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Farmland as an Alternative Asset

AGINVEST FARMLAND FUNDS

Who We Are?

We are managers of farmland investments. AGinvest ignites an opportunity for investors to add farmland holdings to their investment portfolios in a tax effective manner.

What We Do?

AGinvest Farmland Funds raise capital to purchase, optimize and manage premium Ontario farmland. AGinvest works with progressive farm operators using a grower’s agreement to generate annual income.

Investing In Farmland?

We believe that farmland is a continuously sensible investment because of the global demand for agricultural products. This demand will only be driven higher by an increasing global population and decreasing area of arable land.

Where Do We Invest?

We focus on Southwestern Ontario as our target market due to the abundance of premium quality farmland available. The climate of this area has long growing seasons and well established agricultural infrastructure, which has yielded historically dependable growth.

Growth for Accredited Investors

AGinvest can diversify your investment portfolio with Ontario farmland. Consider the advantages we provide:

  • Long-term history of growth
  • Uncorrelated with capital market returns
  • Unique tax-savings
  • Macro-economic trends that favour productive farmland

With the exception of only 6 years, farmland values in Ontario have risen steadily in the past 70 years. Ontario farmland is currently poised to capitalize on converging trends that will be vital for the global food production system in the coming future.

Once-in-a-lifetime tax savings

AGinvest’s innovative investment model creates a unique opportunity for both investors and farmland owners to utilize their lifetime exemption for tax-free capital gains.

As a shareholder in an AGinvest Farmland Fund, you become a shareholder in a company that actively manages and markets crop production on premium Ontario farmlands. This ownership structure enables you to utilize the lifetime capital gains exemption on the eventual sale of your shares.

Our farmland ownership plans allow you  to grow your investment tax free.

TAX FREE GROWTH

UP TO 36.5% GREATER
RETURN FOR INVESTORS

Capital Gains Exemption Benefit Chart

Pre-Tax return needed to earn the same After-Tax return in Ontario with various types of income

The chart above compares the after-tax rate of return on interest bearing investments and capital gains. *For example, please note that in order to achieve an after-tax return of 10% in Ontario, an investor would need to earn 21.5% of interest income or 13.7% in capital gains ineligible for the capital gains exemption.

Click Below to Download Our AGinvest Properties Canada Term Sheet

AGinvest Term Sheet 2020 PDF

FREQUENTLY ASKED QUESTIONS

Question: What is the minimum investment?
Answer: The initial minimum investment in The Farmland Company is $150,000 Canadian dollars.
Question: What other criteria do I need to fulfill, to be eligible to invest in The Farmland Company?
Answer: If you are either a Canadian citizen or permanent resident of Canada, and an accredited investor as defined in the Securities Act (Ontario), you are eligible to invest in The Farmland Company.
Question: How do I complete the investment process?
Answer: The Farmland Company has engaged Belco Private Capital Inc. (“Belco”), an exempt market dealer (“EMD”) registered in certain provinces, including Ontario, in connection with the offer and sale of the common shares (each, a “Common Share”) of The Farmland Company. New investors must complete, in full, the Subscription Agreement found in the package provided by The Farmland Company.  For questions relating to the Subscription Agreement and an investment in The Farmland Company, investors may contact Anthony Faiella, Senior VP with AGinvest, and a dealing representative with Belco, at: Anthony@belcopc.com.
Question: Why does AGinvest use an Exempt Market Dealer (EMD)?
Answer: Under Canadian Securities Law, when AGinvest sells shares to a member of the public, it is required to ensure that certain investor protection functions are performed and these functions must be discharged by a registered exempt market dealer.  These functions are fundamental to maintaining fair and efficient markets in Canada and include such duties as the collection of “know your client” information and the determination that a proposed investment is suitable for a purchaser.

Kent Wilmore and other key members of the AGinvest team will always be available to our investors to discuss AGinvest’s business, however, they cannot discuss with you whether or not the investment is suitable for you.  Only a dealing representative properly registered under applicable securities laws may conduct the “know your client”, suitability and relationship disclosure obligations that are required.  Anthony Faiella, Senior VP with AGinvest, will take on the role of Belco dealing representative, and will be responsible for making inquiries required to determine if the investment is suitable for you.

