Ep #12: Making Farmland Accessible: A New Way to Invest in Agriculture with Brian Kearney and Marc Hartness

What does it take to transform farmland ownership for the future? In this episode of The Land Ledger, guest host Justin McMenamy sits down with Brian Kearney and Marc Hartness, co-founders of Farmland Stock Exchange, to explore the evolving landscape of farmland investing. From navigating emotional bonds with land to grappling with the debate between conventional and organic farming, Brian and Marc share how they’re tackling these challenges, offering an innovative approach to farmland ownership that balances financial returns with sustainable practices.

Listen in as Brian and Marc reflect on the highs and lows of launching a startup in an industry steeped in tradition. They share candid stories about their journey—from gaining the trust of farmers to dispelling investor skepticism—and highlight the impact their company is already making. With farmland ownership poised to shift dramatically over the next decade, they discuss their vision for the future: empowering farmers to secure the land they work and ensuring it doesn’t fall into the hands of the highest bidder.

Listen to the Full Episode:

What You’ll Hear About in This Episode:

• What Farmland Stock Exchange is and how it operates.

• Why most farmers don’t own the land they farm.

• The problem with traditional farmland sales.

• Fractional ownership and farmer-first investing.

• How Farmland Stock Exchange manages ownership and transactions.

• Why farmland is a strong investment.

Ideas Worth Sharing:

• “We're the first fund that is truly a win-win on both sides. Our investors make money. The farmers make money. And at the end of the day, it's all about supporting small rural communities.” - Brian Kearney

• “Farm ground is so emotional. And if you're not in the industry and you don't understand the asset, it truly is unlike any other asset I've ever seen. It's something you kind of have to tread carefully because it can destroy families if it's handled incorrectly.” - Brian Kearney

• “We're not going to [be a] fit for all of them. We're not going to get to all of them, but just [to] be that optionality that didn't exist before, and take advantage of those opportunities to help people.” - Marc Hartness

Resources:

• Brian Kearney: LinkedIn

• Marc Hartness: LinkedIn

• Farmland Stock Exchange: Website | X | LinkedIn | YouTube

• The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson

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Read the Transcript:

 Brian Kearney: You're talking a small farm, 40 acres in this area is 650, $700,000 and you have to put 40% down at the bank. I mean, if you had to buy a house and you had to put 40% down, how many people in the U.S. would actually own a house? Probably almost none.

Welcome to The Land Ledger podcast, where investing in farmland meets the future of finance. I’m your host, Brian Kearney, here to guide you through the untapped potential of farmland as an asset. 

Whether you’re already investing in farmland, want to invest in farmland, or you’re just curious about safe alternatives to stocks and bonds, this is your space to learn, explore, and be inspired.

Your journey to farmland investing starts now.

Justin McMenamy: Welcome to the Land Ledger podcast. My name is Justin McMenamy, and Brian Kearney, who typically hosts this show. He reached out to me and he asked me if I could tag in for him today and interview a few very special guests that he has scheduled for our episode today. I said, “Absolutely.” So here I am pleased to have the opportunity to interview Brian Kearney and Mark Hartness, the co-founders of Farmland Stock Exchange. Guys, welcome to the episode. 

Brian Kearney: Thanks for having us. Excited for you to interview and for me to be on the other side. It'll be interesting. 

Justin McMenamy: I was going to say, Brian, how does it feel on that side of the table? 

Brian Kearney: Yeah, I've done more interviews than been interviewed, so we'll see. 

Justin McMenamy: All right, well, let's start out if you guys would, what is Farmland Stock Exchange?

Brian Kearney: Yeah, I'll take this and then Mark, you can add on Farmland Stock Exchange, high level, we are a company that is helping farmers buy out their landlords. So we're the first fund that is truly a win-win on both sides. Our investors make money. The farmers make money. And at the end of the day, it's all about supporting small rural communities.

How do we make our rural communities strong? We're based out of El Paso, Illinois, a small little town, and that kind of shapes how we operate and our end goals. But yeah, Mark, do you have anything else to add on that? 

Marc Hartness: Yeah, I would just say when we were like kind of looking at the market and we were interested. There's a lot of cool groups doing similar things and they were super interesting, but at the same time, they're, at the end of the day, basically competing with farmers for the ground and being where we're from, we can put faces to that.

We went to preschool, middle school, junior high school with those guys. And so to me, it was like, well, that's a cool concept. But at the end of the day, I know who I'm competing with for that, and I'm not helping. And I think that was something we wanted to like find that middle ground where like Brian said, it's kind of a win-win where it's like why can't there be some alignment between these groups doing these interesting things and the actual farmers at the end of the day.

Justin McMenamy: Excellent. And we'll get into some of the specifics and details of the farmland stock exchange. But one of the things that I'm always fascinated as I talk to founders, the origin story. You think about companies like Uber, Garrett Camp, the founder, tried to find a taxi on New Year's Eve in Paris, couldn't find one, said there's got to be a better way.

Founders of Airbnb, Joe Gebbia, Brian Chesky, couldn't afford their rent in San Francisco, 2008 Democratic National Convention comes in, they rent out a literal air mattress, and give them a breakfast on the backside. That's what Airbnb stands for. What is the origin story of the Farmland Stock Exchange?

Brian Kearney: Yeah, that's a great question. And I think a lot of the origin story is just Mark and I growing up in this area, seeing what happens when farmers are not the landlord, when farmers are the tenant, we saw how things can go kind of wrong. And if you have a farmer who's making decisions for 10 years, and then maybe a third of their farms disappear in a year, well, that's something that you cannot really move past in any business, let alone a business with low margins.

