EASTERN ONTARIO — Corporate land investors are starting to make waves in the Eastern Ontario farmland marketplace.
Though he wasn’t involved in the transactions himself, Iroquois-based farm realtor Marcel Smellink says a corporate investment vehicle recently snapped up two parcels of farmland — 52 acres and 250 acres —along County Rd. 2 near the Seaway.
Another outfit bought a 122-acre parcel in the same Municipality of South Dundas, close to the hamlet of Hainesville, he said, paying $12,000 per acre for land that some locals viewed as arguably closer to $8,000. He said he couldn’t fault the sellers and suggested the buyer figured the price was worth it if the land was fetching 2 % of that value annually in cash-cropper rent.
And that same organization, he added, also bought land to the north, in nearby Hulbert.
The trend of “commoditized” real estate — a term more often used to describe investment in the housing market beyond one’s own home — has arrived on the farm scene. “There are more and more investment groups buying up farmland,” says Smellink, adding that prices have been rising because of crop prices and yield, bringing the sector to the attention of these non-farm investors.
“I don’t know why farmland is all of a sudden in the investment portfolio of companies,” he offered, though he opined that rising inflation is undoubtedly a factor, creating a demand for tangible things that hold their value.
“Farmland is a fantastic hedge against inflation,” said London area realtor and farm property specialist Phil Spoelstra, co-owner and broker with ReMax FarmOntario serving Southern and Eastern Ontario. Such investment, he added, is “no question … on the rise.”
In southwest Ontario, corporate investment vehicles “have long been part of our farm market,” said Spoelstra, though he conceded it’s an increasing topic of conversation. Half a dozen domestic investor entities are currently buying land in Ontario, he said, noting, “It is Canadian money.”
But these players still only represent a small minority of sales that Spoelstra has seen. He estimated that 6 of FarmOntario’s last 140 or 150 farmland clients were on one side of such a transaction.
“There are valid opinions on all sides of the subject,” he offered.
For farmers looking to raise capital, selling land to an investment firm — then leasing it back — is a legitimate option, he pointed out.
Bottom line: Ontario farmland is a hot commodity attractive to more than just farmers. It rose in value an average of 15.4% by mid-year 2021, compared to the same period in 2020, according to Farm Credit Canada.
Among the players in the farmland investment market is Toronto-based Area One Farms. The Canadian private equity firm was founded in 2011 by sister-and-brother team Joelle and Benji Faulkner — part of the Faulkner family at London Dairy Farms, one of Ontario’s largest milk-producing operations.
With officers in Ottawa and Toronto, Bonnefield has grown into the largest firm of its kind in Canada, managing an $875-million portfolio of acquired farmland. Some of Canada’s largest pension funds have money in Bonnefield, according to the National Farmers’ Union.