S1E13: Farmland Investing with Joelle Faulkner from Area One Farms

A pre disclaimer to the actual disclaimer that you are, I'm sure, waiting to hear. At the time of recording this podcast, I had a microphone malfunction and had to decide whether to go to the backup microphone or reschedule the whole thing. And you know what they say the show must go on. So apologies in advance for the slightly poorer sound quality of my microphone, but I don't think it detracts from the wonderful conversation we had with our guest today. Let's go. This podcast is brought to you by Gensler Wealth. The information discussed today is meant to be general in nature and not tailored to specific investing circumstances. This means that you should talk to your regular Gensler wealth advisor or your own advisor before acting on any information we discuss today. Nothing in this podcast is intended to be a solicitation and past performance is not guaranteed Future returns Insurance Today we are discussing investing in farmland as such. Additional important disclaimers include when investing, make sure you separate the wheat from the chaff, don't put all your eggs in one basket, don't count your chickens before they hatch, and most importantly, definitely don't bet the farm. Today on the Gensler Wealth Unlimited podcast we speak with Joelle Faulkner, Founder and CEO of Area 1 Farms. We talk about her growing up with a family farm, the current global climate for farming, why farmers need a partner, and why farmland is a great investment. Giddy up.

Foreign.

Welcome everyone to the Gensler Wealth Unlimited podcast. Really pleased today to have my friend Joel Faulkner, Founder and CEO of Area One Farms. This is back to our regular approach of speaking with folks in the investment world as opposed to the last podcast which was a little deviation into cybersecurity. But it also follows the theme of us talking to folks doing some different or non traditional investing as opposed to stocks and bonds which everyone hears about and reads about all day every day. So I'll give a quick intro to Joelle and I actually said on the last podcast I wasn't going to read bios, but Joel's background is so impressive I feel like I must read this. So Joelle is a multi generation Canadian farmer and she's going to explain how combining her finance expertise with her farming knowledge and background led to founding Area One Farms, which now has 450 million of committed and invested capital and owns 140,000 acres of farmland in partnership with 28 farm partners in four provinces. Joelle is a Rhodes Scholar and a Fulbright Scholar and obtained degrees in engineering, Business and Law from Western University, Oxford University and Stanford University, Stanford University she was also named one of Canada's Top 40 under 40, Canadian Private Equity Summit Emerging Leader, EY Entrepreneurial Winning Women and Canada's Top Hundred Most Powerful Women Future Leaders. Holy moly. When did you have time to start, you know, start your career here? This is unbelievable. So thank you very much, Joelle, for joining. Really, really appreciate it.

Thanks so much for having me.

No problem. So farming, you know, we learn, we grow up as kids, we learn about farms, we learn about farming and food and all this stuff. But really, I think for a lot of folks this is not something familiar to them on a day to day level. Maybe. Tell us, let's start by telling us a little bit of your backstory and your family and farm, etc. And how did we get to where we are today with Area 1 Farms?

So I'm from a dairy farm, My parents and brother run a dairy farm. And my brother was really interested in adding land to the farm that could grow hay in areas where the land was better priced than where we are from. And when I was helping him look at that, I got really interested in how people invest in farmland. And the traditional way that people invest is they buy land and they rent it out. And there's a number of groups that do that on behalf of individuals and institutions. And I thought that actually as a farmer it would be much better to be in partnership with the person who was buying the land. And in particular because most farmers have ideas on how to create value in the land, cleaning some of it up or severing and selling houses or different things to make it work better economically that actually if you had that partner, you could afford to share a lot with them. So we built Area 1 on the idea that the farm partner actually deserved to have a lot of the upside, even more than the part they own. And that if we could do that with farmers, we would be able to partner with really great operators and do well for investors. And so that was in 2011. I started looking at it and raised the first fund in 2013. And we're now, we've just raised and closed our fourth fund which we're investing at the moment.

