Ownership of agricultural assets has historically provided an excellent vehicle to grow wealth over most time periods. We believe the need for all sectors of agriculture is set to increase materially over the next two decades. Estimates project global population to reach 9.6 billion by 2050 and we expect the appreciation and demand of agricultural assets to track that growth. The required expansion in food production should also continue to increase, giving way to unique investment opportunities in agricultural markets, and the commercial businesses supporting the entire agricultural sector. We believe that future inflationary pressures should also help drive the value of agricultural land and property higher. This outlook should provide attractive opportunities for investment, but until very recently there have been very limited options for investors to access these types of opportunities. AgriRoots Capital Management Inc. (ACMI) will provide investors with the opportunity to participate in this growth.
ACMI focuses on authenticity in ESG. We target farms that strive for and/or demonstrate best practices in Environmental, Social and Governance factors. ESG best practices are embedded within the ethos of countless multi-generational farms. Stewardship, sustainability, and good governance are, to many, farming prerequisites. ACMI underwrites its portfolio with the intention of contributing to a positive social impact.
ACMI is transforming the Agricultural Lending Market, making it more accessible and efficient for borrowers and investors across Canada.
Where We Began
AgriRoots Capital Management Inc. was created out of the FamilyLending.ca business model. Over the past 17 years, FamilyLending experienced increasing demand for private capital mortgages in the agricultural sector. This demand for agricultural lending occurs when borrowers are unable to meet the mainstream financial services underwriting requirements. These borrowers often have ample surplus collateral in land and buildings that helps minimize the risk of capital loss. Based on our experience and due diligence, we’ve been able to better understand their current liquidity issues and clear paths to returning their agricultural operations back to “bank criteria eligible”. Beyond this need for private capital, we believe there is an investor market wanting a higher yield, and a brokerage-business able to identify the opportunities and connect the parties. These conditions created what we believe is a unique opportunity, and FamilyLending was realized. The company began to assemble teams of private capital investors and match them with agricultural lending opportunities that would not meet the typical mainstream financial model.
As a result, over the past five years, numerous private agricultural and commercial mortgages have been funded. On average, these mortgages have tended to mature every two years as the borrowers return to mainstream capital markets. AgriRoots Capital Management Inc. was created to focus on these opportunities and establish itself as the industry leader in Canadian non-bank agricultural lending. Over time, AgriRoots plans to roll out additional agricultural focused investment products and opportunities, allowing investors to participate in what has been a stable and growing asset class. All of these factors, along with our unique experience and skill set, have led to this exciting opportunity with AgriRoots Capital Management Inc.
The initial product launched is the AgriRoots Diversified Lending Fund, a limited partnership established to provide secured mortgage financing focused in the agricultural space, primarily in Ontario. This is a market we know very well. It is suitable for Accredited Investors only. Our plans call for additional credit and equity type agricultural opportunities to be offered to all types of investors in the future.
Where We Will Grow
Our portfolio is composed entirely of products in the agricultural sector. We believe that the local market demand for capital in the agricultural industry reflects what is required across Canada, making this platform very attractive. That need for capital matches up well with the increasing need for stable investment opportunities from investors looking for yielding products that are uncorrelated to other asset classes.
Canada has more than 193,000 farms valued at over $468 billion, plus equipment valued at over $50 billion, and the agricultural sector employs hundreds of thousands of people in Canada, according to data available from the 2016 Canadian Census.
Based on our experience, we estimate that at any given time a minimum of 10% of the agricultural borrowing market that currently is financed by the banks is under pressure from their institutions. This 10% segment represents not clients in the middle or final stages of business failure / foreclosure, but rather operators that require access to funds for a one to three year period with financing terms that simply do not fit within the banks’ policies. As such, their local bank account managers have no choice but to squeeze them out. Based on recent census numbers, that 10% estimate would equate to a Canadian market size of 19,200 farms with a land/assets value of over $50 billion. At AgriRoots, we use the relationships from our brokerage beginnings as well as our current agricultural clients to connect with these customers and create investment opportunities for investors.
IMPORTANT: AgriRoots is NOT a shortcut to easy credit. All of the standard, proven underwriting processes, rigour and due diligence used in the mainstream financial vertical will form an integral part of AgriRoots Capital Management Inc.’s risk management policy.