Today’s guest is Chris Rawley.
Chris is the CEO of Harvest Returns, an agriculture investment platform. He has invested in real estate and income-producing agriculture for over two decades.
Show summary:
In this podcast episode, Chris discusses the opportunities in agricultural investing, emphasizing the importance of agriculture in providing food for the growing population. He suggests investing in specialty types of agriculture products that are more immune to commodity fluctuations. Chris also explains how Harvest Returns attracts farmers and ranchers looking for financing options, offering creative financing solutions tailored to their specific needs. The conversation covers the benefits of grass-fed beef, regenerative soil practices, and the platform's ability to diversify investors' portfolios. Chris also shares insights on managing deals and investor communications.
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Intro [00:00:00]
Chris Raleigh's background [00:00:48]
Opportunities in agricultural investing [00:03:34]
Ranchers seeking financing [00:10:17]
Challenges in funding grass-fed livestock [00:11:11]
Expansion and financing options [00:12:02]
Working Harder and Time Allocation [00:20:15]
Investor Communications and Management [00:20:49]
Deliberate Growth and Learning from Experience [00:22:11]
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Connect with Chris:
@harvestreturns
Web: https://www.harvestreturns.com/
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
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Want to read the full show notes of the episode? Check it out below:
Chris Rawley (00:00:00) - Agriculture. And I'd say real estate, too, is the are the two industries that touch every single person on the planet. Everybody's going to have a place to stay and everybody's got to have something to eat. So it's not a it's a growing industry, just like real estate. As the population grows, people are going to consume more food, more calories. And so there has to be more farmers and farms to produce it. And as that happens, we have to do it more sustainably.
Sam Wilson (00:00:23) - Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Chris Raleigh is the CEO of Harvest Returns, an agricultural investment platform. He has invested in real estate and income producing agriculture for over two decades. Chris, welcome to the show.
Chris Rawley (00:00:47) - Thanks a lot for having me here.
Sam Wilson (00:00:48) - Sam Absolutely. The pleasure's mine. Chris There are three questions I ask every guest who comes on the show in 90s or less.
Sam Wilson (00:00:54) - Can you tell me where did you start? Where are you now and how did you get there?
Chris Rawley (00:00:58) - Well, like a lot of people in my real estate investing career, I started with single family homes, um, just rental property. And that quickly evolved into multiple single family homes and duplexes and that evolved into land. And then that evolved into I wanted to invest in a farm and there wasn't a good way to do it. So I decided to go the hard way and built a platform for not only myself to be able to invest in farms and ranches, but other people as well. So we've put together over $30 million syndicated farm and ranch and agribusiness deals and been going strong since 2016.
Sam Wilson (00:01:36) - Okay, fantastic. Tell us about the opportunity in agricultural investing.
Chris Rawley (00:01:43) - Yeah. So, you know, the first thing that it's important to know about agriculture is the basis of it is food or the basis of food is agriculture. And we take that for granted. You know, we all go out to eat.
Chris Rawley (00:01:57) - We go to the grocery store, we pretty much got whatever we want 24 over seven, 365 Food is in. Produce is always in season because it's shipped in here from Mexico and South America and beef and lamb shipped from Australia. So so we have we're very blessed in the United States to have access to food and other countries are not they don't have that same benefit. So if you're an investor and you're interested in where your food comes from and how it's produced, investing in a farm or a ranch or an agriculture business is a great way to kind of make that connection and get a little bit more in tune with the food system. On top of that, you know, agriculture and I'd say real estate, too, is the are the two industries that touch every single person on the planet. Everybody's going to have a place to stay and everybody's got to have something to eat. So it's not a it's a growing industry, just like real estate. As the population grows, people are going to consume more food, more calories.
Chris Rawley (00:02:55) - And so there has to be more farmers and farms to produce it. And as that happens, we have to do it more sustainably. So that's kind of the other dynamic that's going on within agriculture right now as technology is being applied to produce food more sustainably and more efficiently.
Sam Wilson (00:03:13) - Right? No, undoubtedly the need is obvious. You know, the need for food won't go away. Tell us about if there is an opportunity from an investment standpoint, like where are you? Where are we in the investing in agriculture kind of cycle if there is even such a thing?
Chris Rawley (00:03:34) - Yeah, you know, there are cycles in agriculture. They revolve around commodities for the most part. So prior to Covid, you know, there's base commodities, things like soybeans and corn. We're kind of in a in a downslope and beef. And now they're there on the especially with food inflation that we've all experienced. Every single one of us has seen that whether you're going to Chick fil A or a five star restaurant, you know that food costs more these days.