So I think we saw the need more than we knew how to fix the product ‘cause the product we launched with was not great, but it was not what we're doing now. Mark also has some interesting kind of thoughts on that, I think, from the 80 acres that your parents had. So you can also see it kind of from the landlord's side how this is a win on both sides, right?

Marc Hartness: Yeah, honestly, it started because Brian's always been trying to start a business with me and it's mostly been me being like, “No, dude, no, that's dumb. I'm not doing that.” And then this is kind of a slow burn because they start talking about this and it's super relatable, like you said. I, you know, to get so many examples just growing up about what it means to have equity in something and then grow with it.

And then, like you said, just freak events can wipe out significant part of your livelihood and you're already a market taker as a farmer. Like that's just one more variable that can absolutely make or break you, like you said, that we co-opt acreage. I would never say I was a farmer, but I was exposed to it.

It was right in front of our house every day. I was always interested like, “What are we planning this year and why?” One year we did wheat. I thought that was super cool. Again instead of explaining to me why we weren't doing wheat there, it just didn't really make sense on our property, but then it was this great asset and as myself, my older sisters went to school—and we weren't overly scholarly, so there was some funds needed—and the only option at that point was you don't have to liquidate the asset.

You can't like just pull cash out of it. At least it could at that point. And looking back, I didn't really think anything of it just because I wasn't overly involved. And now looking back, wow, that would have been awesome to still have. Like that would be a great asset for my parents to still own. That was a big investment at the time.

It worked out for what they needed, but there really wasn't a solution that would have worked because I know, you know, it's land, it's an emotional attachment to it. It's not like a car. I mean, it's not something you buy planning to sell or replace really. So for us, that was an example when Brian kept bugging me about this.

I was like, you know what, like there probably is something here out of all the ideas you've tried to hook me on. I think this one I can see so.

Justin McMenamy: That's a great origin story. I think, like many companies, it starts from an experience that you wish would have gone a different way. You see an opportunity in the market and say, “Man, if this product existed, this instance wouldn't have happened in the past.”

A couple of things that jump out as we go through that story. I think one, just for those that are listening to the podcast that aren't intimately familiar with agriculture, I think it might surprise many people to know that most farmers are not the owner of the land that they are farming on.

When you see a tractor in a field on the side of the highway, more often than not, that's not a field that farmer owns. What are some of the reasons, for those that aren't familiar with the industry, what are some of the reasons for such high non-landlord farming? 

Brian Kearney: Yeah, that was even interesting growing up around here. I didn't know that. And if you're not a farmer, I don't think you do know it because farmers will not talk about how much they own. They rarely want to talk about how much they rent. And they will not talk about what they own. It's kind of just standard. So yeah, I had no idea until I got into the industry, but I would say really the main reasons for that is it's a really, really expensive asset.

You're talking a small farm, 40 acres in this area is 650, $700,000. And you have to put 40% down at the bank. I mean, if you had to buy a house and you had to put 40% down, how many people in the U.S. would actually own a house? Probably almost none. Or if you had, when you were buying a business, you had to put 40% down.

Who can do that? Usually it's 10% down even to buy a business, but farm grounds, just a little different. So I'd say that's part of it. And then the other part of it is when people retire, they pass it on to their heirs and then the heirs might hold it for a while, often they don't, and often they want to sell, but you might have six people that own that 80 acres.

And that makes it kind of complex because even if one person wants to buy, if five say no, or one person wants to sell, five say, no farmer can't buy it. So that's where with our model, it's kind of able to work in that situation. Maybe not five don't want to sell, but if two want to sell and four don't, great.

We'll help you buy out those two. We'll figure something out so those four can keep it. So that, I think, maybe we kind of knew, but it didn't really hit us until we started having conversations with farmers. 

Justin McMenamy: Yeah. There's a lot of land that sits in a trust and it may be your grandmother's trust and maybe your great grandfather's trust.

You may be a second or third generation heir of the owner of the land, but the land is actually owned by six or seven trustees. And in that instance, you have relationship with the landowner, but you are tenant farming in that situation. There's also remote or absentee landlords that have invested in agriculture for the land purposes, but aren't seeking to actually grow the crop, aren't actually seeking to cultivate the crop.

And so they're looking for a farmer or a grower to come and grow the crop for them in that instance. Another question that I did. As you guys are describing the scenario, what are your backgrounds that–you guys are talking about financing, you guys are talking about agriculture, ownership structures.

What are the things that in your background led you to see this solution for the industry? 

Marc Hartness: Obviously just growing up like ag adjacent in the rural community. You're always going to hear about it, whether you're just hearing the complaints, the diner or what, you're going to hear things like that. And I remember just growing up, we'd have friends being, “You want to come right in the combines?”

Yeah. And then you just, you start picking up things like that. In terms like this solution, I didn't see it at first. That's where I think Brian and I balance out really well. Brian can see 10 years best case scenario. And I'm like, I don't see it at all, man. And so then we have to sit down and like kind of back me into it.

Like, “Okay, yeah, like this is where I see it going.” And I'm like, “Well, I don't see any steps.” And so we have to kind of like back through it. And so he finally got me to the point where it's like, “We could just do this.” I'm like, “Well, no one else is doing it. Why would this work?” Just, to me, this is such a long industry.

Like these are family, this has been, like, this is probably the first industry you'll think about it. And I'm like, there's nothing we're doing is like new in the sense of the tools we're taking advantage of to do this. So to me, it was almost like, this is too apparent. There has to be something I'm missing.

