George Bravante - Bravante Farm Capital
The future of online agriculture investing today
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George has spent the last 20 years building a vertically integrated farming business, farms some 5,100 acres, and has acquired over $175 million in agricultural assets including, citrus, table grapes, wine grapes, stone fruit and pistachios.
Before founding Bravante Farm Capital, He spent 10 years in the real estate private equity business as the President of Colony Advisors, Inc. Prior to Colony George was the President of American Real Estate Group where he led the managed liquidation of $15 billion in real estate assets of the then failed American Savings Bank.
Discover a new way to invest in farmland in this conversation with George Bravante.
What You're Going to Learn
- How George transitioned from private equity real estate to farming.
- Economies of scale in farmland real estate investing.
- Why Bravante only farms in The Oasis of California.
- How to buy farmland real estate for success.
- Increasing profitability with value add farmland.
- Why sophisticated investors love farmland real estate.
- How cap rates could supercharge returns for farmland.
- Receiving premium benefits with crop insurance.
- A brand new farmland investing opportunity.
- Why you need farmland in your investment portfolio.
Listen To or Watch the Full Podcast Here
Economies of scale in farmland real estate investing
Adam Gower: Right. And you've been very successful, haven't you? Give me a sense of scale. What is your scale today?
George Bravante: You know, we farm about 5,000 acres. We pack and sell about 3 million packages of fresh fruit worldwide. We ship to Southeast Asia. A little bit to Europe. And obviously, domestically. We have another 800,000 that are packed by others. Like in the mandarin business, we don't pack and ship those. We have South Pacific or a Cuties brand that does that for us. They're the best at it and we make the most money with them. So, we're a little different. If somebody can do it better than us, we outsource what we do to them so we can optimize how much money the ranch makes, not how much money you make processing stuff. That's like pennies compared to what you can make owning the ranches, when they do well.
Adam Gower: Is the - so I know. I was going to say, you are the farmer, right? You don't own land and lease it out to somebody else. That's what you do. You are the farmer.
George Bravante: Yes, we - well, I mean, I'm not the farmer. I manage the farmers, I guess.
Adam Gower: Well, hang on a minute. I've been with you. I've been with you on a tour. You know what you're doing on the farm, right?
George Bravante: Obviously, I know what I'm doing on a farm. But we an amazing staff of farming people, field people, packing people, sales people. We have a fairly large organization. The average person has worked here, has been here almost 16 years. We have about a 95% capture rate and people stay with us forever. You know, we have a really good group and, a real good esprit de corps here. So, but I mean, you know, we have other people help us farm certain commodities that are just, maybe it's too far away or they have a certain expertise. But we basically farm, you know, we do the whole vertical chain on about 90% of what we have.
Why we invest in The Oasis of California
Adam Gower: What is The Oasis and why is it important? Tell me about the background to that. What it is. What's going on with The Oasis in California?
George Bravante: Oasis is a term that I've coined on an area of four water districts, basically. And, they encompass what I call the Fresno Plain. So if you go to a map and look at where Fresno is, Fresno is at the base of the Sierra Mountains. And the reason Fresno is there is because, it's the best soil, the best microclimate for growing - what we do down in the South Valley. And, the geology of the underground water is amazing, right? Because there's two major rivers that flow right through the Fresno Plain. And most people think about rivers on top of the land. There's also underground rivers that run under the land and it's very concentrated in this area. So the Oasis is roughly 500,000 acres, which sounds like a lot, but there's parts of it that are built up. Parts on mountains or hills, so there's probably 300,000 real good acres in this Oasis area, what we call. The water districts there have absolute rights to the water - perfected for 50, 60, 100 years, depending on which one it is. So, in my thinking, of being in the valley for 25 years, the further south you go, towards Bakersfield, the deeper the water gets and the worse the water gets because there's more salts and volatile compounds, the deeper you go.
George Bravante: So where we are, in the Oasis area, which is our target - and I've got a few ranches on the boundaries of the Oasis that do pretty well but - we only want to invest in the future deals and things that we know, the water is bulletproof. And we know, we'll be the last guy standing in California when it's over with. Because, in California, they've changed the law. There's now a thing called SIGMA, which is Sustainable Groundwater Management Act, which basically gives the state control over pumping out of the ground, into the future. And, if you don't have any surface water, coming out of these water districts, they're going to curtail and you're going to lose 40% of the acreage in the South Valley, probably 30%. Everybody argues about how much, but it's more than 20, less than 60, somewhere in that range. So, our thesis is, as the rest of the valley dries up - and it's not going to drive up 100%. There's going to be spots where it's good but, this is a real supply and demand business, both for selling commodities and land prices.
