:49:01,960 --> 00:49:04,399
Speaker 3: land for a data center. I said, well, what's your

961
00:49:04,400 --> 00:49:06,399
Speaker 3: goal and they said, well, we want to continue to farm.

962
00:49:06,440 --> 00:49:08,399
Speaker 3: We just want to do it debt free. So it's

963
00:49:08,440 --> 00:49:10,120
Speaker 3: not like they just want to buy a place in Florida.

964
00:49:10,160 --> 00:49:13,200
Speaker 3: They'll have one, but they want to continue to farm,

965
00:49:13,239 --> 00:49:14,720
Speaker 3: so they want to go buy more.

966
00:49:14,560 --> 00:49:18,719
Speaker 2: Farm Really interesting. Coming up, we continue our conversation with

967
00:49:18,800 --> 00:49:23,359
Speaker 2: Brandon Zick, chief investment officer of Sarah's Farms, discussing the

968
00:49:23,520 --> 00:49:28,040
Speaker 2: state of farmland investing. Today. I'm Barry Ridults. You're listening

969
00:49:28,040 --> 00:49:44,920
Speaker 2: to Masters in Business on Bloomberg Radio. I'm Bury Ridults.

970
00:49:44,920 --> 00:49:48,200
Speaker 2: You're listening to Masters in Business on Bloomberg Radio. My

971
00:49:48,400 --> 00:49:51,279
Speaker 2: extra special guest this week is Brandon Zick. He's chief

972
00:49:51,320 --> 00:49:55,480
Speaker 2: investment officer of Sarah's Farms. They are a specialty fund

973
00:49:55,680 --> 00:50:00,279
Speaker 2: investing in farms and farmland. We haven't really talked about

974
00:50:00,360 --> 00:50:04,560
Speaker 2: the risk of farming. And a couple of my favorite

975
00:50:04,880 --> 00:50:08,000
Speaker 2: YouTube shows. So I'm a car guy. I like Harry's

976
00:50:08,040 --> 00:50:12,360
Speaker 2: Garage and his adjacent channel is Harry's Farm, and watching

977
00:50:12,440 --> 00:50:16,840
Speaker 2: him do this stuff, you realize what a difficult job

978
00:50:16,960 --> 00:50:21,879
Speaker 2: farming is, especially sometimes it's drought, sometimes it's too much rain,

979
00:50:22,000 --> 00:50:27,239
Speaker 2: it's so expensive and so much of your product is

980
00:50:27,360 --> 00:50:31,160
Speaker 2: totally out of your control. And then if you liked

981
00:50:31,280 --> 00:50:35,680
Speaker 2: top Gear, there's an Amazon show called Clarkson's Farm and

982
00:50:35,719 --> 00:50:39,280
Speaker 2: it makes you realize, God, this is an impossible business.

983
00:50:39,800 --> 00:50:42,560
Speaker 2: At least in the UK, farmers there having a really

984
00:50:42,640 --> 00:50:45,759
Speaker 2: hard time. So let's talk a little bit about the

985
00:50:45,960 --> 00:50:49,600
Speaker 2: risks of farming and the risk of investing in farming.

986
00:50:50,200 --> 00:50:51,879
Speaker 2: What are the possible downsides?

987
00:50:52,480 --> 00:50:56,800
Speaker 4: Yeah, so on. Being a farmer is a very difficult business.

988
00:50:56,880 --> 00:50:59,120
Speaker 3: I mean, there are so many different risk factors and

989
00:50:59,200 --> 00:51:02,239
Speaker 3: so many decisions points that you can make that completely

990
00:51:02,640 --> 00:51:05,400
Speaker 3: can impact your bottom line in a material way. Not

991
00:51:05,560 --> 00:51:07,719
Speaker 3: just what crop you grow and when you plant, but

992
00:51:07,880 --> 00:51:10,239
Speaker 3: when you sell it, how you sell it, who you

993
00:51:10,280 --> 00:51:13,440
Speaker 3: sell it to, how you store your grain, and all

994
00:51:13,480 --> 00:51:16,520
Speaker 3: these things can change year to year and to your point,

995
00:51:16,800 --> 00:51:18,960
Speaker 3: and this kind of goes back to there hasn't been

996
00:51:19,000 --> 00:51:22,360
Speaker 3: a lot of institutional roll up yet on the land side,

997
00:51:22,760 --> 00:51:26,000
Speaker 3: but the people that sell inputs to farmers, and the

998
00:51:26,040 --> 00:51:29,480
Speaker 3: inputs can be seed, fertilizer, equipment, whatever it may be.

999
00:51:29,840 --> 00:51:32,600
Speaker 3: And the buyers of their crop, the large grain buyers

1000
00:51:32,600 --> 00:51:36,279
Speaker 3: out there, your bungies and adms and cargills, they all

1001
00:51:36,320 --> 00:51:39,120
Speaker 3: have a lot of pricing power. Your average farmer doesn't

1002
00:51:39,120 --> 00:51:41,200
Speaker 3: have any pricing power, so they are a price taker

1003
00:51:41,320 --> 00:51:43,239
Speaker 3: on the input side. There are a price taker on

1004
00:51:43,280 --> 00:51:47,440
Speaker 3: the crop side. So part of our value add for

1005
00:51:47,560 --> 00:51:50,719
Speaker 3: investors is we try to identify farmers that are the

1006
00:51:50,719 --> 00:51:53,759
Speaker 3: most well positioned to have whatever pricing power they can get.

1007
00:51:53,800 --> 00:51:56,040
Speaker 3: So they have to have scale so that when they're

1008
00:51:56,080 --> 00:51:59,719
Speaker 3: buying inputs that they can go out and negotiate the

1009
00:51:59,719 --> 00:52:02,960
Speaker 3: best price possible. You want farmers that can store their

1010
00:52:02,960 --> 00:52:05,319
Speaker 3: grain so they're not selling it all at harvest. They

1011
00:52:05,320 --> 00:52:06,880
Speaker 3: want to be able to sell it into the spring

1012
00:52:06,960 --> 00:52:10,200
Speaker 3: when other people don't have the crop. Yeah, so hopefully

1013
00:52:10,280 --> 00:52:12,880
Speaker 3: you get that positive carry. So we try to identify

1014
00:52:12,920 --> 00:52:16,920
Speaker 3: those folks. But when you're looking at investing in farmland,

1015
00:52:17,400 --> 00:52:21,120
Speaker 3: what are the downsides? Well, there's certain just climate issues.

