A protest outside a New Jersey State Investment Council meeting in September 2018. (Photo: Bryan Anselm for The New York Times)
New Jersey State Investment Council commites $100 million to Homestead Capital's US farmland fund
by Lynda Kiernan
New Jersey’s $70 billion public-employee pension manager, the New Jersey State Investment Council, has agreed to commit $100 million in Homestead Capital’s third fund.
Founded in 2012 by co-founders and co-CEOs Gabe Santos and Daniel Little in San Francisco, California, and with offices in Idaho, Illinois, and Arkansas, Homestead Capital is focused on investing and operating farms throughout the Mountain West, Delta, Midwest, and Pacific regions of the United States.
Since its inception, Homestead has launched two prior investment funds. In the last quarter of 2016, the firm announced that it had closed its second fund – Homestead Capital USA Farmland Fund II at $400 million. This fund, which surpassed its initial target of $350 million to close oversubscribed, more than doubled the firm’s first fund – Homestead Capital USA Farmland Fund I which closed in 2015 at $173 million. Currently, the firm is raising a targeted $600 million for its third fund.
Bottoms Up for Sustainability
Partnering a “bottom-up” approach to sourcing and value creation, which is driven by Homestead’s locally engaged farmland managers, with a “top-down” course for portfolio construction and risk management, Homestead is able to deliver a properly diversified portfolio with an appropriate risk and reward profile.
This investment by the New Jersey pension system represents its first in a fund that targets U.S.-based farmland. As such, Homestead was chosen due to the alignment of the firm with the pensions’ ethos of investing with socially-conscious concerns in mind.
Through an investment process that considers “labor, sustainable farming, and the environment,” Homestead is mindful of “…issues that relate to climate change and the scarcity of water” through its diligence and management. Using a proprietary software platform for modeling asset returns that accounts for yields, soil quality, climate patterns, commodity prices, and other factors, Homestead is able to manage concentration risk at the portfolio level, according to the firm’s website.
When asked about sustainability practices, Santos told GAI News, “The ones we employ are varied, depending on the type of farm we’re investing in. For example, water efficiency; we can deploy capital to make irrigation systems more efficient. More precise allocation of water can enable us to change crop rotation to a more profitable crop. Other sustainable practices we can use include variable rate of application of fertilizer, no-till farming and the use of cover crops.”
A First-String Team
Another driver for New Jersey noted as being behind the significant investment in Homestead is the financial knowledge and deep experience of the firm’s executive team.
“Each of us has had a relationship with agriculture,” Little told GAI News back in 2015 upon the final close of the firm’s inaugural fund at $173 million. “I’m from Ohio, I have a farm there, and, as a career fund manager at J.P. Morgan, I grew an appreciation for the attributes that farmland has as an asset class. Gary has spent his career in agriculture, managing farms and consulting on projects globally. Gabe was involved in Goldman Sachs’ natural resources and agriculture group, where he did mergers and acquisitions in the ag space.”
In January of last year Homestead further added to its team, announcing that Patrick Trainor had been named Homestead’s new vice president and head of acquisitions, and Kyle Jacobs had been appointed as vice president of due diligence.
Prior to this appointment with Homestead, Trainor served as executive vice president and head of portfolio management with TIAA subsidiary, Westchester Group Investment Management Inc. where he oversaw portfolio construction, the management and reporting for all client accounts and funds, and served on Westchester’s Global Investment Committee. Prior to serving in this capacity, Trainor served as director of acquisitions for Westchester’s U.S. Row Crop business and the head of the Midwest region.
Jacobs brings more than 15 years of ‘boots on the ground’ experience to Homestead, having been instrumental in growing his family farming operation into a leader in the Mountain West region of the U.S. His experience provides Homestead with a vast agricultural network, as well as a deep knowledge of multiple crops including corn, potatoes, barley, wheat, triticale, and alfalfa.
“Patrick and Kyle join at a pivotal time for Homestead as we continue to invest and manage our row and permanent crop farmland portfolio,” said Santos last year. “Kyle’s background in production agriculture and Patrick’s broad transaction experience provide Homestead with the right combination of skills necessary to create long-term value for our investors.”