Investing in Organic Farmland: How Iroquois Valley Builds a Sustainable Food System
If you're curious about how farmland can diversify your portfolio, act as an inflation hedge, and support a healthier planet, you’ll find plenty in this episode. Michelle is joined by Chris Zuehlsdorff, CEO of Iroquois Valley Farmland REIT.
Iroquois Valley supports experienced organic farmers through long-term leases and mortgage financing, helping to preserve farmland and build a more resilient food system.
Key takeaways:
Farmland as a Diversifier & Inflation Hedge: Investing in organic farmland provides real asset exposure that can balance a traditional 60:40 portfolio and help hedge against inflation.
Accessible, Values-Driven Impact Investing: Iroquois Valley makes it possible for both accredited AND non-accredited investors (minimum $10k) to support organic farmers. (Its SEC-registered Reg A structure and B Corp certification.)
Support the Next Generation of Farmers: The REIT’s portfolio skews younger, focusing on supporting millennial farmers to scale their sustainable businesses.
Links:
If you’re interested in learning more about how to align your investments with your values, or want exposure to organic farmland, check out the full episode or visit iroquoisvalley.com
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Introduction to the Unconventional Investor Podcast
Welcome to the Unconventional Investor Podcast. I'm your host, Michelle Moses, certified financial planner, licensed realtor, and founder of ME Financial. If you're an accredited investor feeling overwhelmed by managing your portfolio and looking for alternative investment strategies that go beyond the traditional stock market, you're in the right place.
Let's head into today's episode so you can start taking control of your financial future.
Exciting Guest: Iroquois Valley Farmland CEO Chris Zuehlsdorff
Hello everyone and thank you so much for tuning in. I am excited about this one. This one is something that I have been watching. We're gonna have Iroquois Valley farmland today, and we're gonna have the CEO Chris Zuehlsdorff talking with us.
I'm excited to have this one on because a lot of this stuff that I talk about when it comes to alternative investments is not. So green and sustainable, and I have been watching Iroquois Valley for, I wanna say seven or eight years and watching what they're doing and looking at their updates and so they're finally on the podcast, so yay.
So I have Chris Zuehlsdorff, who is the CEO of Iroquois Valley Farmland REIT here, and he is a farmland. It is a. I'm sorry, I'm tripping over myself. He's a farmland investment company focused on organic regenerative agriculture, and the company provides long-term leases and financing to organic farmers and works to build a more resilient food system by preserving farmland for organic production.
So Chris, thank you for being on. Thank you for having me. It's great to be here, Michelle. Yeah, I I don't think that people really know that this type of investment exists. I get a lot of calls and people say, I wanna buy some farmland. We gotta get into this. This is it's something that people want.
People obviously want to buy organic. Just look at Costco, right? I mean it, the organic sells out and that's what people want. They want to be healthier. So I think it's wonderful that you guys, what you're doing. And so can we just start out with like how long Iroquois has been around and how it got started?
And then I really wanna get into your story 'cause your story is also like very interesting. Yeah.
The Origin Story of Iroquois Valley Farmland
Happy to do that. So Iroquois Valley was founded in 2007 by Dr. Steven Var and David Miller. They were actually college roommates at Loyola Chicago and grew up in the same small town near Kankakee, Illinois.
Dr. Var was a emergency medicine doctor for nearly 30 years, and Dave Miller spent most of his career in kind of commercial real estate. And they were, I think, having a cup of coffee at, the local IHOP in, in Chicago and began discussing really the kind of the declining patient population that Dr.
Ard would see in his in his practice in coming through the er. So whether it's the increased prevalence of diabetes and heart disease and cancer and they traced it back to, really chemicals in our food system. And the solution that they came up with was to go out and buy a farm and transition it to organic.
So we bought one farm, I think in 2007 a second farm in 2009. And then by 2012 they had a small little kind of friends and family investment fund that kind of got got things started. And in 2016 as the company started growing Dr. Ard and Dave Miller converted the company into a real estate investment trust and a public.
Benefit company, which is a structure that we have in place a they are now in the day-to-day activity that Iroquois Valley. And I was fortunate enough to join the company in 2022 and became CEO in February, 2023. Okay. And then that kind of segues into your history. So let's go start in yours.
Chris Zuehlsdorff's Journey from Dairy Farm to Finance
'cause you grew up on a dairy farm, right? That's right. Yeah. Small family dairy farm in Fergus Falls, Minnesota. So west central part of the state, about 500 acres and maybe had a herd of cattle of about eight 80 head or so that we that we milked on the small family farm.