1016
00:52:21,160 --> 00:52:23,000
Speaker 3: So if you're close to a river and it floods,

1017
00:52:23,040 --> 00:52:26,719
Speaker 3: that's a problem. If you have very sandy soils and

1018
00:52:26,760 --> 00:52:29,720
Speaker 3: it doesn't rain and you have drought, that's a problem.

1019
00:52:29,800 --> 00:52:32,120
Speaker 3: So we like to have farms where we can do

1020
00:52:32,200 --> 00:52:35,480
Speaker 3: some of that capax like adding irrigation or adding drainage,

1021
00:52:35,480 --> 00:52:37,680
Speaker 3: so that you can help manage some of those risks.

1022
00:52:37,760 --> 00:52:41,400
Speaker 2: How do you manage around weeds, past bugs, and disease,

1023
00:52:41,480 --> 00:52:45,040
Speaker 2: because there are a lot of dangerous diseases that literally

1024
00:52:45,160 --> 00:52:45,959
Speaker 2: come in on the wind.

1025
00:52:46,400 --> 00:52:49,399
Speaker 3: Yeah, and that's I mean part of what the way

1026
00:52:49,400 --> 00:52:52,960
Speaker 3: we've constructed this portfolio. I mean, Perry was really prescient

1027
00:52:53,040 --> 00:52:55,480
Speaker 3: when he thought about the Great Lakes the Midwest. It

1028
00:52:55,520 --> 00:52:58,319
Speaker 3: wasn't just because he was from Wisconsin or he was

1029
00:52:58,360 --> 00:53:01,400
Speaker 3: traveling to the Midwest. Because in the Midwest we have

1030
00:53:01,440 --> 00:53:04,439
Speaker 3: the best soil, some of the best water resources. And

1031
00:53:04,520 --> 00:53:07,000
Speaker 3: what I mean by that is these recharging aquifers. The

1032
00:53:07,000 --> 00:53:10,760
Speaker 3: Great Likes aquifers, but also it rains during the crop season.

1033
00:53:10,840 --> 00:53:13,320
Speaker 3: So the cheapest form of irrigation is still just rains.

1034
00:53:13,480 --> 00:53:15,440
Speaker 3: You don't have to turn anything on or do anything.

1035
00:53:15,840 --> 00:53:17,760
Speaker 3: But there are parts of the South and the West

1036
00:53:17,760 --> 00:53:19,640
Speaker 3: where it doesn't rain when you're growing a crop, or

1037
00:53:19,680 --> 00:53:22,280
Speaker 3: it's very sporadic, so you can't really grow a crop

1038
00:53:22,280 --> 00:53:25,680
Speaker 3: without irrigation. In the Midwest, it's more supplemental. So from

1039
00:53:25,719 --> 00:53:29,720
Speaker 3: a risk management standpoint, it starts with good soil, good water.

1040
00:53:30,200 --> 00:53:32,640
Speaker 3: We like good infrastructure so you can move your crops

1041
00:53:32,640 --> 00:53:36,000
Speaker 3: around you Also, and I had mentioned earlier, we like

1042
00:53:36,120 --> 00:53:38,880
Speaker 3: areas where it's a highly competitive market for rent because

1043
00:53:38,920 --> 00:53:41,840
Speaker 3: we're renting ground. We want to have lots of farmers

1044
00:53:41,840 --> 00:53:44,399
Speaker 3: out there that are all looking to grow, they're all

1045
00:53:44,440 --> 00:53:46,880
Speaker 3: looking to add acres, and so that makes a very

1046
00:53:46,920 --> 00:53:50,400
Speaker 3: competitive market from the rental side. Some of the stuff

1047
00:53:50,440 --> 00:53:53,239
Speaker 3: that you know, investing in the US isn't a risk,

1048
00:53:53,320 --> 00:53:55,520
Speaker 3: but there are a lot of people and a lot

1049
00:53:55,560 --> 00:53:58,560
Speaker 3: of managers that invest outside of the US. Currency risk

1050
00:53:58,640 --> 00:54:01,120
Speaker 3: is a big deal, Sovereign risk is a big deal.

1051
00:54:01,200 --> 00:54:03,759
Speaker 3: I mean, there's been many investors that have had more

1052
00:54:03,800 --> 00:54:06,840
Speaker 3: than their handslapped for buying land in South America, particularly

1053
00:54:06,880 --> 00:54:09,000
Speaker 3: in Brazil, that they found out the group they bought

1054
00:54:09,000 --> 00:54:11,799
Speaker 3: it from might not have been the owner. And there's

1055
00:54:11,840 --> 00:54:14,759
Speaker 3: a lot of things that we think transparency is key.

1056
00:54:15,120 --> 00:54:19,040
Speaker 3: But we we really like title insurance, we like rule

1057
00:54:19,080 --> 00:54:21,920
Speaker 3: of law. So we invest in the US, We invest

1058
00:54:21,960 --> 00:54:25,719
Speaker 3: in areas that are very friendly to farmers. And so

1059
00:54:25,760 --> 00:54:28,439
Speaker 3: that's we don't own any land in California today. Maybe

1060
00:54:28,440 --> 00:54:30,560
Speaker 3: we will at some point. I think that's a little

1061
00:54:30,560 --> 00:54:34,400
Speaker 3: bit more difficult from a regulatory environment, and water is

1062
00:54:34,440 --> 00:54:37,520
Speaker 3: something that we view as longer term. You know, water

1063
00:54:37,600 --> 00:54:39,600
Speaker 3: is going to be a gating issue or a gating

1064
00:54:39,640 --> 00:54:41,920
Speaker 3: factor in a lot of areas, and you're seeing not

1065
00:54:42,080 --> 00:54:44,960
Speaker 3: just regulation but restriction all across the country. So we

1066
00:54:45,000 --> 00:54:47,120
Speaker 3: want to be in areas where water is plentiful. It's

1067
00:54:47,120 --> 00:54:49,640
Speaker 3: one thing to have a paper water, right, It's another

1068
00:54:49,760 --> 00:54:51,600
Speaker 3: to have water availability.

