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ATTENTION ORGANIC OR SUSTAINABLE FARMERS

I am launching a new program designed to help farmers committed to organic and sustainable agriculture start, maintain and grow their operations by linking them with socially motivated investors who will purchase the farmland they need and lease it to them on long-term, renewable leases with an option to buy. I am sending out this Call for Pre-Applications because I have an initial investor who has asked me to help them invest $3 million in this way in 2008.  I will seek out other investors as well based on the opportunities that come forward.

Below is an outline of the program in brief. Attached is detailed information in two formats (PDF and Word). Please don't hesitate to contact me if you have questions after reading the attached document.

What: A program designed for experienced organic and sustainable farmers who need additional land, or need help maintaining their existing land base. I will help farmers who meet the criteria link up with ethical investors who will purchase the land they need and lease it to them on long-term (up to fifteen year), renewable leases. The leases will include an option to buy at a fair market value if the investor ever wants to sell the land. A conservation easement may also be put on the land. The program is being piloted in 2008 through this Call for Pre-Applications.

Who: Farmers may apply who can demonstrate a commitment to the core principles of organic/sustainable agriculture; have stable markets, and have been in business at least five years. Farmers should be able to offer, at minimum, a starting rental rate that is 4% of the land cost.

Where: The Call for Pre-Applications is being widely distributed in six states: Kansas, Nebraska, North Dakota, Iowa, Wisconsin and Minnesota. Farmers in other locations may also apply.

How: Read carefully the attached document and send in a short letter by June 15, 2008 describing your farm and the investment you are proposing.

For more information contact:

Robert Karp
New Spirit Ventures, LLC
W2811 Friemoth Road
East Troy, WI 53120
orgfarminvest@centurytel.net
414-477-1170

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Call for Pre-Applications:

New Spirit Ventures, LLC
W2811 Friemoth Road, East Troy, WI 53120
 April 14, 2008 

Dear Farmer,           

I am piloting a new program to help farmers committed to organic and sustainable agriculture start, maintain and grow their operations by linking them with socially motivated investors who will purchase the farmland they need and lease it to them on long-term, renewable leases with an option to buy.  I am sending out this Call for Pre-Applications because I have an initial investor who has asked me to help them invest $3 million in this way in 2008.  I will seek out other investors as well based on the opportunities that come forward. 
 
The goals of the program are to:
• Foster the viability and growth of farmers and ranchers committed to organic and sustainable agriculture;
• Preserve farmland and strengthen the economic, social and ecological health of rural communities;
• Help ethical investors achieve their financial, social and environmental goals through investments in farmers committed to organic and sustainable agriculture;
• Create a community of interest among farmers and investors committed to the values of environmental sustainability, farmland preservation and healthy food.

Please read the material below for detailed information about the program. If you have further questions please don’t hesitate to contact me; my information is below. I look forward to hearing from you.

Sincerely,

Robert Karp
414-477-1170, orgfarminvest@centurytel.net

Advisors
Mark Ackelson, Iowa Natural Heritage Foundation
Wende Biggs-Ractcliffe, Woodshouse Foundation
Susan Davis, Capital Missions Company
Mike Duffy, Iowa State Univesity
Dwight Ebaugh, Dickinson Wright PLLC
Wyatt Frass, Center for Rural Affairs
Tom German, Thankful Harvest Farm
John Hall, Michael Fields Agricultural Institute
Rick Hartmann, Small Potatoes Farm
Gary Holthous, Northern Plains Sustainable Agriculture Society
Don Katz, Katz Investments
Fred Kirschenmann, Leopold Center for Sustainable Agriculture
Teresa Opheim, Practical Farmers of Iowa
Krista Reck, Kenosha, WI
Steve Stevenson, Center for Intergrarted Agricultural Systems
Elizabeth Ü, RSF Social Finance

New Spirit Ventures, LLC: Call for Pre-Applications

Quick Facts

What: A program designed for experienced organic and sustainable farmers who need additional land or need help maintaining their existing land base. I will help farmers who meet the criteria link up with a socially motivated investor who will purchase the farmland needed and lease it to the farmer on a long-term (up to fifteen-year), renewable lease. The lease will include an option to buy at a fair market value if the investor ever wants to sell the land. A conservation easement may also be put on the land to prevent non-farm development. The program is being piloted in 2008 through this Call for Pre-Applications.
 
Who: Farmers may apply who can demonstrate a commitment to the core principles of organic/sustainable agriculture, have stable markets, and have been in business at least five years. Farmers should be able to offer, at minimum, a starting rental rate that is 4% of the land cost. (See detailed farmer criteria under #’s 2 and 3 below).

