As agricultural service providers, we are always intrigued by innovative models enabling farmers to acquire farms. Farmland investment is one intriguing emerging option. A new entity, called Northeast Farm Access, has formed to facilitate farm investment partnerships and farm access in the Northeast:
New Spirit Farmland Partnerships and Northeast Farm Access are currently seeking organic farmers in New England and the Hudson Valley who need access to additional land to sustain or grow their current operations. Our social investors will purchase the land you need and provide you with a long term lease and right of first refusal if the farm comes up for sale. An option to purchase will be available under certain circumstances. If you are an established farmer or grower with a good track record we encourage you to apply. If you are a farm owner selling a farm to a farmer with an established business, this may assist you as well.
Key criteria for farmers include:
5 years or more track record as a farm business;
Need additional land, but generally not a home farm;
Able to pay a rent roughly equivalent to 4% of the purchase price of the land.
If you would like to discuss the program by phone, please call Michelle Russell any Monday –Thursday between 2:00 p.m. and 5:00 p.m at 603-547-0893.
New Spirit points out on their website that its approach is different: “Other farmland finance companies, even those with an interest in organic farming, are often focused on and driven primarily by investor priorities. We instead seek people who desire to have a social impact with their capital and align their interests with farmers and rural communities.”
It remains to be seen whether large investment firms like TIAA-CREF will buy up farmland in the Northeast like they have been in the Midwest. Many analysts believe land prices in the midwest could be near a bubble ready to pop, in which case investors would scatter, land values could plummet, and farmers could see their debt relative to the equity they hold skyrocket. This recent NY Times article, “As Crop Prices Surge, Investment Firms and Farmers Vie For Land”
points to potential negative ramifications.
The typical farmland investment arrangement involves an investment entity holding land, and the farmer leasing, paying annual cash rent to the investment entity. But variations of the model exist. Some provide farmers a secure path to land ownership in a way that conventional credit might not do. For example, the Northeast Farm Access announcement posted above mentions, “ An option to purchase will be available under certain circumstances.
” As this quick article from U. of Missouri Extension
explains, the lease-option can present a unique opportunity for eventual transfer of ownership.
We published the Guide to Financing the Community Supported Farm last year for farmers. For more background on farmland investing, and considerations for dealing with farmland investors, see Chapter 4
. More is sure to come on this subject, as more entities like New Spirit make their way east. We anticipate farmers will welcome them, as long as their true needs and those of the land are taken to heart.