Toronto-based specialty farmland investor Area One Farms has held a $120 million first close for its Fund IV.
The fund has started to invest some of its capital, already making its first two partnership allocations.
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 ($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.
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.”