February 2, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

Launched by siblings Joelle and Benji Faulkner, Canadian private equity firm Area One Farms bridges the gap between agriculture and equity by creating joint venture partnerships with farming operations looking to expand, but that do not want to take on large amounts of bank debt.

Understanding that it’s often not a farmer’s abilities, but rather financial capacity that dictates success, Area One provides the equity to ensure farmers, and their operations, can work at their highest potential.

Under the fund’s structure, a farmer looking to expand might commit a percentage 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 at a future date – 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, instead allowing their farming partners to earn 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.

“In years of poor returns, it can be difficult to make payments if expanding the farm through rental agreements or debt financing,” said Joelle Faulkner, founder and CEO, Area One Farms. “Plus, rental agreements do not typically allow long-term certainty for the farmer.”

Now in its ninth year, Area One also provides farm oversight and mentorship to guide less experienced and/or less financially stable farmers in improving their operations. Together, these committed partnerships form a network that engages collectively to share and foster new ideas and best production practices, aligning with Area One Farm’s commitment to sustainable farming methods. 

“We’re the only farm investment group that isn’t buying farmland and just leasing it back to farmers,” said Faulkner, a multigenerational farmer. “Instead, we partner in all of the farm purchases and operations, and then share part of our financial appreciation of the farm with the farmer.”

Global AgInvesting’s connection with Area One Farms goes back to 2016, when funding stood at $60 million and the investor had partnered with seven row crop farms. This closing brings total funds raised by Area One Farms to $480 million, giving Area One Farms the ability to deploy $300 million to-date to forge partnerships with 25 farmers covering 150,000 acres across Northern Ontario, Manitoba, and Alberta, Canada.

(Area One explained that despite their willingness, and despite there being a need, so far the firm has not been able to partner with farmers in Saskatchewan due to provincial farmland ownership regulations that restrict pension funds from buying farmland. [A portion of the capital invested in Area One comes from pension funds.])

These equity deployments have occurred for a range of situations:

~ Farm expansions to bring members of the next generation into the business.
~ Buying out retiring parents and off-farm siblings.
~ Shifting from rented land to owned land.
~ Achieving the needed scale for viability.
~ Time-intense farmland improvement that doesn’t cashflow well for debt financing.

With plans to deploy another $200 million in investment capital, Area One stated that these investments will extend to irrigation development, tile drainage, equipment upgrades, and grain storage, as well as farmland expansion.

“Canada has a great opportunity to help satisfy the growing worldwide demand for food, but it will require innovation and investment,” said Faulkner. “At the same time, consumers want to know their food is produced with sustainable production practices. That includes knowing that farmers will own their land over time.”

*The content put forth by GAI News and its parent company HighQuest Partners is intended to be used and must be used for informational purposes only. All information or other material herein is not to be construed as legal, tax, investment, financial, or other advice. GAI and HighQuest Partners are not a fiduciary in any manner, and the reader assumes the sole responsibility of evaluating the merits and risks associated with the use of any information or other content on this site.

– 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.