George Bravante: So, as our land is going to get much more valuable as other land gets less valuable and what we make every year is going to skyrocket because supply and demand. Like sometimes we'll have a freeze, in citrus. I mean, the prices are 2X, when that happens. So a $20 box of oranges is $40. So imagine, when these groves go out of business, basically, half of them are fallowed. You're going to see a supply curve that's out of whack that's going to really benefit our investors in the Oasis area. So, the Oasis is a term that I coined. I mean, it's not - you can't go on a map and see it. But, we kind of know what area it is. The other reason the Oasis is important to me, is it's close to where we do business. We're in this market every day. We know the brokers. We know the chemical people. We know the soils people. We understand it. We know how to do the due diligence perfectly on these things. It's not difficult but you've got to execute with 100% performance to make sure every deal is good for the investors.
How to buy farmland real estate for success
Adam Gower: Now in the Oasis. Tell me about the industry. Describe a, kind of, classic target acquisition that you're looking for.
George Bravante: I mean, all over California, it's the same. But in this area, there are lots of little farms. 30-40 years ago, a family would have 20 acres of raisins or citrus or table grapes, and they'd make a living for 6 family members. Have a little house, so they'd have 18 acres of vines, little house, little barn, and they would make a living on that. And, you know, these people are now - the average farmer, I don't know the exact age, but I would say the average farmer, in our target market, is probably 75-80 years old. After the war, this area took off. The country grew. We provided food for most of America and it was the heyday of ag here, for individual farmers. So, when you think about it, your kids got educated. Nobody wants to come back and work on a little farm anymore. So, we've all been, kind of, aggregating these ranches, over time. So, in this Oasis area, there's lots of these, and I bought a lot of these. And basically, they are crops that are underperforming. They're old. They haven't been kept up. You know, they don't spend the money because they don't have the money. They don't have the liquidity to do it.
George Bravante: And you need economies of scale to make this stuff work now. You just can't do it as a lone wolf very effectively. You've got to buy chemicals in bulk. You need the packing houses. If you're little - doesn't pay attention. You know, it's a very hard thing to do. That is a target rich environment for us. There's going to be plenty of people that are going to want to get out of this space. We have a really great team that we can analyze the property, understand what crops should go there and get it in the ground fast. Some people have done a little bit of redevelopment, which is our real target market for us. It was half done and half undone and we could pay a price for half. I mean, then our cash flow comes faster and returns are higher in the short term. But, all this is going to work really well just because the returns are going to get higher and the values are going to get higher, and the returns driven to the investors are going to be really good 10 years from now when we get done with this.
Increasing profitability with value add farmland real estate
Adam Gower: And this what you might describe as value-add farming, isn't it?
George Bravante: Well, I mean, I think it's more like - we have a thesis on the target - the target we want to hit and where we think it's going. We just need to do value-add on the properties that need to be renovated or upgraded, whatever you want to call it. And we've got to be able to make the most money possible, which we, as a vertically integrated company, we have a little bit more ability to do that. Because all that drives returns to investors. We're happy investors because we're going to be investing. So we all want to be happy and, you know, and have this thing really turn out well. And I believe, we're at a critical moment. This SIGMA thing is happening. I mean, these ranches are going to skyrocket in value in the next ten years, in my opinion. I'm not going to debate what skyrocketing means, but it's going to get a lot better. People are talking about this, but there aren't a lot of people that want to go out and do 20 acre ranches and do 100 of them. Right? We do. No ranch is too small. As long as soil is really good. The water is really good. The proximity is good. We're going to do it. I don't care if it's 5 acres, we're going to do it and we have the ability and the team to do that. We're very efficient.
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Why sophisticated real estate investors love farmland
Adam Gower: Now, when you say nobody wants to do these redevelopments, you're talking about institutions, aren't you? Tell me about the impact of institutions, now starting to come into the Central Valley? What's your experience been of these investors coming in?