Chris Rawley (00:04:04) - And it's it's part of that cycle now. We try to avoid that cycle by investing in kind of specialty types of agriculture products like grass fed livestock that tend to be a little bit more immune to some of the commodity fluctuations. And and indoor agriculture is one of our little specialty niches and and some more other niche things like, like wineries, vineyards. Um, so those are things that, that we hope are inflation proof but also not so impacted by fluctuations in commodities. So if you're looking at farmland itself, there's a lot of people that want to invest in farmland. I would say they're at the top of the cycle right now. Farmland appreciated quite a bit over the past 3 or 4 years, especially what we call row crop farmland, which is things like wheat and soybeans that everybody's familiar with. But for the smaller specialty niche sort of ag spaces that we like to invest in, I think we're not really in a market cycle necessarily.
Sam Wilson (00:05:07) - Got it. Yeah. I want to I want to touch on on that for just a second and then hear kind of what you guys are seeing, where you guys are seeing the opportunity because yeah, I mean, we've seen everybody from Bill Gates to I mean, just everybody and their mother, it seems as investing in farmland.
Sam Wilson (00:05:22) - I actually had lunch with a I'm based here in the Mississippi Delta, of course. So we've got row crops galore across the arc. I mean, we're ten minutes from Arkansas and I got a buddy over there that buys just, you know, he's a broker, but also just buys tons and tons of farmland. And he had never done syndications. He said, hey, you know, we're trying to pull some investors together. I want to do an investigator, you know, and we started talking return profiles. And it was in like 1% annually and returns on cash on cash basis. And I'm like, who's investing? Like who's like, who are you getting that cares about a 1% return? Right. And farmland and obviously it was row crop. You know it's again it's it's the it's the commodities it's the like you mentioned soybeans, corn, wheat, the stuff that everybody grows. But I just wondered from an investment cycle how you guys were different. It sounds like you are like you're not just Yeah.
Chris Rawley (00:06:14) - That yeah. And you know for your buddies that there is that 1% which is probably the annual rents from the cash crops. That's yeah.
Sam Wilson (00:06:22) - That's it.
Chris Rawley (00:06:23) - Land appreciation you know land is they're not making any more of it as all saying goes and especially farmland becomes more and more scarce. But you know, it's, it's an overbought market. That's my personal standpoint right now kind of kind of farmland. That doesn't mean you can't make money over the long term. And it is a long term sort of thing. You're dealing with a speed of biology. You know, people like tree crops. We've done some things like hazelnuts and things like that where you might plant a tree, but it's going to take you seven years or so to start getting some sort of cash flow. So people have to be patient. You have to be creative in the way you structure these deals. You have to be creative in the way that the companies are able to achieve cash flows. So it's it's a lot different than just going out and buying land.
Chris Rawley (00:07:09) - If people want to do that, that's great. And there are ways to do that. There's farmland, REITs and publicly traded stocks and things like that. You can do that. But for our particular investments, something like grass fed livestock, we're actually investing in a ranch operation. There may be a land component, might be a high yield debt that's secured with land or the cattle themselves. We've done both or combinations. So there we tend to pride ourselves in our creativity and these structures, these investment structures, whether it's high yield debt or equity or even convertible debt, we've done all three of those and seen some nice returns.
Sam Wilson (00:07:47) - Can you walk us through I mean, this is really fascinating. I think for me and probably also for our listeners because I think all of us are familiar with the multifamily syndication at this point. We understand the waterfall return, know the splits, all that. I mean, it's just it's we've been down that road more than once on this show. But things like what you're talking about, we've covered almost not at all.
Sam Wilson (00:08:08) - And I forgot to even mention this here at the beginning of the episode. For those of you who don't don't know, Chris actually came back on the show or came on the show. He took a gamble on this show back on December 4th of 2020. So if you want to go back, I think we're at episode we're north of 820 at this point. It was episode five. So you can find Chris back on December 4th, 2020 and kind of get a preview as to what he was working on then and what Chris is working on now. So just wanted to put that plug in there. If you want to get kind of both sides of the coin of what what he's done in the last almost three years now. But let's get back to this creative structures side of things. I mean, I think I think this is fascinating. Can you give us some case studies on how you guys structured it, how you found the deal and kind of what what was the win win between you and the operator?
Chris Rawley (00:08:55) - Yeah.