Where: The Call for Pre-Applications is being widely distributed in six states: Iowa, Kansas, Nebraska, Minnesota, North Dakota and Wisconsin.

When: Read carefully the document below and send in a short letter as soon as possible, but no later than June 15, 2008, describing your farm and the investment you are proposing.

Application Process

To apply, please send a letter of no more than three, single-spaced pages (12 point font). Feel free to include additional info such as a farm brochure or photograph, etc. Keeping in the mind the criteria listed in the application, please answer the following as concisely as possible:
1. Describe your farm and your business: Include the history and goals of your operation, the location, size and character of your farm, the different products you raise and whether you are certified in any manner.
2. Describe how you market your different products and how long you have worked with your current buyer/s. What have been your challenges and successes as a business?
3. Describe the investment you have in mind and why you are seeking this assistance: include how much land, where it is located, how obtainable it is, what you think it would cost and what kind of lease terms you would propose.
4. Tell me what kind of financial information you would be willing to be share in the next step of the application process (i.e. tax returns, property statement, etc).
5. Send three names as references from some of the businesses or organizations with whom you work, for example, farm groups, buyers, certifiers, bankers, or agencies (i.e. Extension Service, NRCS, etc), etc.
6. Let me know the best way to reach you.

Send your letter to me at the below address by email or by US Postal Service as soon as possible, but no later than June 15, 2008.
Robert Karp
New Spirit Ventures, LLC
W2811 Friemoth Road
East Troy, WI 53120
orgfarminvest@centurytel.net

New Spirit Ventures, LLC: Call for Pre-Applications

Detailed Information

1. How does this program work?
The program is designed, in this round of applications, for experienced, successful organic and sustainable farmers who need additional land, or need help maintaining their existing land base, and who cannot afford the expense or who do not want to tie up their capital in land acquisition. The investors will purchase the farmland needed and lease it to the farmer on a long-term (up to fifteen year), renewable lease. The leases will include:
• A lower or stable lease payment during the first three years while the land is being transitioned to a new production system, if necessary;
• An option to buy, for the farmer, at a fair market value, if the investor ever wants to sell the land;
• A conservation plan, if necessary to insure proper care of any woodlots, stream banks, etc.
The investors may also choose to donate or sell a conservation easement to prevent non-farm development on the land but this will be determined on a case by case basis. 

2. What are the qualifications to apply?
Farmers should meet the following criteria to apply. Farmers who do not meet all these criteria but feel they can make a compelling case for an investment are also welcome to apply.
• Small and mid-sized farmers managing diversified crop and livestock operations including dairy operations and managed grazing systems, etc.;
• Farmers who can demonstrate a commitment to the holistic principles of organic agriculture whether or not they are certified organic;
• Farmers who have been operating for at least five years, have stable markets, good bookkeeping practices and a track record of profitability;
• Farmers who are well connected with other farmers and with support organizations;
• Farmers with land near them that is available for purchase;
• Farmers who are open to being in partnership with an investor;
• Applications are also encouraged from farmers who are seeking additional land in order to help their children or another person become a partner in their farming operation.

3. What will the lease payments be?
To be considered in this round of applications, the revenue from lease payments should deliver at minimum a 4% annual, gross return to the investor.  Thus if land costs are $4,000 an acre, then the minimum rental rate would need to be $160 an acre. This might change slightly based on property tax rates in the state where a farm is located or perhaps on some other special circumstance, but 4% is a good guideline to use. I realize this ratio will preclude some farmers from participating, especially those dealing with particularly inflated land prices. In the future, I may be able to find investors who can offer lower minimums. In addition, I hope in the future to partner with land trusts and agencies that can buy the development rights and so bring the cost of the land down considerably.  Hopefully, farmland values will also begin to come down. If you can offer better than 4% and remain profitable please let me know in your Pre-Application letter.

Please Note: Farmers should be prepared to cover all costs involved in improving or transitioning the land and to install and maintain any necessary infrastructure (fences, sheds, etc.).

4. Will lease payments change each year?
The recommended approach, based on input from farmers and investors, is to tie the rental rates, after a three year transition period, to a local index (such as is often published by the Extension service), so that if farmland rental rates go up in the local community by a certain percentage, your rental rates would likely go up by approximately the same percentage. Farmers applying should feel free to propose other approaches, including some type of flexible lease arrangement. Ultimately, we have to see what method makes sense on a case by case basis.

5. What is your timeline?
My timeline is as follows, but please keep in mind that everything is subject to change based on new thinking or on the needs of a particular situation.
• June 15: Deadline for Pre-Applications
• May 15 to July 1: Request more information from a subset of the applicants.
• July 1 to August 15: Based on additional information, phone interviews and farm visits, make final selections for 2008 investments.
• By September 1: Move forward with negotiating land purchases and setting up initial leases.