And Brian did a good job of kind of like, I wouldn't say prodding, more like shoving me to be like, “No, like we can figure this out.” And my background is investigations and risk management. I did a little bit of real estate assessment and so like the risk manager side of me is like, “Okay, like how, why? Is there a risk here that someone else saw and we're just oblivious to it. What are we missing?”

And slowly, over the last couple of years and really in the last nine months, 10 months, sat down, started talking to attorneys, farmers. It's like, why wouldn't this work? Like you're half done. You mentioned earlier, you're doing this with your siblings or your family already. There is split ownership now, why couldn't we standardize that in a way that we can make it work for everyone and help people at the same time, not because it's easier to split with your brother and your dad, but do it in a way that whoever's actually on farm can have control.

And the other party can just have that interest that they wanted without it coming at the expense of you being on the farm. I don't know. That's probably a bad answer, but I don't know. I think Brian should have started because he really, I mean, like he threw the finish line up and then was like, “I think we can do this.” And I was like, “I don't know where we're going yet.”

Brian Kearney: Yeah. And I guess that's part of how we balance each other out too. So my background is all sales, his is all risk and making sure commit to something that we cannot actually deliver as salespeople are known to do. So, yeah, my background, tactically, and how we kind of have this blend, I think, of finance and ag and all of that is I was actually a financial advisor right out of college, did not like it at all, great people I worked with, one of the better organizations, I think, in that space, they actually really do care about their clients, they really care about the communities, but the more I researched, I'm like, “I don't think that you should be doing anything fancy.” Like literally just by VOO, like that should be your stock allocation.

But again, that's not maybe the best thing for a financial advisor to say, even if it is the truth. So I was pretty receptive into moving into other industries, got poached into the ag tech world. It's kind of a blend of finance and farm management and agriculture. I'm like, “Ooh, that's….” I remember thinking I wanted to be a farmer and then realizing it was impossible because I don't have 5 million dollars burning a hole in my pocket to build out an operation.

And if I did, I could probably make more money living on the interest of that 5 million dollars in farming. So I'm like, “Well, this doesn't make a whole lot of sense.” And that's probably where the seed got planted. I would say. 

Justin McMenamy: Yeah, it's really interesting. I think whether a corporation or organization is two people or 2,000 people, there's always a very important aspect of being balanced and no one person by themselves can be balanced in the sense that they have all perspectives. And so it's really interesting that even you guys, as you get started here, you've got someone that's like, “Go, go, go, go, go,” Brian, from a sales background. And Mark, for your tendency is to say, “Well, let's talk about this. Let's figure out what's broken. Let's figure out who else has hiked this mountain before and decided it wasn't worth keep going.”

And so that's a really, I'm guessing that makes for some very interesting conversations. Where should we go? How. Fast should we go? How much risk should we take along the way? I'm guessing that's a good, healthy, hopefully healthy conversations that you guys end up in. 

Brian Kearney: Yeah. Yeah. I mean, we've been friends for two decades basically, so we know how to work with each other and maybe say things a little bit blunter to each other that probably we'd both get really mad at other people if they did it, but it's kinda like, I can't remember that parable about Irish siblings and how they fight so much it's, but you know, if someone else fights my sibling, like absolutely not. And I think that's kind of how our relationship is.

We fight a lot, but it's like, no, no, no, no. Like at the end of the day, so that's been helpful, I think, with the startup.

Justin McMenamy: That's great. I want to focus in for a moment and. Let's think about an actual farm. Let's think about an actual operation. How does Farmland Stock Exchange help an actual operation?

Describe the sequence of events that is that ideal scenario that Farmland Stock Exchange really serves. 

Brian Kearney: I think the ideal scenario is one of our farmers comes to us and, “Hey, I've been renting this farm for 40 years. I was renting it from this person's grandpa or my dad was renting it from their grandpa. And it's been here. It's not our land technically, but you know, they grew up working it.” I said, the heirs came to us, one wants to sell one dozen. And what they said is, “We want you to have the first shot, like you have a relationship with our family, they really care about their farmer, but at the end of the day,” they're like, “this 60,000 a year split five ways or whatever it is, or 20,000 split two ways to…” Like, “It doesn't move the needle for us. At the end of the day, not going to help us as much as selling part of this farm. And we need that to pay off our student loans. We need that to buy a house. We need that to build our lives.” But the farmer still needs that. And that's when they can come to us and say, “Hey, I can't put a 40% down payment on this 80 acres. That's $500,000. I can't take out of my operation, but I can put down $50,000. I can put down 10% of that and work with you guys to bring in investors or even better, keep one of those family members there.” Because, again, that's the legacy we're trying to build. We're trying to keep those ties because the more we have ties with rural America to people living in New York, Chicago, L.A., the stronger our country is going to be overall.

And if that tie, if their only tie is that farmer that they know is treating that land right, that farmer that they know really cares about them, cared about their grandpa, that's a way to kind of combat some of this divisiveness that we've got, I don't know, and I think that got a little too pie in the sky, maybe, but that is kind of the ideal situation.

Justin McMenamy: You're the visionary, my man, you gotta take us there. So I do want to dig into that just a little bit more, Brian. So you described a couple players in this transaction. There is a landlord, which may have some interested participants, meaning that they live close to the land or they're near the property, then there may be other landowners in the trust or brothers, sisters, nieces, nephews that live a distance away, aren't nearly as connected to it, have financial needs. And there comes this point where it's like some of us really want to transact. Some of us really want to transact the land, then there's a grower who has been on the ground, has been renting the ground sometimes.