Amazing. So, so maybe it's a little deviation, but you know, give us a sense of when you were with your family, your family farm or the farmers you, you deal with, you partner with, et cetera. What is life like for farmers? Literally like a day in the life today. What does that look like for someone who's owning and running a farm? And how's that? How does it look Today, relative to maybe, you know, 30 years ago, when you were probably much younger within your family's farm enterprise.

The farmers I work with are actually run fairly different businesses than what our family did because I work primarily with row crop producers now. So they're growing wheat, canola, oats, really soybeans, really basic commodities. The way that that has changed over the last 30 years is it's gotten bigger because equipment has gotten bigger. And so productivity per person has gotten higher. And as a result, you need to farm more acres to make that machinery work and pay off the capital expense of everything has gotten bigger. So land is worth more per acre and there's more acres per farm, machinery is more expensive, et cetera. But both 30 years ago and today, probably the thing that people mostly miss about farming is, is that it is a really complicated business. So when you think about farming mostly, especially in the city, you're thinking about crop production. So how do I grow a plant? But in addition to having to produce that plant, which is weather dependent and like has a lot of risks that you can't always manage, they also run like super complicated, really big businesses. So you're hedging crops, so you're forward selling things. You have a lot of machinery to maintain and manage and finance. You have bim space, so you have physical capacity constraints, you have employees and so you have workplace constraints. And so it's a really, really big business that individuals still like. Canada's almost entirely family farm. So individuals are running and they're managing all kinds of things. Whereas in general, when you look at businesses that would be more like that, you'd have a person who's managing contracting and you'd have a person who's managing machinery and you'd have a separate person who might be managing the agronomy. And while you might hire different people for different roles within the farm or consultants, most farmers are actually managing a lot of those things. So it's. That's probably like, I think I see it with our investors, but that's probably their biggest takeaway is they're really big businesses that are complicated.

And not, not to jump too far ahead, but I guess the question that comes out of that is with your involvement and your team's involvement, owning or, sorry, not owning, having partnerships with 28 ARM partners, are you and your team also, in addition to investing, helping these business owners, you know, run more efficiently, bring other expertise in, et cetera?

We call our office helpful where possible. So I don't guarantee that I'm going to be helpful but if you have an issue that you're trying to think through, we are certainly happy to help you try to think through it. Which also means I'm going to grant our partners the autonomy to still run their businesses the way they want. But certainly support has been useful and probably actually more than us being helpful to our partners, we're able to create connections between them. So when somebody has a question on machinery, we can send them somebody else who actually recently dealt with that question with BIM things, with contracting. Yes. So that part, it's a lot of fun, but unfortunately I don't have enough expertise to, to really be super helpful in a lot of cases.

No, but you have a network now of all your partners that can interact with each other. There must be huge value in that alone. You know, when you, when you approach a potential invest the farm farmer partner, you can bring full scope of your other 28 partners to the table.

Yeah, that part's very helpful.

Great. So. So anyways, I fast forwarded a bit. We're going to get into a little bit more about, you know, how you work with your partners, et cetera. But for folks who aren't totally aware, can you paint us a picture of sort of the current, let's call it the global climate for part for farming or the, you know, the economic picture that farming is operating in. Commodity prices, inflation, crop product. You're the expert on what the key metrics are, so enlighten me. I guess how do you paint the picture of what's happening in the farming world today? Canada or around the world?

You did a very good job with your broad categories. So farming from a production standpoint, especially in Canada, where we have very little irrigated land, so not a lot where we're watering it is very weather dependent. Canada is probably a net beneficiary of climate change, meaning climate change isn't good for anybody. But within the context of climate change, the worst hit countries are probably the hot and dry ones because we aren't yet, from a scientific standpoint, great at designing for drought resistance. And so Canada's not doing too badly in that scale. We have a lot of volatility. And so you use crop insurance to kind of manage out the bottom side of the risk. Once you actually have a crop, then it depends on how well it yielded. So how many bushels per acre, which is both a weather question and a scientific question. And science keeps getting better to increase yields and then what's the selling price? And so like you said, commodity prices are a really big thing. And commodity prices are really high this year and they were really high at the end of last year. And to put that in perspective, they're about 60% above the five year average price right now in Canada and they're about 70% above the 10 year average price.