Please Note: There is no guarantee that any investments will be made in 2008. All depends on whether applicants come forward who meet the criteria and in whom my investor feels confidence in.

6. Is there a minimum or maximum investment? Where are you hoping to make investments?
I anticipate that investments will be made by my initial investor in no more than six farms, and that no single investment will be less than $200,000 or more than $1 million. The program is being launched in the Midwest and Northern Plains because this is where research suggests success is most likely. The key criteria are locations where there is a growing number of organic and sustainable farmers and where existing rent-to-value ratios allow for at least a 4% return. The Call for Pre-Applications is being distributed in Kansas, Nebraska, North Dakota, Iowa, Wisconsin and Minnesota. Farmers located in other states in the Midwest or Northern Plains are free to apply as well, but should keep in mind the criteria just stated.

7. What if you get more applications from farmers who meet your criteria than you can serve in this round?
In order to grow this program, I need to demonstrate that there is a need among farmers and I need to be able to show new investors specific opportunities. It will help me immensely to have a pool of farmers who are seeking this kind of investment, whose story I can tell as I meet with foundations and other investors. You can help me bring in new investors and grow the program by applying to this program now, even if it turns out I cannot help you in this first round.

8. Who are the investors you are currently working with and how will you seek other investors?
The current investors I am working with and the investors who I hope to work in the future are:
• Committed to the preservation of farmland and to organic/sustainable agriculture;
• Willing to hold their investments long-term and provide, at a minimum, long-term, renewable leases with an option to buy at a fair market value if they ever want to sell the land;
• Not looking to profit through the eventual sale of the land to developers;
• Seeking a stable, modest return on their investments.

I will be seeking additional investors through a variety of means including:
• Partnering with innovative financial institutions that already serve these types of social investors;
• Approaching foundations to make Program Related Investments; and
• Partnering with food companies that are already working with socially motivated investors committed to their products and farmers.

9. Why are you piloting this program with experienced, successful farmers rather than beginning farmers? 
First, because there will be no one for beginning farmers to learn from and be inspired by if existing farmers cannot stay in business or grow their operations. Second, I need to show that this innovative strategy can work in situations where there is less risk before trying to tackle the harder job of helping beginning farmers. Third, one reason a number of existing farmers need more land is to enable them to bring one or more of their children into the operation. In this way, this strategy can already help beginning farmers.  

10. Is this the only strategy you are using to help farmers?
I hope down the road to employ similar strategies to help capitalize others constituencies including beginning farmers, smaller growers on the urban fringe, and other food and farm- based entrepreneurs. Everything will depend on the kind of partners and investors who I can get interested in supporting and participating in the program.

11. Who are you and why are you starting this program?
My name is Robert Karp and I am the former Executive Director of Practical Farmers of Iowa, one the country’s leading, farmer-led sustainable agriculture organizations, where I worked from 1997 to 2006. (See www.practicalfarmers.org). Currently I live in southeastern Wisconsin and work as an organizational development consultant and social entrepreneur.

I am starting this program because I am deeply committed to the success of organic and sustainable farmers, to healthy food, to fair trade, and to preserving our working landscapes. And I believe we need a much stronger investment in farmers and in the supply side of our movement if organic, sustainable and local food efforts are going to grow and maintain their integrity.

For years I have seen the great potential that the growing trend toward ethical investing and new forms of social finance offer our movement, but have been frustrated that these efforts have yet to reach the farm level. Just as the local food movement has thrived by building direct relationships between farmers and consumers, so I believe there is immense potential in building more direct, intimate relationships between farmers and socially motivated investors.

Last year I received a grant to research the feasibility of linking farmers and ethical investors in the fashion proposed in this document. The results of my research look promising for certain farmers, in certain parts of the country and one investor has a taken strong interest. To further develop the program, I have decided to pilot the effort and learn by doing. The need is too urgent, in my mind, to take any other approach.

12. How is this program organized?
During its pilot phase, this program is being run through New Spirit Ventures, LLC, the business through which I do all my projects and consulting. I also have an informal advisory group, listed above, of individuals who have been providing invaluable input into the development of this effort. If the pilot phase of the program is successful, it is possible that a new entity will be created to manage the program. I anticipate active involvement of farmers, food businesses, innovative financial institutions and other stakeholders in the formation of any such entity. Determining exactly what sort of entity would be best and which partners to involve is part of the research I will conduct in the coming year.

13. Are you willing to come and talk about this program at meetings and conferences of farmers?
Yes, of course. Use my information listed above to contact me.

14. I know someone who might be a potential investor; can I send them your way?
By all means, give them my contact information or send me their information.