Daniel Little and Gabe Santos of Homestead Capital
Global AgInvesting | 12 January 2024
Homestead Capital Fund IV nearing target of $500M
By Lynda Kiernan-Stone
Homestead Capital USA Farmland Fund IV is nearing its target of $500 million with $460 million in capital commitments, according to an SEC filing.
Led by co-founders Gabe Santos, a former executive with Goldman Sachs’ natural resources group, and Daniel Little, previous head of a global portfolio management team at J.P. Morgan, Homestead Capital has built, and continues to manage, a vertically integrated portfolio of farmland across the U.S. that spans crops, lease types, operators, and regions.
With a particular focus on investing and operating farmland throughout the Mountain West, Delta, Midwest, and Pacific/Pacific West regions of the United States, Homestead has curated a team that has a deep well of experience in agriculture, financing, farm management, farm acquisition, portfolio construction, and risk management.
In a signal of enduring confidence in Homestead’s team and strategy, in November 2023 the State of Connecticut Retirement Plans and Trust Funds (CRPTF) doubled down on its support by approving an investment of $125 million to Fund IV, having previously invested $75 million in Fund III.
The ability by the team to generate results is evident in the record of Homestead Fund III, which ended its investment period in May 2023, outperforming CRPTF’s INR benchmark and the NCREIF Farmland Index with a net IRR of 8.4 percent. And considering the level of maturation still required for the portfolio, preliminary comparisons to the NCREIF suggest the future potential for outperformance as strategic execution progresses.
Today, Fund IV carries forward the successful investment strategy of Fund III. After beginning operations in May 2023 with a funding target of $500 million and a hard cap set at $575 million, Fund IV made its first investment in August 2023 in a potato, sugar beet, corn, and hay farm in Idaho.
From this beginning, Homestead Capital plans to build out a diversified portfolio for its latest fund by making 35-45 investments in smaller sized farms throughout the U.S. with typical tickets ranging from $5 million to $30 million. The targeted niche strategy in smaller farms is uniquely sound, as the firm views this particular segment as a pocket of opportunity – too large for non-institutional scale farmers, and too small for corporate scale investors.
Ratios for the portfolio are targeting 60-70 percent row crops and 30-40 percent permanent crops with investments spread nearly evenly across the firm’s targeted geographies. The closed-end fund will have a term of 15 years from the point of initial close with two one-year extensions, and is targeting gross IRR of 11-14 percent.
Over the life of the fund, Homestead intends to foster appreciation through a multi-directional approach: capital improvements; better farm management through operator/lessee selection; identifying economies of scale; effective crop selection and rotation; the implementation of ag technologies; and participation in government programs.
Within this ecosystem, the experienced Homestead Capital senior leadership team brings to bear the specific relationships and ability to tap into these potential upsides in the farming sector to bring Fund IV beyond its target.
