The Calgary-based Avenue Living Agricultural Land Trust rents more than 42,000 acres of farmland in Saskatchewan to farmers
The Avenue Living Agricultural Land Trust recently acquired almost 5,400 acres of land in Saskatchewan.
The farmland is a single block near Lancer, Sask. that a farmer in the area decided to sell for $12.75 million, said Leif Snethun, CEO and co-founder of the Agricultural Land Trust. He is also a cow-calf producer near Calgary, Alta.
The farmer “decided that he wanted to reduce his debt levels a little bit, so he sold that block off. It’s a nice single block, there were actually no houses or anything on it. Very simple deal for us to do,” he told Farms.com.
Since this property didn’t have anything on it, the trust is going to build almost half a million dollars worth of bin storage on the property, said Snethun.
“We're actually not just a passive investor, I want to emphasize that as well, which is perhaps different from some of our past competitors in this space,” he said. Building the bins “was at the request of the tenant and he's willing to pay us extra rent for putting those bins up.”
This most recent farmland deal brought the trust’s total acres of land owned in Saskatchewan to more than 42,000. The Calgary-based leveraged, mutual fund trust has invested in farmland in Saskatchewan since 2017, said Snethun.
All the land the trust owns is rented out to farmers in Saskatchewan, said Snethun.
“My perfect transaction is when some land is listed for sale, a neighbour wants to buy a portion of what's for sale and a broker comes to me and says, ‘Well there are 10 quarters here, the neighbour wants to buy two of them. They want to buy the home quarter and maybe another one. Would you be willing to rent it to them, if you bought the other eight?’ he said.
While not every land deal works like this, the trust won’t purchase land unless a tenant is found, said Snethun.
“I will have a 30-day due diligence period, if an offer gets accepted, during which time I'll make a site visit, have my tour of the place. But in those 30 days, one of the biggest things to get done is to find a tenant, and that is almost always a neighbour. If I can't find a suitable tenant, then I actually don't buy the land, I'll just walk from the deal at that point because, I mean, it's important to take as much risk out of the investment for my investors as possible,” he explained.
The trust built up it’s reputation over the last few years and Snethun believes it’s developed into a very good one.
“The biggest component I think in having the reputation we've got is we're not one of these "corporate investors" that are out there driving up the price of land,” he said. “I pay what I can see as when we view the historical sales. I pay within that range and I won't go above it. If someone wants to beat me out, great, that helps the rest of my portfolio as far as its valuation.”
Currently, all the land in the trust is farmland. Snethun plans to continue to build the trust over the next few years and in 2023 the fund will hit the end of its life, but that won’t be the end of the venture.
“We don't plan on selling the land we plan on creating an open-ended structure going forward,” he said. Land is “an asset that doesn't depreciate. It's not like a building that needs to be replaced every once in a while. It'll be around forever and as far as I'm concerned, unless we come up with some new type of food… I think that farmland will be of forever value.”
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