And you mentioned it, I've heard it multiple times. Two generations of renting this ground, sometimes three generations of renting this ground. And so what Farmland Stock Exchange, then correct me where I misstep, what that does is it allows for a partial transaction, or it allows to transact a fraction of the asset.

If the asset is 80 acres, if the asset is 300 acres. And by doing so, the land owners that want to exit are able to exit. The grower is able to enter into the ownership category without having to acquire millions of dollars to buy the property. And then I think you mentioned a third party, which could be someone from outside agriculture who wants to add money into this transaction as well because of the interest in land as, you know, they're not making more land as an asset, things of those natures. How do you manage all of the interests and backgrounds and relationships in a transaction of that nature? 

Brian Kearney: That part's brutal, especially because Mark talked about it a little bit earlier, farm ground is so emotional. And if you're not in the industry and you don't understand the asset, it truly is unlike any other asset I've ever seen. Maybe someone who built a small business for their entire life is almost as emotional as ground, but it's still not the same way. It's something you kind of have to tread carefully because it can destroy families if it's handled incorrectly.

And it does all the time. It can also build up families if it's handled correctly. So how do we manage that carefully? I don't know, Mark, what are your thoughts on that? 

Marc Hartness: I mean, it's still a handshake business. It's still, it's a super manual process. It's talking to all parties. You got to understand what they want to get out of the transaction.

It's not something where you can come in and just like hard sell. Like this is just such a good deal. You're going to do it. ‘Cause yeah, the land is generational. They didn't just get this land. They've had it. And I think that's where the sweet spot is with the landowner retaining 49% because it's like, “Look, you probably do need the liquidity out of this.” You have that emotional attachment, right? It's been in your land for generations. You probably know when you got it. There's probably a photo of day one. So with this, you can kind of reap the rewards of what the prior generations did by investing in that land while still holding on to it. And you're not just open market selling, you're giving it to a trusted partner you've been in a partnership with them for probably years. So you've probably plowed your grandparents' driveway. There's some connection there. And with this, you can kind of reap the benefits for you and your family now. And also that can set them up too because then it's a super liquid asset.

It really is. And that's the hard part of it. It's keep it or you lose it. And so with this, you can actually kind of see the light at the end of the tunnel and still hang on to it. So that partnership with that farmer still works together in a sense of you're still stewarding my grandparents' land.

And I think that helps. But again, if they're not interested, it's kind of a non-starter than just you're trying to buy my land and I'm not interested. So it really is trying to marry the interests because it's always in the farmer's best interest to have control and have that equity, you know, the rug can't be pulled no matter what happens.

So it's really sitting down, shaking hands, driving on the back roads. And just seeing this, is this an interest? And I think that's, we just want to be a really good option. And I think we are a good option for most of these situations. Obviously, if you want your hands completely free, that's one thing. And with this, it is, it becomes passive, but it's just trying to identify what are they looking to get out of it and trying to marry that with the farmer that they've been working with. 

Justin McMenamy: So really some, the landowner or the land that they're one owner does want to have, or some fraction of the ownership wants to have a transaction event, but we aren't going to auction. We aren't sending this to the paddle at the auction.

That is the space where Farmland Stock Exchange steps in is where you have some component of emotion, financial, history, proximity that says, “I'm not ready to sell,” but another part of the ownership that says, “but I need some cash for A, B, C, and D.” And that's a huge part of the industry. Don't get me wrong, but that's really, that's the difference between just send it to auction. Is that right? 

Brian Kearney: Yeah, that's exactly right. When you send it to auction, you're–trying to think exactly how I want to put this. Well, A, you're kind of rolling the dice because it can be mismanaged and it can be sold under. That happens all the time, but also you can bring it to auction. And if it just goes for top dollar, that also might not be the best thing for that asset, if you actually care about it long term.

Justin McMenamy: Sure. Because you don't have control, you don't have control over who throws the paddle last. Whereas in an exchange situation, you are vetting, you're selecting not just who, but at what percentage various owners step into the future ownership of the property.

Brian Kearney: Yes, that's exactly it. And some operations, some farming operations, they look at an acquisition as just a way to spread equipment costs ‘cause equipment is another thing that we're not talking about here. That's also pretty expensive. I think land is still a bigger issue by far, but equipment is expensive and they might just be trying to spread it out over more acres.

And that's why they're paying such a high price, not because each individual farm will cash flow. And I think that's dangerous for the industry. We want every farm that we do to darn near cashflow on 4-dollar corn, which means that some years they'll lose a little money, some years they'll make a little bit of money, but we want it to be really close because if you're buying farms, subsidizing from other farms, that's really dangerous.

That's something that can turn against you really quickly and I shouldn't speak too far out of turn because a lot of farmers are doing it really well. They built great operations, but there's just as many that have gone under. It's kind of like in the startup world, but the survivorship bias, we see the ones that works for them, but that doesn't mean it's the best way to operate.

So that's a little difference there as well, I would say, we want each of ours to actually cashflow if that makes sense.

Justin McMenamy: Yeah, absolutely. Mark, you had mentioned earlier that there are others that have tried to solve a similar problem. And as you were, and Brian were considering Farmland Stock Exchange, you said there's certain aspects that hadn't worked in the past.

Without getting into the details of other people's products and other people's companies, what are some of the aspects that really are unique to how farmland stock exchange approaches the customer and the problem that differentiate against what others have tried to do to solve this fractional ownership problem?

