The lenders that supported Spice Creek Farm are two of a number of alternative farm finance organizations that have sprung up over the last few decades to support the long-term success of small, regenerative farms.
“I’d imagine a lot of farmland investors want to see numbers on a spreadsheet about how to maximize yield from acreage,” he says. Instead, Israelow and his team are playing the long game. “Gail is clearly envisioning her future on that property for the rest of her life. She’s not like, ‘What can I do next year to maximize my revenue from it? She’s like, ‘What do I need to do to build a relationship with this property so that we can nourish each other for the next several decades?’”
Taylor and Graham began the search for a permanent farm site in a more affordable ZIP code more than a year ago. On top of never knowing how long their land tenure would last in D.C., increasingly, their team was being priced out of living nearby. Taylor heard about Dirt Capital as a means to make the transition to land ownership and was immediately struck by how different the conversation was with them compared to other funders.
For one thing, she said, the Dirt Capital team started by asking, “How much can you pay a month?” They then used that number to design the financing around the land purchase. Taylor and Graham don’t technically own the land—yet. The way it works, Israelow explains, is that Dirt Capital first seeks out what he calls “exceptional land stewards.”
“A lot of times they’re at that influx point of growth where they have that set of experience and their markets established and know what they’re doing, but they need that land security, need additional land to grow, or need a home farm to really secure a base,” he said.
Dirt Capital buys the land and then leases it a monthly price the farmers know they can afford. The 10-year lease comes with two opportunities to purchase, at five and 10 years. Most importantly, the price Dirt Capital pays for the land is the same price the farmers will pay at either of those points in the future. So, whether they make lease payments for five or 10 years, if the market value of the land is increasing (which it generally is), they’re building equity.
The investment partnership just celebrated its 10-year anniversary, and by the end of the year expects to have completed 44 projects. Of those, nine farmers are now full owners of their land. These include organic, grass-fed dairy farmers who now own more than 300 acres in upstate New York and an immigrant family from Mexico who now owns their produce farm in New Jersey.
The rest are mostly on their way to ownership. While a few farmers Dirt Capital worked with decided to hang up their hoes or their business went bankrupt, they haven’t yet had a case where the farmers made it to the end of the 10-year term and couldn’t transition to full ownership.
All of it is funded by impact investors, a term for those who are willing to settle for minimal returns so their money can make a difference in the world. They pay Dirt Capital’s fee, Israelow explained. His team works to explore other opportunities that can boost value for farmers, such as conservation easements or community-scale solar.
“We’re investing in support of farmers, but we’re also taking money from them, right? So, every dollar we get from our farmers is a dollar less in their bank account,” he said. While most lenders would try to maximize the money flowing their way, Dirt Capital aims in the other direction. “Part of our goal is profitability and wealth-building for farmers.”
What’s on the Land?
The Dirt Capital model may also serve farmers better than taking on a traditional farm mortgage, Israelow said, because without a ton of debt on the balance sheet, they may be better able to access financing for infrastructure. Because as every farmer knows, land is just the foundation.
“Other farmers drool when they see this barn!” Taylor told the tour participants as she stepped out of the rain into the property’s second barn, already outfitted with a cement floor and electricity. Plastic-covered walk-in coolers ready to be unwrapped and filled with produce and poultry were stacked on pallets. Despite the equipment, the barn felt nearly empty, and Taylor pointed out that the extra space will allow them to bring in crops from their neighbors for cooperative distribution.
