(Bloomberg) -- Owning farmland has proven one of the best investments in Brazil over the past decade. But only for Brazilians.

Foreign investors are prohibited from buying land directly and there are few publicly traded companies or funds that offer them exposure to the increase in value for farmland, especially in the country’s wealthy center-west region.

Now, a Sao Paulo-based investment firm is beginning to market a private equity-type fund for foreigners to access the asset for the first time, with a target of raising $150 million.

After gathering some money locally, AGBI will now look to attract global investors with planned feeder vehicles in the US, Europe and Middle East, according to Mario Lewandowski, director of new business. The fund targets a 10-year period but will return capital once the farms are improved and divested.

“We’re not speculators, we transform the land,” Lewandowski said in an interview. “That’s where the bulk of the value comes from.”

Over the past 20 years, land values in Brazil have increased on average about 6 percentage points more than inflation. AGBI’s first two funds had annual internal rates of return in US dollars of 5.75% and 8.73%, respectively, or more than 8 percentage points above inflation in reais.

And even when agricultural commodity prices fall — as they have in the past year — land retains its value, Lewandowski said.

Founded in 2012, AGBI acquires idle farms and converts them into productive acreage for agriculture, boosting their value. It has bought five farms and sold three in Mato Grosso state. The first was purchased in 2013 for 39 million reais ($7.2 million) and sold for 177 million reais in 2021. 

For the latest fund, which complies with green taxonomies and will produce carbon credits, more than 80 million reais have been raised within Brazil from wealthy investors including multifamily offices. Lewandowski is now heading out on a road show with plans to raise additional money globally.

Depending on how much is raised, AGBI will either dedicate all the resources to the current vehicle or start a new one.

While US-based investors are generally looking for financial returns, Europeans are more concerned with sustainability and some in the Middle East are interested in securing food supplies directly from the farms, Lewandowski said.

“There are large countries in the world that don’t have access to food and who had never looked at Brazil before.” he said. “Now they’re crazy about coming. They just need a more professional market.”

AGBI’s partners will also co-invest in the fund and secure Brazilian control, which is key for meeting legal requirements, Lewandowski said.

To find the right opportunities, AGBI is relying on a proprietary database of more than 1,100 farms, which tracks information including asking prices, land use and annual rainfall.

That’s how they found their two most recent farms that were acquired earlier this year for 104 million reais with a combined 5,606 hectares (13,853 acres). AGBI is currently choosing tenants, mostly small farmers, who’ll develop the land following practices established by the fund.

Part of the strategy includes buying in areas that have new highways and infrastructure close by and, in the case of the most recent farms, the presence of large global grain traders like Cargill.

Mario’s father, Luciano, is a founding partner of AGBI. He previously helped manage a portfolio at Global Logistics Properties and before that worked at Prosperitas Investimentos, GP Investimentos Imobiliarios and Rio Bravo Investimentos.

Gustavo Fonseca, a managing partner, previously worked at Risk Office.

Much of the capital for the first two funds was from family and friends as many investors were skeptical about the business model.

“The first time we fundraised back in 2012 everyone said, ‘You guys are crazy to invest in farm land,’” Lewandowski said. “The second time in 2015 people said, ‘It might work but I’ll only believe it with a longer track record.’ Now people are starting to believe in us.”

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