Ceres Partners’ evergreen farmland fund is close to hitting $1 billion for the value of assets held by the vehicle, chief executive Perry Vieth confirmed to Agri Investor.
“It’s coming up on its 13th year and so it has a long track record. [The fund] holds 145,000 acres and we expect to go over the one billion threshold in Q1 of next year,” said Vieth. The firm estimates assets held by the fund are worth $940 million.
Investors have committed $685 million to Ceres Farms LLC since its launch in December 2007. The fund has taken commitments worth $70 million in 2020.
Chief investment officer Brandon Zick confirmed Ceres Farms has “averaged just under 10 percent annualized returns net of fees on an annual basis since inception.”
The fund has exited 10 properties during its 13-year life, said Zick, and “every time they’ve sold for well above our mark to market value and our purchase price.” All 10 farm exits have yielded a little over $12 million, the firm confirmed.
Ceres Farms’ structure features a one-year lockup and provides annual liquidity windows, said Vieth. “By September 30 people give us notice which can be whether they want income paid out, a partial redemption or even a full redemption after the one-year lockup,” Vieth explained.
“We generally pay by the end of October but legally we have it so if we were in a situation where we had to sell properties, we have a legal window that allows us until March 1.”
The chief executive added that fragmented ownership across the US farmland space means 40 percent of land is held by absentee owners, with investors only accounting for 2 percent to 3 percent of the whole market.
This puts the firm’s active management approach in a position to markedly improve efficiencies, Vieth said, which in turn have led to attractive returns that have continued to draw in investors.
“At a time where 10-year treasuries are yielding under 1 percent, we use a 5 percent target when we’re buying farmland. It’s very attractive given where interest rates are in general and there’s also the long-term appreciation [of the assets].”
The fund follows a strategy of acquiring undervalued farming properties and undertaking value-add improvements such as installing irrigation and drainage tiles, explained Zick, which has the effect of allowing its farms to diversify their crops, decrease risk and increase yield.
Ceres’ uses crop rotation across its farms and roughly 75 percent of its 145,000 acres produce commodity crops such as corn, soybeans, rice, cotton and wheat. Around 20 percent of the portfolio is used to grow specialty crops and vegetables such as melons, potatoes, tomatoes, as well as organics. The firm also has a small percentage of the portfolio dedicated to specialized permanent crops such as juice grapes and tart cherries.
Another factor in the firm’s farmland strategy is identifying the right tenants, said Zick, whom he referred to as “the secret sauce to what we’re doing because they represent almost a million acres of farmed land in the US every year.”
“The key to the strategy is identifying the right farmers to work with and then partnering with them to help grow the portfolio – they do a lot of investment sourcing for us because they’re local in every area,” Zick said.
“There are some other investors that have this model that they’re going to teach farmers how to do things. If they have to do that, our opinion is they’ve got the wrong tenant.”
Ceres Partners launched its first close-ended fund in 2016. Sustainable Food and Agriculture Opportunity Fund I closed on $17.5 million in 2017.
The vehicle’s portfolio is comprised of six assets which include water filtration company Digested Organics; hops company Hop Head Farms; Mexican aquaculture business King Kampachi; crush-to-bottle winemaking facility Sugarloaf Crush; malt producer Proximity Malt; and greenhouse grower Pure Green Farms, into which Sustainable Food and Agriculture Opportunity Fund II has made a follow-on investment.
Fund I is yet to have any exits.
Ceres launched Sustainable Food and Agriculture Opportunity Fund II in 2019. The fund has a $100 million target and had an $18 million first close in H1 2020. As well as the follow-on investment into Pure Green Farm, it has also invested in agtech company iUNU.
Chief executive Perry Vieth said “not having exits [on Fund I] has made it difficult to go out to the marketplace” for Fund II, but the firm remains confident of getting close to its target.
Ceres had also teamed up with Canada-based metals specialist Sprott to launch the Ceres-Sprott Institutional Farmland Fund in 2017, but the vehicle “never really gained any traction,” confirmed Vieth.