Investing in farmland
has been a staple in the commodity world for decades, as many have enjoyed handsome returns by holding plots of arable land. But as the years have gone on, it has become harder and harder for an individual to afford this hard asset, essentially closing out this investment opportunity for many. Enter Fquare
, a new service that aims to eradicate this problem. Commodity HQ had the opportunity to speak with CEO and Co-Founder Charles Polanco about his company, and how it can benefit investors of all kinds.
Commodity HQ (cHQ):
Why did you start Fquare?
Charles Polanco (CP):
The inception of Fquare came while reading a September 2004 Forbes
article on the founder of Grey Goose Vodka, Sidney Frank. The article highlighted his sale of Grey Goose Vodka for $2 billion. But what caught my attention was that prior to starting Grey Goose, Mr. Frank owned a 500-acre beachfront property in Antigua he sold for $500,000, and on the date of the sale of Grey Goose the value of that same parcel of land was worth $1 billion. It stunned me. Mr. Frank easily could have not lifted a finger and still be a billionaire in ’04. From that day on, “land” as an investment intrigued me.
In late 2012, I launched Fquare. I started the service because land is one of the only investments that increases in value with little or no effort by the owner. I wanted to solve a big problem that is likely to become even bigger in the future. The problem is, as land prices continue to increase in value, how can small investors continue to own this valuable asset? It’s easy to see now how an individual investor could have purchased the Antigua beachfront land for $500,000, but it is more difficult to picture an individual investor buying that same land today for over $1 billion.
Although beachfront property, islands, and residential land are all valuable long-term investments, we wanted to focus on income along with capital appreciation. So we built the platform around arable land. Farmland, as an investment, is unique because it offers both income
and capital appreciation.
Today, farmland for many individual investors is becoming too expensive to own as an investment. Fquare solves this big problem. What the Fquare agricultural investment platform does is provide a place where funds can be pooled together to buy land. It is my own opinion, that without services like Fquare, farmland as an investment will be out of reach for most individual investors.
Can you detail what your services provide?
In short, Fquare is a capital raising platform that allows investors to pool capital together to buy farmland through leasebacks. Farmers interested in selling their land, but that are not yet ready to retire, offer to sell their land to investors on Fquare for 3-6% interest per annum on 5-20 year leasebacks. Once the lease expires investors agree to sell the land using a local real estate broker or it is sold at auction.
What kind of investors would benefit from Fquare?
Our services will benefit both institutional and individual investors. For institutions, farmland provides a great way to diversify their portfolios and spread risk. For individuals, Fquare allows retail investors to purchase land that they might not be able to afford on their own, as they can pool their assets with others wishing to do the same.
Why should investors be interested in owning farmland? Is there a minimum/suggested investment amount for Fquare investors?
As I said earlier, there are two big reasons why an investor would want farmland: capital appreciation and fixed income. Let’s start with land values for Iowa farmland. In 1990 the average price per acre was $1,214. Fast forward more than 20 years later, and the value of that same acre is worth more than $8,296. That’s a near-600% increase in land value compared to the S&P 500′s
(INDEXSP:.INX) gains of just 270% over that same time period. Moving on to fixed income, leasebacks on Fquare average between 3-6% per annum, far better than an investor would receive at their local bank.
As far as a minimum of suggested amount, it varies from deal to deal but investors can expect a $5,000 minimum per farmland deal.
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Editor's note: This article by Jared Cummans was originally published on Commodity HQ.
No positions in stocks mentioned.