Question: How do I transfer my money to The Farmland Company?
Answer: AGinvest will accept a wire transfer or bank draft from a Canadian bank.
Question: How do I know my investment in The Farmland Company is official and closed?
Answer: Upon acceptance of your subscription, you will receive a counter-signed Subscription Agreement and a closing notice from The Farmland Company to pay the applicable subscription price in order to complete the subscription.
Question: Can I add to my investment in future openings? Would those additional Common Shares be subject to the same redemption schedule as my original investment?
Answer: Yes. Existing shareholders will have the opportunity to add to their investment and additional Common Shares purchased will not be subject to the original minimum investment amount.
Question: How will future subscriptions from investors be priced if the Common Shares are purchased next year or the year after?
Answer: New investor subscriptions will be priced based on the most recently determined net asset value or NAV per Common Share which will include the appraised value of all properties in the portfolio adjusted for the fair value of any other assets and/or liabilities on the balance sheet of The Farmland Company and an assumed return of 5.5%, accrued from the date of the last appraisal.
Question: How can I keep track of my investment in The Farmland Company going forward?
Answer: The Farmland Company will prepare and deliver annual audited financial statements together with information bulletins that profile the farmland portfolio.

 

Structure of the Corporation

 

Question: What is the fee structure of The Farmland Company?
Answer: The Farmland Company and the Manager entered into a management agreement whereby the Manager will provide certain services to The Farmland Company in consideration for a management fee (the “Management Fee”) and, if applicable, a success fee (the “Success Fee”).  The Management Fee will be as follows:

Class                                     Amount Invested             Fee

Class A Shares                    Less than $1 million            Fee 1.75%

Class B Shares                     $1 million – $5 million        Fee 1.50%

Class C Shares                     Greater than $5 million      Fee 1.25%

and will be calculated and payable monthly in arrears as to 1/12th of eligible fee. Referral fees, if any, will be paid by the Manager from amounts from the Management Fee.

In addition, the Manager will be entitled to a Success Fee based upon returns in excess of a 6% (the “hurdle”) rate of return.  The Success Fee payable to the Manager will be paid at year end, once every three years by the shareholders of record on that date.  The Success Fee will be paid only on the portion of returns in excess of a 6% compound annual rate of return during the term of their holding.  The Success Fee will be paid in Common Shares of The Farmland Company to the manager and those Common Shares shall remain invested in The Farmland Company.

·       A compound annual return of less than 6% will result in a 0% Success Fee.

·       A compound annual return of 6% or more will result in a Success Fee of 20% of the gain in excess of the hurdle.

Question: What are my liquidity options? When is the earliest date that I could liquidate my investment in The Farmland Company?
Answer: The liquidity feature in The Farmland Company has been designed with the intention of both aligning the long-term investment thesis of Canadian farmland as well as providing increased liquidity compared to traditional farm ownership. You may request that The Farmland Company repurchase your Common Shares. Any such repurchase will be subject to restrictions and limitations, including the following:

·       No redemptions for 36 months

·       After 36 months at a 20% discount to NAV

·       After 48 months at a 15% discount to NAV

·       Sometime after 72 months The Farmland Company intends to find a buyer for 100 percent of the outstanding Common Shares.

 

Redemptions are limited to a maximum of 10% of the outstanding shares annually and will be offered on a “best efforts” basis.

The Farmland Company will endeavor, on a best efforts’ basis, to find a buyer for an investor’s Common Shares if extenuating circumstances arise prior to 36 months (A discount of 25 percent of NAV will apply).

