Launched three years ago by siblings, Joelle and Benji Faulkner, Canadian private equity firm, Area One Farms creates joint venture partnerships with farming operations looking to expand, but that do not want to take on large amounts of bank debt.

Focusing on operations that are looking to scale up significantly and rapidly, Area One targets farmers that are looking to double or triple their scale, and for whom private equity is more stable than bank debt.

Under the fund’s structure, a farmer looking to expand might commit 20% of the cost of a land acquisition, while Area One would fund the balance of the cost. The firm would then create a joint venture with the farmer, taking an equity stake in the newly acquired land with the intent that the farmers would buy out Area One after ten years – providing Area One investors with returns on investment while leaving the farmer with a more profitable and larger operation.

Because the newly acquired land is owned through the partnership there is no mortgage and Area One does not charge fees, rent, or interest according to their website, instead allowing their farming partners to earn 100% of the income and appreciation generated by the investment. The structure also dilutes the risk of expansion for farmers in the face of unpredictable weather, interest rate fluctuation and more.

Upon its launch, Area One invested in 600 acres of farmland – today its portfolio has grown to 60,000 acres with $70 million in assets under management. The firm has targeted a 15% net return on investment per year, and based on a market-to-market estimate, Ms. Faulkner states that Area One has exceeded this target in 2013, 2014, and in 2015.

Fifty five percent of Canadian farms are being operated by farmers that are over 55 years old, and 16% are operated by farmers between 50 and 54 years old, according to the most recent census conducted in 2011. However, the next generation of farmers are finding entry into agriculture challenging and cost prohibitive in an industry where operators tend to have assets but little cash. Area One Farms is looking targeting these situations for investment.

“Canadian farmers want to grow and need to grow,” Ms. Faulkner told the Globe and Mail, adding that partnering with Area One “allows them to own more even in the context of a rising land price.”

Amid these conditions, Area One Farms is seeing more demand than they can immediately fund. “If tomorrow, someone gave me $200 million, I could spend it,” Ms. Faulkner told the Financial Post.