Wow.

So they're really high. That makes farming actually quite profitable. So even though the input costs of fertilizers up, fuels up, labor's up, like all the things that are inflationary that are affecting every business right now are certainly affecting farms, but the profitability if you have a good crop is also up because the commodity prices are so high, they're not expected or I don't expect them to stay there. Like I don't think anybody's looking at that and saying just because they're at this level, they're going to be at this level for 10 years. There were a number of issues that kind of all came at once last year to create really high commodity prices. And some of those issues in particular global weather. So production across the globe hasn't stabilized yet. And then the political instability that we're seeing from Russia, in Ukraine and other places with potential political instability tend to make money prices go higher. So in general what we're seeing is bad for the world makes it actually pretty good to be a farmer right now.

And, and, and, and so aside from maybe some political instability that I hope will lighten up, although there's some interesting things happening over there right now as, as we're recording this, what then leads to these commodity prices and food prices coming down over time? It sounds like there's a whole bunch of headwinds that are pushing them up. Obviously, you know, government's raising interest rates and trying to sort of curb some spending. But people need food. It's a, you know, number one thing after shelter, I guess so. So what are the catalysts to actually bring it back down to I guess somewhere closer to average increases?

So our, the kind of food we produce are your really basic commodities. So it's like wheat, oats, barley, soybeans. So we're not talking about fancy things. So this isn't avocados or cashews or things that, that are going high income. So so our biggest determinant is global food production and really good weather across the world that brought up ending stocks. So that basically leads to more production on a global scale, will bring crop prices down because it is a supply and demand problem. And really bad weather last year led to really high prices. And then the combination of not great weather in Many places this year, along with political instability has continued high prices. But those I think over time probably like any market, go up and down, probably end up coming down at some point.

Okay, got it. You know, I, I grew up just north of Toronto, not too far north in Thornhill, so I guess that's still considered Toronto. And I remember when I was a kid, 40 years ago, if I drove 10 minutes north, not even 10 minutes north of my house, there were farms all over we could see. And now If I drive 10 minutes north of my parents house, there's entire cities of houses and peoples and malls and, and I don't know, I'd probably have to drive half an hour before I come across first farm. And you know, point is there these seem to be disappearing at least closer to cities. What's happened in the last 30 years? As you know, land, real estate's gotten so valuable and farms are turning into multi hundred residential housing developments, which I assume means humongous amounts of money to the farmers when they sell the land. What's, what's happening there, A and B, doesn't sort of the disappearance of farms there actually create a little bit of a supply constraint or maybe it's not material in the grand scheme of, you know, farms across the country.

Cities tend to be built on the best land in the country. So certainly when more land is used for cities, you're taking over really great. That said, and to your last point, Canada's got a lot of land and in particular in climate change. So as we warm, northern Canada actually becomes much more productive. At the same time, technology, better seed technology, better fertilizer, technology, better chemicals, better machinery, all of these things are leading to better production and actually quite at high rates in Canada. So our per acre production is rising at 2 to 5% a year. So what used to grow a hundred bushels will now grow between 100. And what would have grown that last year would grow between 102 and 105 bushels. That will more than make up for what we as a country are losing to urbanization, the loss of farmland. Globally there is a bunch that is because of urbanization. But your much bigger loss is actually a climate one that in the hot areas you aren't getting as much rain. And that lack of rain means a lack of crop for us. We only invest in farmland and we actually only invest in farmland. In Canada we are in areas that are much less affected by real estate prices, residential, commercial, even recreational. So we tend to be much further from urban centers and in particular in Ontario we actually don't own anything in southwestern Ontario. And so while there are farms that are very affected by this and in lots of ways, like you said, very positively affected, like their farmland went up a lot in value as it changed use. If they still owned it, they had kind of these big windfalls. That isn't the case in the areas we're investing.

Good, thanks. I had to put my, my thing on mute for a second every time I record the podcast. There's just for that moment of the day. Either the garbage collected outside.