And then you went into finance, right? And you spent many years in New York in finance. Is that correct? That's correct. Yeah. So I grew up, on the farm in the 1980s and 1990s and, that was the last kind of, let's call it really severe recession and almost depression, farm economy.
And candidly, in high school, one. You probably get as far away from the family farm as I could. And so I went to St. Ola College down in Northfield, Minnesota to study math and economics. And then after a short career in the Minneapolis area slowly migrated to the east coast, went to graduate school in Pittsburgh, and then yeah, like you said, I spent about.
Years working in New York City in the more traditional kind of alternative investment space. The company I was with advised kinda high net worth individuals endowments, foundations, and other institutional investors on, alternative investment and kind of hedge fund allocations.
So we kinda identified and built built portfolios for those types of clients. And I did that for for, yeah, for nearly 20 years until looking to ha get back into agriculture and do something in the next kinda chapter of my career. So you were looking out for, you wanted to do something in agriculture after doing the, all the finance stuff for 20 years.
Yeah the catalyst was probably twofold. I had gotten involved in a nonprofit in the Hudson Valley of New York Glenwood Center for Regional Food and Farming. And so they had a a working farm a very kinda large successful apprenticeship program where they're training the next generation of of farmers around sustainable farming farming practices.
And there was a whole kind of suite of programming around convening thought leaders and change makers up and down the Hudson Valley from Albany down to New York City. And so that kind of got me kinda reengaged interested in this space. And what I kept coming back to was how do we mobilize capital?
How do we get the same type of investors that I'm working with in my day job, so to speak, more interested and passionate about sustainable and regenerative agriculture. And yeah, I, I left in, summer of 2021 from my finance career and really focused on how to have that kind of next next chapter in food and egg agricul.
Yeah, I can't agree with you more. I, there's so much money out there of, private equity and these funds that if it could be put towards some of these things that people really do want, like organic farming and regenerative farming it. I it's like it could change the world, honestly.
So I think what you guys are doing is so amazing. And so can we go into how you guys grow, and how, like how the fund kind of works so that, are you attracting farmers? Are they coming to you? Like those sorts of things. Yeah, no, great question. Happy to discuss that.
So I mentioned that we're a private real estate investment trust and a public benefit corporation. So we're focused on delivering both, financial returns and impact to our to our investors. We use that capital to support farmers transitioning farmland to certified organic production.
And we do that in partnership with with our farmers. I think our business model is pretty simple. We raise capital from those impact driven investors and we use that capital to provide long-term leases, mortgage financing, and post-investment support. To farmers, they are the ones bringing us the transactions and the deal flow.
Typically we're not managing the farms ourselves as Quai Valley in a top down way, whether rather we're relying on our farmers who are the best stewards of the land, locally on the ground to to go through that organic organic transition, which is a three year. A three year process.
And so farmers value our six year kind of long term lease model that we have have in place. So they come to you with a farm already or are some of them looking to get into farming? Almost all of them are successful kind of organic farmers in their own right, and they're looking to grow their business and grow their acreage.
So we're almost like growth capital or kind of growth equity in a way for farmers that maybe have transitioned 200, 300 acres of farmland to certified organic production and another. 80, 120 acres, in some cases, 240 acres may come available. And we'll help them get tenure and secure that farmland via long-term lease so they can be in growing their business and their their overall portfolio.
And so does the fund buy the land that they're wanting to expand and then you're leasing it back to them? Or are you giving them loans or, it's a combination. That's right. We, we buy the farmland and then lease it back to the farmer. That's about 80% of our portfolio. The other 20% of the portfolio is is mortgage financing.
That got started really to support farmers in some of the anti-corporate farming states. In the, I would say the west of the Mississippi. River. So states like Iowa, Minnesota, the Dakotas Nebraska, where corporations are limited in owning owning farmland.
The bulk of our portfolio is in Illinois and Indiana. So 80% of our portfolio is owned farmland, under that purchase lease model that I just described. And then another 20% is mortgage mortgage financing. So today our portfolio is about $125 million. We manage about 37,000 acres in partnership with 70 farmers in 20 states.
Wow. And is that all in one fund? It is all in The one fund. Yep. It's all in the reit. Yeah. That is really interesting. And so most of the time they're coming to you saying, okay, I already am an organic farmer. I already know. So they know the basics of organic farming. And so is that kind of what you guys are looking for?
Is that they already have some knowledge of farming?
Investment Structure and Farmer Support
'cause you're not into that like education piece of it. That's right. Yeah. Farming's is hard and in its own right. And organic, if farming is even harder, so like I Ideal farmer, I. Our ideal customer has gone through that transition hopefully at least once.
