Ottawa's Kaminski family sells stake in fast-growing agricultural fund to Montreal firm

Bonnefield to retain major Ottawa presence as fund's assets increase over 30% in past 18 months
Wheat field

Backed by a new equity partner, an agricultural fund with a big presence in Ottawa sees fertile growth opportunities ahead as more investors in Canada and abroad turn to farmland as a secure and sustainable asset class.

Launched in 2009, Bonnefield now manages more than 134,000 acres of agricultural land worth nearly $1 billion, up from 110,000 acres valued at $750 million just 18 months ago. The fund has flourished even as COVID-19 sowed uncertainty in traditional markets, says Tom Eisenhauer, Bonnefield’s Toronto-based president and CEO.

“We’ve been really lucky,” he says. “We were nervous at the beginning (of the pandemic). By and large, with very few exceptions, COVID has had very little impact on our farmers through 2020.”

Agriculture’s growing investment appeal has captured the attention of Montreal-based Walter Global Asset Management, a private equity firm launched three years ago. 

On Wednesday, the company announced it has acquired a majority stake in Bonnefield. Financial terms of the deal were not released.

Eisenhauer says the fund began looking for a new partner after co-founders Jan and Steve Kaminski decided they wanted to divest their ownership stake.

Bigger employee stake

The Kaminskis run Ottawa-based private equity firm Colonnade Investments, whose current portfolio also includes well-known local real estate investment and management company Colonnade BridgePort. One of the firm's previous investments was Manderley Turf Products, an Ottawa sod farm, and the Kaminskis had seen firsthand the need to inject more capital into Canadian agriculture.  

“They were very involved in the business in the early years, but as we grew and grew, they became less and less active in the business,” Eisenhauer explains, adding the deal “just made sense.”

Under the new arrangement, Bonnefield management and senior employees will own the remainder of the venture, with their share of ownership expected to increase in the years to come.

Eisenhauer called the deal a “perfect fit” for the operation, which is poised to grow its team from 23 to 26 employees with three new hires next week. While the Kaminskis are no longer owners, Bonnefield’s finance, accounting and property management teams will continue to be based in the capital.

The fund buys land from farmers in need of cash and leases it back to them. Bonnefield now works with 140 farm families in seven provinces, and its holdings stretch from northern B.C. to the Annapolis Valley in Nova Scotia. 

Leases typically last 10 years, at which point the farmer has the option of buying back the land or renewing the agreement. In addition, Bonnefield offers resources to farmers such as tutorials on agricultural economics and considers itself a financial partner to those who work the land.

Eisenhauer says Bonnefield offers an alternative source of capital to farmers who’ve traditionally had just two options to financing things such as paying down debt as well as funding further expansion, retirement, succession planning or other capital requirements: sweat equity and bank debt.

“The single biggest constraint to farming in Canada is the capital drought, not just the weather droughts that occasionally happen,” he says. 

While agriculture suffered in some other parts of the world last year, Eisenhauer says the Canadian industry weathered the pandemic storm relatively well. 

"The single biggest constraint to farming in Canada is the capital drought."

A shortage of seasonal workers disrupted operations in some parts of the country and some crops ended up producing higher yields than others, as always, he notes, “but in terms of the performance of the farms and therefore the performance of our funds, it was really pretty seamless.”

One of the lures of farmland as an investment is its value tends to appreciate over time and isn’t subject to the rollercoaster of highs and lows that are a fixture of industries such as oil and gas.

So far, Bonnefield has delivered, with its first fund in 2011 providing investors with a 13 per cent annualized return, while a second fund in 2013 produced 11 per cent returns.

Eisenhauer says another factor working in the fund’s favour is the trend toward socially responsible investing.

“Through COVID, I think people have really focused on where their food comes from,” he says. “I think there’s a huge focus on sustainability. That’s really benefiting Canadian farmers. We, in our small way, benefit from that.

“We’re seeing big institutional interest right across Canada and frankly around the world, in this asset class. I think as more and more people focus on (sustainable) investing, it’s pretty hard to find a better story than you have in Canadian farmland. We could not be more excited.”