Investor Insights: AcreTrader's Aggregation Advantage in Illinois
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On September 28th AcreTrader successfully closed the sale of an aggregation of four separate offerings in Illinois. These exits highlight the value investors can potentially receive on the AcreTrader Platform. These four farms were funded in four separate offerings conducted between 2020 - 2022 and provided approximately 200 individual investors with above target returns. While AcreTrader has provided access to farmland investments* across more than twenty states and two countries, if you’ve been active on the platform for more than few months you’ll notice a consistency of offerings in a number of distinct prime growing regions: these include the Corn Belt, the Mississippi Delta, the Southeastern Coastal Plains, the Red River Valley, Irrigated valleys of the Pacific Northwest, and the Central Valley of California.
Within each of these regions there are additional subregions where we’ve provided a higher density of offerings. The corn belt is a prime example where we use a term that references the primary crops grown – in this case corn and soybeans – for what is actually an incredibly diverse growing region.
Advantages of an Aggregated Farmland Portfolio
There are several advantages we can capitalize on by building an aggregated portfolio of what we believe to be high-quality farmland offerings within certain subregions. One advantage is in sourcing. AcreTrader sources opportunities in direct partnership with the farmers and agricultural professionals that are local to these regions, where we have developed several unique sourcing relationships that have repeatedly provided access to off-market opportunities. This allows us to gain a deep understanding of local land and land markets which can assist in identifying market inefficiencies that may provide strong investment opportunities.
A second distinct advantage to our aggregation strategy is that it allows us to consolidate multiple vetted properties into one offering upon exit, which may attract larger institutional or investment buyers who may be willing to pay more for the opportunity to pick up a portfolio in a single region.
Illinois: A Case Study
One region where AcreTrader has deployed this aggregation strategy is Illinois. AcreTrader manages over four thousand acres of soil across the northern half of Illinois. Just under half of this is in northeast Illinois, east of the Illinois River. While soil scores overlap across this area, the soil types vary quite a bit since this straddles multiple geological regions.
So zooming in further we see over eight hundred of these acres within the Kankakee River Basin. This is a subregion with soil classes we’ve come to understand at a far greater level than a soil score can.
This is a region punctuated by silt and silty clay loam soils – through extensive work with our farmers and farm manager we’ve come to understand the production upside of these soils when purchased in favorable areas and paired with appropriate drainage infrastructure. With access to an unparalleled comparable sales database via Acres, we can execute detailed diligence and financial analysis within this region, deriving a favorable entry price as well as recommend deployment of capital improvement budgets to maximize crop production and ease of operations.
We’ve seen the impact of that knowledge in farm yields and investment value. Investors often share in production upside through flex leases, where we saw an average performance above underwrite of 25% across the Kankakee River Basin in 2022.
This also allows us to market a much larger portfolio of farmland offerings than one single offering provides, which recently led to five independent investments going under contract to a single buyer at an aggregate preliminary IRR of 12.75% compared to the average targeted IRR of 8.4%.
Investing with Aggregation in Mind
Investors may want to consider incorporating some aggregation into their farmland portfolios, as exemplified by AcreTrader's achievements in Illinois. This strategic approach, whether throughout the Corn Belt or in specialized subregions like the Kankakee River Basin, offers unique advantages. Aggregation fosters essential relationships with local farmers and experts, uncovering off-market opportunities and deepening insights into regional land markets, which can potentially result in more lucrative market results.
*Note that Investors are purchasing shares in an entity that will purchase a farm but are not purchasing actual acreage of the farm directly.
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.
Farmland investments are also subject to additional risks including volatility in commodity prices, weather events or disease that could damage crops and many other operational factors. The PPM for each offering includes more complete information on risks associated with each investment.
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