Farmland owners can now put the headache — and potential financial heartache — in the hands of Tillable with its first-of-its-kind lease arrangement service.
The online marketplace that’s targeting the $32 billion farmland rental market has added a new feature that allows members to enter into farmland leases called the ‘Hassle-Free Lease.’
With this new service, Tillable provides landowners a one- or three-year rental offer for their land; pays the landowner up front and in full; and finds a farmer to operate on their land for the duration of the lease beginning in the 2020 growing season. It also provides certainty that landowners receive a fair lease payment, eliminating the risk of market volatility, destructive weather, or unfair rental contracts that ultimately damage profitability.
“We think it’s important to provide landowners with the option for a longer term relationship. One-year leases are great because the renewal process provides the mechanism for reviewing performance; but a three-year lease, with regular check-ins, gives landowners the option to have their rent taken care of for a longer period of time,” Kull wrote to AgFunderNews in an email.
“For example, one of the challenges of owning farmland from a financial perspective is that it’s a fixed asset. Both lease options allow people to treat it more like a liquid asset so they can quickly convert it to cash without selling it or borrowing against it. Choosing a one- or three-year term allows the landowner to decide how much and how long they’d like to take advantage of that.”
After the landowner and Tillable agree to a one- or three-year fair rental offer, Tillable handles the rest including providing payment to the landowner in full at the outset of the lease. The payment is calculated beforehand using a number of publicly available sources to conduct a rent analysis on any given farm, including factors like the farm’s productivity score (based on soil quality), crop history, soil maps and more.
Putting a full payment in the landowner’s hands mitigates the risks of fluctuating commodity prices and the impact of destructive weather patterns by providing payment for the lease before things have a chance to go wrong.
“We have a standard lease for each state that we operate in and they have all been legally reviewed and approved. This document will work as-is for many landowners. However, there are often specific needs that apply not only to the landowner but also to the farmer. Any terms that are negotiated and approved by both parties can be added to the lease.”
The Tillable platform also tracks farm performance data, using data provided by the farmer to report back to the landowner on a consistent basis, ensuring the land is treated with respect so it can continue to provide the landowner lifelong value.
Tillable has also accounted for situations where the lease arrangement may go sour before the term is up by spelling out which party is responsible for the outcomes of lease termination; that can vary depending on the circumstances and who is seeking the termination.
So what’s Tillable’s cut for arranging your hassle-free farmland lease?
“This will vary depending on the farm, and basically represents the difference between what we pay the landowner to lease the land, and what the farmer pays to lease the land from Tillable. We’re not looking to make a very big spread. Ultimately, we want to make the farmland rental process easier, with the goal of helping landowners receive higher rent than they do today that’s more in line with the value of their land, and for the farmer to still pay a fair market price.”
Bringing Farmland Leasing out of Antiquity
Tillable was co-founded by Corbett Kull, who sold his former startup business 640 Labs to Climate Corporation in 2014. The company closed a $8.25 million Series A earlier this year led by agtech investment holding company The Production Board, directed by former Climate Corp founder David Friedberg, with participation from seed-stage venture firm First Round Capital.
The startup wants to help landowners optimize their leasing experiences by capturing multiple offers for leases and aggregating information on fair market prices to ensure that the landowner gets the best going rate. Farmers will likely benefit from having a curated list of available leases to scroll through, providing key information like acreage, soil type, and location in lieu of having to secure land through word-of-mouth or by hoping to pass a ‘For Lease’ sign on the road.
Although landowners collect $32 billion in rent each year, Tillable estimates that they leave $8 billion on the table due to underpriced rent.
The idea of having another company manage your property isn’t exactly new, but Tillable is adding data-driven aspects like taking into account a farm’s viability or aggregating market data on a fair market price for a lease.
“In agriculture, there’s nothing like this that we’re aware of, though we’ve seen that something like this model is being tried in residential real estate. The real difference between Tillable and existing farm management companies is that we’re providing the certainty of payment upfront, assuming active responsibility for ensuring the farm has a great farmer who’s going to take good care of it and providing the technology platform to share the data that shows how the farm is performing,” says Kull.
“It’s a good solution for people who are looking to back away from some of the responsibility of managing their farmland and want information and assurances that it is well cared for, but who might not be interested in fully managing their farm themselves.”