Launched in 2019 with a capital commitment from Spring Point Partners, the recent exit of SLM Partners pilot programme has delivered a Gross Internal Rate of Return (IRR) of over 10 per cent – exceeding the NCREIF Total Cropland Index and the NCREIF Annual Cropland Index for this period – as well as generating positive environmental and social outcomes.

Between 2019 and 2020, SLM Partners said it acquired four farms totalling 500 acres across Illinois and Ohio and partnered with three local organic farmers. By 2022, all farms achieved organic certification. Since then, the farmers have expanded their operations and improved profitability, while the value of the land has risen. Over the last two years, SLM Partners managed the sale of these farms as part of the planned winding up of the pilot programme.

Organic farming
Investment in organic farming is rising globally and it is gaining investor attention. Australia holds the worlds largest organic area, accounting for about 15 per cent of total agricultural land. The EU has an estimated 10.9 per cent of agricultural land under organic farming, and has set a target to have 25 per cent of agricultural land under organic by 2030 under the European Green Deal strategies. In the UK, it is still niche, covering a small part of the total estimated farmland at about 3 per cent, although organic sales have bounced back recently.

In the US, land under organic only represents less than 1 per cent of total US farmland, with California leading the way. While the US is the largest consumer of organic food, the amount of land under organic is far less than the EU and Australia. However, public subsidies and private capital are going into the sector to help farmers transition to organic certification. The global organic farming market size is projected to grow from $136.75 billion in 2026 to $253.5 billion by 2034.

SLM Partners said their farms will continue to be farmed organically, and two of the farmers have exercised their rights to purchase their farms, bringing the land under their long-term ownership. Following a full exit, the investor realised a gross IRR of 10.1 per cent, before management fees and costs.

SLM Partners made the land available to the farmers through 10-year flexible leases, with below-market rents during the conversion period, followed by profit-sharing after organic certification. Transitioning away from chemical inputs and investing in soil health takes time, and it can entail two to three years of losses before breaking even.

As most farmland leases in the US Midwest are one, two or three years in duration, many farmers cannot afford the risk of experimentation, and they are not incentivised to invest in soil health. SLM Partners’ model provided security for farmers to implement long-term ecological practices while sharing the financial risk of the transition to organic agriculture.

The programme also delivered environmental benefits, including improved soil health and biodiversity, through organic practices such as eliminating pesticides and synthetic fertilisers, introducing cover crops and diversifying crop rotation. The farmers grew corn, soybeans, wheat, alfalfa, pumpkin, rye, oats and popcorn and sold their products through national organic channels at premium prices. The boost to soil health can be seen on these farms after five years of organic farming practices.

Building on this pilot programme, SLM Partners raised $475 million in capital commitments from institutional investors to scale its US organic farmland strategy. The firm has now made a total of 89 farmland investments and partnered with 35 local farmers across 32,000 acres in the US. 

“The premium organic market is relatively insulated from global commodity market shocks, for example those linked to rising synthetic fertiliser prices since the blockade of the Straits of Hormuz,” Paul McMahon, managing parter at SLM Partners, said. “Likewise, domestic demand for organic products remains strong and farmers benefit from substantial price premiums. Our strategy demonstrates how the right kind of investment structures can provide long-term access to land and support farmers through the transition to organic agriculture, making them more resilient.”

“Back in 2019, when I was looking to grow my business, the 10-year lease structure offered by SLM Partners made all the difference in the world, giving me long-term visibility that I was not able to find elsewhere,” Jeff Anderson, Illinois-based farmer partnering with SLM Partners, added. “With this long-term lease, we are able to do the right thing for the farm, like switching the rotation or doing an investment the soil needs. We don’t need to use up all of the soil's nutrients this year just because we might lose access to it next year. The benefits of this are huge.”

“Our goal was to be catalytic: we hope the strong results generated by the farmers and SLM Partners will encourage more investors to consider sustainable, farmer-first approaches like this,” Margot Kane, chief investment officer, Spring Point Partners, said. “The success of this pilot shows the positive role that investors can play by addressing the structural barriers that farmers face in transitioning to more regenerative farming practices. We’re encouraged to see that the farmers have grown their businesses while implementing long-term organic practices that improve their land and waterways.”

The case study features in SLM Partners’ sixth impact report which also highlights that SLM Partners has fully deployed their Irish forestry fund and Iberia permanent crop strategy in Europe. Added to this, the assets managed by SLM Partners sequestered an estimated 93,683 tonnes of CO2 in trees and soils – equivalent to the electricity use of almost 20,000 homes – offsetting all emissions incurred from operating the assets.

The sixth impact report also highlights SLM Partners entering into a partnership agreement with MIGDALO for the management of almond orchards in Portugal. To support MIGDALO in adopting more regenerative practices, the firm co-developed a regenerative transition plan, which was built with the help of consultants with expertise in regenerative Mediterranean orchards, establishing key practice changes and objectives for the farm management going forward. It covers irrigation management, covers crop management, tillage practices, input usage, fertilisation plans and more. Every year, this plan helps assess progress against targets and guides future management decisions.

In its fifth impact report, the firm unveiled a case study of its regenerative agriculture strategy with quantified financial and environmental returns, highlighting the benefits of combining livestock production with carbon projects for diversifying revenue on Australian properties.

The term "regenerative agriculture" is a conservation and rehabilitation approach to food and farming systems. It concentrates on topsoil regeneration, increasing biodiversity, improving the water cycle, enhancing ecosystem services, supporting biosequestration, increasing resilience to climate change, and strengthening the health and vitality of farm soil. Organic farming can be considered as a form of regenerative farming to avoid synthetic chemicals and boost biodiversity.

Alastair Cooper, head of venture at , a specialist investment advisory firm focused on sustainable food and agriculture, also recently highlighted the importance of making agriculture more sustainable and resource-efficient for both the planet and humans. “Large-scale farmland needs to revert to more organic and regenerative agriculture and use new tech to make up the slack in terms of production,” Cooper told this news service.

Founded in 2009, SLM Partners is a specialist real assets manager investing in agriculture and forestry; its investment programmes span Europe, the US and Australia. See more about the firm here and here.