1069
00:54:51,719 --> 00:54:52,880
Speaker 4: And that's what we focus on.

1070
00:54:52,960 --> 00:54:56,000
Speaker 2: So last question, last two questions before we get to

1071
00:54:56,040 --> 00:54:59,759
Speaker 2: our favorite questions. We ask all our guests, let's look

1072
00:54:59,760 --> 00:55:02,319
Speaker 2: out five or ten years. What are some of the

1073
00:55:02,360 --> 00:55:06,480
Speaker 2: biggest opportunities in farmland and what are some of the

1074
00:55:06,520 --> 00:55:10,160
Speaker 2: potential dislocations and risks you're considering.

1075
00:55:10,520 --> 00:55:13,839
Speaker 3: Yeah, so in terms of opportunity, I mean, we think

1076
00:55:13,880 --> 00:55:16,719
Speaker 3: there's just so much capacity out there to continue to

1077
00:55:16,840 --> 00:55:19,600
Speaker 3: invest in the current markets where we are today. But

1078
00:55:19,640 --> 00:55:23,239
Speaker 3: within the US, we think, you know, the world's going

1079
00:55:23,280 --> 00:55:26,719
Speaker 3: to continue to need food as water becomes more expensive

1080
00:55:26,920 --> 00:55:29,880
Speaker 3: in other parts of the US. So California as an example,

1081
00:55:29,960 --> 00:55:33,040
Speaker 3: or Arizona as an example, a lot of those crops

1082
00:55:33,120 --> 00:55:36,800
Speaker 3: that people want to have the USA stick around, so

1083
00:55:36,960 --> 00:55:40,399
Speaker 3: vegetables produce, they're going to be grown more, at least

1084
00:55:40,400 --> 00:55:44,160
Speaker 3: seasonally in areas where they're cheaper to grow, and every

1085
00:55:45,080 --> 00:55:47,920
Speaker 3: or so a lot of that today, a lot of

1086
00:55:47,960 --> 00:55:51,320
Speaker 3: produces grown to Mexico, and that's labor's the biggest issue.

1087
00:55:51,400 --> 00:55:53,120
Speaker 4: Labor there is next to nothing.

1088
00:55:53,280 --> 00:55:57,880
Speaker 3: So if people don't care, if they're blueberries or if

1089
00:55:57,920 --> 00:56:00,960
Speaker 3: they're watermelons, say USA, and then it will all come

1090
00:56:01,000 --> 00:56:03,640
Speaker 3: from Mexico. If people don't care, because it's just from

1091
00:56:03,680 --> 00:56:06,480
Speaker 3: a cost of production standpoint, it's so much less. But

1092
00:56:06,840 --> 00:56:10,080
Speaker 3: in California, the cost of water. So let's say you

1093
00:56:10,120 --> 00:56:12,280
Speaker 3: have a well that you need to pump a thousand

1094
00:56:12,280 --> 00:56:16,200
Speaker 3: gallons a minute to grow celery. That might cost a

1095
00:56:16,239 --> 00:56:18,239
Speaker 3: couple hundred thousand dollars a year. The cost of the

1096
00:56:18,239 --> 00:56:21,600
Speaker 3: well itself is a million dollars to grow that same salery,

1097
00:56:21,640 --> 00:56:23,879
Speaker 3: maybe less of it because you're not growing year round.

1098
00:56:23,880 --> 00:56:26,920
Speaker 3: In Michigan, that well costs fifty thousand dollars and it

1099
00:56:26,960 --> 00:56:29,359
Speaker 3: costs two hundred dollars a year to operate. So even

1100
00:56:29,400 --> 00:56:31,640
Speaker 3: if the labor cost was same same, the cost of

1101
00:56:31,640 --> 00:56:36,000
Speaker 3: productions much less. And every crop in the US, almost

1102
00:56:36,080 --> 00:56:39,120
Speaker 3: every crop moves west to east toward the population center,

1103
00:56:39,520 --> 00:56:41,640
Speaker 3: So if you're east of the Mississippi, you've cut a

1104
00:56:41,719 --> 00:56:44,200
Speaker 3: huge freight cost off of the cost of production too.

1105
00:56:44,440 --> 00:56:47,160
Speaker 2: So it's best straight to the west east coast and

1106
00:56:47,440 --> 00:56:49,080
Speaker 2: much cheaper than coming up from Mexico.

1107
00:56:49,239 --> 00:56:51,560
Speaker 3: Yes, and I think over time, you know, we're going

1108
00:56:51,640 --> 00:56:53,840
Speaker 3: to see more and more of that high revenue production

1109
00:56:53,920 --> 00:56:56,319
Speaker 3: move there, So we view that as an opportunity. A

1110
00:56:56,480 --> 00:57:00,920
Speaker 3: risk is always does the cost of labor out technology

1111
00:57:00,960 --> 00:57:03,520
Speaker 3: growth We've seen and part of the reason we like

1112
00:57:03,640 --> 00:57:07,040
Speaker 3: row crops are because there's more technology being implemented a

1113
00:57:07,200 --> 00:57:08,040
Speaker 3: much less labor.

1114
00:57:08,320 --> 00:57:10,239
Speaker 2: I'm glad you mentioned that because one of the things

1115
00:57:10,239 --> 00:57:14,920
Speaker 2: that was fascinating on both those shows were the GPS

1116
00:57:15,160 --> 00:57:18,440
Speaker 2: driven tractors. So if you're going to run a combine,

1117
00:57:18,520 --> 00:57:21,520
Speaker 2: you're going to lay fertilizer down, you're going to harvest.

