Agriculture Investing - Taking Food to the Next Level with Chris Rawley

So what does the typical say return to the investor? Look like, I, our background, we buy multi-family fix it up to a value add a deal, and then there’s some cashflow along the way, but the big paycheck comes in the back end.

And once we sell it for more money, wherein this case with the agriculture. Purely cash flow or how are you exiting the deal? 

What does the cash flow all look like? Tell us about all that. Yeah. So there are some other ways, there are some other platforms out there that, that do agriculture. Now we were one of the first what probably differentiates us is the way.

We put the deals together and it’s very similar to commercial real estate. Cause that’s what I knew. So that’s how the way we started. So everything you just said, the payoff comes at the end. There are cashflows. Sometimes as frequently as quarterly, sometimes annually, sometimes you don’t see them for several.

years so that they’re going to investing in real estate in there’s a lot of similarities between real estate and.

Investment or ag investing. But one of the differences is we’re, you develop a building and you move in tenants and you start making cashflow. It can take years to develop a farm. You start out with raw land and let’s just say, you’ve got a greenhouse. It might take a couple of years to construct it in and you start growing and producing the cash for, or if it’s something like tree crops like we’ve done hazelnuts you plant that you and protect the land, you improve it.

You put irrigation, you plant the trees and they take a few years before they start pushing out cash flow. So we, that said, different types of investment risk profiles. Just like you’d be investing in single-family and multi-family or commercial office building or storage facilities or whatever, industrial, same thing with ag, lots of different flavors of it.

It’s not just all row crops. And that’s one of the things that differentiates us from our platform is that we’re doing that kind of niche, investment opportunities. Our exits, it could be as short, we’ve done some debt some structure, some notes that are collateralized that are as short as the seven months to a year are for a couple of years to, as long as a, a 10 year, 10-year sort of thing has been here.

We recently did was roughly a 10-year timeline with the payback in eight years. And that’s all based on, the biology of growing grapes and producing grapes and that sort of thing. So exits, it could be a cash-out refinance, just like you built, you develop a building and starts to stabilize cash flow and you cash them out.

So that’s one-way cash-out. The targeted, your cash flows grow. You develop a project, the cash flow starts pushing out cash, and you’re able to exit a targeted IRR. And then a third, especially on some of our more, developmental deals or speculative deals, you’re going to see a higher IRR of course there’s higher development risk, but you’re going to see, potentially a merger acquisition.

Or even an IPO and some of the companies with that we’ve invested in. And we also do ag tech. It’s not necessarily real estate, but it’s something it’s, the brick and mortar of supporting agriculture. So we’ve done several of those deals lately, too. And those are more of your sort of angel investing with the potential for a high.

Cool. So you mentioned a few things about you, you’re either coming in as a debt partner with a collateralized note or you’re investing equity, things like that. If you are making an equity investment, are you able to say, get a loan? If we’re buying a multi-family property, we’re going to go get a mortgage.

It’s going to be the pretty, relatively low-interest rate. Whereas in this case, Are you able to leverage? Is that smart? Can you tell us about the, especially the uses of supplemental, that things like that? 

Yeah. We come in deals where the entire deal is equity and in our investors are a big part of it.

And maybe the founder has some, the principal has some equity involved, some skin in the game too. We’re a small part of the capital stack. A project where we might be the last money. So these, a lot of these large-scale greenhouse deals. And when I say greenhouse it’s, people need to envision, it’s not just like a little.

No small thing in a backyard. These are literally acres and acres of buildings that are large multi-year construction projects, irrigated hydroponics. They’re springing up all over the country. They started in Europe, but now we were in one in. Kentucky that’s been fully developed and is spitting out cash.

And we’re going to have an exit here pretty soon to a one that’s being developed in New Hampshire to some others that we’re looking at. And those have, those are, $50 million projects, just like building a multi-family might be. And so we might only have a million of it in equity. And then.

There are other investors that are coming in and then there’s a debt component, as you can imagine. So it’s very similar to structuring any kind of large-scale construction project. And, our projects run the gamut from that’s on the higher end, down to smaller, a vertical farm. So a building in an urban area.

It’s just a shell that might have been sitting vacant for years. It gets redeveloped into something. Neat. Like we’ve got one in Birmingham, Alabama, yellowhammer farms started out as a shell building vacant, and now it’s, an urban vertical farm that’s selling produce locally direct to retailers or direct to consumers to restaurants and to, to local groceries.

And the earth, the local food movement is a big deal. Most people don’t realize that most. Like real estate agriculture is local. The returns can be local, but the difference is the products can be shipped all over the country. However, more and more, especially with recent supply chain shocks more and more people want to grow their food locally and consume their food locally.

It takes a lot less To move lettuce across Birmingham, Alabama than it does to move it from Salinas Valley, California, to Birmingham, Alabama, which is where actually most of the lettuce and leafy greens are produced as in Salinas valley. But that’s we’re seeing that ratio begin to change as more produce is produced outside of California.

And California is awesome because it’s got amazing weather. Although now they’re having a lot of water problems there and so people are looking for alternatives. And one of the ways to do that is to build these vertical urban farms. Interesting. 

So when you mentioned the one in Kentucky in particular, just pick on that as I think about it, really from the outside, what I picture is a more premium product that, the elderberry kind of sounds like something where it’s probably fairly expensive. You’re competing with, an imported product and you’re probably able to get a lot of money out of it. Whereas if you were. Building a big indoor greenhouse to grow red, delicious apples.

I love apples. I hate red delicious apples. So it probably, that probably doesn’t make as much sense. You have to grow the trees and then they’re a fairly cheap type of product. Is that right? Are these all premium products? You mentioned lettuce there, which I wouldn’t really consider a premium product.

No, it’s not necessarily premium. Although when you see the kind of lettuce that comes out of these greenhouses, it is pretty amazing. It’s very nutritious and you actually lose nutrition the longer. The lettuce may look perfectly fresh, but by the time it gets to you and, flyover country from California or to the east coast, it’s been sitting here for a week refrigerated, whereas you can go and basically buy lettuce that has been picked that day or the next day.

So it is more nutritious than it does taste. It’s more flavorful. I was up at our, we have an urban farm slash restaurant in Omaha. I was up there a couple of weeks ago and it. I’m not a solid guy, but I absolutely love the salads that came out of this place. And it’s called gathering Omaha. Anybody happens to be in Omaha.