Chris Rawley (00:08:55) - So one of the niches that we like is livestock. There's very few places for a investor to get into purely investing in a ranch where you are helping a cattle producer or a sheep and lamb producer, that sort of thing grow their business. And we kind of stumbled upon the the method of collateralize the livestock themselves. Since then, we've combine that with collateralized land and collateralized equipment. But these are high yield notes. We've done, gosh, probably 12, 15 million of them, I think, and never had any default. You know, of course, past performance is no indication of future results. But, you know, knock on wood, we've done pretty well. Our investors have done well with them and they're seeing double digit returns. And, you know, which is nice. It's not as nice as it was when CDs were paying 1%. Now CDs are paying 5% or Treasuries, you know, 4 or 5%. You can get those those safe returns. But if you're looking to build beat inflation, getting something north of 10% is always is always good.
Sam Wilson (00:10:05) - Oh, yeah, absolutely. So how do you how do you find a rancher that is in need of capital without finding a rancher that is a bad rancher?
Chris Rawley (00:10:17) - That's a great, great question. You know, the first part of that is they find us. We had a little success, kind of by luck. Um, our deal flow really started to accelerate as we started doing more successful raises that the ranchers that come to us, in some cases they already have conventional land loans, maybe they have equipment loans on expensive piece of. And for anybody that knows ranch equipment is is very, very you know, six figure high six figures to get a tractor or something like that sometimes. Um and they need to expand their herd. So they've got all the pieces in place. Maybe they have a piece of family land that they inherited from their grandfather. So that's generally the biggest expense in these operations is land. So they have that, but they're just starting out. Maybe they grew up, you know, feeding cattle, raising cattle.
Chris Rawley (00:11:11) - They know all about it. They're ready to start on their own. We have a lot of husband and wife's teams and they come to us and say, hey, starting out, we know what we're doing, but we can't get a loan because we don't have a track record. You know, USDA, the AG finance system, the AG credit union system is pretty much optimized for those row crop farmers, right. Like we talked about. And if you're doing something out of the ordinary, if you're doing like grass fed, regenerative livestock, that sort of thing, it's much harder to get funding. So we'll, you know, we'll look at all the pieces of their operation, look what their cash flows can sustain, and then we'll put together some kind of instrument that will work for them, whether that's debt or equity.
Sam Wilson (00:11:55) - Got it. So you guys will come in and structure this debt or equity or both potentially.
Chris Rawley (00:12:02) - Generally we won't do both. I mean, we have done convertible debt, which is, you know, debt that turns into equity.
Chris Rawley (00:12:07) - But we have worked with other pieces of a capital stack where they've got a bank loan and then we'll bring in equity to kind of make them a down payment or help them be able to get a bigger operation. Because like anything else, there's economies of scale and we're trying to help smaller farmers get bigger and make more money and get higher margins. And of course, that's a good thing from the investor standpoint.
Sam Wilson (00:12:28) - Oh, for sure. For sure. And doing things like grass fed beef again, I think that that you're I don't know what the yield is or even the right way to put that because I'm not a rancher clearly. But it you know the dude do those cattle then of course fetch a higher price per pound when they go to they.
Chris Rawley (00:12:48) - Do generally the other piece of that grass fed is that you know grain fed. So all cattle has the same cycle. Life cycle, you know, starts out on milk, mother's milk, then it eats grass and then either becomes grass, finish where it spends its whole life on grass or grain finish where generally it goes to a feedlot and they'll feed grain.
Chris Rawley (00:13:08) - And we have nothing against feedlots. We've supported those. We will continue to support those. But a lot of consumers are really looking for this grass fed grass finished. It takes a little longer to get a product because the cattle doesn't grow as fast as when you're shoving, you know, soy or corn down its throat. It takes a little while. So it's a premium product. Some people say it tastes better. Some people say it's better for you. I'm I'm agnostic. Don't make those judgments. But it's a good market. So we like it. And those those ranchers, the other piece of that is regenerating the soil. We're working with a lot of ranchers that are doing that by, you know, animal agriculture gets a bad rap for a lot of reasons, and most of them are unfounded and produced by misinformation and bad information. But it's really a healthy product and it's a sustainable product when it's done right. We're not talking about clearcutting Brazilian forest, you know, hardwood floors, which a lot of people think about.
Chris Rawley (00:14:06) - That's not the kind of ranches we work with. We work with American ranchers and the Great Plains and Texas and Georgia that are doing their best to to maintain healthy animals and healthy soil and healthy watersheds.
