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Not only are investors speculating on land, they believe they can make a profit leasing the acreages to farmers while they wait for the right time to sell. Investors in Saskatchewan are charging rent equal to seven per cent of a property’s worth, said Johnston. That would mean a farmer pays around $70,000 upfront in rent, per year, for an average-sized 2,000-acre farm from Agcapita. The number could climb with farm prices, which are already rising. According to Statistics Canada, the price of Alberta farmland almost doubled between 2000 and 2009. According to Marvin Painter, a business professor at the University of Saskatchewan, the dividend yield from the rent and the predicted capital gain from a future land sale works out to be only slightly below what a blue-chip stock would reap.
“It’s a forever asset that produces income,” said Brad Farquhar, co-founder of Assiniboia Capital Corporation, which controls more than 110,000 acres, worth about $55 million, in Saskatchewan. They began raising money for their venture in 2007, both from big clients and smaller investors—half of their approximately 500 investors put in less than $10,000, he said. To ensure they are buying land that can generate rental income, the company assesses the productivity of a farm, and therefore the worth of the land, by examining soil quality, past yields and rainfall. “The last thing you want to do is buy land where the nutrients have been extracted by the last farmer,” he said. They only rent to farmers who “farm well,” and agrologists go out every year to inspect the land. The company hopes to assemble a large farmland portfolio that might be of interest to big-league investors. “Maybe Canada Pension Plan takes an interest in farming,” he said.
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