That's fat.

All the banging, our construction. But last I think they were actually trimming the tree right outside my office window. It's perfect timing. That's how it goes. Okay. No, that's good. That's, that's great. Sort of high level overview of sort of the global climate for farming. Both pun intended and not intended, I guess. So let's talk about your, your partners. Your farming partners. You know, I don't know what a typical situation looks like, but I assume they had the family farm. They've been running it for decades, generations. I don't know. And then maybe you come along or maybe they're doing an outreach. I don't know. How does the relationship begin? And maybe at a more basic level, why does the farmer want to bring on and you're investing in their business and you're going to own a portion of their business. So why does the farmer farm want to have you at the table and give up some of their business, et cetera, et cetera?

Great questions. So our farmers are mostly fourth generation at this point in Canada.

Wow.

Yep. So they're mostly on farms that are over a hundred years old.

It's amazing because they always say with regular businesses they almost never make it to the, to the third generation, let alone the second generation. And you're saying generally with farms you're, you're looking at fourth generation.

Yeah.

What are they doing that sort of right. That allows this to continue on for 100 years?

There's tends to be a really big overlap between generations, maybe more so than you see in regular family businesses. So kids will tend to join younger and often in their 20s and parents will tend to stay longer. And so we actually tried to partner in most cases with two generations because the older generation generally is better at saying no to spending. So they will be much more capital aware, which means we don't have to be as much. And the younger generation is generally a bit more active around newer technologies and adopting kind of new practices and the balance Works out really well.

Unreal.

Yeah. That overlap might.

But. Sorry, I interrupted you. I was asking. They want to have you as a.

Partner and you were saying no, you're exactly right. So. So what we always say is there is no partner better than having no partner. So exactly. Like you're thinking if they can do all the growth that they want alone, we suggest that they do. And sometimes we look at.

Both. No part.

Yeah. To review it and we say like look, you can do this with debt. It's really comfortable. You, you probably want to do that. The reason that we're useful is when you need to grow by a lot. So generally the rule of thumb is you're going to more than double. So you're going to triple the size of your farm because you have three kids who are interested in farming and in order to accommodate them you need to have that kind of growth. Or you actually a third of your, where half of your land base is owned, but the other half is rented and your landlords want to sell and so you need capital to buy them just to keep the same base that you're actually already farming.

Sorry, sorry. And how does that come about? Because if you own half of it, does that mean you're, you're renting your neighbors?

Yeah, exactly.

Right next door.

Yep. Or very close by. Yep.

Oh, oh, okay. I see.

And so uh, in almost all the cases it is outreach to us. Like we very rarely find partners and it is almost always need based and sometimes that's a need that they know is going to come up. Like their landlord neighbor will have said to them, you know, I want to sell in the next three years. And sometimes that's kind of an immediate need base. Their landlord neighbor says, I'm ready to sell and you'll have first chance, but I need you to decide in the next three months.

Wow.

Yeah. And so. And it work. So then they have two options. One is you finance with debt, which at even 30% growth is pretty comfortable. Maybe 50% growth, maybe even a hundred percent growth. But once you're getting into kind of 200 or 300% growth, debt is probably not a way you can finance that. And so we come in as co owners and depending on the situation, we actually just come into the new stuff. So they keep their whole home farm, they put in money, we put in money, we own new stuff together.

Oh wow.

And in other situations they're buying out a bank or they have enough growth that we come into their home place and the addition and, and so those are much better.

For you. Because if you come in only as an owner to the new addition, which I assume is you're paying into that acquisition, but along with that, you're getting the full infrastructure of the farmer and all the employees and the equipment and all that stuff that was there before. It's almost like you only have to pay for a part of the business, but you get the whole infrastructure with it.

It's a really good question. We don't. So when we structure those, we're actually doing it on a. What's called a crop share. So we are sharing in part of the crop, but they actually get much more of it because they have that whole infrastructure and they have machinery and other things that are valuable and important.

Darn it. I thought I figured out the secret to burns and farming, but that's how you run it and not me. Okay.