They've got a history, an operating history that we can now look at a kind of financial history that we can look at and underwrite. Ideally they've got their own network in place. They have their own markets already established. And we can begin to help them grow and and build their build their business.
We also have our own network of farmers technical assistance providers and other kind of financial partners that we can help connect them with and further, further their business as well. It's when I mentioned some of the post-investment support that we can provide, but ideally farmers are bringing some of that.
Network to the table and mentorship to the table. Already. Yeah. And I wouldn't think that you would be the education piece of it, but just from the emails and things that I get from you, there is so much education about what. Regenerative and organic farming and highlighting some of these farmers that, I guess I assumed that you guys were educating some of these people because you do such a good job of, just with your communications and to investors and to the public.
Yeah. And there are a lot of great organizations out there that are, really kinda leading on that front, on education and technical assistance. And earlier this year we announced the STR strategic partnership with Rodale Institute to really kinda deepen our support of farmers going through the transition.
There's a few different organizations that we like to work with and put farmers in touch with when it makes sense to do and so what do you mean about transitioning? So if they already have an organic farm and they're looking to purchase like more land, so is do they need the funding from you guys?
Because you said it takes three years. What does that look like? Is it that it can't, that land can't be farmed and so that's why they need the money from you guys? Or how does, what's the story there? Yeah good question. We're typically buying conventional farmland and then the farmers undertaking that transition to certified organic production.
And the point of of going from that. Day one to being certified organic and selling your crop under the USDA organic certification is a three year process. And our long-term leases give farmers at le the six year period to undertake that transition. And then in year three, begin selling their production at a organic premium.
And then. On into the future. So you take a pretty big hit in years one and two, when you're going through the transition, you're you're facing very dramatically lower production, lower yields, and you're selling into conventional markets. And so farmers either need to have, a big pool of acreage to spread that decline in revenue across, they need to have access to, capital, whether that's operating lines of credit.
Or cash on their balance sheet in order to weather that initial kind of two to three year transition period. And so the typical agriculture finance model is not set up for organic transition. So our leases are attractive to farmers to help them get to get through that transition.
So basically in those three years they have a lower payment. Is that kind of what it is? Yeah, we have a, there's a base rent that we that we establish with farmers, and then after certification. We have a variable rent component in our leases as well. We share in some of that kind of up upside with with farmers after they get through the the the transition.
Okay. That's wonderful. Yeah, because I would think it would be difficult to, I was thinking that they couldn't farm on the land at all if they were trying to turn it to organic, but really what they're doing is organic farming, but they can't call it organic because it hasn't been the three years.
That's correct. Yep. Yeah, it's considered transitional ground and you're selling it into conventional kind of commodity markets. Lower, which is lower prices to begin with. And then you also have lower yields and lower production. 'cause you're not putting any chemicals on there.
There are very few markets that exist for transitional crop land. That's one area of opportunity, for transitional production. But really that doesn't, that's a very small component of it. Most of it is going into the kind of conventional commodity markets. Okay. And I'm also very surprised by your emails of that.
The people that are, I feel like from what I see is that a lot of the farmers are young. Is that, are there a lot of young people wanting to get into far, are there newly established farming or and they're wanting to expand? Is that a good, or is that a correct perception that I have from reading everything?
Yeah. Yeah. Our portfolio very much skews younger, millennial and below. I think the average age of the American farmer is almost 60 years old. The American Farmland Trust has an interesting stat, but they expect 40% of farmland to transition in the next 20 years. And, the next generation of farmers and farm families are at least I would say like organic, curious and interested in, regenerative organic practices and how they can.
Have a career farming that is free of chemicals and healthy for their kids and their families on on the on the family farm. And so yeah, our portfolio skews skews much younger because of that. Yeah, that was a really interesting stat to me. And then do you, since you said you have most of your farms in Illinois and Indiana, do they like partner?
Because you'll see sometimes I went to a wine, I think I was on a wine tasting and they had the ducks, going from, and the goats. Change them from different wine, like they would share them all on the, in the different wineries. So do they share any resources, if they're really close together, or do you bring them together in any way?
Or is it strictly, we're just financing and leasing and that's about it. Yeah, that's a great question. And it's something that we're exploring a little bit more deeply in what we call a building hubs or very like regional groupings of farmers so we can have some more knowledge sharing and more connection.
There is one of the original farmers that we work with Harold Wilkins and his son Ross Wilkins. Farmed several thousand acres organically in in Illinois. And they've all actually established a a mill for some of their production. And I do believe other organic farmers in the area that we also partner with probably have contracts and supply into that into that mill.