Question: Is there a maximum number of shares that The Farmland Company can repurchase in any given year?
Answer: In the ordinary course, the total maximum number of Common Shares that can be repurchased (for all investors) in any given year will not exceed 10% of the total outstanding Common Shares in terms of value as at the beginning of such year. Note, however, that The Farmland Company reserves the right to discontinue repurchasing of Common Shares in any given year in certain extraordinary circumstances. These limits have been put in place to protect The Farmland Company from any “run” on capital which could force the liquidation of farmland properties to fund Common Share repurchases.
Question: How is Net Asset Value (NAV) calculated and how often?
Answer: NAV is defined as the fair market value of the total assets, less all liabilities, of The Farmland Company. Fair market value of each individual property in the portfolio will be determined on an annual basis by third party appraisers. Given that Ontario farmland typically has only one crop cycle per year, The Farmland Company has chosen to recalculate the NAV on an annual and on a trailing basis. Based on the long-term average appreciation of farmland, a 5.5% return (the 100-year compound annual growth rate or CAGR for Ontario farmland is 5.6%) is assumed between appraisals and accrued monthly for the purpose of calculating the NAV each month.
Question: Are there cash distributions under The Farmland Company?
Answer: The Farmland Company will endeavor to make one annual distribution. Each year, it is expected that The Farmland Company will assess the company’s cash flow, set aside appropriate reserves to fund anticipated liabilities and acquisitions, and make a distribution to shareholders. Investors will have the option to receive distributions from The Farmland Company in the form of cash. Cash distributions will be classified as a reduction in paid up capital.  This tax-free distribution will reduce the adjusted cost base of the Common Shares.
Question: What role does debt leverage have in The Farmland Company?
Answer: The Farmland Company has provisions for the use of debt up to a limit of 30% of total asset value. This provision is intended to enable AGinvest to manage working capital and to facilitate farmland purchases; however, The Farmland Company is expected to continue to maintain modest debt levels (less than 30%) over time; 35% debt leverage is permitted after 36 months on a temporary basis to allow for distributions.  Leverage must be reduced to less than 30% within 12 months of any distribution.
Question: How does The Farmland Company deal with the risk profile of Ontario farmland investment?
Answer: The Farmland Company endeavors to purchase prime Ontario farmland using a proprietary due diligence system which is intended to mitigate risk and provide additional certainty that the “buy” is carried out correctly.  AGinvest attempts to reduce investment risk by purchasing farmland at or below appraised value and carrying out optimization strategies to improve the lands productivity characteristics.  Once farmland is purchased correctly and optimized to its fullest extent, AGinvest works to preserve the value of existing investment properties by monitoring operations and farming practices, as steps to further decrease the risk of the overall land portfolio.
Question: How does The Farmland Company offer the advantage of the Capital Gains Exemption?
Answer: The Farmland Company’s innovative investment and operational model opens a unique opportunity for both investors and farmland owners to utilize their lifetime exemption for tax-free capital gains.  As a shareholder in The Farmland Company, you become a shareholder in a company that actively manages and markets crop production on premium Ontario farmlands. This approach entitles up to 49 investors, capital gains exemption benefits on the eventual sale of their Common Shares. The Canada Revenue Agency includes your taxable capital gain (50 percent of the total gain) as income for tax purposes but allows an offsetting deduction when calculating taxable income. Our farmland ownership plans, therefore, can achieve after-tax rates of return comparable to the pre-tax rate of return for traditional plans.

The Canada Revenue Agency has the right to challenge any company’s position that it is conducting an active business.  AGinvest is confident that the use of the AGinvest Grower Agreement will result in the income generated by The Farmland Company to be considered active business income.  If the Canada Revenue Agency successfully challenges The Farmland Company position that the company is operating an active business, the shareholders may not be eligible for the Capital Gains exemption.

Question: What is the maximum Capital Gains Exemption available?
Answer: Each Canadian citizen or permanent resident of Canada is entitled to a capital gains exemption on qualified gains arising from dispositions. The Canada Revenue Agency refers to the exemption as a capital gains deduction, whereby the capital gain — which is 50 percent of the total gain — is still included as income for tax purposes. However, an offsetting deduction from net income is allowed when you are calculating taxable income. The total of your capital gains deductions on gains arising from dispositions in 2020 of qualifying capital property has increased to $441,692 (one half of an increased lifetime capital gains exemption or LCGE increased by indexation to $883,384 for 2020).
Question: How is the Investment committee (IC) selected?
Answer: This three-member committee consists of at least one investor from AGinvest Farmland Two Inc.  The fund will rely on committee members from AG Farmland One until it has a suitable group of investors in AG2 that can be called upon to be part of the committee.

The other two members must be invested in an AGinvest farmland product and only one of the three members can be a part of the management company (AGinvest Properties Canada Inc.)

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