US general partner Farmfolio plans to open Latin American agriculture to a wider pool of American investors through what its founder calls “farm shares”.
“We are developing a back end system where investors purchase and sell shares on a platform,” said founder Dax Cooke. “It is not a public offering. It is a private, registered platform […] We are trying to create a new category of investment that is easy to access and sell, offering direct investment into agricultural properties.”
Farmfolio initially aims to attract between 15,000 and 25,000 users for its system, which is akin to a crowdfunding platform, Cooke told Agri Investor.
He said his previous experiences outside agriculture helped him come up with the idea and set up the investment structure. He first set up finance firm Keystone Wealth Management in 2009, and was previously chief executive officer at Federal Employee Benefit Counselors, a national consulting group for federal employees.
“I had several clients [at Keystone] who were after me about looking into different things [two years ago]. Markets were kind of in flux […]. They were really concerned about fixed income markets, traditional asset classes like stocks and bonds and even some of the strategies we were managing seemed to be a little frothy,” he said.
Cooke decided to invest in agriculture operations through a structure that allows his firm to sell Delaware limited liability company shares for investments into projects. His angel investors are informally committing to starting up projects on a case-by-case basis.
“It is mixing financial technology with agriculture […] this actually offers direct investment into the properties, projects and operations.”
Cooke also said he spent time looking at REITs: “You are investing in agriculture that is secured by land but you are getting the fluctuation of equity markets. That is why we are trying to keep this on private placement.” He said share prices are based on the revenues and the valuations of properties on a project by project basis.
The firm started life in Panama over a year and a half ago, but moved its headquarters to Colombia by the beginning of 2015. Cooke said that was a lucky break, given the attention surrounding the Panama Papers.
“When we got to Panama it seemed like a great place to headquarter the project. The problem is that sourcing talent in Panama is difficult on a local level. In the last five years the land pricing has really shot up, and that combined with the labour issue and management on the ground – there are only 5 and a half to 6 million people — it was just a difficult place for us.”
The Colombian government then actively recruited Farmfolio and set them up in a special hub. Land prices are a third of those in Panama, with secure land titles and less business risk, Cooke said.
The firm’s first project is a 1,270 acre property on the Caribbean coast of Colombia, including teak and organic passion fruit cultivation and 1,070 acres of grass-fed cattle grazing. Farmfolio is also looking at investments in Mexico, Peru, Panama and Brazil. The minimum share for this property is $25,000.
“We set up a structure where we fund that initial purchase to acquire a certain amount, for instance with for [the Colombian property], we purchased 20 percent, and we got options on another 30 percent, so we had the ability to be 50/50 partners with the family [owners]. However, we do have operational control,” he said.
“We are hiring the family to continue managing the project, as they have in the past, and are also bringing in experts for expansion projects. […] So we are bringing in the talent to make sure that we get the development right but the families are the ones that are really managing the day to day, and we have a vetting process for that.”