Exclusive: OTPP acquires Washington orchard

Dale Burgess, the Ontario Teachers’ Pension Plan's head of infrastructure and natural resources, tells Agri Investor that Broetje Orchards is a natural fit for the C$194bn pension’s ag strategy.

The Ontario Teachers’ Pension Plan has purchased Broetje Orchards, a family-owned vertically integrated apple company based in Washington State, for an undisclosed price.

The transaction, which closed in late December, has resulted in the creation of three new companies: FirstFruits Farms, FirstFruits Marketing and FirstFruits Community.

Headquartered in the city of Prescott, Broetje produces 17 varieties of apples and pears on more than 6,000 acres that include a 4,300-acre orchard described as one of the largest in the US. The company also has a 1.1 million-square-foot processing facility located in Prescott that it uses to pack 28,000 boxes of apples per day, including of their proprietary Opal variety.

“We are looking forward to maintaining the legacy established by the Broetjes to focus on growing quality apples and investing in our people,” said Jim Hazen, who was formerly a business manager at Broetje Orchards and will serve as president and chief executive of FirstFarms.

OTPP head of infrastructure and natural resources Dale Burgess told Agri Investor in an email that the fact Broetje Orchards provides large-scale, direct exposure to a staple component of the food basket made it a strong strategic fit for the C$193.9 billion ($145.4 billion; €127.5 billion) pension.

“A key aspect of our agriculture strategy includes investing in permanent crops that deliver stable cash flows, strong risk-adjusted returns and inflation protection for members of our pension plan,” Burgess added.

Building blocks

In mid-2017, then OTPP managing director for infrastructure and natural resources Steve McLennan, (who has since been elevated to senior managing director for total fund management) told Agri Investor the pension considered agriculture to be an area of growth and a “core building block” of its overall natural resources strategy.

McLennan said that, while OTPP would consider making commitments to closed-end agriculture funds, it would likely continue its traditional focus on direct investments, with the optimal size for a platform company being somewhere between $100 million and $400 million.

“Direct investments enable us to ensure that issues around health, safety and other considerations are being managed at the level that we think is required to sustain the business over the long term,” said McLennan. “There are some other considerations around appropriate leverage and some of those other things that we like to have line of sight on – and you do get better line of sight if you are in the direct role.”

In addition to FirstFruits, OTPP’s North American agricultural investments include mussels producer Atlantic Aqua Farms, row-crop-focused Goldcrest Farm and Woodspur Farms, an organic date processor with properties in California and Arizona.

In Australia, its agricultural investing platforms include almond-focused Aroona Farms, Western Australia avocado grower Jasper Farms and Melbourne-headquartered AustOn Corporation, which is responsible for overall management and oversight of OTPP’s Australian agricultural assets.

Heading west

Stu Turner, an independent agronomist long active in Eastern Washington, told Agri Investor the main Broetje orchard is not far from the Weidert Farm property purchased by Farmland Partners last year.

Both sales are indicative, said Turner, of an increased pace of activity among financial investors in Washington’s farmland market that he estimated began about five years ago with a series of purchases by the Aquilini Investment Group, a vehicle affiliated with the owners of the Vancouver Canucks ice hockey team.

“Outside investors are spending a lot more time in the Pacific Northwest,” Turner said. “Five or six years ago, we just didn’t see the big institutional investors working here.”