George Bravante: I mean, investors have been coming for years - boom and bust. It's a different thing now, though. Investors are bigger and more sophisticated. 20 years ago, people tried to do it, but they were hacks. They didn't really know - they just had money and they didn't know what they were doing. And they basically went broke. Nowadays, there's private equity, sophisticated private equity. All the big insurance companies are in this space. You know, there's hedge fund guys looking at it. I used to do those businesses so I know some of these people. They see very high cap rate returns. You know, in the market today, in what we do and they're thinking cap rate compression and they're saying, okay, we buy this, we improve it, we get cap rate compression. We just made 100 IRR. That's what we like to do. That's how they make money.
How cap rates could supercharge farmland investor returns
Adam Gower: When you talk about very high cap rates. Let's just think. We're talking to folk that are listening to this podcast, are used to sub four, right? Multifamily cap rates. Is probably going up at the moment. What kind of cap - are we talking like mid-teen cap rate, mid-teen and higher cap rates. Talk about the numbers of what a farm looks like. Give me some, kind of, examples.
George Bravante: First, ranches here, or farms, trade by the acre.
Adam Gower: Right.
George Bravante: No one thinks about what the return is. I mean, we all think about the return, when we're starting to think about how much money we can make. But, we talk about buying a ranch from someone, we say, we'll give you 25,000 an acre. We're not saying, well, how about an 8 cap rate? Nothing here works that way. The new investors coming in, the sophisticated investors coming in, they're starting to buy that way a little bit. It's happening. You know, or they're thinking long term of what the cap rate is and what it could be, that will drive value, the value proposition that we're selling, in our program. But, you know, I mean, for instance, we did a deal eight years ago and we had a fortuitous buy on it, which doesn't really matter, but, we had 2 million in the deal. And, you know, we didn't make anything for three years and then we made a million a year for three years. So, I mean, the cap rate was cafe 100. I mean, it was giant.
Adam Gower: Hmm.
George Bravante: But nobody cares, right? I mean, we ended up selling it for a very high number to Prudential. It was part of one of our fund things that we did. And the term of the fund ended after ten years and we need to liquidate. So it was a really happy liquidation day. But I mean, on a cap rate basis, I mean, it's like 30 or something. You know, when you think about making a million on something, in you're in a million 2. It's a 100% cap rate, I guess. I hadn't thought of that.
Adam Gower: That's what I mean. These are just...
George Bravante: That was a very, very, very fortuitous deal. But I mean, there's plenty of them. I have a ranch that we bought in 2006 and, you know, the numbers were smaller back then. But I mean, it didn't matter, right? We were making 50% on the equity each year, for the first three or four years and it went up from there a little bit. So, if you look at today values, it's still a 15 cap rate. Right and I mean, you know, this is way more predictable than people think it is.
Receiving premium benefits with crop insurance
George Bravante: People who think about farming. Oh, my God. It's going to snow, lightning, hurricanes, locust. We have crop insurance on everything we do. So we have crop insurance. You know, all your farming money comes back to you. You never get in a hole, if you have a bad year. I mean, we've had years where it froze. We lost half the crop. So I mean it's...
Adam Gower: But the - let me just jump in there. But when the impact is - so you lose half, you get some insurance, which covers your expenses, but the value of the remaining crop that you can sell goes up. Right? So you make money even during those years.
George Bravante: Yeah. I mean, most freezes, unless there's a wipe out, we usually make money. I mean, it's counterintuitive in a way, but I mean, if we could get a 30% freeze every year, we would take it. That's when we make the most. It's hard on the trees and vines. But I mean, we make the most money then. And I think that, this water phenomenon, that's going to constrict the supply of Ag in the Central Valley, is going to be like a freeze every year. It's going to be those kind of numbers, going forward.
A new farmland real estate opportunity for accredited investors
Adam Gower: Let's talk about deal structure. You decided to go ahead and to start crowdfunding. Your background is to have raised money. You used your own money. You've raised money from a small group of private investors. You're now looking at going to accredited investors, to individual investors, you know, much wider. Tell me something about why are you doing that? What you're thinking is and what's the objective to that?