It's it. No, no. So it. The. We've had a number where we start like that and then over time we end up in both parts of their business. So in their home firm also we have a little bit where they. Where they operate with us in a way that is legal. I guess along the way they change the. Like we. We end up with more. They sometimes have processing plants so they'll be doing some light processing. And sometimes we end up in that, sometimes we don't. So we just look at the full business with the partner to say what will be most helpful to you. And once we have that, we work with them to try and structure it so that both it's helpful to them and it's very profitable for them. Right.

Okay, amazing. And you look at your portfolio overall, like how would you split it between sort of the uses for the capital or that need. What was that need that brought you there? If you sort of look span across the portfolio.

Almost always the uses for the capital are something to do with land. So it is almost always adding land or in some cases there's financial instability because of either risk issues. So they had a couple years of really bad weather and higher debt levels. And so now they need a partner or they need some other financing source. And so it's usually one of those things.

You mentioned land, always the focus on land. One thing that I've noted from all your material that I've reviewed. You talk a lot about land improvement and you mentioned that a little bit so far. But I'm a little bit of a geek and I love sort of to learn how things get better or science or et cetera. Just, just at a super high level. How do you come in and quote unquote improve the land and make it more productive? Well, what are sort of, you know, the ABCs or the one, whatever you call it of that?

Okay. It's almost only one of two things. So we just like you think of them with real estate for highest and best use, we look at it as production per acre. So there's two big ways you can increase production per acre. One is you are opening up production, usually in our case from pasture land, so what was used for cattle into crop production. And so we do conversion that way, which often requires like some land rehabilitation. Our focus in those cases are actually from previously timbered private land. So maybe it was used for cows and then it grew over in trees and then they sold the trees off of it and so it became kind of stumps and waste and it's, I don't know if you've seen timberland, but it's a little messy looking.

Yep.

And we go in and take out the stumps and bring it in, put in drainage systems and put it into production for row crop commodities. So that's one. So we went from timber or kind of waste, like non receded timberland into row crop production. And the second one is we go from dry land to irrigated land. This we do much less of because there's the restrictions very helpfully in Canada are actually very tight around irrigation. And so there's very few areas where we can irrigate that haven't already been irrigated. But when we have those, we are developing irrigation to bring what would otherwise rely on rainwater and then we can actually use water that's coming from under the ground to produce the crop.

Nice. And Ian, I, I, I guess in the first instance with the timberland, I mean there wasn't crops there before, so it's tough to say what was it doing before to after. But for the land where you put in the irrigation, like what, what's the increase in yield that you can get? If that's the right phrase that you.

Oh yeah, yeah. Now it is. Ants. That's a good question. Depending on the year, you're going to run from like 20% to 100% increase in yield.

Oh wow.

Yeah.

And we're talking sort of finance world, you know, what, what's the, what's the cost or the return on investment or whatever, Whatever. However you think about it, we're going to put in X dollars and therefore we're going to get a 20 to 100% increase. Like that must be a huge ROI. Return on investment.

Okay. It is a huge ROI because it's dependent on the year. If you're in a wet cycle, so there's lots of rain, maybe you aren't seeing that much extra, and you put this money in and so it isn't paying back super quickly.

Yeah.

But for the most part, the reason that there's so few opportunities to do that is where irrigation can be developed. It has been developed. So for the most part, in the areas we're in, there's a reason that it wasn't done. And maybe that reason's a little stale, dated. And so now we're doing it, but there's not a ton of those acres across the country.

Okay, got it. Cool. Okay. Well, that gives us a sense of sort of how you partner and what you do. So now the big question, and I was reading an article this morning. I'll ask the question and then. Well, actually, I'll. I'll make the statement, then I'll ask the question. So. And I'm sure you. You get asked this or you've heard this millions of times. So apparently Bill Gates is the. Is the largest private owner of farmland in the U.S. so he owns, I can't even remember how much, but a couple hundred thousand acres of farmland. And he's a very smart person.

