Alberta Investment Management Corporation will continue to pursue a combination of direct and fund investments as it balances its timberland portfolio with additional agricultural investments.
The C$118.6 billion ($92.6 billion; €78.9 billion) firm acquired Australian farmland portfolio Lawson Grains from Macquarie Infrastructure and Real Assets in early September. Renewable resources portfolio manager Jonathan Braams told Agri investor the deal is part of a broader diversification that began around 2016.
“Going forward, we’ll probably have a focus on looking at permanent crop opportunities, because right now there is a bit of a gap in our portfolio since we’ve mostly deployed on the row-cropping side,” he said. “Our focus is still on direct investments, or co-investments alongside fund partners, however we still look to do fund investments in certain strategies.”
AIMCo invests on behalf of 32 pension, endowment and government funds in Alberta, Canada. Its other farmland investments, according to Braams, include a commitment to a combined timber and farmland vehicle managing assets in the US, Australia and South America. He said AIMCo also invested in the fourth Canada-focused fund managed by Bonnefield and another subsequent vehicle from the Toronto-headquartered firm.
Braams explained that AIMCO’s decision to add ag to a combined portfolio including timber rather create a distinct category, builds on lessons learned in managing its $C1.6 billion portfolio of largely North American and Australian ag and timber investments since 2005. That management, he explained, has included conversion of land from one purpose to the other and demonstrated the value of mandate flexibility.
“We’ve seen other investors take a more rigid approach to pure timber or pure ag and then feel like maybe they missed out on some opportunities by doing that. We are really trying to take a landscape management approach, so it’s not just pure timber or pure ag with any one of the properties, we look to do both,” added Braams, who has been with AIMCo for 10 years and in his current role since January, according to his LinkedIn profile.
“When you own a piece of land, the highest and best use of that piece of land is going to be really dictated by things like topography, soil type and climate, rather than property lines, which have historically dictated what the properties were used for,” he said.
AIMCo’s Lawsons Grains acquisition was carried out in partnership with New Forests and came after about a decade of investments in Australia largely focused on timber. Braams explained the deal brought agriculture’s share within AIMCo’s renewable resource portfolio from less than 20 to more than 30 percent, while providing exposure to five climate zones and mixture of domestic and export focused crop types.
“We really like what Macquarie had done with this asset over 10 years and saw it would take a long time for us to actually build that out on our own, like Macquarie did,” he added. “They were coming to the end of a 10-year fund, and we see the opportunity to pick this up and hold it for a long period of time.”
As AIMCo looks to expand permanent crop investments elsewhere, Braams said his team has investigated opportunities in a range of fund and direct investment deal structures across crops that have included almonds, avocadoes, blueberries, citrus and others. Regionally, he said AIMCo has evaluated investments in markets including the US Pacific Northwest, Portugal, Spain and elsewhere.
“Permanent crops are interesting because they have some characteristics of timberland,” he added.
Braams said there are no specific targets driving AIMCo’s diversification effort and added it continues to consider both fund and direct investments across core markets of timber, agriculture and livestock, and a separate category that includes water and controlled environment ag. Among AIMCo’s recent agricultural investments is its commitment to Equilibrium’s Controlled Environment Foods Fund II, which closed on $1.02 billion in July.
AIMCo has roughly 10 investments within its renewable resources portfolio, which have an average size of about C$200 million. Braams said the firm may have to make commitments lower than its preferred minimum threshold of C$100m due to the fragmentation of ag markets, but it intends to enhance the value of its assets through investments.
Braaams that added while AIMCo continues to be interested in global timberland, high valuations and low returns mean its near-term focus will likely remain on ag.