By Anayat Durrani

While Opportunity Zones run the gamut from urban to suburban to rural, much of the focus has mainly been on urban property. However, real estate interest in farmland located in Opportunity Zones is starting to cultivate.

“We've seen an uptake in interest in farmland and agriculture investing in general since the COVID pandemic began,” says Chris Rawley, CEO of Harvest Returns, a FinTech marketplace for investing in agriculture.

More investment in raw or agricultural land in Opportunity Zones is occurring by real estate investors seeking to change up their portfolios.

“With continued eviction moratoriums and a frothy market in general, real estate investors are looking for new sectors with which to diversify their portfolio,” says Rawley. “Farming operations provide investors an important source of diversification, while maintaining the tax advantages of Opportunity Zone funds.”

Data supports growth in farmland investing for Opportunity Zones

The value of farm real estate currently averages $3,380 per acre, up $220 per acre, or 7%, from 2020, according to August data from the U.S. Department of Agriculture. It marks the biggest increase since 2014.

“Agriculture projects, especially controlled environment agriculture (indoor farming), can provide non-correlated returns while solving problems in the food supply chain, including reducing water usage, food wastage, and reducing the miles it takes to get food from farm to consumer,” says Rawley.

The Sustainable Agriculture Opportunity Zone, a fund which Harvest Returns manages, invests in Qualified Opportunity Zone Fund businesses across the country that make a positive economic, social, and environmental impact, Rawley says.

Opportunity Zone investors appear keen to invest in farmlands nationwide.

“Interest in Promised Land Opportunity Zone Fund has picked up based on inbound inquiries from OZ investors,” says John Heneghan, Servant Financial, Ltd. “We now manage 10 farms in four states and eight thousand acres of row crops.”

Farmland as an asset class for Opportunity Zone investors

In early September, Promised Land Opportunity Zone Farms announced the completion of a $29 million investment in a farm located in eastern North Carolina. The fund’s portfolio has over $50 million with 8,300 acres of farmland in Illinois, South Carolina, Mississippi and North Carolina.

“Farmland is a stable asset class that is positively correlated with inflation which is a great combination in today’s investment market and economic environment,” says Heneghan. “Farmland is a stable asset class because people got to eat. Eating is non-discretionary at the life sustaining level.”

Heneghan says investing in farmland located in an Opportunity Zone has its advantages.

“In addition to farmland being a stable asset class, there is limited risk related to the required OZ improvements for farmland,” says Heneghan. “The improvement plans for OZ farmland bear considerably less development risk and lease up risk than urban real estate development projects.”

He says farm development projects usually take months to complete in comparison to years for urban real estate developments that have to deal with zoning, permitting and other approval requirements and complications.

Plus, the farmer tenant is usually already on the property.

Heneghan says the farmer tenant will typically view favorably any farm improvements that increase the productivity of the soil “and be willing to pay the landowner additional rent on the capex – irrigation equipment, drainage tile, land leveling and drainage management systems, grain bins, workforce housing, etc.”

Heneghan says farmland is largely held by non-institutional investors—generational farming and landholding families—so traditional real estate investors typically are not familiar with the asset class.


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