So the other way his investment is actually like. Or to get to that sale is actually generally fairly new. But. Yes. Yeah.

So sky. So the other way of taking that statement and turning into your question is he obviously sees some benefit to investing in farmland. I don't think he's there rolling up his sleeves doing work. So he's. This is an investment. So why would investors want to invest in farmland? Why. Why do your investors. And why do you. I guess why would you want to invest in this asset class?

So I like it because unlike most people, it is actually the one thing I understand. So my reason and the general investor's reason is probably a little different.

Yeah. Yeah, totally.

From a general investor standpoint, the asset class is interesting and popularized by David Swenson from Yale's Endowment because it is low correlation to other asset classes. So like we're seeing now, probably the economy is going. People are worried about instability generally. That hasn't been the case on farmland. It continues to appreciate even this year. So. So people like it. From a diversification standpoint, like we were talking about earlier, it's actually a really good inflation hedge. So in addition to production being up, so commodity prices up because profitability is up. Store land prices. So you're in an asset class that in otherwise recessionary periods have tended to be periods of high inflation. And that high inflation also means high food price inflation and that means higher profitability and that means an inflation hedge. So your land price is actually your asset basis and those would be your dominant two. Like.

Yes, that, that makes sense. And, and just a, just an investing question as it relates to, to you and your, your fund and you, you made it very clear you're only investing in Canada. You know, typically, as they say, the US is 10 times the size. Surely there's, you know, great opportunities that would, could, could use your help and could partner with you, etc. Why only in Canada and, or, or, and the flip to that question is because I don't know many others, maybe I. In Canada, that's doing what you're doing. I'm sure there's more. That's just not my expertise, but I. In the US there must be tons of folks investing in farmland and professional firms like yourself. Anyways, there are more.

Yeah. So the US has more opportunity for sure. And the, there are more professional managers both in Canada and my understanding is in the States, there's actually no other groups that do partnership in the way we do, so we might have something that's very attractive to the farmers, but to investors there's a lot of options. The reason we haven't gone there is that for however good my resume looks, it has taken me 10 full years to understand how to run this business really well in one place with one set of, of opportunities and problems. And so I think while we may end up going to the States, we just weren't ready for it yet.

Well, it sounds like there's not that many players in Canada anyways. Very, very few. And you've got a humongous country to work with here, so maybe.

Yeah, exactly. You don't need to work. Yeah. Takes a long time to get good at anything. And so we're getting good at it, but it's taken us a while.

Yeah, no good. That's really good feedback. So, you know, part of our job at Gensler wealth is we look after family's wealth holistically, but from an investing perspective, we build diversified portfolios. We're looking at different asset classes and we need to think about how that all fits together. You're building a portfolio as well, although it's the same, you know, single asset class. But how do you think about portfolio diversification within a fund or across your funds, you know, for your investors to balance out the risk and return like two key things in investing.

So we think about it from two aspects. One is geographic. So we try to have a range of geographies both east to west across the country and north to south within provinces. And that lets us expose to different weather patterns is probably the most important thing for us. And to some extent different buyers. And then we do a lot by partnership type. So we do what we call full farm partnerships. So these partnerships where we are owning machinery and making input decisions and kind of these bigger places and then we do these smaller kind of where we just have the add ons. And so there we're really dependent on crop production, but much less on the expense side of the operation. And then we focus a lot on this land improvement work. So that's really close to a third of our business. And that one's there because it gives us that place where we can create value that isn't actually dependent on weather or commodity prices because it's really about creating value in the land base itself. And so that's how we think. So we try to create value kind of through active land improvement. We try to be diversified a little bit between types of partnerships. And then within each farm, the farm itself is diversified on crop production. So it tends to be what's called a three or four year rotation. So each farm is growing three or four different crop types and changing which land each of those crop types are on. But importantly, that means they're exposed to different commodity prices and different weather risks depending on the crop. Nice.