Marc Hartness:  I would say fractional ownership opportunity is the better way to say, the fractional ownership opportunity, we're a farmer first and we're an equity play. it's more of a true partnership. The most important factor for us when we're looking at acquisition or kind of like the secession play is the farmer. They're the best network we can get, they're going to know their local market better than we ever will.

They know who the hands they’re shaking, like they know when stuff's coming up. I think that's the difference because we're not ever competing with farmers. They're like our secret weapon. If you want to buy ground and it'd be like below market, you need it to be talking to farmers because most of the time before it goes to the auction, someone was offered it.

Those conversations are being had and it's almost always comes down to timing. It's like, “Well, I just bought ground last year.” And like Brian said, 40% down, that's just, “I can't, that's a big cash outlay this year. I can't risk it.” And we kind of remove, we don't remove it. We lessen the risk of maybe consecutive years of the purchase when they normally wouldn't with that 10% down.

And because they're not going to an option or potentially the profit and that grounds being bit out of it, because of something like you guys mentioned earlier, someone's trying to spread risk or just get more acres, just no matter what, that allows us to be one, super selective and how we look at these.

And it allows us to kind of have an insider look because when you're talking to them, it's probably worth this. This is where I buy it for this. I can make money and I can feel good about it. Even if it's a little more cash than I planned on, because I just bought that 80 last year, this makes sense.

And I think that's kind of our secret weapon is using them as our deal sourcing and our networking. I think that's our differentiation between the other plays where they start when it's in the market. And that's, I think you're late to the game if that's when you're starting to look at these deals, you're already behind because there's always a BTO in the area that goes the auction.

If they're interested, they're going to be there and it might not go the way you want, or it might not go for the price it really should. So I think our, that's our main difference is we start from the farmer and we work backwards. And so we'll have that partnership, even if it's not this year, next year, because they know the ground.

They know when it's going to come or they have a good idea and they know the one's worth buying. So I think that's our main difference.

Justin McMenamy: Does Farmland Stock Exchange take shares in some of these transactions? Or are you guys more of a broker, an agent for the transaction? 

Brian Kearney: Yeah, no, that's a great question. So we're the managing member of the LLC, and we don't take shares in the farm today just because we're nine months old and we need the cash flow, to be honest, 

Justin McMenamy: I thought that was a big pile of cash sitting behind you, Brian. Sorry, I miscalculated that. 

Brian Kearney: I wish, yeah. Down the road, that is the goal. The goal is, “Hey, if you want to waive your fee and we'll take some of the shares. Great.” That's very interesting to us longterm because it's a good asset. Right now, we need the cash flow. So no, it's cash, but we are the managing member of the LLC. So we're able to help a little bit there. And I'll just kind of say like tactically how we get paid as the farmer pays us acquisition fee and the investors pay us an acquisition fee.

And then on the fund, there's an asset management fee. So for the farm where, you know, “Hey, we don't actually need you managing this. Like it's between two brothers and it's 51-49.” We get paid once and that's it. But if we need to help them market the grain, that's when we continue to get paid. So it depends on what the client needs at that point. And the farmer only pays us once regardless. 

Justin McMenamy: So you guys do get involved as needed in the marketing of the grain, also placing a grower on the land if needed, or? 

Brian Kearney: Yes, if needed.

Justin McMenamy: Yeah. It's a far less likely scenario.

Brian Kearney: Yeah. Yeah. Our preference is always to stay with the farmer that's there, but things happen and you do have to protect the investors as well. It's pretty minimal for all of our farming listeners. It's, you have to follow ag extension guidelines. It's well, check, everyone does that anyways. And you have to be within 10 percent of the county average yield accounting for soil type. And I have never talked to a farmer who didn't think they're going to be county average yield because the numbers are just terrible, but that's the barometer we have.

So that's what they have to do or else they will not be removed. But when we're going to acquire it, that's where our first preference is always going to be that farmer who's already on it. And if they're like, “You know what? No, I'm 62. I'm not taking on more acreage. I'm done.” We'll say, “Okay, well, who would you trust to take this over?” And that's how we go there ‘cause they'll know the farmer who that would be a good fit in their operation. 

Justin McMenamy: Another question. So you talk about setting up an LLC. You've talked about shares in that LLC in general is the thought that there is a one day alignment and then maybe years and years and years in the future, there may be some shifting of, say, of shares. For lack of a better term, how liquid are these LLCs?

Not that they're on some exchange that people are buying them sight unseen, but how much movement of shares do you anticipate inside of a given farm or inside of a given LLC? 

Brian Kearney: Yeah, no, and I'm smiling because our initial idea was having it basically on an exchange where it is fully liquid. And then we realized that just didn't, it just wasn't good for this asset.

Justin McMenamy: And it doesn't serve us some emotions either. 

Brian Kearney: No, it just doesn't work well. But the liquidity itself, it's an illiquid asset, and we're not making it liquid with this. We're making it maybe semi liquid. Maybe it's a little bit more liquid. But the goal is that you hold it for a long time, because that is kind of the best holding period for farm ground is 30, 40, 50 years.

But, we know that's not likely. There are a lot of people who are going to have to sell sliver here or there. And how it works is the farmer on there's the operator gets first right. So if an investor wants to sell first or the landlord wants to sell 5 percent of their 49%, they go to the farmer first and say, “Hey, for these five acres, I need x per acre”. The farmer either says yes or no.

And then if they say yes, they buy it. Now they have 56%. If they say no, that's when we go to the other members of the LLC and say, “Do any of you want that same term?” If they say no, it's okay, that's when we find an outside investor to buy them out. So those are kind of the three opportunities. And then if the farmer wants to buy the whole thing, they can make an offer at any time.

