'Unfortunately, it will probably mean higher returns for our funds'

Kent Willmore, President of AGinvest Farmland Properties Canada., Inc., is almost apologetic that the Russian war against Ukraine is going to benefit his already outperforming Ontario farmland funds.

“If I were to invest in two places in the world, I would invest in Ontario and the Ukraine. Those are two of the richest farmland areas in the world,” he told Wealth Professional. “So, food security is absolutely a concern for many of the countries that are near Russia and Ukraine because, combined, Russia and Ukraine supply about 30% of the global wheat supply and about 30% of the global corn supply. Russia is also the number one manufacturer of nitrate fertilizers in the world.

“What’s going on over there is pretty significant and they are a big part of the global food supply chain. So, I don’t think it’s going to affect our area in terms of food scarcity, but it will affect, obviously, oil prices and inflation, and fertilizer costs will also be impacted by the situation.

“Unfortunately, and I mean unfortunately, it will probably mean higher returns for our funds because it’s going to make our farmland even more valuable. I know that our farmland is continuing to appreciate because we have the security and government security in our nation.”

Willmore, who grew up on a farm near Chatham, Ontario and still does some farming there, started AGinvest in 2012 and launched his first investment fund in 2018. It now has four funds with 6,400 acres of prime Ontario farmland and $100 million assets under management.  While three of the funds now are closed to investors, they’ve earned between 15.5% and 23.24% over the last four years, which is considerably higher than the traditional farmland returns of 8 to 10%.

“The reason that our funds are doing so much better than the long-term track of farmland, I think really speaks to the way we operate AGinvest and what we do to optimize the value. It’s been proven in our returns that are over and above the long-term track record of farmland,” he said. 

“The four different funds are all outperforming. It just means that the process that we have in place is actually working and we’re surfacing a lot of value. That’s mainly because I come from a farming background, and I’ve been doing this my whole life. It’s not like we’ve hired someone off Bay Street to start investing in farmland. It’s the opposite. We’ve hired a farmer to partner with some smart folks who have the Bay Street knowledge to make a great investment.”

Brian D’Costa, President of Algonquin Capital, for instance, is on AGinvest’s advisory board.

AgInvest’s fourth fund, AGinvest Farmland Three Inc., opened in January 2022 and can accept 49 investors. Willmore said it’s a good alternative for advisors who are accredited investors because it has low volatility and great returns. The company buys premium Ontario farmland, then optimizes its soil and land with things like improving draining and removing unnecessary buildings, then signs grower agreements with farmers.

Many of the farmers are younger, but need $25-30 million to start, so they can begin to replace the farmer, now at the average age of 57, as they retire.

“Because we’re a capital partner, we have a lot of young farmers partnering with us,” said Willmore. “Three or four of our 25 farm families are in their twenties.”

Willmore noted that enhancing farmland is important since the world will need to produce more food before 2050 than it has in the history of mankind. That means developing more productivity per acre, and AGInvest is improving how that’s happening.

Willmore is also bullish on the Ontario farmland that he’s buying from Windsor to Ottawa – excluding the Greater Toronto Area because of speculation – because, even though it’s some of the best in the world, climate change is also making its climate warmer, wetter, and more productive.

The fund that is still open operates, for Revenue Canada purposes, as a small business, so investors are eligible for the capital gains tax exemption on what they earn on their investment with it.

Willmore said that’s a bonus since “a lot of professionals don’t have access to during their lifetime”.