Sam Wilson (00:14:19) - Right. Right. No, there's a lot to be said for that, man. I I'm a big I'm a big fan of grass fed beef. I've got about a cow and a half in my freezer sitting here on the other side of my office wall. So it's. Yeah, I know. I know where it came from. I know it's actually grown by my family in Alabama, but same idea where it's like, Oh, hey, I know the farm this came off of. I don't know exactly. It's, you know, start to finish grass fed. No, it's great, great beef. Anyway, so I'm a believer in the in the great beef strategy that you're employing there. I think I think it's absolutely awesome. So you guys have found a niche it sounds like inside of.
Sam Wilson (00:14:53) - Being basically banking the kind of unbanked sectors of agriculture, if you will call it. That's true.
Chris Rawley (00:15:01) - I mean, part of it is I don't necessarily like the term unbreakable, but it's sure, we're creative in financing in banks for various reasons or not. And we are. So that's that's always a good thing. And that's why these producers keep coming back to us.
Sam Wilson (00:15:17) - Yeah, I'm sorry. I shouldn't use the word un bankable unbreakable. Sounds like they are, you know, some reprobate that can't can't get a credit card. That's not not what they're saying at all. But there are creative structures that you're setting up.
Chris Rawley (00:15:29) - But you know, it's that's just as the banking system becomes more and more regulated and that's what happens. Anybody who's tried to, like, go out and purchase like more than one rental property or more than five rental properties, you know, the drill is, is there's just it doesn't matter how much money you have, how much equity you have, the banks are kind of hamstrung with their with their metrics and their limits.
Chris Rawley (00:15:53) - And it becomes you're essentially unbreakable, even though you're a great credit. You know, you might be a very experienced investor.
Sam Wilson (00:16:00) - Oh, gosh, yes, absolutely. And and I seem to consistently find myself investing in things that are outside of what the norms are because of the opportunities like you're describing, where it's like, oh, hey, you know, we can hit double digit returns, we can do this and this and this, and it's just, it's, it's, um, you know, it's blue ocean for you as an investor, but yet finding the creative way to get that financing across the finish line can be at times a bit challenging. So you've invested in ranches. You talked a little bit about tree crops. I mean, is that something you guys are still active in or is there.
Chris Rawley (00:16:34) - Yeah, I mean, we get probably about 30 deals a month across our desk and maybe four, 4 or 5% of them actually end up on a platform in front of investors. And that's as part of our due diligence process.
Chris Rawley (00:16:46) - But yeah, we do livestock. We're looking at vineyards right now, we're looking at tree crops right now. We're looking at, um, agriculture, technology companies is something we kind of came in, stumbled upon a couple of years ago. These are companies that provide technology to help farmers grow more sustainably and efficiency efficiently and all that. And it's it's obviously a higher risk. It's more like an angel startup investor. Right? But it makes it kind of put some juice in somebody's portfolio. And the beauty of our platform, I think, is, you know, our minimums are fairly affordable. If you've got enough money to kind of self direct your money into a. You know, whether it's real estate or whatever, outside the just dumping money in your 401. Every month and the stock market index, it's supportable because you can spread your 1015 K across multiple deals, spread your risk, but also spread your exposure into different parts of livestock or agriculture.
Sam Wilson (00:17:45) - Right. You mentioned the term platform a couple of times and then you said spread your risk out.
Sam Wilson (00:17:50) - Describe that for us because it sounds like there's something you guys have built maybe that the average syndicator doesn't have.
Chris Rawley (00:17:57) - Yeah. So it took us a while to get here, but we've got the deal flow and we've got all the technology in the back end that we launch a new offering about every 2 to 3 weeks. Wow. Um, so we're, we're constantly, you know, we're serial issuers. I guess you would, you would classify us where we've got offerings going. And these are farms and ranches raising anywhere between and businesses, you know, $200,000 to several million dollars and and sometimes that's part of a much, much bigger project like we've done where we were just a piece of a capital stack of a $50 million project, but we may have only invested 500, 600,000. And then we've done some where we were a big chunk of of a, you know, new farmer, that new rancher that described kind of getting off their feet. But maybe they maybe they're sitting on $1 million piece of land and they just need a few hundred thousand dollars to go out and buy some fences and chutes and cattle and things like that.
Sam Wilson (00:18:51) - How do you manage all of I mean, a new issue every 2 to 3 weeks is that's a lot of parties. That's a lot of ranchers, you know, don't even know what you call them. Guess you farmers, I guess, is what you call people growing, you know. Yeah. Tree crops and all those sorts of things. I mean, how do you manage all of those various entities and people? That's a lot of communication, I would think it is.
