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CPPIB buys out Assiniboia’s farmland assets

The farmland portfolio sold for $115 million and ends the nine-year life of Assiniboia’s listed vehicle.

Canada Pension Plan Investment Board (CPPIB) has bought a farmland portfolio from Assiniboia Capital Corp, a Canadian agriculture investment company, for C$128 million ($115 million; €84 million) after winning a competitive bid against other Canadian pension funds. The deal represents CPPIB’s second into agriculture.

The deal is for all of the assets in Assiniboia Farmland, an unlisted, publicly reporting issuing company, which raised $53 million over seven tranches between 2005 and 2012 — companies that own farmland in Saskatchewan are not allowed to be listed on an exchange. The first $3.15 million was raised after a four-month bookbuild in 2005. The company did 150 deals to create an 115,000-hectare portfolio of Canadian farmland. The investor-base was made up of about 650 high net worth investors although some sold their units along the way.

“This sale brings to completion a plan established in 2005 – to build a large portfolio of farmland in Saskatchewan for sale to a large Canadian institutional investor,” Doug Emsley, Assiniboia president, said in a statement. “Now this portfolio is effectively owned by Canadians for the benefit of all Canadians.”

LPs in Assiniboia Farmland will be paid C$52.50 million per unit in an initial cash distribution. Further smaller amounts will be distributed later when the partnership winds up, according to a press release on Assiniboia’s website.

CPPIB was the winning bidder after “previous offers from tire-kickers were turned down”, Brad Farquar, partner at Assiniboia told Agri Investor in an email.

“We were getting close to the end of the timeframe many of our original investors had signed up for, and CPPIB made an attractive offer,” he added.

Assiniboia will continue to manage the portfolio of farms in Saskatchewan province and does not plan to launch a new fund in the future, according to Farquar. The portfolio farms mainly produce wheat, barley and canola.

“We see this as an attractive opportunity for CPPIB to invest in an established platform of high-quality farmland in a strategically significant agricultural region of Canada,” André Bourbonnais, senior vice-president of private investments for CPPIB, said in a statement. “We look forward to working with management to grow the portfolio and contribute to the development of the farming sector in Saskatchewan.”

The investment will form part of CPPIB’s agriculture investment programme that was launched in 2012 with the purchase of a geographically diversified farm portfolio in the US. CPPIB allocates agriculture and farmland as part of its private equity portfolio and under the Private Investments Group.

Farquar at Assiniboia called the portfolio a real estate play because it involves little to no farm operation and the farms were acquired to then rent out to farmers.

“Farmland investments align well with CPPIB’s long-term investment strategy while also further diversifying our portfolio. Our initial strategy is to seek partnerships with top quality investors, managers and operators,” Bourbonnais said in an agriculture-related paper CPPIB released earlier this month.

In the paper, the fund stated its intention to focus on investing in farmland in Australia, Brazil, Canada and the US, noting these four countries represent more than half of the global farmland market. It will also focus on annual row crops — grains and oilseeds — but will be flexible to explore other opportunities in perennial crops, dairy and pasture. CPPIB will provide capital to expand operations, buy farmland and lease it back to the operators or buyout farms for farmers that want to retire.

The pension fund likes the asset class’s ability “to maintain value through economic cycles, as a hedge against inflation, and the fact that it is uncorrelated to other asset classes including core real estate”, the paper noted.