1118
00:57:22,080 --> 00:57:27,919
Speaker 2: These things essentially drive themselves long before TESLA because doing

1119
00:57:27,960 --> 00:57:32,000
Speaker 2: that efficiently is a giant money saver. Talk about the

1120
00:57:32,040 --> 00:57:35,000
Speaker 2: technology that's making farmland more productive.

1121
00:57:34,720 --> 00:57:37,520
Speaker 3: Yeah, I mean technology, I would say, and agriculture is

1122
00:57:37,560 --> 00:57:40,360
Speaker 3: moving as fast as anywhere, and it's really because there

1123
00:57:40,400 --> 00:57:44,760
Speaker 3: are real tactical issues around labor's too expensive, the cost

1124
00:57:44,800 --> 00:57:47,280
Speaker 3: of inputs has gone up. So to talk to our

1125
00:57:47,360 --> 00:57:49,840
Speaker 3: farmers and that's a big part of our underwriting is

1126
00:57:49,840 --> 00:57:52,920
Speaker 3: we want farmers who are using the latest technology. Whereas

1127
00:57:52,960 --> 00:57:55,480
Speaker 3: in the past, if someone was planning a crop, they

1128
00:57:55,480 --> 00:57:59,720
Speaker 3: would broadcast equally across the entire field, the fertilizer, the

1129
00:57:59,760 --> 00:58:03,320
Speaker 3: seas and when you look at actually some of these farms,

1130
00:58:03,320 --> 00:58:06,400
Speaker 3: the soil types and quality throughout a farm can be

1131
00:58:06,520 --> 00:58:09,440
Speaker 3: highly diverse. You could have five to one hundred different

1132
00:58:09,440 --> 00:58:12,120
Speaker 3: soil types. So the soil mapping that they can do

1133
00:58:12,200 --> 00:58:13,240
Speaker 3: with technology to.

1134
00:58:13,240 --> 00:58:16,360
Speaker 2: Them see a satellite right via satellite.

1135
00:58:15,800 --> 00:58:18,000
Speaker 3: And they also use probes to get out there, trust

1136
00:58:18,040 --> 00:58:20,520
Speaker 3: but verify you go out there and do that, and

1137
00:58:20,560 --> 00:58:25,480
Speaker 3: then they can use variable rate applications of fertilizer and seeds.

1138
00:58:25,480 --> 00:58:28,720
Speaker 3: So in an acre of ground of really high quality

1139
00:58:28,760 --> 00:58:33,240
Speaker 3: black dirt, they might plant thirty five thousand seeds per acre,

1140
00:58:33,760 --> 00:58:36,840
Speaker 3: but then in the sandy or lower quality soil, it's

1141
00:58:36,880 --> 00:58:41,120
Speaker 3: only twenty thousand and achieve the same yield. So what

1142
00:58:41,160 --> 00:58:45,120
Speaker 3: you're doing is saving money on the seed, applying fertilizer

1143
00:58:45,400 --> 00:58:47,880
Speaker 3: so that it's not running off. And farmers don't want

1144
00:58:47,920 --> 00:58:50,440
Speaker 3: waste either, because that's money that's just rolling away.

1145
00:58:50,480 --> 00:58:53,680
Speaker 2: And this isn't just satellite. It's satellite, it's drone. It's

1146
00:58:53,720 --> 00:58:57,000
Speaker 2: a lot of high tech tools that you don't think of.

1147
00:58:57,080 --> 00:58:59,680
Speaker 2: You think of picks and shovels with farms, but there's

1148
00:58:59,720 --> 00:59:00,960
Speaker 2: a lot high tech here.

1149
00:59:00,800 --> 00:59:03,600
Speaker 3: Well, and something as easy as if you said, twenty

1150
00:59:03,680 --> 00:59:06,160
Speaker 3: years ago you had irrigation on a property, these big

1151
00:59:06,160 --> 00:59:09,080
Speaker 3: irrigation pivots, and you know there's some publicly traded companies

1152
00:59:09,080 --> 00:59:11,920
Speaker 3: that manufacture all these in the US, like Valley and Lindsay.

1153
00:59:12,560 --> 00:59:15,560
Speaker 3: And twenty years ago, if a farmer had twenty pivots,

1154
00:59:15,920 --> 00:59:17,880
Speaker 3: they'd have to have five or six different people in

1155
00:59:17,880 --> 00:59:20,040
Speaker 3: the morning get in a truck and go out and

1156
00:59:20,040 --> 00:59:22,320
Speaker 3: start them up, and then throughout the day drive by

1157
00:59:22,440 --> 00:59:25,560
Speaker 3: and make sure they're still running. Now that farmer can

1158
00:59:25,560 --> 00:59:28,360
Speaker 3: control everything from his or her iPhone they can start it,

1159
00:59:28,480 --> 00:59:32,560
Speaker 3: stop it, monitor they have soil moisture probes out? Are

1160
00:59:32,600 --> 00:59:34,440
Speaker 3: they moisture probes out in the soil so that they

1161
00:59:34,480 --> 00:59:36,880
Speaker 3: know do we need it? In some cases they are

1162
00:59:37,000 --> 00:59:40,920
Speaker 3: using AI or some learning mechanisms to say, well, based

1163
00:59:40,920 --> 00:59:43,160
Speaker 3: on is it going to rain, we're not going to

1164
00:59:43,200 --> 00:59:46,400
Speaker 3: turn itself on. So farmers are subscribing to some of

1165
00:59:46,440 --> 00:59:48,760
Speaker 3: this kind of smart data to go out there and

1166
00:59:48,760 --> 00:59:50,120
Speaker 3: make them a better operator.

1167
00:59:50,200 --> 00:59:51,520
Speaker 4: And those are the farmers that.