Chris Rawley (00:19:16) - And you know, started out just me and my partner Austin Manus back in 2016. And we would launch, you know, we launched our first deal on 17 and we launched, I think, maybe two deals that year. Um, maybe, you know, it's just grown. We've grown the team, we've, we've improved our processes. We've got a lot of automation in our due diligence process and our asset management process. So it is a lot to juggle. You know, we send out like 1600 K ones. I think this year it's quite a, it's a, it's a lot, but I've got a super accountant, super, you know, resources that we tap into.
Chris Rawley (00:19:50) - We've got some third party providers that do all the sort of background compliance stuff. So we just kind of put all the pieces together and that was the hardest part of starting or getting to where we are is organizing the pieces. We didn't know what we didn't know. And now we have learned lessons the hard way in some cases, and we've got built a system kind of systematize our building our business, and we're able to iterate it over and over again.
Sam Wilson (00:20:15) - Do you feel like you work harder now or did you work harder in the earlier stages of your business?
Chris Rawley (00:20:21) - That's a great question. I'd say the amount of work is about the same. It's what we spend our time on is different. So there was a lot of head scratching early on and trying to figure out what we didn't know. We've learned those lessons. We built a network of contacts and providers that now we spend more of our time, like you said, just dealing out lots of communications. We're constantly on calls. I'm still the chief sales officer.
Chris Rawley (00:20:49) - I get on almost every single sales call when a deal gets to the stage where we think it's viable, you know, I'll get on that call after it's kind of going through the initial processes. And so it's and then once we get the deals up and running, of course there's that the management piece, which is investor communications and tax documents and distributions and all those sorts of things. And we get fortunately we've got all the pieces in place to do that.
Sam Wilson (00:21:17) - That's cool. I'm sorry. Go ahead.
Chris Rawley (00:21:20) - Yeah. And that wasn't easy to get all in place. And it's not necessarily always easy to execute and you're always kind of dealing with the, you know, the one investor that needs a little bit of extra attention. And that's just the reality of of being in the world that we're in.
Sam Wilson (00:21:37) - It really is. Yeah. There's there is, there is that there's always the one investor that needs a little bit more, which is, okay, it's all right. There's also there's also lots of investors that you know that I'm sure you have these too, where it's, you know, they require almost no attention.
Sam Wilson (00:21:53) - And so it probably all washes there in the end. When you review the last, say, 5 or 6 years, if you could do one thing to have either made the process easier or maybe made a mistake that you could have otherwise avoided, anything come to mind on those fronts?
Chris Rawley (00:22:11) - Yeah, that's really hard because I we people take pain to learn, right? Austin always says this is like the best way to learn is through pain. And so think a lot of the things. That we have in place now. And, you know, a couple of deals that have gone bad and things like that we wouldn't have learned unless we experienced them. So although I have no regrets. Yeah, sure, there's deals we wouldn't have done or, you know, we would have changed something or automated processes sooner or later. But we didn't know what we didn't know. And, you know, we built very deliberately our processes and our team and our systems and grown very deliberately. We tried not intentionally not to grow too fast by raising a lot of money as a company or some of our competitors did that and, you know, haven't ever had to lay anybody off having ever, um, you know, been involved in lawsuits and, you know, any kind of issues, negative issues like that.
Chris Rawley (00:23:08) - So we're, you know, we're happy and we're going to continue to move very deliberately and fund as many farms and ranches as we can.
Sam Wilson (00:23:14) - Right? I love it. I love that word. Deliberate. That is, um, that's something we think about a lot here on our side of things where it's like, hey, you know, we have unlimited opportunity, but do we want or are we prepared to take that on right now? Like I think I think you should be as much afraid of too much growth, too fast as you should be a failure, because I think they can both lead to the same place, which is.
Chris Rawley (00:23:42) - That's very, very true. You can you can fail. You can grow hard and fast and you can fail hard and fast. And it's it's you don't want to be there.
Sam Wilson (00:23:50) - You don't want to be there. Yep. Deliberate. That's a great word here for today. Chris, thank you again for coming back on the show. It's been a pleasure to hear just where you guys have gone and almost, again, almost three years since the last time you and I got to chat.
Sam Wilson (00:24:04) - If our listeners want to get in touch with you or learn more about you guys, what is the best way to do that?
Chris Rawley (00:24:10) - Yeah, the best way is just harvest returns. Of course, we got social media and all the different platforms, but harvest returns, dot com.
Sam Wilson (00:24:17) - Harvest returns.com will make sure we include that there in the show notes. Chris thank you again for coming on. I certainly appreciate it.
Chris Rawley (00:24:23) - My pleasure Sam. Thanks. Hey, thanks.
Sam Wilson (00:24:25) - For listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
