AcreTrader’s Investment Selection & Due Diligence Process

September 11, 2023
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Our Investment Philosophy

AcreTrader’s philosophy is to provide investors with attractive farmland offerings that are evaluated across different market environments. We strive to create investment opportunities that fit investors’ goals across a range of risk tolerance, hold term, income, and capital growth potential. At the core of our strategy is a bias for deep research supported by both scientific data and industry experience. We take a long term view while understanding short term fluctuations.

Our Due Diligence & Investment Process

AcreTrader prides itself on a rigorous due diligence process that draws on the team’s deep experience from end to end: sourcing, financial strategy, management, and exit. We use our proprietary land valuation platform, Acres, to screen each piece of farmland. We have a defined investment process from sourcing to exit with checkpoints at every step. As a result, less than 5% of opportunities screened ever make it to our investors on the platform.

Below you will find a breakdown of our process by stage.

1. Sourcing

  • Use the expertise of our team and networks within the agriculture ecosystem to source attractive investment opportunities – oftentimes off-market
  • Leverage in-house data analytics tool, Acres, to quickly understand local markets and drivers
  • Look at commodity pricing performance, demand trends, and macro environment, seeking insights from relevant sources along the value chain (e.g. regulators, customers, marketers, academia)

2. Screening

  • Initial screening criteria includes (but is not limited to):
  • Crop demand
  • Water availability
  • Variety types
  • Elevation, vegetation index, soil composition
  • Local market environment
  • Evaluate the commercial hypotheses, opportunities, market positioning, and the associated risks and challenges of the specific market and investment
  • Thorough background check on potential sponsors, assessing their track record, experience, and integrity through reference checks
  • Review of preliminary findings; if unanimous then offering moves on to deep diligence and narrowing valuation.

3. Valuation

  • Financial, commercial, legal, tax and technical due diligence to validate transaction
  • Ensure the structure fits investors’ tax needs and takes advantage of regulatory incentives if available
  • Test investment drivers in various market conditions including price scenarios and yield variability
  • Underwriting assumptions based on scientific data, our experienced teams, and local sponsor knowledge
  • Collective findings reviewed as part of wider investment case rationale and proposed transaction structure
  • Internal investment committee agrees to proceed with funding on the platform

4. Funding

  • Legal and Farm teams work closely to finalize all transaction documentation, including, but not limited to: the Purchase and Sale Agreement, Shareholders’ Agreement, Limited Partnership Agreement, and/or any other related documentation
  • Investment offering is published on our platform and open for investing until fully funded

5. Management

  • Operations are monitored to optimize and improve efficiency of the farmland investment for the duration of the hold period
  • Asset valuations are periodically updated with actualized performance
  • Prepare bi-annual investor reports and K1s
  • If applicable, distributions are made to the investor’s account

6. Exit & Disposition

  • Operations and investment teams collaborate to identify exits in accordance with the investment agreements associated with the offering, ensuring investors interests are first and foremost considered
  • If at the end of the targeted hold period, it is determined that market conditions are not supportive of an exit, extension periods may be exercised subject to the offering agreements
  • Net proceeds from exit are distributed to investor accounts

The above content is not intended to be a comparison between products but is intended for general, educational, and informational purposes only. Any performance noted is historical and there is no guarantee any trends will continue. All investing involves risks, including the complete loss of principal. Diversification does not guarantee a profit or protect against loss in a declining market. It is important for each investor to review their investment objectives, risk tolerance, tax liability, and liquidity needs before investing. Investment vehicles have differences in fee structure, risk factors, and objectives. Investments are considered speculative, involve a high degree of risk, and therefore are not suitable for all investors.

Distributions paid are not solely based upon performance and are not guaranteed in frequency or amount. Distributions will be paid from net investment income, offering proceeds, borrowings, or reimbursable expense support, subject to certain conditions being met.

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