1168
00:59:51,480 --> 00:59:54,040
Speaker 3: When you look at who are the people that are

1169
00:59:54,040 --> 00:59:56,120
Speaker 3: going to grow, they're the ones that are using the

1170
00:59:56,160 --> 00:59:57,640
Speaker 3: latest technology that'll do that.

1171
00:59:57,840 --> 01:00:00,640
Speaker 2: And our final question before our favorite, what do you

1172
01:00:00,680 --> 01:00:05,080
Speaker 2: think people don't understand or aren't talking about when it

1173
01:00:05,120 --> 01:00:08,360
Speaker 2: comes to farmland as an investment.

1174
01:00:09,000 --> 01:00:12,680
Speaker 3: Yeah, I think most people don't understand just the sophistication

1175
01:00:12,800 --> 01:00:15,240
Speaker 3: of the farmers they're dealing with. When people say what's

1176
01:00:15,240 --> 01:00:18,840
Speaker 3: going on in agriculture, they paint with a very broad brush.

1177
01:00:18,920 --> 01:00:21,200
Speaker 3: And you wouldn't say that if you said what's going

1178
01:00:21,200 --> 01:00:23,720
Speaker 3: on in accounting, Well, there's some great accountants and probably

1179
01:00:23,720 --> 01:00:24,280
Speaker 3: some poor ones.

1180
01:00:24,360 --> 01:00:26,000
Speaker 4: Or what's going on in.

1181
01:00:25,600 --> 01:00:28,080
Speaker 3: Any industry, you have to look at who are the

1182
01:00:28,080 --> 01:00:30,840
Speaker 3: people leading the way and that's who we try to

1183
01:00:30,840 --> 01:00:33,560
Speaker 3: partner with because we think they will help us generate

1184
01:00:33,600 --> 01:00:38,200
Speaker 3: the best returns. Whenever that Bloomberg Indiana Farmland Go exists,

1185
01:00:38,240 --> 01:00:39,720
Speaker 3: it's going to be pretty fully priced.

1186
01:00:39,760 --> 01:00:41,200
Speaker 4: I think it'll be much more efficient.

1187
01:00:41,520 --> 01:00:45,680
Speaker 3: The inefficiency is still out there, and I think that's

1188
01:00:45,680 --> 01:00:48,120
Speaker 3: what we're able to I won't say take advantage of,

1189
01:00:48,200 --> 01:00:50,479
Speaker 3: but that's what we've been able to lever over time

1190
01:00:50,640 --> 01:00:53,600
Speaker 3: is focusing on that inefficiency. There will be a lot

1191
01:00:53,640 --> 01:00:56,160
Speaker 3: more money that comes in investing in farmland. We're seeing

1192
01:00:56,200 --> 01:00:59,800
Speaker 3: crowd sourcing of farms. We're seeing more public rates that

1193
01:00:59,800 --> 01:01:01,920
Speaker 3: are going to be launched, and that we'll be out there.

1194
01:01:02,240 --> 01:01:04,240
Speaker 3: But I think it's a long way. When you think

1195
01:01:04,280 --> 01:01:06,080
Speaker 3: of there's no cheap beta, there'll be a lot of

1196
01:01:06,120 --> 01:01:09,600
Speaker 3: expensive beta out there. There are still alpha generators, and

1197
01:01:10,040 --> 01:01:11,800
Speaker 3: this is NASA classic. You just have to go pick

1198
01:01:11,800 --> 01:01:14,840
Speaker 3: a manager. You can't just say acid allocation helps us

1199
01:01:14,840 --> 01:01:16,600
Speaker 3: and gets us there. You have to pick a manager.

1200
01:01:16,680 --> 01:01:20,280
Speaker 2: There's no vanguard for a passive indexing fall.

1201
01:01:20,360 --> 01:01:22,200
Speaker 4: Now, yeah, there's no wisdom try for that. Yeah.

1202
01:01:22,240 --> 01:01:24,960
Speaker 2: Now all right, so let's jump to our favorite questions

1203
01:01:25,000 --> 01:01:28,680
Speaker 2: we ask all our guests, starting with tell Us about

1204
01:01:28,760 --> 01:01:31,200
Speaker 2: your mentors who helped shape your career.

1205
01:01:31,720 --> 01:01:35,480
Speaker 3: Yeah, so I'll start with my parents, because they encouraged

1206
01:01:36,160 --> 01:01:38,160
Speaker 3: all of us, on the six of us and our

1207
01:01:38,160 --> 01:01:39,479
Speaker 3: family do something else.

1208
01:01:39,680 --> 01:01:40,480
Speaker 4: We know this is.

1209
01:01:40,480 --> 01:01:42,600
Speaker 2: Not not uncommon with farmers, right.

1210
01:01:42,560 --> 01:01:45,960
Speaker 3: Yeah, And they both grew up on dairy farms, and

1211
01:01:46,000 --> 01:01:48,960
Speaker 3: we grew up on my dad's family farm. And my

1212
01:01:49,080 --> 01:01:52,600
Speaker 3: parents were both very well educated. You know, I'll remember

1213
01:01:52,640 --> 01:01:54,480
Speaker 3: some of my best memories as a kid. We're having

1214
01:01:54,560 --> 01:01:58,400
Speaker 3: dinner watching Jeopardy with them, and it was we always shocked.

1215
01:01:58,400 --> 01:02:00,720
Speaker 4: How do they know all these ans ran the table exactly.

1216
01:02:00,760 --> 01:02:03,880
Speaker 3: We were not very successful, but you know, our parents

1217
01:02:03,880 --> 01:02:07,520
Speaker 3: were really focused on education and just doing you know,

1218
01:02:07,640 --> 01:02:10,400
Speaker 3: something better. You know, we'll always have the family farm.

1219
01:02:10,440 --> 01:02:12,920
Speaker 3: My mom still lives there today and it's great to

1220
01:02:12,960 --> 01:02:15,280
Speaker 3: go back there. But you know, they really encouraged all

1221
01:02:15,320 --> 01:02:17,600
Speaker 3: of us go do something else and gave us the opportunity.

