AcreTrader Revolutionizes Farmland Investing

AcreTrader Revolutionizes Farmland Investing

Published On: February 22, 20234.3 min read
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Founded in 2018, AcreTrader is an online platform that offers innovative pathways to invest in farmland.

“We believe buying and selling land should become common, transparent, and easy for farmers, for investors, for landowners, and for everyone else interested in land,” said CEO Carter Malloy.

During a recent AcreTrader Annual Business Update Webinar from their offices in Fayetteville, Arkansas, Malloy and COO Garrott McClintock shared insights on the company’s growth and key successes to date — and why they feel their new approach to land investment is a win-win for farmers and investors.

A Diversified Portfolio

Since launching its online investment platform in 2019, AcreTrader has grown quickly.

Last year, the company raised more than $300 million in funds, made 6,200 distributions to investors, and saw more than 90 percent of its active investment properties generate a distribution greater than or equal to the returns projected by AcreTrader’s internal models.

“We are seeing growth here at AcreTrader, both in the scale of our business and our farming partners’ businesses, growth in our industry, and importantly, growth in the opportunities for investments for our customers,” McClintock said.

In 2022 alone, AcreTrader:

  • Grew its land under management to more than 40,000 acres
  • Funded more than $100 million in equity
  • Added timberland as a new option in their portfolio
  • Incorporated its first vineyard offering
  • Diversified with 11 different row crop investment options, plus citrus and nuts
  • Increased its land offerings in the US and Australia

“Diversification within an asset class like land can help spread risk and boost returns,” Malloy said. “We strive to offer our investors plenty of opportunities to do that within this diverse asset class.”

How It Works

AcreTrader’s online platform lets investors purchase shares in an entity that owns a farm. Each entity is divided into shares equivalent to one-tenth of an acre (so, for example, 20 shares would be the equivalent of two acres of land).

Then, at the end of the year, AcreTrader pays out cash distributions to investors based on each farm’s excess annual income.

The Case for Land Investment

To date, AcreTrader’s by-farm exits have yielded a weighted average return of 14.1 percent to its investors, Malloy reported in the webinar. However, AcreTrader’s website explains that this asset class has historically had an unlevered yield of 3 to 5 percent for lower-risk properties.

Thus, AcreTrader’s recent returns are “well above target,” Malloy said. “What’s fascinating is just to see these types of returns during a time when many other asset classes are meaningfully underperforming.”

Malloy went on to share some historic land value data to illustrate that US farmland values have increased by an average rate of roughly 6 percent annually since the 1960s. In very rare down markets, land values typically only lost 5 percent of their value — a modest loss when compared with other asset classes such as gold or S&P, which saw declines of 40 to 50 percent some years.

“So, you can understand why many investors often look to farmland for its relative stability,” Malloy said.

With many economists predicting a US recession in 2023, land investment could offer a way to hedge against potential upcoming market disruptions, Malloy further explained. Sharing a slide depicting the ways various asset classes respond to varying markets, Malloy pointed out that farmland typically falls in or near the upper quartile for top returns when compared with other investment classes.

“Farmland is not a silver bullet,” Malloy clarified. “But it does appear to be very helpful in a diversified portfolio for providing stable returns.”

A New App

AcreTrader currently offers a mix of land investment opportunities that fall between the following thresholds:

  • Core: anticipated returns of 6 to 9 percent
  • Core Plus: anticipated returns of 7 to 10 percent
  • Opportunistic: anticipated returns greater than 10 percent

To better help would-be investors weigh the pros and cons of new investment options, AcreTrader launched a partner app called Acres, which allows users to access immediate, in-depth land data in the palm of their hand.

“Over the course of evaluating thousands of farmland properties for the AcreTrader platform, we realized just how tough it is to systematically research farmland,” McClintock said. “It required jumping between multiple — sometimes costly — digital tools, county courthouses and our own databases. To solve this, we set out to build a land research platform for ourselves but quickly realized that this frustrating experience was not unique to us.”

The result is Acres, launched in 2022. The app is now available for free to anyone, on both Android and Apple platforms.

During the webinar, McClintock offered a quick tutorial spotlighting the Acres app’s capabilities. Drawing on GIS data, ag valuation tools, satellite images, and other key records, the app can help users quickly identify a specific land tract’s tillable acres, soil makeup, elevation, slope, current vegetation, crop history, flooding potential, and much more. It can also show the area’s average per-acre yields for various crops and the average rental cost of nearby land, per acre.

“We really value this tool,” McClintock said. “It’s an easy way to properly go through all of the various analyses you might need as you’re evaluating land.”

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