And if half of the investors say yes, it's theirs. That's just like a stock offering if you're going to take it private. I guess that's maybe the only thing that stayed from our Farmland Stock Exchange idea. 

Justin McMenamy: I like how that's set up, right? You guys said farmer first. You guys are very focused on keeping people that are operating on the ground, giving them the opportunity to grow, not just their operation, but grow their wealth, grow their land.

And so those terms inside of every LLC actually do give the operator first right of refusal. They're the first receiver. It's very much said in a way that it defaults to a grower that wants to expand their operation. That's really helpful for a company that's declaring, “Hey, we want to help out growers. We want to help out people.” I appreciate hearing it that way. 

You mentioned outside investors. Having spent a decade inside of agriculture, there's a lot of opinions about quote unquote the outside, right? And depending on who you're talking to, the outside might be six miles away, it might be 2,000 miles away, is how big the outside is.

Talk to me about how you vet and pair what we're going to call outside investors. And just for the sake of this conversation, let's define outside investors as someone who is not even near ag, someone who is, they didn't grow up on a farm. They don't own assets in the ag space, but they view agriculture, they view land ownership, to your point, as a very strong asset, and they want to add that to their portfolio. What is that process for a person to sign up? What is that process to vet? And what is that process to pair them with a grower? 

Brian Kearney: Yeah. So they all have to be accredited at this point. You have to be an accredited investor and a U.S. citizen are the two things that you have to be. That's kind of non-negotiable. There's a lot of states where you can't even buy if you're not a U.S. citizen and accredited investor. That's because of the SEC regulations we have to go through for other than that, we look at it as someone who's kind of built their wealth already.

And they're looking at this as a way to either back farmers, and or park money for their grandkids. They're saying, “Hey, I've made my money. I'm trying to preserve it now in an asset that's stable. That's my goal. I'm not looking for private equity returns. I'm not buying multifamily to get 20% cash returns every year. I want something that's going to be here in 200 years.” And ground will be like farm ground will be particularly in the high states. Yeah. Mark, do you have anything to add in? 

Marc Hartness: Yeah, kind of what Brian said, it's kind of level setting, making sure that they don't see it as in three years, you know, we're flipping this.

I mean, you can try, don't recommend it. We're not going to be like, “Oh, absolutely not.” But it is like level setting market education, like knowing what you're getting into with this asset and where the real value with the asset is. ‘Cause like Brian said, it's not, I wouldn't call it the sexiest investment by any means, right? Just look at just the raw returns.

Justin McMenamy: Oh, you haven't seen a flat black and beautiful Iowa 80. 

Marc Hartness: True. True. They look at the returns compared to like multifamily or something. They are, it's not impressive in just a number of cents. So it's something, they have to understand kind of tangible side of it, and the land ownership, what goes into that, what that's being used for. So it's vetting in a sense of like setting expectations and knowing the liquid nature of the asset. It's not like a turn and burn. So it's like if you think in 10 months, you want to back out, this is probably not a good fit for you.

Brian Kearney: It actually is a really impressive investment long term. People don't talk about that. They don't talk about the actual appreciation. Even people in the industry I've talked to, they're like, “Oh, it's just, it's, I don't know. It's not that great of an investment anymore at 3% cash yields.”

I'm like, “Well, yeah, but they've got six to 9% appreciation. Like it's beat the S&P 500 over any 14 year period.” Maybe the current one, just because things are a little weird right now in the stock market, but let's wait a couple of years and see it's beat the S&P 500. So it's like, it's kind of hard to give that explanation ‘cause like, ah, it's real estate, but most real estate doesn't appreciate how farm ground does. It might appreciate some, maybe one or 2% a year, unless you got lucky and bought in, you know, well, maybe not LA, certain parts of the country, say you're in Manhattan, okay, you bought in Manhattan 40 years ago, great investment, but you bought a lot of towns and that's not the case. So farm ground is just different and it's hard to explain. 

Justin McMenamy: Do you find that growers or landowners want to know the outside investor or understand where that money's coming from? How do you, or because of the way the terms of the LLC are set up and they have first right of refusal and they have all of the advantages in ownership transactions, it's not as concerning. 

How does that emotion from someone that's owned or operated taking investment from someone they don't know? How does that conversation typically go? 

Marc Hartness: I mean, obviously we haven't talked to every farmer we've talked to a lot. But based on like the way we're set up, haven't really seen much concern from farmers on it.

They're like, “Oh no, it's just like an equity partner. I have operational control unless they decide to rip acres out. I'm free to farm as I want,  just hitting these goals.” It's been more on the investor side, per se, because obviously we have those operational. It's all laid out. It's all agreed to. It's enforceable.

That's where more of the hang up is, especially those that have maybe been in this space or already buying farms. Even if they're not farmers, they probably know what they want or they look for, whether it's right or wrong. And that's kind of like, well, hey, now I gotta trust this guy out in Southeast Iowa, I don't know,” right?

“I'm in a partnership with them, but I don't know them.” That's been where I would say that concern that you mentioned comes from our farmer side. It's like, “Wait, I can just go farm there.” 

Justin McMenamy: Cash the check and do nothing  different. I'll take it.

Marc Hartness: Which was kind of surprising. I didn't really expect that. But honestly, end of the day there, yeah, as long as I know when I can close and when I can get in the field, let's roll. 

Justin McMenamy: So then let's flip the question for investors. How do you allay some of those investor concerns? 

Brian Kearney: I'll take that side on the investors, and it kind of does still get back to that emotion you were talking about earlier, where people who are already buying ground are emotional to it already, even if they're just looking at it as an investment.

