AcreTrader Investors Pool Cash to Buy Farmland

AcreTrader Investors Pool Cash to Buy Farmland
Carter Malloy is CEO of AcreTrader of Fayetteville, a farmland investing service that’s so far put $100 million into more than 60 farms. (Beth Hall)

Carter Malloy thought there had to be an easier way to invest in farmland.

While working for investment firms, something he did for more than a decade, Malloy was investing personally in agriculture. “I had some good experiences and had some friends who wanted to invest in farmland,” said Malloy, 39, who was born in Stuttgart and raised in Little Rock. “But there was no real way to go about it.”

If an investor wanted to buy farmland, she would have to put up a lot of money and then handle farm management. “For most people, buying a million-dollar farm and managing it is a nonstarter.” But, he thought, if investment money could be pooled, then an investor could buy only a fraction of a farm instead of the entire property.

The idea for AcreTrader was born.

Since launching in 2019, the Fayetteville farmland investing service has placed “well over” $100 million into more than 60 farms in a dozen states, Malloy said. It has blossomed with a staff of about 50 and is looking to hire more for new product launches.

AcreTrader is also investing in data science and geospatial analytics, which will allow the company to evaluate a piece of land before making an investment. The company hopes to fill 20 or more positions by the end of the year. Malloy declined to release revenue figures, but said the company is seeing “triple-digit growth.”

In March, AcreTrader announced it had raised $12 million of venture funding for business operations, bringing AcreTrader’s total amount raised to $18 million. Jump Capital of Chicago was the lead investor in that $12 million round.

“In today’s environment, farmland is a great investment,” said Peter Johnson, a partner at Jump Capital who sits on AcreTrader’s board. “And what Carter is doing and the team at AcreTrader is making that investment accessible to a whole new class of people.”

Jump Capital decided to place money in AcreTrader’s business because, with equity values at high levels and bond yields low, investors are searching for assets in which to invest.

Meanwhile, the average farm real estate value in the United States has been steadily increasing. In 2019, the average price per acre was $3,160, and this year it’s $3,380, according to an August report on land values by the U.S. Department of Agriculture.

And with concern about potential inflation, investors are looking to diversify their portfolios and earn better returns, Johnson said.

Emerging online services allow investors to invest in a piece of everything from commercial or residential property to collectibles or wine. “And so we looked at all of those,” Johnson told Arkansas Business recently. “We came to the conclusion that farmland was really the most compelling new asset that most investors currently aren’t investing in.”

In addition to a yield on the row crops, the farmland appreciates in value, he said. In the last several years, investors have seen double-digit returns on farmland as a result of the yields and the land appreciation, he said.

‘A Long Road’

After graduating from Central High School in Little Rock, Malloy went to the University of Arkansas, where he earned a degree in physics in 2004. He then joined the investment banking firm Stephens Inc. of Little Rock where he spent time as a managing director of research. He stayed there for about seven years, focusing on internet and data analytics companies.

In 2013, Malloy moved to San Francisco to work for an investment firm.

After getting the idea for AcreTrader, Malloy left the Bay Area in 2018 and returned to Fayetteville, “my favorite place in the whole world,” to work on the business plan, he said.

But going from the idea to market was “a long road,” Malloy said. With help from family and friends, Malloy developed a business plan “and had as many people as I could challenge it,” he said.

Malloy also enlisted attorneys to make sure that what he was proposing met regulatory requirements.

In addition, he became a client of Startup Junkie Consulting of Fayetteville, which offers consulting services to entrepreneurs. Jeff Amerine is Startup Junkie’s founder and managing director. Amerine, an investor in AcreTrader as well as an investor in its farmland, said the company’s business model of pooling money for farmland wasn’t unprecedented.

“You see similar things happening in different forms of real estate,” he said. “The thing that was impressive to me was Carter himself. … He’s just a genius-level, smart guy.”

Malloy said he hired five software engineers to develop a prototype version of AcreTrader so customers could use it and offer feedback.

The company launched in 2019 and people liked the concept, he said.

“And so that was really it,” Malloy said. “From there, we saw the interest online from real people who were strangers, farmers and investors.”

Malloy said it was then that he realized AcreTrader could be something big. “So that was not quite three years ago,” he said. “It’s been a pretty crazy deal.”

But that doesn’t mean it was all easy.

Malloy said one of the most dangerous assumptions he made was that if he created a website for AcreTrader, customers would flock to it.

“That is not the case,” he said. “If you want to build a business, you need to build it. Then you have to go and communicate it with the world and potential partners and customers.”

Since the concept of buying farms as an investment vehicle that will help farmers, landowners and investors was new, it took time to build relationships.

He said he did a lot of advertising on the internet and on social media and spent time “calling every person I know.”

How It Works

The company works with farmers who are interested in expanding their operations. The farmer might spot farmland for sale and request that AcreTrader buy it. The farmer in turn will rent the land from AcreTrader. “A farmer may not have $5 million to go buy a large slice of land,” Malloy said. “And so we work with those farmers to help them grow their businesses.”

Farmers also can sell their land to AcreTrader but continue to operate it in a sale-leaseback arrangement.

For investors, typical investment minimums are $10,000-$25,000.

Malloy said that once AcreTrader buys the farmland, it will often make improvements on it, such as adding a drainage system, which makes the land more efficient and valuable.

“It’s really important that it is a win-win for the investors and the farmer,” Malloy said. “That’s the only way it works.”

This year, he said, AcreTrader has spoken to thousands of farmers across the country to cultivate long-term relationships.

“There may not be a piece of land for sale now,” Malloy said. “That doesn’t matter. We still want to get to know the farmer.”

Keeping the headquarters in Fayetteville is a strategic advantage, Malloy said. “It puts us equal distance between the Delta and the Midwest, which are two of the most important growing regions in the U.S.,” he said.

Amerine, of Startup Junkie, said AcreTrader “has to constantly be on the prowl for really good, high-quality, productive farmland that fits the model for what they’re trying to do.”

“If you want to keep the land investors happy, there has to be lots of good deals,” he said. “And if you want to keep the people that are looking to bring liquidity to what they own, you have to make sure that there are plenty of investors involved.”

Amerine said he thinks AcreTrader has done a good job so far, but finding property will be one of the company’s challenges. “It’s nothing they can’t overcome,” Amerine said. “And [Malloy] has built a fantastic team to be able to do it.”

AcreTrader makes money as a real estate broker and the investors pay the company an ongoing management fee to oversee the land. “But our goal for all involved is to keep fees low,” Malloy said. Its annual management fees are 0.75%, which are lower than the industry standard of 1%-2%. And it charges “competitive” real estate broker fees, he said.

Malloy said the company’s intention is to make it easier for people to buy and sell farmland and help farmers. “We know if we continue to provide great outcomes for farmers, landowners and investors, we will build a large company along the way,” he said.