by BETTER FARMING STAFF
A new company, counting on global trends that point towards increased demand for food, has announced intentions to sell public shares in Canadian farmland.
Bonnefield Canadian Farmland Corporation, based in Ottawa, announced Thursday that it plans to sell common shares in a scheme that will either buy farmland outright or, in jurisdictions like Manitoba and Saskatchewan that restrict public ownership of farmland, provide interest-only mortgages.
Investors would obtain “a liquid investment in primarily Canadian farmland, with the potential for long-term capital appreciation and dividend income,” the company’s preliminary prospectus says. The prospectus is filed with security regulatory authorities in all Canadian provinces and territories for review.
The new corporation, formed in December, claims to have secured conditional agreements to invest about $25.6 million in 14,600 acres. The acreage consists of 600 to be purchased in southwestern Ontario and 14,000 under conditional interest-only mortgages in central Manitoba and south-central Alberta. The Ontario land has been used for crops such as soybeans, grains, vegetables and ginseng.
Bonnefield has set 10 million shares as the maximum to be sold with each share selling for $10. It has set the minimum investment at 200 shares or $2,000. It is targeting annual dividends of three to four per cent but has not set a fixed dividend amount. Income will be generated by long term land leases “to the previous owner or to other progressive, growth-oriented farmers,” the prospectus says. In turn, the company will provide “progressive, growth-oriented Canadian farmers” with capital to help reduce debt, improve cash flow, finance expansion and facilitate succession.
The company predicts shareholders will benefit from Canadian farmland’s “exposure to global trends that are increasing demand for, and limiting the supply of, food around the world.” It projects that global population growth, changing diets in developing nations, climate change, water shortages and soil degradation elsewhere will eventually boost Canadian farmland values.
Bonnefield Financial Inc., also based in Ottawa, will manage the farmland. Farmland will be diversified in terms of geography, crop type and farmer.
Bonnefield Financial currently manages Bonnefield Farmland LP, an Ontario limited partnership established in 2010 that holds nearly 14,000 acres of farmland in Alberta, Saskatchewan, Manitoba and Ontario with a value of $17.4 million.
The prospectus notes that while farmland investment schemes are found in the United States and Europe, farmland “is a relatively new investment asset class in Canada.” However, with farm operations becoming “increasingly capital-intensive,” new generations of farmers are forming larger operations in order to capture economies of scale. “This trend, along with significant succession challenges experienced by the large number of older farmers facing retirement across Canada, has led to a growing demand for alternative sources of capital among Canadian farmers,” the prospectus states. BF
Comments
Many farmers looking too rent farmland but should farms not be wned by the one farming it ? Don't think we want torally end up like the sharecroppers of the south with cotton years ago
Sound like a scam to rid the farmers of owning the land and become share croppers. Doesn,t matter what the price of the land is when you buy it ,its value is only got one way to go and that,s up. Who ends up owning the land in the end one company just like a communist country and every body thats wants to farm works for them.All farmers end up losing in the end.
"14,000 acres of farmland with a value of $17.4 million".
The company is looking for people to buy shares?
So what happens when the price of land drops like it did in the mid '80's? Farmland devalued to half the going rate in a matter of months then.
If it were to happen again, how long will the corporation last when the shareholders lose 50% of their equity?
Sounds like a Pyramid scheme to me.
At that rate they are looking for some one to by some swamp land in Florida . $1,200 per acre ? Good luck growing food on it unless you are going to a Farmers Market .
This type of investment scheme surfaces about once every generation, usually near the top of the market, and last happened for farmland in the late 1970s.
The promoters of these sort of funds never track the price/earnings multiples of their investments, and look only at the face value of the investment itself. That's why, without any earnings at all, many dot.com companies went from being worth millions, or even billions, to being worth nothing, almost literally overnight.
People who bought land around here for $2,000 per acre in 1980 saw it plummet to $1,000 per acre by 1986, and it took until about 2000 for the value to recover to what they paid for it twenty years earlier.
Stephen Thompson, Clinton ON
Previous comments suggest that Farmers should own the land they farm and not rent or lease.
So in this same mind set everyone that lives in a house has to own it.
If an investment company buys the land from the farmer @ say $10,000 an ac. (a reasonable to low expectation in Ontario currently) rents/leases the land back to the farmer freeing up huge capital to expand the farmers BUSINESS. If the price of land drops back to $5,000/ac. and the investors start pulling out the farmer has the opportunity to buy the land back at half of what they sold it for.
It just makes business sense for a farmer looking to grow
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