Homestead Capital has raised more than $400 million towards the $600 million target for its third farmland fund, according to a US Securities and Exchange Commission filing.
Homestead Capital USA Farmland Fund III has raised $402 million from 13 investors since its first sale in October 2018.
San Francisco-headquartered Homestead was founded in 2012 and closed its debut fund on $173 million in July 2015. Fund III’s immediate predecessor, Homestead Capital USA Farmland Fund II, closed on $400 million in late 2016.
Commitments to Fund III have included $100 million from the $76.9 billion New Jersey Division of Investment (NJDOI), $25 million from the $8.5 billion Rhode Island State Investment Authority and $35 million from the $8.54 billion District of Columbia Retirement Board.
According to an NJDOI investment summary, Homestead will use capital from Fund III to acquire and manage row and permanent crop farmland in the Mountain West, Pacific, Midwest and Delta regions of the US.
“The fund intends to acquire farms where Homestead Capital believes value-add opportunities exist through capital improvements, improved farm management, identifying economies of scale, efficient crop selection and rotation, utilization of precision agriculture technology and participation in government programs,” said the summary.
Fund III has a 15 percent carry, a 6 percent hurdle rate and a management fee of 1.5 percent, according to the NJDOI summary.
NJDOI staff noted Homestead’s formalized ESG policy contains a focus on issues related to climate change, scarcity of water and labor.
According to the summary, “Homestead’s focus within labor is centered around partnering with top operators that pay fair wages, actively [monitoring] working conditions, properly [training] workers and supervisors, and [communicating] with workers to ensure they understand their rights.”
The presence of high-quality labor is among the advantages offered by US farmland, according to comments by Homestead co-founder and portfolio manager Gabe Santos in a video on the company’s website.
“We have persimmons, alfalfa, potatoes, corn and rice with unique return drivers that help stabilize the return over time, so we are not up at night worried about what corn prices are doing when we have such diversity of crops,” added co-founder Daniel Little.