Kurt Cole has 700 cattle on his 8,000-acre farm in central Alberta, just four miles from where his great-grandfather homesteaded. He grows canola, wheat, oats, peas and corn—and, the way he sees it, he’s growing an investment that can help preserve the family farm.
“Taking in investors is a way to manage succession,” he says. “For a family farm to be successful, you need to keep growing as the family grows if you want to stay on the land.”
Agricultural investors don’t just pop up like seedlings, so Cole partnered with Area One Farms, a 12-year-old firm with some $700 million in assets under management that connects farmers with advisors, family offices and prospective investors.
“We’re Canada’s largest independent agricultural investment manager,” says Joelle Faulkner, the company’s founder and chief executive officer. “I grew up on a farm near London, Ont., and when my brother wanted to expand it, we wondered why people didn’t invest in agricultural land in a way that would benefit farmers and farming.”
Agricultural land should be for agriculture, not for shopping malls or suburban sprawl, she says. While not all farms are under development pressure, Ontario has been losing an estimated 319 acres per day to development in the last few years, according to the Ontario Federation of Agriculture.
Area One, which has 50 farm partnerships with a total of 180,000 acres in Alberta, Manitoba and Ontario, raises funds that investors buy into to form equity partnerships with the people who work the land. It’s raising a new $500-million fund, its fifth, between now and 2026 that will invest in Canadian row-crop and pasture farmland.
“The fund will invest in farms that provide low-risk, stable returns, and benefit from an established track record of recurring income, rising productivity and land value appreciation,” Faulkner says.
Area One’s partnerships are structured over 10 years. The farms are run as joint ventures; the farmers manage the farms and they can purchase additional land with the investors. After 10 years, the farmer can buy out Area One’s interest, or the partners can opt to continue or to sell to someone else.
“As a young farmer, our arrangement gives me access to capital, and I can save up to buy out later and not have the land disappear from under me,” says Dane Froese, who grows canola and soybeans in southern Manitoba, just north of the U.S. border. “It’s a good alternative to my other options, which would be to go to a lender or dip into a line of credit.”
He says he likes being able to make operational decisions on matters such as fertilizer use or soil conservation. “They do look at our budgets, but Area One is not a hedge fund driven by suits in a corporate office,” Froese says.
Marshall McAlister, president and portfolio manager of North Road Investment Counsel in Edmonton, says that investing in farms for farming’s sake—as operational businesses rather than mere land plays—is worth considering because of its long-term stability.
“It doesn’t bring an awesome rate of return, but it does have an attractive rate of return. One thing we like about farmland is that it doesn’t operate as an investment anything like the stock or bond markets do,” he says.
“We like the equity partnership model because it gives us a diversified exposure to many farms, geographically and according to their operations, what they grow and raise. It’s something that would be hard to do if you were a family office without a specialist manager.”
People are often surprised to discover that farmland has actually outperformed the TSX and S&P since the turn of the century
Kent Wilmore
McAlister also says he likes the environmental and social benefits that investing in farmland brings. “We’re providing capital that farmers can use to make the land better,” he adds.
Area One say its staff of 16, who have both farming and investment backgrounds, provide mentorship and advice on conservation and sustainability practices such as no-till farming.
“We’re also unlocking value for the future,” McAlister adds. “If farmland is protected and conserved, it can also increase in value.”
“People are often surprised to discover that farmland has actually outperformed both the TSX and the S&P indexes since the turn of this century, significantly,” says Kent Wilmore, founder and chief executive officer of AGinvest Farmland Properties Canada in Chatham, Ont.
Indeed, Canadian farmland delivered a 9.2 per cent annualized return between 2003 and 2022, compared with about eight per cent for stocks and about three per cent for bonds, according to data from Bloomberg and Farm Credit Canada (FCC). And the average value of cultivated land in Canada rose by 11.3 per cent in 2023.
Unlike Area One, Wilmore’s AGinvest operates on a sale-and-leaseback model, in which investors buy the farmland and lease it back to the farmer to operate for an agreed period of time.
“We intentionally don’t buy farms in areas that are pressured by urban sprawl to be redeveloped,” Wilmore says. “We buy farms for the purpose of farming; we provide investors with an investment alternative and we provide farmers with liquidity.”
The farmers have a right of first refusal to buy back the land at the end of the lease, he adds. AGinvest has bought about 7,000 acres of farmland between Windsor and Montreal.
With climate change increasingly showing its ugly presence, the value of viable farming is likely to grow in Canada, Wilmore says.
“We’re tied together with farmers,” he adds, “in protecting the top 12 inches of the investment—the soil.”
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