Agriculture Capital flies past target to close Fund II on $548m

The vehicle will seek low-teen returns through investments in farmland and processing assets devoted to sustainable production of tree nuts, citrus and blueberries.

California-headquartered Agriculture Capital has closed its second fund on $548 million, a  spokesman told Agri Investor.

Vice-president of investor relations Atish Babu told Agri Investor that about a third of investors in Agricultural Capital Management Fund II were investing in agriculture for the first time, while another third of commitments to the fund came from LPs that were also invested in AC’s first effort. He added that there were about 15 investors in the fund, contributing an average of $50 million.

ACM II was launched in July 2016 with a target of $400 million and plans to solicit investors across 42 states, according to regulatory filings (the firm re-branded itself from “Agricultural Capital Management” earlier this year).

The vehicle went on to secure $50 million commitments from the $15 billion Ohio Police & Fire Pension Fund and the $22 billion New Mexico State Investment Council and a $25 million commitment from the $8 billion Sacramento County Employees’ Retirement System.

Its predecessor, ACM Permanent Crops Fund, also surpassed its initial target and closed on $250 million in early 2015. That vehicle’s investors included the $120 billion Washington State Investment Board, the $13 billion Maine Public Employees Retirement System and real asset-focused investment management firm Aether Investment Partners.

ACM Fund II will look to purchase farmland and processing assets for permanent crops, with a particular focus on hazelnuts, citrus and both organic and traditional blueberries, according to a NMSIC memo. In addition, a quarter of the fund will be devoted to midstream processing assets.

The fund expects to produce an overall net return of 12 percent and a stable cash yield of 8 percent by looking to manage growing, processing, packaging, marketing and distribution in target crops, according to a SCERS memo.

AC’s focus on vertical integration was demonstrated last month when the firm hired Darren Filkins as president of its asset management unit. The role sees Filkins run AC’s citrus marketing unit, citrus nursery, packing and shipping business, in addition to all farming operations in California’s Central Valley.

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“The company’s vertical integration model creates an opportunity for seasoned operators, like me, to lead diverse teams with a shared commitment to excellence, accountability, transparency and stewardship,” Filkins said when his hire was announced. “It exemplifies the kind of progressive agricultural company that I want to be associated with.”

In a report on the firm’s website, AC wrote of how its approach is anchored in the ethos of sustainability and focused on the production of healthy food, growing access and scale and advancing responsible production. AC noted that while it does not consider itself to be an “impact investor” in the traditional sense, it  aims to have a positive impact through its pursuit of a “re-generative agriculture” model intended to renew health, the economy, communities and natural resources.

“The most productive farms are successful because of the ecosystem function they actively manage and protect and because of the opportunities they create for the enrichment of people,” the firm said.

AC was founded in 2014 in conjunction with real asset platform Equilibrium. The firm owns and operates more than 9,000 acres in California and Oregon, including 1,900 acres that are in transition – or under evaluation for conversion – to organic production.