George Bravante: Well, I mean, part of it is just, I love what I do and I want to keep doing it. Most of my investors and friends are older than me. And like they tell me all the time, we're not buying any green bananas anymore. So, you know, they want to cash and they want securities where they can get the money out quick. I mean, this is a 10-year deal. So, you know, 8 to 12, ten, whatever. I mean, to get the kind of value extraction that I'm looking for, for myself and the investors. So, you know, in the past, you know, I didn't have a huge stable - I had a lot of good investors that invested time and time again. But I want to, you know, I want to put $100 million in the Oasis, in the next seven years, minimum. So I need more investors. I need more of them. I also, you know, I love this business. I love - I mean, I've been doing it. I've done a lot of different things. This is my favorite thing I've done in my life. I really enjoy it. I enjoy my company and my people that work for me here. I'm kind of a people person. So, the investors that I do have, are more friends now than they are investors. So, you know, I want to turn this more into a business on the investing side. I want to put a platform up, that we can deliver real service and value to our investors and get, you know, I mean, our minimum investment is $25,000.
George Bravante: I want to have thousands of investors, you know. As we have more opportunities that come, they can pick and choose what they like and don't like. But, you know, I mean, if we do this right, everybody will be happy. It'll be a pretty significant payday in the end I think, so. And a lot of my investors are going to do this, the individuals, will probably try it. You know, but I mean, they're literally in their seventies and eighties, a lot of these people that have done this with me in the past. So, you know, so I'm just looking into the future and I think this is a really great way to educate people and bring them into something. I mean, you can't get this. I mean, it's not available. So I mean, there's a lot of other crowdfunding sites that do agriculture. They don't own any agriculture. They don't farm anything. They just raise money and have a sponsor they barely know, kind of doing this, and they're all professional, good companies. But I think we have an edge. I think that we, in a vertical situation like this, our fees are less, our focus is more. You know, we're investing 10 to 15% in every deal, which can be real money. I just think we have a formula that can really win for everybody.
A well structured farmland investment with good returns
Adam Gower: You've also put together a very investor-friendly deal structure, haven't you? Tell me something about your deal structure.
George Bravante: Well, I mean, always in my past, I've always had smaller fees. You know, I'm not trying to make money on fees. I'm not trying to make money on that kind of thing. I just need to hire the best people to do the job. Right? I mean, my thing is, you know, I think of it as these are my farms too. That's the way - when I go out, they're my farms. I treat them like my children. I mean, that's what I do. And, you know, so the idea of making a little extra money, charging a little extra fees. It hurts the deal. It hurts the returns, if it's not good. So what we did - what I decided is, we're going an 8% pref and the investors get 8% pref on their money. Then they get all their money back. So, before I get a dime, you know, they get all their money back at 8%. Then we're going to go 70/30. And after they get double their money back, we're going to go 50/50. So, I mean, you know, to me, you're on the house's money.
George Bravante: You know, you've got a good 8% in this market. You know, for the foreseeable future is great. You know, I think you're going to be in the mid teens, probably, at a minimum level, if we execute well. I mean, we've had some dislocation, the last couple of years, when the Trump administration put the tariffs on, you know, because of trade embargo. The Chinese were not playing fairly with us. You know, that really hurt the ag space for us shipping to China, which was an unintended consequence of the deal, but it hurt us a little bit. So, things can, I mean, it hasn't broke our back or anything, but it made it tougher for a couple of years. So, I'm not saying every year will be perfect, but I mean, I think over the ten-year horizon we're talking, we'll have plenty of great years, a few years OK years, maybe one bad year, a freeze or rain or something happens. But, it'll be, you know, a very sound programmatic investment that we can count on.
Adam Gower: Yeah and what I like about the structure that you're proposing is, that you're going to give investors their - your priority is to first pay them their pref and then return their entirety of their investment and then double it. And then even after that, continue splitting profits with investors. And it's like as - you get to the point where investors have a zero risk investment.
George Bravante: Well, I mean, the thing about it is, I mean, people work hard for their money, right? I mean, if it doesn't work really well, I don't want any. I'm going to have 10-15% - I have a bunch of money in this and I'll get my money back and an 8% pref also. But, you know, I mean, you know, I don't want to work for free either. So, if it gets really good, I want a payday, too. But I mean, if you're not delivering more than 8% and your money back, you don't really deserve anything in my mind. I mean, plenty of people - much better deals than that. I mean, we have no acquisition fee. We have no disposition fee. We want to make it on the ranch. We want to make it when the investors make it and the ranch pays back. So, you know, and I have confidence we can do this. I've been doing it for 20 years. I mean, we've performed. And we've had good years and bad years. But here's the thing. One really good year, you can get half the money back on the equity. I mean, the stars got to align but I've had years where we've made huge amounts of money on different properties because everything lined up and we had like, you know, we had some peaches on the first property we were offering. We had one year where we got 2,000 boxes an acre and they're all giant. And we made so much money that year that it was a big - it was like 25% of the entire capitalization on the ranch, on one part of it. So, I mean, really good things can happen even if we don't have the Oasis effect and cap rates don't compress, you still can make a lot of money at this, at this, relatively to other things.
