September 20, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

Calgary-based Veripath Farmland Partners’ (Veripath) R fund has made its second acquisition in as many months, acquiring an additional 1,600 acres of farmland in Alberta to bring total acres under management to 95,000. 

Launched in mid-2020 amid a global pandemic, Veripath has rapidly grown, operating on the conviction that global demand for agricultural products, including food, feed, fiber, and fuel, make farmland – particularly Canadian farmland with compelling valuation discounts and an ability to hedge both inflation and stagflation – is a prime long-term investment.

This opportunity is approached through funds that incorporate two features that are unique for the Canadian market, Stephen Johnston, director, Veripath, explained to 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 of approximately 84 million acres each – its R Fund invests only in Saskatchewan and Manitoba, while its UR Fund invests in the rest of the country – to comply with ownership regulations that vary by province. This structure streamlines, simplifies, and opens the Canadian farmland thesis to a broader universe of investors.

Supporting its premise in regard to the multiple benefits of investing in Canadian farmland, Veripath cited:

Value – Canada is home to some of the most competitively priced farmland among developed nations, especially when viewed on a productivity adjusted pricing basis.

Diversification – Farmland has a low correlation to traditional stock and bond markets, providing an ideal mechanism by which to improve portfolio risk diversification.

ESG – Zero-till portfolios centered on Western Canada capture material amounts of carbon.

Demand – Farmland is a non-volatile class through which investors can capitalize upon the demands generated by population growth, and the global growing need for food, feed, fuel, and water.

Inflation hedging – Historically, farmland has presented strong hedging capabilities in the face of inflation/stagflation, and has outperformed (in real terms) during periods of low real rates/high inflation.

In addition to these factors, Johnson noted in Canadian Farmland Portfolio Construction – Adjusting For Provincial Variations in Sharpe Ratios, an article published in GAI News in August 2021, “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.”

And indeed, when considering that Canadian farmland represents a $500 billion market with $20 billion in turnover (approximately 50 percent the size of Canadian commercial real estate), with the majority of farmers over the age of 55, Veripath continues to be well-positioned to achieve its goal of building a portfolio of $1 billion in AUM.

~ Lynda Kiernan-Stone is editor in chief 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 Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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