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May 8, 2012

Sustainable Business Oregon
By Christina Williams

Oregon has long been on the forefront of the local food movement but what started as a trend on Portland menus has grown into a global economic shift that has the attention of creative entrepreneurs and top-shelf investors.

Copyright (c) 123RF Stock Photos

Oregon’s head start in thinking about local food, sustainable agriculture and land-use planning has positioned the state to benefit from this new age of agriculture finance.

That new age is earmarked by a variety of approaches to finance. One example is the rise of a new class of impact investors — investment organizations looking to collect a return that delivers not only financial results, but also environmental and social good — has trained its focus on food. And for good reason.

A global view of the economy shows a planet with diminishing resources but large swaths of population in countries like China and India making more demands on the global food system. Narrowing the focus to the U.S. shows average grocery produce items traveling thousands of miles before landing in the cart, rising childhood obesity rates and a shrinking pool of farmers minding the fields.

A report released last year by The Springcreek Foundation documented a growing investment trend. The report covered 40 investment funds dedicated to sustainable agriculture endeavors.

“In general there has been an increasing interest among the impact investment community in sustainable food and agriculture investments,” the report states.

Springcreek found that foundations and governmental organizations had been the go-to sources for food system investment, but the scale of the changes needed to meet demand and address environmental challenges has opened the door to investment dollars.

And the interest has been good for entrepreneurs. The report cites Mike Tohai, founder and CEO of CityScape Farms, an urban agriculture company in San Francisco, saying that a few years ago he had trouble getting investor attention. Now, he says, investor interest has increased tremendously.

A COOPERATIVE ENDEAVOR

Narendra Varma isn’t interested in getting investor attention, but that doesn’t mean he’s not forging an exciting new financial model to support local food.

Community by Design LLC is a 60-acre farm operation putting down roots in Sherwood — as Varma puts it, 15 miles south of Powell’s Book Store.

The site isn’t an accident.

Varma, a former Microsoft employee with a background in finance, became interested in food and agricultural issues and wanted to do something that would make an impact. He started looking around Seattle to find some farmland that would be close to the metropolitan area and support the kind of farm-incubator idea that was starting to form in his mind.

“Around Seattle, with the lack of comprehensive land use and zoning, it was difficult to find decent farm land that was affordable and close to the city,” Varma said.

Portland proved the better option and $1.3 million later, a Sherwood farm plot with water rights and Measure 49 support for up to three houses, proved the perfect spot.

Varma calls Community by Design an “investment in a nontraditional sense of the word.”

“I’m not looking for a return measured only in dollars and cents,” he said. “It’s a long-term investment in the community and in the soil.”

Varma is finishing up the legal paperwork to establish Community by Design as a cooperatively owned farming operation. It will comprise three residences — one for Varma and his family and two that he will lease to other farming families — a farm stand, a food processing facility, food storage and other farm infrastructure like barns and irrigation.

The cooperative will lease Varma’s land and farmers and food producers who are members and shareholder will sell their wares through the farm stand to consumers who can also buy into the cooperative.

“The cooperative will be the brand,” Varma said. “There’s a huge marketing advantage in that.”

Noah Marquis has signed on to Varma’s vision and is one of the farmers pioneering the Community by Design concept.

Marquis, who is raising geese, chickens and goats, will also run a blueberry u-pick operation called Berries to Bellies.

“We’re such a fractured nation,” Marquis said.

What he likes about what Varma is trying to do is that it emphasizes community and local food, and also that it removes the financial burden for people like him who want to farm but don’t own land.

INVESTORS CIRCLING

Farmland LP, a private equity fund that’s buying farmland in the Willamette Valley and San Francisco’s Bay Area and converting the acreage to sustainable farming practices, also leases land to farmers.

Farmland bought its first Oregon acreage last year with two plots in the Willamette Valley. Under the management of Jason Bradford, who is based in Corvallis and oversees the fund’s farming operations, the land is being transformed and is going for organic certification. Farmland partners with Cattail Creek Lamb of Junction City to raise lamb on newly acquired pasture land.

Bradford said that with 64 investors and $10 million raised to date, interest in what Farmland is doing is running high.

“Once we’re at this scale it becomes easier to raise more money,” Bradford said.

Farmland buys property as the money comes in and for now is only looking at the Willamette Valley and Northern California for land to buy.

“We could by the end of the year be ready to look at other areas,” Bradford said, “once we get over the $30 million threshold.”

Portland-based Meyer Memorial Trust, with $650 million currently under management, is exploring ways to put more of its endowment funds to work in agriculture-related investments as part of an overarching plan to invest in Oregon’s economic development. The details of what those investments will ultimately look like is still under construction, but the interest is there, said Kipp Baratoff, who was selected as a Meyer Fellow to work on the trust’s economic development strategy for Oregon.

Investing in regional agriculture systems is investing in Oregon’s economic resiliency, Baratoff said. Goals and desired outcomes include jobs, more access to agricultural and ranching land, more acres of sustainably managed land, better access to local food and supporting the development of the sustainable regional food system.

In addition to his work with Meyer, Baratoff runs a firm called Sea Dragon that aims to build and finance companies using for-profit business models to create regional social and environmental change.

“Why? Because integrating natural, human and financial capital yields superior investment returns and is critical to humanity’s path forward,” Baratoff said.

Food systems, along with water, shelter and energy is at the top of his interest list.

Portland-based Equilibrium Capital, an impact investment group co-founded by David Chen and Bill Campbell, is also looking at agriculture as part of its focus on sustainability-driven investments.

In April, Equilibrium announced an investment in a fund called Australian Pastoral Funds Management Pty Ltd., which is investing in sustainable pastureland Down Under. The investment is attractive because it focuses on improving sustainable farming practices and positions Australia to become a protein supplier to a growing Asian middle class.

As Chen put it: “The outcome is more profitable business, a better product and greater capital value growth of the underlying asset — the land.”

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Posted: Tuesday May 8, 2012, 12:40 pm
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