But there are some opportunities like that, that we're looking to explore more more deeply. Yeah, I think it's really cool when people do that. Like they had the little ducks, and they would take, go from one. Property to the next and all that. I don't know a whole lot about it.
Obviously I'm very novice in this, but I know more than the average person I guess. So maybe. And so when you're talking about these people that your first investor that kind of brings up, do these people, how long are these, leases and mortgages and all that? Are they in the fund forever or is there a chance for them to pay this off?
What's their exit strategy? Yeah, the, so the leases, like I said are six year six year in duration, the first part, and then they evergreen renewals every two years thereafter. And then it's after year six that farmers have the ability to repurchase or purchase the farmland from Iroquois Valley.
Should they should they want to, typically, it's a farmer is kinda making that operating expense or kind of capital expense decision for their business. And, the typically they. Farm land is very profitable 'cause they've gone through a six year, six years of, three years of transition and another three years of certified production.
They have a very profitable farm and they're happy with our lease payments and our lease structure and they want to keep that operating expense and maybe grow land elsewhere. And so one of the stats I find really interesting is that the repeat investment rate with farmers in our portfolio is extremely high.
I think, something like 60% of our portfolio as two or more farms with the same the same farmer. And that's them making the, almost the operating expense decision rather than a capital expense decision. And then with the mortgage financing, it's a 10 year a 10 year mortgage term.
We have five year interest only to help again, get through that kind of transition period. And then a kind of a five year principle plus ization before kind of that. Payment at the end of year 10. So the typical outcome there is farmers will get through their, get, through their transition and look to refinance with a traditional traditional lender.
Okay. And are the traditional lending rates usually higher than what you guys are charging from the reit? It it, it depends a lot on the interest rate environment. Yeah. I'm sure, to be honest. Yeah. But in the past, has it been.
When rates are higher, we tend to be a little bit more competitive than when rates are low, just because of the nature of a, kind of our cost of capital. Okay.
Investor Information and Fund Details
okay, so now let's switch. So now we know what your fund does. Okay, so everybody is putting money into this large reit, everyone.
So a REIT is a real estate investment trust. And essentially it's, I describe it as like a mutual fund or everybody pools their money and you are. Dean Iroquois, who is the manager to then manage that money. And they're basically deploying it and then they pay you whatever the rate of return is.
And so what can you give us the the basics of what your fund pays out and maybe the minimums and things like that? Yeah. So the do you mean like the investment minimums? And the kind of terms of the fund as well. Yep. Yeah. Happy to do that. So we are, I think, unique in the marketplace in that we're also registered with the SEC under a reg a exemption.
So we can take non-accredited investors as low as $10,000. So we have 950 investors in our, in our fund in our reit today, so as low as $10,000 all the way up to a large family office that has close to $10 million invested with us and everything in between. So we have a very diverse investor base and we are, also given our that our real estate investment trust structure required to pay out about 90% of taxable net income or greater every single year. Investors get the benefit of a small dividend stream from our investment. And then the the long term capital appreciation of of organic farmland that makes up the.
The return to to investor, which since inception has been just over 9% per per annum. And is that 9% the dividend that they're receiving or you're, that's combined the appreciation with the dividend. 9% total return, and it's driven largely by the kind of capital appreciation of the farmland and the dividend income or current income is a much smaller component of that.
It's range between half of a percent to sometimes as much as 1% as we grow. We expect our, our, hopefully our dividend yield to increase over over time as we get more scale. Yeah, it's, I've, that's the way that I've pitched it. I've had a couple of investors invest with you and that is the way it's been more of, this is a long-term play of that.
You, you're gonna wanna appreciation over time of land and if you want to buy some farmland, this is the way to do it. That's the way that I've Yeah. Told them about it. It's, you're not looking for regular income. You're looking to one help out with organic farming and you want the appreciation from the land 'cause they're not making it anymore, and so I really think it's great. I want to circle back to this reg a registration that you guys have. You guys, I think it's really great that you did that. It is. So expensive to do it, and I, the paperwork I hear is about twice as much. And so I really wanna applaud you guys for doing that because it's, it just shows the kind of company that you are.
'cause I think a lot of companies, they shy away from it just because of the time and energy and resources that it takes. No thank you. It is a significant undertaking and we're, very excited to have as broad and diverse of an investor base as we can. And, the real estate investment trust really a, affords us that semi-permanent capital base, but also with the reg A exemption and being able to take non-accredited investors, extremely proud that we've been able to really democratize access to a diversified portfolio of organic farmland. Yeah, I completely agree. And there's so many of these investments and people that are not accredited investors that come to me wanting to get into some sort of alternative investment. They don't want all their money in the stock market and in bonds and, they're normal things.
