AcreTrader is committed to transparency and ongoing communications with our investors. While we are not registered investment advisers, this snapshot is intended to share relevant performance data and help you understand the role farmland might play in a balanced investment portfolio.
Cash distributions made to investors in calendar year 2021 totaled approximately $1.4 million, with 2,113 individual distributions made. These returns are constituted by annual rent payments made by farmland tenants in the case of row crop farms and by cash flow generated by permanent crop entities.
Cash yields this year were, in general, greater than anticipated, with an aggregate 2.7% actual net yield across 47 properties versus 2.4% expected.
Note that these numbers don’t include any financial results from our sponsored offerings, which are modeled differently from row crops. Many of those offerings are still in the early stages of development, thus are not yet generating projected cash-flow. A small number of AcreTrader farms generated returns lower than anticipated in 2021, primarily due to higher than expected tax and drainage assessments; all those appear to be currently on track for 2022.
Our offerings’ financials are modeled according to historical land appreciation averages, average regional rental rates, and historical commodity market averages. We strive to be conservative in our projections and diligent in our farm analysis, and any upside as a result of farm performance is the investors’ gain.
Flex Lease Distributions
Flex lease distributions were a particular case in which returns exceeded expectations, due largely to increases in commodity prices during 2021.
A flex lease begins as a standard cash lease, which establishes a price/acre annual rent, setting a floor for the rental income. The flex component indicates that in years with higher yields or increased commodity prices, a bonus rent is paid, allowing investors to participate in the upside.
As macro forces continue to drive up the price of commodities, a flex lease allows investors to participate in those rising markets while limiting downside exposure. However, in the event of falling commodity prices, the base rent for a flex lease is guaranteed even if no flex rent component is received.
This past year also marked our first fully realized property lifecycle with the disposition of the Iowa Row Crop Farm. One of AcreTrader’s early offerings, the farm was sold to the existing operator/tenant, who approached us with an attractive offer.
This sale resulted in an ultimate IRR of 22%, as compared to the offering’s projected IRR of 8.5%—far exceeding expectations for this farm.
We want to point out that these circumstances are not typical, and past performance is not a reliable indicator of future results. That said, we are committed to conservative financial models in which any realized upside flows to the investors in each farm.
Ultimately, this is the kind of scenario we hope for: a farmer has the opportunity to purchase from our investors, who make a decent return on their investment.
Our expert team of farm analysts is continually working to expand the range of our offerings so that investors have options for diversifying their farmland portfolios across regions, climates, crop types, and more.
New Crops & Countries
2021 marked expansion into Australia, where a robust legal system and strong agricultural industry support rising farmland values. Major crop expansions in AcreTrader’s offerings in 2021 included olives, avocados, pistachios, and citrus, and our first timber and wine grape offerings are slated for 2022.
Continued Growth Amidst Market Volatility
We are proud to welcome a growing investor base representing all 50 states. Since AcreTrader’s inception, we have fully syndicated 91 farms.
This continued growth points to investors’ growing recognition of farmland’s strength as a sustainable alternative asset class, especially amidst shifting economic conditions. In times of change and upheaval, a real asset producing crucial commodities can provide meaningful portfolio stability.
Thank you for your continued interest in AcreTrader. Stay involved by exploring our upcoming farm offerings. To hear more about exciting developments at AcreTrader, watch our business update webinar below, which aired in February 2022.
Note: The information above is not intended as investment advice. Data referenced herein is through year end 2017 and is sourced from Bloomberg, USDA Agricultural Land Values Survey, USDA Nominal Farmland Values, USDA Farm Sector Equity Assessment, and NCREIF, with additional calculations and analysis performed by AcreTrader. Past performance is no guarantee of future results. For additional risk disclosures regarding farmland investing and the risks of investing on AcreTrader, please see individual farm offering pages as well as our terms and conditions.