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Real Estate Fundamentals in Action: Alberta | Add Comment

    • Another Alberta/western Canada Investment 9/28/2008
    The equity and bond markets have benefited from a long period of low inflation, but ongoing and massive central bank liquidity injections point to a far less benign environment of elevated inflation ahead. Research by our firm, Agcapita Farmland Investment Partnership (Calgary, Canada based agriculture private equity firm) shows investors must be prepared to rotate into asset classes with different characteristics. During the last commodity bull market & high inflation period in the 1970’s, equities materially underperformed farmland. - Western Canadian farmland went from around $100/acre to $550/acre (550% total return and 176% in inflation adjusted terms); - Cash held in a money market account barely kept ahead of inflation (6% inflation adjusted return); and the - S&P 500 index returned less than 2% per year (a loss of almost 50% in inflation in adjusted terms) We believe the world is still in the early stages of this current commodity bull market. When agriculture commodities prices are compared against their previous inflation adjusted highs they are significantly discounted implying scope for further increases: - Corn is US$ 5/bushel currently compared to US$16/bushel in 1974, - Wheat is US$ 7/bushel currently compared to US$27/bushel in 1974 - Canadian farmland is C$ 660/acre currently compared to C$1,100/acre in 1981 Agcapita’s investment team has over 40 years private equity and fund management experience and over $1 billion in total career transactions. The team currently manages a group of private equity funds with almost CAD$ 100 million of assets under management and previously managed a group of emerging market funds with almost C$500 million in assets for one of the largest banks in Europe. Canadian farmland is low cost: Agcapita believes Saskatchewan farmland in particular is an undervalued asset. With an average price of $390 per acre, Saskatchewan farmland is some of the least expensive in the world. The prices in Alberta are almost 3 times higher than Saskatchewan at an average of $1,100.

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      • Cash Is King 1/23/2009
      Land of course is a good investment to have in your portfolio. However, in today's market where cash is king, you need to put your money into cash flowing assets such as revenue properties, mortgages etc. That is why revenue properties that produce a steady stream of income will protect you in an up, down or static market. Simply put land is speculative and you have to wait to sell for your profit.

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