1222
01:02:17,640 --> 01:02:19,760
Speaker 3: There was no pressure for any of us to come

1223
01:02:19,800 --> 01:02:21,920
Speaker 3: back to the farm. They actually said, I remember my

1224
01:02:22,040 --> 01:02:24,480
Speaker 3: dad telling me the year you were born in the

1225
01:02:24,560 --> 01:02:26,480
Speaker 3: year you graduated high school, the price of milk was

1226
01:02:26,520 --> 01:02:29,920
Speaker 3: the same. This is not a long term strategy. So

1227
01:02:31,360 --> 01:02:34,400
Speaker 3: and so, so I'll start with them. But you know,

1228
01:02:34,440 --> 01:02:38,240
Speaker 3: I had some great folks I've worked with throughout my career.

1229
01:02:38,840 --> 01:02:40,680
Speaker 3: Someone at Morgan Stanley that I think really made a

1230
01:02:40,680 --> 01:02:42,760
Speaker 3: difference for me was Arthur lev who had come from

1231
01:02:42,840 --> 01:02:45,360
Speaker 3: front Point. He was the head of chief legal officer

1232
01:02:45,440 --> 01:02:48,600
Speaker 3: there and he was probably the biggest proponent of me

1233
01:02:48,720 --> 01:02:49,440
Speaker 3: going to Cyrus.

1234
01:02:49,480 --> 01:02:51,920
Speaker 4: He said, you have to do this, why would you not?

1235
01:02:52,520 --> 01:02:55,720
Speaker 3: And I've worked with some great people that you know,

1236
01:02:55,800 --> 01:02:58,080
Speaker 3: having been at Lehman Brothers, there's a lot of people

1237
01:02:58,120 --> 01:03:01,959
Speaker 3: that got vaporized that I really respect it. And you

1238
01:03:02,080 --> 01:03:03,960
Speaker 3: just think, Okay, if you're going to take a chance

1239
01:03:03,960 --> 01:03:07,280
Speaker 3: on something, you got to do it. And seeing kind

1240
01:03:07,320 --> 01:03:09,680
Speaker 3: of what's happened over time throughout my career, a lot

1241
01:03:09,720 --> 01:03:12,120
Speaker 3: has occurred. You know, it's all shaped you in a

1242
01:03:12,120 --> 01:03:15,840
Speaker 3: different way. And our founder, Perry Beeth, I mean I

1243
01:03:15,880 --> 01:03:18,680
Speaker 3: think about this today and five years I'll be fifty two,

1244
01:03:18,680 --> 01:03:21,160
Speaker 3: and that's when he started serious when he was fifty two,

1245
01:03:21,800 --> 01:03:24,480
Speaker 3: and it was completely different than being the fixed income

1246
01:03:24,480 --> 01:03:27,400
Speaker 3: money manager that he was. And you know, building a

1247
01:03:27,440 --> 01:03:30,760
Speaker 3: great team I think is the best thing he did.

1248
01:03:30,760 --> 01:03:32,280
Speaker 4: And the people that we've been able.

1249
01:03:32,040 --> 01:03:34,240
Speaker 3: To hire over time, you know, I want to be

1250
01:03:34,320 --> 01:03:36,480
Speaker 3: their mentor because I know they'll be better than me,

1251
01:03:37,000 --> 01:03:39,880
Speaker 3: and that, to me has been the most important thing.

1252
01:03:39,800 --> 01:03:42,160
Speaker 2: Really fascinating. Let's look about books. What are some of

1253
01:03:42,160 --> 01:03:42,720
Speaker 2: your favorites.

1254
01:03:42,720 --> 01:03:43,720
Speaker 4: What are you reading currently?

1255
01:03:43,920 --> 01:03:46,280
Speaker 3: Yeah, so a book and I mentioned Water is just

1256
01:03:46,280 --> 01:03:48,600
Speaker 3: such an important thing. A book that I read often.

1257
01:03:48,640 --> 01:03:52,160
Speaker 3: It's called Water, The Epic Struggle for Power and Civilization,

1258
01:03:52,240 --> 01:03:54,360
Speaker 3: and it really talks through It's a history book, but

1259
01:03:54,400 --> 01:03:57,880
Speaker 3: it talks through the success of civilizations around their ability

1260
01:03:57,920 --> 01:04:01,560
Speaker 3: to access clean water and their ability to treat dirty

1261
01:04:01,560 --> 01:04:03,960
Speaker 3: water and get rid of it. And it's just a

1262
01:04:03,960 --> 01:04:08,960
Speaker 3: fascinating story of kind of the growth throughout the world

1263
01:04:09,000 --> 01:04:12,960
Speaker 3: population growth. But something I'm reading now that I just finished,

1264
01:04:12,960 --> 01:04:14,880
Speaker 3: and it's because I'm on the board of my high school.

1265
01:04:14,960 --> 01:04:17,720
Speaker 3: They just did away with cell phones and it's The

1266
01:04:17,760 --> 01:04:22,600
Speaker 3: Anxious Generation, and it's really Yeah, it's an eye opening

1267
01:04:22,640 --> 01:04:26,400
Speaker 3: book about social media and when people have their phones

1268
01:04:26,520 --> 01:04:29,360
Speaker 3: just how it impacts their life. And so our Jesuit

1269
01:04:29,440 --> 01:04:31,120
Speaker 3: High school did away with cell phones and I think

1270
01:04:31,120 --> 01:04:32,600
Speaker 3: it's the greatest thing they could do.

1271
01:04:32,600 --> 01:04:34,880
Speaker 2: There's a lot of that going on these days. More

1272
01:04:34,920 --> 01:04:38,160
Speaker 2: and more school districts are are forcing them the kids

1273
01:04:38,240 --> 01:04:40,320
Speaker 2: to put schools and phones and lockers.

1274
01:04:40,480 --> 01:04:42,280
Speaker 3: Yeah, they should do that. I mean, we have to

1275
01:04:42,280 --> 01:04:44,280
Speaker 3: get them out of our house, the iPads and stuff.