And there's so many things that are shut off to them even though they wanna diversify and invest in something that they're more excited about. So I hats off to you for doing that. I think it. You guys are certified B Corp. You're doing all the right things. So I, you guys really have some values and morals and principles that you seem to follow all the time, and so I just think it's really great that you do that.
Thank you, Michelle. Yeah. And so is there any exit strategy that investors need to think about with your reit? So if they invest money, do they have to hold it for a certain period of time in your fund or is there anything like that? What is their exit strategy, yeah. When buying equity shares in our reit there's a five year commitment or a five year lockup.
And then after the end of five years, we offer quarterly liquidity to to investors, subject to a a 6% kind of annual gate. So one, I think one and a half percent per quarter can be redeemed. One of the thing that's very important to us in trying to be values aligned is we never wanna be forced to have to sell a farm out from under a farmer that's invested all that kind of sweat equity into the transition.
And so this gives us kinda that semi-permanent capital base that I mentioned but yet the ability to provide liquidity to to investors over over time. Yeah, you would never wanna sell. Just because of redemptions. Yeah. To sell a farm if they've been working it and doing all that.
That sounds terrible. Yeah. You guys, I, it's really easy to invest with Iqua. Their website is set up. You just go to invest and they have the paperwork. I, it is. Super easy again. And Chris, you guys have done a great job with your marketing. Your newsletters are wonderful. And you guys, if you've listened to a lot of my episodes, then you know how important client communication is to me.
Having skin in the game, having the right principles, all of these. Things and I can attest that the client communications are very good. That your marketing is great. You send out lots of like meetings and all of that. You definitely know what's going on with the fund.
And so I think that's wonderful that you guys do that. So yeah, thumbs up to you. Thank you. And yeah, shout out to Donna Holmes and Nicole Far and our investor relations and business development team. Yeah, they've done a lot of great work. Yeah. Getting our investor communications where they are today.
Yeah, no, they do a great job. Is there anything that I'm missing that's a key part of why some people might invest with you or different ways that people use your fund in a creative way? Am I missing anything or do you feel like we've covered. The basics of people wanting to, if they wanted to find out more, then they could contact us or go to your website.
Yeah. I guess the one thing I would add in is in thinking through how I've seen in I use us in the past is, farmland's very much a real asset. It can provide kinda a strong portfolio diversification and, it can act as an inflation hedge, it can provide current income.
And so it's I think it's a nice diversifier and kind of a traditional 60 40 portfolio. The other benefit, or I guess maybe convenience that that people like with, with our REIT structure is that we issue 10 90 nines and not K ones. So some clients appreciate that.
Absolutely that aspect of it as well. Yeah. You are waiting on the K ones 'cause you guys, if you haven't invested in any of these, most of them give what's called K ones, which is. Like you need those to do your taxes and they don't come out until the week before your taxes are due. So a lot of times you have to file an extension.
So that's what he means by that. It just makes it a lot easier to file your taxes. So totally agree with you. Chris, thank you so much for being on.
Closing Remarks and Contact Information
I really think that I thank you for what you're doing for organic farming and I think a lot of people wanna live healthier. With less chemicals.
Thanks for your time of explaining Iroquois and you guys will have all of Iroquois information in the show notes. Can you tell them what the website is just before we go? Yep. It's iroquois valley.com. A lot of great information about our farmers and our team and our kind of overall investment approach.
Yes, there's a lot of information and you can just invest, like right there, there's paperwork and all of that. And as he said, you don't have to be an accredited investor, so you don't even need somebody like me to invest in it. You can just go straight to the source. So Chris, again, thank you so much for being on.
You guys, thank you so much for listening. I appreciate you tuning in and learning about all of these investments. I hope that you found something interesting here and I hope you have a wonderful day. Thank you so much. Thank you for listening to the Unconventional Investor Podcast. I hope you feel more confident in how you can grow your wealth using the strategies I shared in this episode.
If you're ready to take the next step in diversifying your portfolio outside the stock market with alternative investments, head to me financial.net/contact us to book a 15 minute consult call with me. Let's discuss how we can work together to achieve your financial goals. Until then, I'll see you on the next episode.
Disclaimer: The information provided in this podcast is for general informational purposes only and should not be construed as professional financial advice. Always consult with a qualified financial advisor or professional before making any financial decisions. The hosts and guests of this podcast are not responsible for any actions taken based on the information presented.