Amazing. I think about it one way. You have to think about it a different way. It's amazing. Maybe one or two more nitty gritty, you know. So you're partnering with these farms, you're raising money from investors and acquiring these, either entering the partnerships or acquiring firms or whatever the right phrase is. How are you investing? Is it all. Are you doing sort of an all equity investment? Are you pairing up with some debt as well? Like, you know, sort of traditional private equity?

How do you structure it on the farm level? We do use debt. We don't use nearly as much as a traditional private equity would because of the nature of the asset class and conservatives. I actually think our investors are in this for conservative and stable returns, not so much for maximizing returns and being able to like, I think we don't want to see the risk. So we tend to use 30% debt or less. Okay.

And so yeah, speaking of conservative or stable returns, what do you sort of target when you're making either what's been your track record and I know you have a number of funds open and still sort of, you know, owning. Well, obviously owning farms and investing for a while. But what's the track record or how do you think about what, what how investors should think about target returns on this asset class?

We think about it as 8 to 12% per year, compounding returns, but we actually focus a lot on, on higher than normal returns but low to no cash return. So because we're so heavily invested in land improvement work, we're actually using all the cash that's getting generated for at least the first five years and continue to do improvement work. There are other funds that structure for a different outcome. So they'll give you a very consistent cash return and maybe their total return is less that you can look at it like they will sell it more as a bond, which isn't what we think of it in this, in our business and it isn't how we structure, how I structure for it.

So, so is the, then the end return that eventually annualizes into something in that range, hopefully at the higher end, as you were saying, is that based on some liquidity event or an exit?

Yeah, sorry. That's because you're actually selling your units or we're actually selling the farms and in most cases the farmers are buying us.

Yeah, that, that's what I was going to ask you. I imagine after a hundred years in the family, they're not looking to sell to the next group or something.

That's right. Well, and, and what's interesting about it is because of how we structure, they can buy their home farm out, but usually they can actually afford to buy a whole bunch of the new land. So the biggest reason we have partners is that net, net they will own much more land at the end of a 10 year partnership than they did at the beginning, even independently.

Got it. And, and there is, I, I assume some sort of life to these, like a defined life of, of your various funds. But this seems to be an asset to me where like you might want to hold it for 20 years. Like why are, like why, why do we have. They're, they're growing, they're producing well, et cetera, et cetera.

So we do permanent capital structure now. So it has the ability to keep going with guaranteed liquidity year 10 and every fifth year after that. So anybody who wants to sell, we have to buy them out at NAV or refinance them out at 10 years or every fifth year after. And if we can't, then we sell the properties. So it makes it so that, that yes, we can stay in the asset class really long term, as long as investors want to. We don't actually take away that investor choice. And the reason we don't is the biggest thing for us is being able to make really good partnerships with farmers and they would like longer partnerships. So we do try to have investors that are aligned with that.

Right.

The biggest thing from an investor standpoint is probably actually not about how well the farm did. When you get to year 15 or year 20, it's probably what your life looks like. It might be what your financial needs are, it might be what the rest of the world looks like. Like I always think, you know, right now interest rates are getting kind of high in what we have traditionally thought of for the last 25 years. But if interest rates were at 18%, I'm not sure people wouldn't be invested in much else.

Right.

Like that's a lot of cash to be earning. And so whether we had a great opportunity or not, you actually deserve to have that choice come to you. And so we try to structure to make sure that you do. Great.

Got it. Okay, I think last question, maybe just from an nitty gritty perspective, you know, in your material and everything I've Read about Area 1 firms Big focus on ESG, Environmental, Social, Governance, which probably seems very, very appropriate given we're talking about our land and our earth and farm and food. But what is, can you explain what that means as it relates to your business and how you operate it with those concepts in mind?