1276
01:04:44,760 --> 01:04:48,040
Speaker 3: That's a bigger battle to get through. But yeah, it's

1277
01:04:48,040 --> 01:04:49,160
Speaker 3: something that's just eye opening.

1278
01:04:49,600 --> 01:04:52,000
Speaker 2: Let's talk about streaming. What are you listening to or

1279
01:04:52,080 --> 01:04:55,160
Speaker 2: watching on Netflix or Amazon Prime? Well?

1280
01:04:55,200 --> 01:04:57,480
Speaker 3: I have a lot of windshield time, so I listened

1281
01:04:57,480 --> 01:05:00,240
Speaker 3: to a lot of podcasts, so you know, Investige the

1282
01:05:00,280 --> 01:05:06,160
Speaker 3: best obviously, you know Med Faber, Jeremy Schwartz, Pirvorite Holts.

1283
01:05:06,200 --> 01:05:08,520
Speaker 3: I listen to a lot of business podcasts. I also

1284
01:05:08,600 --> 01:05:10,400
Speaker 3: love sports, so I listen to a lot of Ringer

1285
01:05:10,480 --> 01:05:15,320
Speaker 3: podcasts too around sports and entertainment. On the streaming side,

1286
01:05:15,520 --> 01:05:18,120
Speaker 3: you know, I rewatch The Wire every year. It is

1287
01:05:18,320 --> 01:05:21,520
Speaker 3: just my favorite show ever, and so I do that

1288
01:05:21,600 --> 01:05:24,920
Speaker 3: every year. I'm now watching Severance, which is an interesting

1289
01:05:25,800 --> 01:05:28,200
Speaker 3: I'm not all the way done with the three seasons yet,

1290
01:05:28,240 --> 01:05:30,000
Speaker 3: so it takes.

1291
01:05:29,800 --> 01:05:32,600
Speaker 2: A couple of severe turns that are like where did

1292
01:05:32,640 --> 01:05:33,280
Speaker 2: that come from?

1293
01:05:33,360 --> 01:05:34,680
Speaker 4: Yeah? I can imagine, but.

1294
01:05:34,640 --> 01:05:36,560
Speaker 2: The whole concept is kind of fascinating.

1295
01:05:36,680 --> 01:05:37,520
Speaker 4: Yeah, exactly.

1296
01:05:37,880 --> 01:05:41,240
Speaker 2: Final two questions, what sort of advice would you give

1297
01:05:41,280 --> 01:05:45,080
Speaker 2: to a recent college grad interest in the career in

1298
01:05:45,360 --> 01:05:50,120
Speaker 2: either investing alternatives or farmland investing.

1299
01:05:50,760 --> 01:05:54,200
Speaker 3: Yeah, I think back to you know, building the network

1300
01:05:54,440 --> 01:05:56,880
Speaker 3: is probably the most important thing you can ever do,

1301
01:05:57,080 --> 01:05:59,800
Speaker 3: because there's there's so many people that are good at

1302
01:06:00,000 --> 01:06:01,800
Speaker 3: Whatever you think you're good at, there's someone that's better

1303
01:06:01,840 --> 01:06:05,280
Speaker 3: at it, for sure, whether it's modeling, you know, thinking

1304
01:06:05,320 --> 01:06:09,560
Speaker 3: about investing, whatever it may be, someone's always better. So

1305
01:06:09,680 --> 01:06:13,160
Speaker 3: to me, building that network, and you can't be full

1306
01:06:13,160 --> 01:06:14,800
Speaker 3: of it, like you have to be genuine when you

1307
01:06:15,120 --> 01:06:17,600
Speaker 3: when you're talking to people. But I think that's been

1308
01:06:17,640 --> 01:06:19,760
Speaker 3: the best thing I've ever done, and that's the thing

1309
01:06:19,760 --> 01:06:22,240
Speaker 3: I can and that's why I take a lot of time.

1310
01:06:22,680 --> 01:06:24,160
Speaker 3: I mean, we get a lot of people that reach

1311
01:06:24,200 --> 01:06:27,880
Speaker 3: out to us with all types of questions. And all

1312
01:06:27,880 --> 01:06:30,200
Speaker 3: of the portfolio managers on our team grew up on

1313
01:06:30,280 --> 01:06:32,600
Speaker 3: family farms. They all went and worked in finance. And

1314
01:06:32,640 --> 01:06:35,440
Speaker 3: there's probably a lot of Wall Street people, not per capita,

1315
01:06:35,760 --> 01:06:38,280
Speaker 3: but generally a lot of Wall Street people that grew

1316
01:06:38,400 --> 01:06:42,520
Speaker 3: up on farms and had this great foundation of hard

1317
01:06:42,600 --> 01:06:44,880
Speaker 3: work and then they figured we'll just I'll never be

1318
01:06:44,960 --> 01:06:46,640
Speaker 3: able to use that again for the rest of my life.

1319
01:06:47,120 --> 01:06:49,280
Speaker 3: So I think being able to build up your network

1320
01:06:49,280 --> 01:06:52,520
Speaker 3: because sometimes you can pull on a thread and you

1321
01:06:52,560 --> 01:06:55,360
Speaker 3: won't know where it'll go. And so that's what you know,

1322
01:06:55,440 --> 01:06:59,160
Speaker 3: that idea of talking to someone at an endowment to say,

1323
01:06:59,800 --> 01:07:01,520
Speaker 3: you know, kind of do a reference check for these

1324
01:07:01,560 --> 01:07:03,680
Speaker 3: people I'm talking to, and they just said, well, you

1325
01:07:03,680 --> 01:07:05,720
Speaker 3: should talk to this other person instead, And you just

1326
01:07:05,800 --> 01:07:09,200
Speaker 3: never know what paths are going to go down to leverage.