Why you need farmland real estate in your investment portfolio
Adam Gower: So, last of the quick fire questions. Somebody who is considering investing with Bravante Farm Capital crowdfunding - one of these ranches that you've got lined up for us. What advice would you give to somebody who is thinking about doing that, but really has no clue about investing in farms? It's an unusual thing to invest in.
George Bravante: My only advice would be simple, in a way. I think everybody should have a little bit of what they have in the agricultural space, in general, whether it's with me or somebody else. So, I mean, especially if you're 20, 30, 40, 50 years old and you've got a 20 year runway to make your life work. So I think that, first of all, I would recommend that because I've just seen, people who do it, do well. And I think that, we're a group that you can, kind of, count on not to steal your money and to treat your right. So whether you do it with us or someone else, make sure you're dealing with somebody that's of high integrity and you're sure is going to do your right because, you can take advantage every step of the way in this business. You can pick it, and get a kickback from the picking crew. Can take you to a packing house and get a kickback from the packing house. I mean, there's all kinds of way money disappears. Our program is tight. That money goes to the investors.
George Bravante: We don't need to take advantage of it. We're already doing this. And, you know, our big payday comes when we give all the money back and all the preferred return back and we sell it for a huge number later. That's where we make the money. So anyway, so that's, other than that, I mean, I also think real assets are the place to be. Inflation is here. Probably going to stay here for a long time. You know, America's got to eat so. Things we make, they want. This inflation thing is tough right now, for everybody. We're having trouble with our costs right now, a little bit. Shipping, back East, expensive, shipping overseas. So, I mean, our margins aren't quite as good as they've used to be, but that'll change and come back. And, you know, these values are going to go up regardless. Ranches are going to become more valuable, payday and the annual income is going to go up as things compress. So that's all I would say about that.
A career transition into owning a successful agriculture company
George Bravante: So my background is, I wouldn't say it's strange, but it's varied, to say the least. I grew up in New Jersey. Right by New York City. So, Tri-state area. My dad was a mailman. My mom was a teacher. And my extended family, it turns out, after years of doing genealogy, almost everybody in my history had some aspect of farming in their bailiwick, which I didn't know until I started farming. But anyway, so I guess it's in my blood a little bit, if you believe in that kind of thing. So, I went to school in South Carolina. I studied accounting. Graduated and went to work for Peat Marwick in Charlotte. Had a good friend and partner still to this day in California. He invited me to come to California to interview with Ernst & Young - Ernst & Whinney at the time. Now Ernst & Young. Loved Newport Beach. Packed my stuff in my car, drove to California. We started a real estate practice. And that culminated in years, in the private equity business, into real estate and leveraged buyouts phase with the Robert M. Bass Group, Colony Capital, Texas Pacific Group, entities. When I started having children, I decided I didn't want to do that anymore. Be working 24 hours a day, seven days a week. Started my own business and raising money and private equity.
George Bravante: My partners in Newport Beach were old farming people, that segwayed into real estate. And, they had a few broken deals that were still in the ag space. And, I had built a small winery in Napa Valley in the early nineties and had a little bit of a love affair with planting wine grapes and making wine. So, we were in the ag space a little bit, but I don't really count that agriculture for real because it was a small venture. So anyway, I started working on these broken deals, moved to the Central Valley. Bought one deal, that made money, bought another deal. Built a packing house. Built a cold storage. Got into the table grape business. We have our own farming company now. So I mean, we're fully integrated. We've been doing the buying, managing, farming, selling of citrus, table grapes, pistachios, stone fruit, for about 20 years now. And, we've gotten fairly good at it. We've raised money in different formats, but, we really think that - I'd like to bring what we do, to smaller, less sophisticated investors and have an opportunity to share in what we do. And that's kind of why we're trying to launch this crowdfunding opportunity.
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