So we actually think that a lot of what people miss about ESG is the S, and we have a big focus on that. And so E being environmental, S being social, G being governance. We manage very specifically at a governance level that most of the decisions are farmer made, so they are made locally. What that does is actually it backs into better social outcomes for the communities and better environmental outcomes on farm. From a social standpoint, in addition to the part that the farmer owns, they earn extra appreciation across the whole farm. So that gives them their long term buying power, which also means more of the money stays rurally even after we leave, which results in stronger rural communities. And so we're really focused on that. We're also really focused on labor. So we measure the multiple of living wages that we have on average, which is about one and a half. We measure the number of employees, all of our employees are on living wages. So a big focus there. Environmental, interestingly, is probably the area of greatest focus for investors. And we've spent a lot of time trying to define what outcomes we want from it. And we have not always been in step with how investors think about it because I think that thinking is maturing in this space. So probably if you talked about environmental outcomes five years ago in agriculture, people would look at what amount of your portfolio is organic. And actually from an environmental standpoint, organic isn't so good because it requires a lot of tillage and tillage isn't so good and you get soil erosion. And especially in dry countries like Canada and there's a bunch of knock on consequences in terms of the food price and supply and all those things. So we were really early to say that we actually don't think that's the right metric. The big revolution that's happening right now in agriculture in general, in Canada in particular, and I think aligns really well with where investors want to see this go is what's called regenerative agriculture, which is a focus on both the chemical and biological composition of the soil. Which really means we want more carbon in the soil and we want more bugs in the soil like more life. And that will have huge potential in terms of increasing yields at the same time as improving environment locos. And in particular, making soil a store for carbon is really important. So our focus right now is how do we find those practices that can be applied in Canada in the geographies we work in and be scaled up on commercial farms? Because the big limitation I think is actually having practices that are both well understood enough to scale up and kind of economically proven out to scale up. That's our focus on the environmental side.

Cool, got it. Okay, great. So maybe we have two minutes left. Maybe I gotta get you back to your, to your farming partners here. So two high level questions. Number one, look, you've certainly done, you've certainly built an amazing firm that's quite different than most others in an area that others aren't, you know, focused on. And that's why we love talking to folks doing unpredictional things in the investing world. What are you most proud of when you look back over the past 10, 20 years, what you built with Area 1 farms or in general, like if you have an achievement or something that you just feel really pleased about.

Yeah, I really like the partnerships we've been able to build. Like the probably what's true about partnership generally, but certainly in my experience is if things go right, it is, it goes really right. If it goes badly, it goes really badly. Like you get both ends of the spectrum.

Right.

But I've had my very first farm partner, is still a partner. And actually Neil does a ton of mentorship and guidance and work essentially for me and the company in guiding young farmers and that kind of relationship and being able to learn from his 50 plus years of experience and, and being able to have that kind of relationship with somebody who is just so accomplished in their own right in a very different field has been really, really wonderful. And we've been able to build a lot for him and for the other partners that we're working with. I'm really proud of that. Good.

Awesome. So I think I know what your answer might be to this question, which is the same one we ask everyone right at the end. You know, our theme here is unlimited your wealth. Unlimited. We can help families with whatever they need. And unlimited is sort of our tagline work. So the question to all of my guests is, if you had unlimited options in life, you could do anything you want. Maybe, aside from what you're doing running Area One Farms now, what would you be doing?

Yeah, I. I really like working, which I realize is not what everyone likes. I really like being in an office for lots of parts of the. Like, I really like being busy.

Yeah.

So I'm not sure where I'd be working, but probably, probably somewhere. And I'm not a morning person, so it would not be milking cows.

Very good. I'm not a morning person either, but gotta get going each day. Noelle, thank you so much. That was really, really interesting. New, new, new knowledge for me in many areas and hopefully a new knowledge for our listeners. Thanks for your time. Wish you the best in everything you're doing and appreciate taking this.

Thanks so much for having me.

We'll talk to you soon. Hello and thank you for listening.

My name is David McMillan and I.

Am the new client service associate with Kinsler wealth and I am also the editor of this podcast. This has been Brian's conversation with Joelle Faulkner from Area One Farms. This podcast is not to be taken as investment advice and is not an endorsement of Area One Farms.

This has been a Ginsler wealth audio production.

The unlimited podcast is hosted and produced by Brian Ginsler. Don't forget to rate the podcast and follow us on social media at Ginsler Wealth. Thanks for listening and see you next time.

Sa.