1327
01:07:09,240 --> 01:07:12,440
Speaker 2: That really really interesting. Our final question, what do you

1328
01:07:12,520 --> 01:07:16,240
Speaker 2: know about the world of farmland investing today that might

1329
01:07:16,240 --> 01:07:19,200
Speaker 2: have been useful fifteen years ago or so when you

1330
01:07:19,200 --> 01:07:21,720
Speaker 2: were first diving into the space.

1331
01:07:22,240 --> 01:07:25,080
Speaker 3: Yeah, I think when I think about it now, there

1332
01:07:25,080 --> 01:07:27,120
Speaker 3: are very few farms we missed on that I wouldn't

1333
01:07:27,200 --> 01:07:30,080
Speaker 3: love to own today. And you know, being able to

1334
01:07:30,080 --> 01:07:32,360
Speaker 3: look back in the rear of your mirror and say

1335
01:07:32,360 --> 01:07:33,600
Speaker 3: that would have been a great purchase.

1336
01:07:35,360 --> 01:07:36,680
Speaker 4: You know, that's always interesting.

1337
01:07:37,000 --> 01:07:40,760
Speaker 2: Is the regrets more the things you did and shouldn't

1338
01:07:40,800 --> 01:07:43,160
Speaker 2: have or but the thing or the things you missed

1339
01:07:43,520 --> 01:07:44,280
Speaker 2: and wish you did.

1340
01:07:44,440 --> 01:07:46,280
Speaker 3: No, it's the things we missed that we wish we

1341
01:07:46,320 --> 01:07:48,560
Speaker 3: had done. But today we're in a position that we

1342
01:07:48,720 --> 01:07:52,520
Speaker 3: use no leverage when buying properties. They're all cash purchases.

1343
01:07:52,840 --> 01:07:54,760
Speaker 3: You know, you can never say your bulletproof, but we

1344
01:07:54,840 --> 01:07:57,640
Speaker 3: have a great balance sheet. But over time, we were

1345
01:07:58,240 --> 01:08:00,520
Speaker 3: we were still doing missionary work in terms of telling people,

1346
01:08:00,600 --> 01:08:02,959
Speaker 3: this is a real asset class. So we were using

1347
01:08:03,040 --> 01:08:05,760
Speaker 3: leverage to purchase properties just when we didn't have new

1348
01:08:05,760 --> 01:08:09,160
Speaker 3: money coming in. So we've always been very conservative, and

1349
01:08:09,200 --> 01:08:11,640
Speaker 3: in farmland, leverage is a different beast.

1350
01:08:11,680 --> 01:08:12,640
Speaker 4: You know, you can't buy.

1351
01:08:12,480 --> 01:08:13,560
Speaker 2: It not twenty x.

1352
01:08:13,720 --> 01:08:15,640
Speaker 3: No, you can't buy a farm with five percent down.

1353
01:08:15,680 --> 01:08:17,680
Speaker 3: You need fifty or sixty percent down to buy a

1354
01:08:17,680 --> 01:08:18,240
Speaker 3: f So it's.

1355
01:08:18,320 --> 01:08:21,519
Speaker 2: Hodest leverage and unless there's a disaster.

1356
01:08:21,479 --> 01:08:23,719
Speaker 4: Yeah, and it's all fixed straight mortgage debt.

1357
01:08:24,080 --> 01:08:27,000
Speaker 3: But we were just always very conservative, and I think

1358
01:08:27,000 --> 01:08:29,720
Speaker 3: some of that conservatism now you'd say, well, maybe that

1359
01:08:29,800 --> 01:08:33,960
Speaker 3: was overly conservative, but you know, we also didn't get burned.

1360
01:08:34,000 --> 01:08:36,120
Speaker 3: And you don't move from thirty million to two billion

1361
01:08:36,520 --> 01:08:38,680
Speaker 3: by being overly aggressive, or you don't do it all

1362
01:08:38,720 --> 01:08:41,280
Speaker 3: at once, you have to do it over time, and

1363
01:08:41,280 --> 01:08:42,920
Speaker 3: that's kind of how what we've focused on.

1364
01:08:43,200 --> 01:08:47,240
Speaker 2: Brandon, this was absolutely fascinating. We have been speaking with

1365
01:08:47,320 --> 01:08:51,280
Speaker 2: Brandon Zick. He is the chief investment officer of Sarah's

1366
01:08:51,320 --> 01:08:55,240
Speaker 2: funds now owned by the time you're seeing this by

1367
01:08:55,280 --> 01:09:00,360
Speaker 2: Wisdom Tree Asset Management. If you enjoy this conversation, well,

1368
01:09:00,479 --> 01:09:02,599
Speaker 2: be sure and check out any of the five hundred

1369
01:09:02,600 --> 01:09:06,080
Speaker 2: and sixty nine episodes we've done previously over the past

1370
01:09:06,160 --> 01:09:10,400
Speaker 2: eleven years. You can find those at Bloomberg, iTunes, Spotify,

1371
01:09:10,880 --> 01:09:14,400
Speaker 2: and here at YouTube. Be sure and check out my

1372
01:09:14,600 --> 01:09:19,160
Speaker 2: new book How Not to Invest The ideas, numbers, and

1373
01:09:19,200 --> 01:09:22,439
Speaker 2: behaviors that destroy wealth and how to avoid them How

1374
01:09:22,479 --> 01:09:26,600
Speaker 2: Not to Invest at your favorite bookseller. I would be remissified,

1375
01:09:26,600 --> 01:09:29,200
Speaker 2: and I thank the Crack staff that puts these conversations

1376
01:09:29,200 --> 01:09:33,639
Speaker 2: together each week. Alexis Noriega is my video producer. Anna

1377
01:09:33,720 --> 01:09:37,040
Speaker 2: Luke is my audio producer. Sean Russo is my researcher.

1378
01:09:37,160 --> 01:09:40,960
Speaker 2: Sage Bauman is ahead of podcasts here at Bloomberg. I'm

1379
01:09:41,040 --> 01:09:45,000
Speaker 2: Barry Ridholtz. You've been listening to Masters in Business on

1380
01:09:45,120 --> 01:09:46,120
Speaker 2: Bloomberg Radio.