September 14, 2021

By Lynda Kiernan-Stone, Global AgInvesting Media

Since its formal launch in mid-2020, Calgary-based Veripath Farmland Partners (Veripath) has rapidly grown, today reaching approximately $170 million AUM. The latest addition to its portfolio came in the form of the recent acquisition of 10,500 contiguous acres of farmland in Alberta, Canada, bringing total portfolio acreage to about 90,000 acres. 

Veripath’s highly experienced team offers funds that incorporate two features that are unique for the Canadian market, Stephen Johnston, director, Veripath, told GAI News. The first is an evergreen structure giving their investors control over exactly how long they wish to continue being deployed in the fund, as opposed to a traditional private equity structure wherein the life of the fund is predetermined. This enables long-term investors, such as family offices or pensions and shorter-term investors such as retail, to gain access to farmland that they seek through the same vehicle.

The second feature that Johnston outlined is a dual fund structure that divided Canada into two distinct geographies (R Fund invests only in Saskatchewan and Manitoba, and UR Fund invests in the rest of the country) to comply with ownership regulations that vary by province. This structure streamlines, simplifies, and ensures compliance for all types of investors. 

For these funds, in order to avoid short-term operational volatility from impacting land returns, Veripath’s strategy takes a non-operated approach. Johnston explained that all portfolio assets are leased to farm operators under long-term agreements that include full up-front cash payment in the spring (mitigating default risk), and escalations, without involving crop sharing or profit sharing, or the like.

However, non-operated does not mean non-monitored; Veripath employs a proprietary land management system that leverages an in-house software platform combined with satellite monitoring and AI crop analysis to ensure the manifestation of Veripath’s belief that: “Properly managed farmland is a unique non-depleting, commodity producing capital asset…”

In Canadian Farmland Portfolio Construction – Adjusting For Provincial Variations in Sharpe Ratios, an article written by Johnston published in GAI News in August 2021, he noted, “Canadian row-crop farmland investments have had Sharpe ratios materially higher than publicly traded equities and bonds over the last 30 years – meaning they produced much higher average returns over the risk-free rate per unit of total risk.”

As evidence of Veripath’s success in its prudent management strategy of leasing out their assets, over the past few decades the Sharpe ratio of owning and operating farmland has been lower than those for purely owning farmland.

In Canada, the farmland market is highly liquid, explained Johnston, with yearly turnover in excess of $20 billion – or about 50 percent the size of the Canadian commercial real estate market. In total, the country’s farmland market consists of 150 million acres, of which, 80 percent is located in the three western provinces of Alberta, Manitoba, and Saskatchewan. There is a lot of opportunity out there. 

In addition, Johnston noted in his GAI News article Maximizing The Capture of Returns, Carbon, and Duration in Canadian Row Crop Land Investments published in March 2021, that the Canadian market offers a productivity adjusted pricing advantage, a Sharpe ratio advantage, and inflation/stagflation advantage, a carbon sequestration advantage, and a duration and compliance advantage.

Working within such a dynamic market, Johnston told GAI News that Veripath typically has around $200 million in deal flow in the pipeline on a constant basis, which usually turns over every 30-60 days, depending on the time of year. 

In regard to this latest addition to the portfolio, production is expected to align with the overall row crop output and seeded acre ratios broadly seen across Alberta. Here the key crops are wheat, pulses, barley, and canola, along with the less popular crops of mustard and flax – all managed in various annual rotations. For a more in-depth overview of this production, Veripath’s portfolio crop map can be seen here.

Looking ahead, Veripath has a goal in place to reach $1 billion in AUM within the next 36-48 months, reflecting an estimated portfolio of between 300,000-400,000 acres. Based on how rapidly they have grown since their 2020 launch, their substantial pipeline of transactional deals, and the Canadian farmland ecosystem, there is no doubt of them achieving this goal.

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com.