By Lynda Kiernan-Stone
Veripath Farmland Partners has brought its total acreage under management to approximately 120,000 acres through its latest acquisition of 1,246 acres of farmland in the Province of Alberta.
Veripath was launched during the pandemic in mid-2020 on the predilection that global demand for agricultural products, including food, feed, fiber, and fuel, make farmland – particularly Canadian farmland with compelling valuation discounts and an ability to hedge both inflation and stagflation – a prime long-term investment.
Its approach is unique in that it has adopted an evergreen structure, enabling long-term investors, such as family offices or pensions and shorter-term investors such as retail, to gain access to farmland that they seek through the same vehicle.
The team also manages its holdings through a dual-fund framework that divides Canada into two distinct geographies of approximately 84 million acres each:
Its R Fund, in which this latest acquisition will be housed, invests only in Saskatchewan and Manitoba, while its UR Fund invests in the rest of the country, in order to comply with ownership regulations that vary by province and to offer a streamlined, simplified thesis for investors.
In early 2023, the firm also launched an RRSP-eligible (Registered Retirement Savings Plan) farmland investment vehicle – connected to this second UR Fund – to provide access to the farmland investment class to a broader portion of Canadian investors with a high level of flexibility by including opportunities for both short- and medium-term hold periods running between 1-4 years.
At the time, Stephen Johnston, managing director, Veripath Partners, explained the benefits of such a strategy to GAI News, saying, “The advantage is that an RRSP eligible fund allows Canadian investors to put a farmland holding into their tax deferred federally regulated retirement pension accounts. Contributions to RRSP are only taxed on gains on withdrawal so they provide a material tax benefit.”
“Our new RRSP-eligible, open-ended investment vehicle allows a broad range of Canadian investors to benefit from farmland’s characteristics and do so in their RRSP accounts.”
Veripath noted that all of these features and vehicles are designed to enable investors to gain exposure to, and capitalize upon, the multiple benefits of investing in Canadian farmland:
— Value – Canada is home to some of the most competitively priced farmland among developed nations, especially when viewed on a productivity adjusted pricing basis.
— Diversification – Farmland has a low correlation to traditional stock and bond markets, providing an ideal mechanism to improve portfolio risk diversification.
— ESG – Zero-till portfolios centered on Western Canada capture material amounts of carbon.
— Demand – Farmland is a non-volatile class through which investors can capitalize upon the demands generated by population growth, and the global growing need for food, feed, fuel, and water.
Inflation hedging – Historically, farmland has presented strong hedging capabilities in the face of inflation/stagflation and has outperformed (in real terms) during periods of low real rates/high inflation.
The effects of these upsides are reflected in the numbers in Farm Credit Canada’s 2023 Farmland Values Report, which noted how cultivated farmland in the Province of Alberta increased 6.5 percent last year, after increasing 10 percent in 2022, and 3.6 percent in 2021.
Southern Alberta saw its farmland values jump by 9.1 percent in 2023; Central Alberta saw increases of 6.7 percent; and Northern Alberta saw values increase by 5.7 percent.
Irrigated farmland values in the province increased 11.7 percent in 2023, after posting a massive 29.9 percent jump in value in the 2022 report, and pastureland in the province saw values increase by 9.6 percent on average last year.
