June 24, 2019

by Lynda Kiernan

Toronto-based specialty farmland investor Area One Farms announced the first close of its Fund IV at $120 million. At the same time, the firm also shared that Fund IV has deployed its first two partnership allocations. 

Launched in 2011 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.

“With the earth’s population expected to grow to more than 9 billion in the next few decades, ensuring farmers have the tools they need to provide safe, sustainable, nutritious food has never been more critical,” said Area One Farms President and CEO Joelle Faulkner as a featured professional in Women to Watch, Celebrating Up and Coming Women in Agribusiness, published in the Women In Ag Quarterly Journal Vol 4 Issue 2, 2018. 

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 its “shared-value approach”, a farmer looking to expand might commit 20 percent 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 10 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, allowing their farming partners to earn 100 percent 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.

“We believe that an operator should always do better working with Area One Farms than they could on their own,” said Joelle Faulkner. “We’re excited to have met this target, and to continue to build strong partnerships with Canadian farmers.”

The launch of Fund IV was announced in May 2018 concurrently with the announcement of the launch of Area One’s Fund V, a fund with a more targeted geographic mission. Fund IV was created with a cornerstone investment of $100 million, and was structured as a 10-year, closed-end fund with a target of C$250 million (US$190 million).

Fund IV continues to focus on Area One’s objective of forming meaningful partnerships that bridge the gap between agriculture and equity, offering institutional and accredited investors the opportunity to invest in equity partnerships with Canada’s farmers and farmland, and offering farmers the ability to grow their enterprises through land conversion efforts that have an eye toward sustainability. 

“Our business, Area One Farms, is built on creating value for, and sharing value with, the farm partner, investor, and wider community,” Faulkner told the Women in Agribusiness Quarterly Journal. “When I set out to make us the most desirable financing choice for expanding farmers, I remained serious about sharing all of the value we could create.”

Each deal structured by Area One is a unique joint venture to suit and support the specific needs, both financial and operational, of each operation. Area One currently has partnerships spanning Saskatchewan, Manitoba, Ontario, and Alberta, where both of the first two allocations from Fund IV happen to be. 

Referring to the deals, Faulkner told GAI News, “They are row-crop producers in Alberta. One is buying out his landlords, and will produce conventional row-crops, and reclaim overgrown land for crop production. The other is focused on sustainable farming and regenerative soil health. This is our first sustainable farming partner.”

– Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.