I've talked to a few people who buy an 80 or 120 every single year, like clockwork. And I'm like, “Well, this is better. You're going to get better returns because your risk is spread out.” And they're like, “I don't care.” I'm like, “What? You're a finance person. You should care.” And they're like, “No, I just want to drive by it and say, ‘That's mine.’”

So that's the hard part with investors, I think. That, and then the organic conventional debate I think also makes it kind of hard sometimes because both sides, it's like a religion to both sides. And neither side can think anything good about the other side a lot of times. So it's like, yeah, I don't know.

Religion is the closest example I can think of where people just butt heads and don't want to like actually dive in. And some of that's changing. You are seeing some of that change on the farmer side. I don't know if you're seeing some of that change on the investor side always. There's still investors we talked to like, “I'll only do organic or regenerative because everything else is killing the earth.”

It's like, “Whoa, let's back up a little bit. I think that there can be bad practices. Sure. But that's with anything.” There's also conventional farmers who are really good stewards. So I think those two things make it a little hard and then we're new. I mean, we're nine months old. In five years, it'll be a lot easier to raise money because we'll have done 700 of these.

We'll have a bunch of assets under management and it'll be really easy. Right now it's just a little bit harder. 

Justin McMenamy: Yeah, I think the main way that it could go extremely sideways is if the investor shows up on the property with a deer tag and wants to go hunting. That's probably the one way that this could get out of hand really quickly as I think about the growers that I know and the operators that I know. 

I want to pivot just a little bit and talk about a startup. I mean, both of you guys are first time founders. You guys have some pedigree on your resume, working at places like Amazon and Edward Jones and state farm. Talk to me about the first eight, nine months of being founders. What are the things that have gone easier than you thought they would? If there are any of those, and then what are the things that have taken way more effort, way more energy, way more focused than you thought they would. 

Brian Kearney: What's that, I think it's a Marc Andreessen quote that founders have two emotions, either like sheer terror or ecstasy.

And that's pretty accurate. I don't know. Been a lot of terror, but I would say for me, what's been the best part is the farmer conversations. It was probably two months into starting this and I still don't know how this farmer actually heard of us. ‘Cause it was two months into the company, maybe three.

And I got an email, cold email out of the blue saying like, “Hey, this is what I need in my operation.” Lay up the exact words he said were along the lines of, “I stay awake at night wondering how I can keep this all together. And this might be a way I can do that.” It's like, wow, that is, it makes you feel really good.

Like we're actually doing something that's impactful. There's a lot of hard parts to that too. And I think it's kind of the opposite of what people told us. They're like, “Oh, raising money is easy. Getting farmers to trust you, that's really hard.” And maybe it's because of how we're structured where it's not really aggressive rents that farmers can't pay and that's maybe why it's harder to get investors because we're not charging 500-dollar cash rent, right? That shouldn't be the case right now. And that might be why farmers trust us too. Like, “Hey, we're in El Paso, Illinois, come by and get coffee.” Got a few farmers stopping by in 20 minutes.

And that trust is there. All those people we were talking to are out of New York or Chicago and money's easy to find there. But you say you're in Manhattan to a farmer, just immediate shutdown. So, I don't know. That's been interesting. What about you, Mark?

Marc Hartness: My wife says to stop describing it like this, but I always, I describe it as a super fun nightmare.

I have a lot of fun, but it's just, it's crazy. It's like, oh, here's this, this wind and I'm feeling really good about it. And then I was like, look over and there's 18 fires. It's like, “Oh, right. Okay.” Brian's point though, like my background, even real estate assessment, like I was raising property taxes for people, not from conversations.

Brian Kearney: In Alaska, where they love it. 

Marc Hartness: Yeah, in Alaska. Yeah, they love the government there. It's super fun. And then I did investigations, like fraud investigations. So it was never in the role of helping people. Then risk management, same thing. I was only called when something was going horribly wrong.

And even then when you fix it well, they're like, “Well, still, how'd this happen? I don't care about your fix.” And so it is fun to like kind of be in a role where I'm like, people are happy. Like I can have this conversation with you and it's a solution and it's like a win-win. And so that's a nice change of pace for me.

And that's been like, like Brian said, it's been the best part, like talking to a grower who, it's two brothers, one's off farm in California, one's on farm and then you split it up and it's still amicable, but it's like, how are we going to do this? And it's like, “Hang on, this is awesome. Yeah, we can help.”

So that's been the best part for me probably. It's been a shift from my prior careers, but yeah, otherwise all the little things going wrong and coming from giant organizations when there's a thousand people departments that handle those little things and then suddenly it's just me and Brian and that's an adjustment, but it's been fun, learning a lot. 

Justin McMenamy: What's next on the journey for Farmland Stock Exchange? What phase are you in? What are the next steps for you guys as you both get established and start moving forward or keep moving forward? 

Brian Kearney: It's a great question. I would say next steps is just operationalizing the legacy LLCs where, you know, someone inherits a farm and their first thought is call Farmland Stock Exchange and they can help my farmer get this.

That is what's next. That's what we're shooting for where we're the first call. It doesn't go to the auction block. And my broker friends listening, there'll be plenty of business for both of us, but that is our goal at the end of the day is get there to help that farmer buy it. And after that, I don't even know, you hear the problem of 10 to 15 years, 770 billion dollars of ground is changing hands.

