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Bonnefield closes $235m Canadian farmland fund

The fund attracted commitments from ‘less than five’ institutions, some of which were investing in the asset class for the first time.

Bonnefield, a Canadian farmland investment manager, has closed its third fund on C$261 million ($235 million; €172 million), beating its C$200m target and raising more than its C$22.5 million Fund II.

The fund’s first close of C$100m was announced in July 2013. “Fewer than five” Canadian pension funds invested, Tom Eisenhauer, Bonnefield president, told AgriInvestor. He declined to disclose which pensions, but noted for two of the groups it’s their first foray into agriculture investment.

While replicating the previous funds’ investment mandates, Fund III was marketed only to institutional investors; the first two funds mainly attracted family offices and high net worth individuals.

Previously the firm found little demand from institutions, said Eisenhauer. “Institutional investment into agriculture is still in its infancy in Canada.”

To reflect the appetite of the new pension fund investor base, Fund III has a 20-year life whereas the Fund I and Fund II expire after 10 and eight years respectively. While the investors were keen on a fund with a longer life, where they allocate their commitment within their investment portfolios differs from institution to institution.

“It is very interesting to sit on the outside watching internal processes with investment committees,” said Eisenhauer. “Many don’t have a specific agriculture allocation but prefer to look at it as a real estate investment with lower volatility and better overall returns than a typical real estate asset. Others have a dedicated portion of the portfolio for agriculture, or hard assets at least.”

Bonnefield has already deployed C$80 million of Bonnefield Canadian Farmland III including what Eisenhauer believes is the largest ever farmland transaction in Canada — a C$65 million acquisition of 6,500 acres of farmland in Ontario from Highland Companies, a Boston-based hedge fund.

The fund’s average deal size is only around C$3 million to C$ 5 million however, because farmland is Canada is still very fragmented. But this is starting to change, argues Eisenhauer.

“There is an enormous amount of consolidation going on,” he said. “As younger generations start to take control of farms they want to farm larger tracts of land but they might not have the capital to do so and that’s where we can come in to help.”

Bonnefield’s primary investment focus is on row crop-producing farms but it also holds some vegetable farmland. The firm operates a buy and lease model where it leases farmland back to farmers that previously owned it or helps farmers take control of farms in what Eisenhauer calls “a lease takeover”.