When you think of Eastside private equity and investment firms, you might think of companies looking for the next big cloud computing, AI, or SaaS startup. For Greg Richards, founder and managing director of Bellevue-based Arable Capital Partners, his interests are lo-tech. He’s looking for the next agriculture investment.
According to the California Department of Food & Agriculture, the state’s ranches and farms posted more than $50 billion in sales in 2017, an increase of 6 percent compared to 2016. For Richards, that was one reason to take his experience in entrepreneurship, finance, private equity, and venture capital and launch Arable Capital Partners three years ago.
“I think it’s an exciting time for agriculture,” Richards, 46, explained. “It’s under the radar.”
That sentiment is shared by the Washington State Investment Board (WSIB) — the organization that manages retirement funds for public employees such as firefighters, judges, law enforcement officers, and teachers. In June 2017, the WSIB committed $300 million to Arable Capital Partners.
The Bellevue-based company, in turn, spent most of last year acquiring a half-dozen companies — four irrigation businesses and two businesses that slice fruits and vegetables for distribution to stores, schools, and even amusement parks — based in Bakersfield, Lodi, Oxnard, and Stockton — cities that comprise the agricultural hub of California’s Central Valley and San Joaquin Valley.
“So many private equity firms will tell you, ‘We invest in all industries, so, sure, we do agriculture,’” explained Richards. “But I don’t see anyone out there set up to do agriculture (specifically). We said, ‘Let’s be really good at agriculture.’ We are a young team that has a lot of runway left in us. This could be very successful, and we believe in it.”
Born and raised in Bellevue, Richards studied finance and accounting at the Foster School of Business at the University of Washington, earning a bachelor’s degree in business administration, then working as a certified public accountant at Deloitte & Touche in Seattle before he moved to San Francisco, where he worked as an analyst at Lehman Brothers, and in business development for a couple tech industry startups.
In 2001, he moved back to the Puget Sound region and, looking for a new business opportunity, learned of a small Seattle company that was for sale. That company, Rung Industries, manufactured and sold equipment used in sand and gravel pits and quarries. Inspired by other entrepreneurs in his family, including his father, Bruce, who owned an insurance company in downtown Seattle, Richards acquired Rung Industries in 2001.
“I borrowed everything I could and put every penny I had into it,” Richards recalled. He was 28 years old at the time, the youngest employee at Rung Industries, but also its owner. “It was not an industry I knew anything about. I don’t know if it was because I was young — I guess naïve is the friendly word to use — but I didn’t know any better. I just thought, ‘Hey, you know. If this doesn’t work, then I will go get a real job.’”
Richards learned every aspect of the business, even working on the assembly line and driving a delivery truck on occasion.
Nine years later, he sold the business and considered his next career move.
In 2011, he met Mike Frei, agronomist and certified crop consultant, and Lily Guse, an accounting professional, and his interest in agriculture investment was seeded.
Farmland investing appealed to Richards for three reasons.
First, farmland, in general, was a secure asset where the value of the land appreciated and generated annual income through rent to a local farmer, according to Richards.
Second, a growing population meant increasing demand for food, and the limits on farmland and good water meant the demand increasingly exceeded the supply.
Finally, the value of farmland in the Pacific Northwest was undervalued compared to other parts of the country, added Richards.
Richards, Frei, and Guse, along with other business partners, co-founded HarvestWest Investments and pitched their theory of Pacific Northwest farmland opportunities to investors. In the end, HarvestWest Investments raised approximately $36 million and acquired more than 13,000 acres of farmland in Idaho, Oregon, and Washington between 2011 and 2016.
That experience spurred Richards to create Arable Capital Partners in 2016. The six-member team includes a unique blend of finance, agriculture, and operations industry experts who can crunch the numbers as well as speak the language of farmers operating legacy, family-owned agriculture businesses.
Instead of HarvestWest Investments’ model of buying agriculture land, Arable Capital Partners is more interested in acquiring agriculture businesses.
Richards and his team aren’t above driving the dusty roads of California’s Central Valley to scout investment prospects (Arable Capital Partners also has an office in Bakersfield). In person, Richards is easygoing, candid, and personable — characteristics that go far when meeting farmers to discuss business opportunities.
One of his closest business partners, Arable Capital Partners managing director Derek Yurosek, has a family history in California’s Central Valley farming and agriculture that dates back several generations.
“The person who doesn’t like private equity firms, he doesn’t like them because (the private equity investor) flies in from New York, shows up in a suit, maybe he has a big belt on to look like he’s a cowboy, and talks about how he’s going to take this company to the next level and use leverage to financially re-engineer the production facility,” Richards said. “My business partner, Derek — his family’s name is known throughout the Central Valley. He has a lot of connections. I think (it’s about) personal relationships, personal involvement. And a lot of personal meetings that lead to an opportunity.”
As for the next crop of investment opportunities, Richards and his team are more focused on catching their breath than raising more investment capital.
“We did six transactions last year,” he added. “That’s a crazy number. If we did two deals in a year, that would be a lot. Now we need to focus on managing our portfolio.”