And that has to happen because the landowner's 80. It does have to change hands. So, I don't know. It's kind of daunting sometimes to, if we can just solve that problem and never actually make a dent and we can build a company that has made so much money, but hasn't actually made a dent and that would, I mean, sure, that'd be great, because then we'd have some money for coffee and things like that at the office, but it still wouldn't feel very great if we didn't actually fix it. So it's what other options are there to help those farmers make that transition, keep stronger balance sheets. That's all kind of where we're thinking longterm talking about the like 10-year vision, like Mark was talking about.

How do we help balance sheets be strong in 10 years in this industry? We have our thoughts, but they're probably all wrong. We didn't, it's only been nine months and the product's completely different, but yeah. What about you, Mark? What do you think? What's next?

Marc Hartness: Kind of just echoing that, I think it's just, it's getting the scale to where we are another option.

We're another tool in the tool bag when these situations come up. We're not going to fit for all of them. We're not going to get to all of them, but just be that optionality that didn't exist before. Take advantage of those opportunities to help people. And that's the cool thing about this industry is people talk even if you're in a big competition with the neighbor, it's like trade secrets, you're still going to talk about things like that. And that's going to be how we scale and grow is by doing right by our farmers and our investors. And so to me, it's just, it's continuing to do that and building off of that and trying to get in front of the right people at the right time. And hopefully, our product is what they're looking for. 

Justin McMenamy: Absolutely. You guys are very much in category creation. This isn't just the launch of a product that has existed before, a launch of a product that others have done the hard work in front. You guys are having to cut the path.

And I think as we've talked here, you guys line up a lot with the emotional need and the financial need and the physical needs of the industry. So you've got that as a tailwind, but you're going to have to teach and you're going to have to teach and you're going to have to teach because as you mentioned, Brian, the day you find out that great aunt Iota passed and you're now the owner of 320 acres in a state you visited when you were a kid, there's only a few options in your mind. And it's an overwhelming decision. And to have the Farmland Stock Exchange be on the mind, or at least advisors saying, “You don't have to put it all on auction, or you don't have to be a remote landlord. There's another option in where you can take some equity out.”

And the man or woman that's been farming it since aunt Iota retired, since great uncle retired, can be part of that transaction. I think that's the work, right, is teaching and educating and bringing more understanding of this category to those that are in need. Brian, Mark, what are the best ways to get ahold of you for those that are listening to the podcast, whether it be an operator, whether it be a landowner or whether it be someone that says, “Man, I'm looking for a way to get into agriculture, but I don't have $600,000 and I don't know where the auction is to throw the paddle.” What's the best way to get a hold of you guys? 

Brian Kearney: Show notes. We'll have our emails in the show notes. Reach out there, go to farmlandstocks.com and I'll actually leave with kind of one point, if that's okay, like what you're talking about with category creation, it's true.

This is different than anything in the industry, but it's like using parts from all these different places that are all, they've been around for 30 years, just not in this way. It kind of reminds me of a book I was telling Mark about actually maybe last week, two weeks ago. It might have only been a few days ago, but startup time, but anyway, it is called The Box and it's about the shipping container.

And I was telling him like, yeah, this guy was a trucker who created the shipping container that we use in all of the boats. And it's like, that just seems so obvious that he's like, “Why are they unloading from my truck into the ship? Why don't they just pick up the bed and move it over?” But it seems obvious now. It was actually really hard for him to get that through because they had to change everything about the industry on those boats.

So it seems like it is easy and it's a better option for people, but you're right, that education is going to be hard. It's going to be a long push and that's why we have things like the podcast. That's why we have blog articles. That's why we'll meet with people on their farm or in their town to talk through this with them because you only get to make that decision once for 320 acres if you sell it. But if you put it through our system, that gives you time too. You don't have to wash your hands.

Justin McMenamy: That's great. Brian. Mark, as you and I, Brian, you and I have known each other for a while now, and we've talked about the Farmland Stock Exchange and what you guys are working on. I think one of the parts that I am most excited about, obviously, there's a lot of excitement in a lot of different directions.

What I'm most excited about is in many ways, lowering the barrier of entry for the next generation of farmers. You talk to these guys that are in their late twenties, early thirties, as you guys said, it's 2 million dollars, 3 million dollars, 4 million dollars to stand up an operation. Not just in equipment costs, but also in land acquisition.

And you can be a renter, but every day, every year, there's a chance that you have to go out of business because of landlord decisions or because of family dynamics. What you guys are offering is a lower barrier to entry that someone says, “I want to commit my life to growing a crop.” And this allows them to have a partial ownership of various pieces of ground so that they can go to bed at night knowing this is ground that I'm going to operate on for as long as I desire to. And as you said, there's a changeover. The average age of the row crop farmer in North America is 57 or 58 and inventions have made it a lot less burdensome to farm.

But you see these guys that are in their eighties and some of these guys in their eighties, they're still operating because they don't know who to pass it to.Their kids don't want to, there's a lot of family dynamics. And so of all the things that you guys are doing, that's the thing that I'm most excited about is encouraging and enabling and equipping that next generation to come in and continue the legacy of owning and operating a farm as a private citizen. Thanks so much, guys. This has been an awesome interview. It's been great to be a guest host on the podcast. 

Brian Kearney: No, thank you for doing it. We appreciate you jumping on. This would have been more awkward if it was just Mark and I talking about it around Mike. So I appreciate it. Thanks, Justin. 

Justin McMenamy: Absolutely.

And that’s a wrap on this episode of The Land Ledger. 

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Disclaimer: Brian Kearney is the CEO of the Farmland Stock Exchange. All opinions expressed by Brian and podcast guests are their own and do not necessarily reflect the views of Farmland Stock Exchange.

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