Raising Capital

A New Fund Helps Beginning Farmers Secure Land of Their Own

Nicole Reed | October 25, 2015

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Like most young farmers today, Tim Biello learned to farm through working other people’s land. It was at one of those farms, Essex Farm, a sustainable operation in New York powered by solar panels and draft horses, that he fell in love with farming with horses. “I feel much more connected to farming land with horses than with tractors,” Biello says. So much so, he bought his own team.

In 2011, Biello began scouting for a place where he, his now-wife Jamielynn and their draft horses, Bear and Duke, could put down roots.  “We wanted the security of ownership,” he says.

But Biello soon came up against the biggest obstacle for beginning farmers today: access to land. In a survey of young farmers by the National Young Farmer’s Coalition in 2011, 68% cited the lack of affordable land as their number one hurdle. “I wasn’t going to qualify with a bank on my farm manager’s income,” says Biello. “I needed to find someone who would work with me.”

farmhouseThat someone turned out to be the Local Farms Fund, a new investment fund that helps sustainably-minded farmers like Biello gain secure access to land. The fund purchases farmland in the New York City foodshed—encompassing New York, New Jersey, Connecticut and Pennsylvania—and sets up lease-to-own arrangements with matching farmers.

The idea grew out of conversations between Slow Money NYC investors and Working Farms Capital, an organization that manages and develops farmland ventures. The fund’s “farmer-driven” process—it works with farmers that have a clear plan for a specific tract of land—is borrowed from Iroquois Valley Farms, a pioneering investment effort in sustainable farming.

The Local Farms Fund cofounders put up the initial seed capital and launched the fund in October 2014. All that was missing was a farmer.

In early 2015, Biello was at a land access conservation conference when he met Kevin Egolf, a financier turned sustainable agriculture investor who manages the Local Farms Fund. For Egolf, who credits Fast Food Nation as his inspiration for countering the industrialized food system, the conditions were right for the fund’s first deal. “Tim came to us with great experience in farming, a thorough business plan, and land he had identified for his farm,” Egolf says.

In May, the Biellos moved onto a 63-acre farm near Saratoga Springs with a mix of tillable land, forest and wetlands and a picture-perfect 1790s farmhouse. The $415,000 property was purchased by the Local Farms Fund, which set up a favorable 20-year lease for the Beillos. “We’re hoping they can purchase the land from the fund in 5 to 10 years,” says Egolf.

farm

The purchase also included an agricultural easement on the land, which means the farm will forever be restricted from suburban development.

For Biello, the experience has been “a dream come true.” He had spent several years searching for the right parcel of land, even helping to set up the Hudson Valley Farmland Finder, a website that connects farmers looking for land in the area with land owners looking to sell, for the American Farmland Trust. But without financial support, land ownership was just a dream.

“We got a partner in our farm,” he says of the Local Farms Fund. “Yes, this is an investor group, and they have targets. But it’s a relationship.”

In a world where sustainable financing options are hard to come by, especially for food and agriculture ventures, the Local Farms Fund is a welcome addition. That goes for investors as well as farmers.  The fund is one of the few such investment funds that is open to ordinary investors. Iroquois Valley Farms, for example, while highly regarded, is only available to institutional investors and wealthy individuals who qualify as accredited investors.

Egolf (right) and LFF cofounder Steve Fondiller

The Local Farms Fund relies on the Regulation D, Rule 504 securities exemption, which allows for unaccredited investors. The minimum investment is $10,000, a number determined by the board as the lowest amount needed to cover administrative costs.

To date, the Local Farms Fund has raised $250,000—a quarter of the way towards its goal of $1 million by year end. It currently has about fifteen investors, with more conversations underway. The fund’s cofounders anticipate a 3% annual return on the investments— 2% paid in cash annually, and 1% accumulated over the course of the investment to be paid out in full in the end, says Egolf.

Derek Denckla, one of the founders of Slow Money NYC and a Local Farms Fund cofounder, says the group worked hard to create a program that “solves both sides of the problem.” Young farmers need low-interest, flexible capital to buy land, he says, while investors need “some assurance that the financial risk is mitigated.”

By working with skilled farmers who have identified land, Denckla says, “We’re able to support the higher risk investment in a farmer through the low risk investment of land as an stable asset.”

Bear-DukeThe fund currently has 3 or 4 farmers in the pipeline for future lease-to-own arrangements. In the meantime, the Biellos are settling into their new home. They plan to develop a vegetable CSA first, and over time expand into meat and eggs for local restaurants and grocery outlets. They’re also considering educational programming and tours for the future.

And through it all, Bear and Duke will no doubt have a starring role.

Nicole Reed is the Communications Manager for Down to Earth Markets, a certified B Corp that manages farmers markets in and around New York City.

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