The new company Fquare is bringing crowd-sourcing to the increasingly lucrative market of investing in farmland.
Here’s how it works: On the Fquare website, an investor can purchase a share of a farmer’s land. If enough investors pool their money to buy the whole parcel, they become the new landowners and the farmer becomes the tenant on the land. The farmer gets a three-, five- or seven-year lease to work the land, and the landowners make up to 6 percent annual interest for the length of the lease. When the lease is up, Fquare sells that same farm to a new group of investors.
This month, Fquare hopes to fund its first farm. In a busy New York restaurant around the corner from where the company is based, I chatted with the company’s founder, Charles Polanco. He said buying farmland through Fquare was easy, akin to purchasing a share of a mom-and-pop pizza parlor.
“That's how simple it is. You’ll go in, and there will be a land available for $1 million, and 10 individual investors would join together and put [down] the capital to buy it,” he said.
Polanco said once a farm is crowd-funded, investors could see returns on their land right away.
“Because we work with lease-back arrangements, the farmer will continue to pay the interest. The difference here is that they’ll start paying it to the investors,” he said. “So our investors, as soon as they get into a deal, they’ll start receiving income from that specific farmland deal. When we sell the land, the investors look to also take advantage of the land's appreciation value.”
Most of the land Fquare is interested in selling to investors is located in the Midwest. Polanco said ideally, the parcels will be between 300 and 1,000 acres and will cost investors from $1-$3 million. One of the strategies the company is using to acquire the land is through partnering with farming co-ops.
“Many of these co-ops, they have farmers that are over the age of 60 that are looking either to retire or are sick and they can't work the farm. They look towards platforms like ours because of the fact that we are more focused on lease-back arrangements,” said Polanco. “Basically we go in and offer to buy that land and lease it back to one of the producers of the coop, which is very valuable to them.”
Although there’s plenty of speculation about the farmland bubble bursting, Polanco doesn’t see that happening any time soon.
“We're always monitoring farmland prices and we feel that there could be correction, whether now or in the future,” he said. “But many investors are very interested in continuing to acquire this land. We feel that as a long-term investment, farmland values are going to increase.”