Farmland going public?

Thursday, January 19, 2012

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