What type of business is Skyline engaged in?

Skyline was developed to provide farmers with a more flexible and effective financing solution to acquire farmland than the market currently offers.

Skyline will offer a blend of distinct financing terms to farmers, in a similar fashion to that of competing financial institutions such a Farm Credit Canada or a Canadian chartered bank. Each financing package will be customized to address a farmer’s specific situation. In addition to providing debt or mortgage financing so that farmers may acquire land, Skyline will offer farmers the ability to hedge both their interest rate and land exposure risk. By hedging these risks, a farmer's overall risk profile is greatly reduced, allowing them to borrow sufficient funds and acquire more acres than they could by utilizing traditional financing sources. 

Farmers have the option to accept the terms offered by Skyline or pursue other forms of financing, making Skyline’s business 100% reliant on retaining the support and business of the farming community.

Will Skyline have any influence over farmland values across Saskatchewan?

No, Skyline is not a price setter of farmland. Skyline is a Canadian financial institution that does not directly influence the price of farmland. Farmers will source land available for sale and negotiate what they believe to be a fair price, after which they will approach Skyline for financing, in much the same way they would approach another lender. This makes Skyline’s business entirely reliant on having the support and confidence of the farming community.

Do the mortgages offered by Skyline have any special terms attached?

No, Skyline will offer standard mortgages similar to those offered by Canadian chartered banks. 

Skyline enables farmers to hedge their land exposure risk. What does this mean, how is it accomplished and what purpose does it serve?

In much the same way that farmers manage their commodity price risk by using hedging contracts, farmers can manage their land value risk by entering into a ‘land value hedge’ contract with Skyline. This contract enables a farmer to hedge or lock in a portion of the value of their land, protecting them from depreciating farmland values. This, in turn, lowers the farmer’s overall credit risk which allows them to secure sufficient funding to purchase more land today and farm the optimal number of acres for the long-term. So, a land value hedge contract enables a farmer to more quickly scale up their agricultural operations.

What is an interest rate hedge?

This product was developed at the request of local farmers who wanted to mitigate their interest rate risk payable under a mortgage. Skyline offers farmers the option to swap the fixed interest rate under the mortgage with a flexible floating rate which is tied to the farm’s annual revenues. A floating rate more closely tied to the farming operation’s overall performance during the year helps to protect farmers during difficult crop years and better protects a farmer’s cash flows on an annual basis.

What are the key benefits of Skyline’s financing model?

First and foremost, Skyline provides farmers with a more flexible financing alternative than other financial institutions in the market, and one that allows them to purchase and farm the optimal number of acres. As a result, Skyline enables farmers to grow their operations through land ownership as opposed to other methods, such as renting land.
Skyline can help farmers to more quickly achieve their growth goals, thus incentivizing them to stay in Saskatchewan and farm full-time.

Skyline offers the farming community a very real and viable solution for transferring land ownership from the current to the next generations of farmers, helping to ensure farmland remains owned and operated by farmers in the local communities.

Skyline helps to protect farmers from depreciating land values.
Skyline can ensure that farmers are not exposed to a fixed interest rate payment, and can instead tie financing payments to farm revenues which greatly reduces risk in difficult years. This helps to ensure that farmers can meet their financial obligations in almost all environments.

Limited partnerships have been buying and renting farmland in Saskatchewan for several years. How is Skyline different from the buy-and-rent model, and, if it is, does the farmer benefit in any way?

There are three key differences between the buy-and-rent model and Skyline:

1. The buy-and-rent model results in land acquisition which directly influences farmland values and creates competition with farmers to purchase land. Skyline does neither of these things – it does not influence farmland valuations and does not compete with farmers to acquire land. With Skyline, farmers will negotiate what they believe to be a fair price for piece of farmland after which they will approach Skyline for financing, similar to how they would approach other Canadian financial institutions such as chartered banks or Farm Credit Canada.
2. Skyline’s success is 100% reliant on retaining the support and business of the farming community. If farmers find no value in the financial services that Skyline offers, the Company’s success will be very limited. This differs from the buy-and-rent model where land acquisition leading to economic success can result regardless of whether or not the acquirers have the support of the farming community.
3. The buy-and-rent model provides opportunities for farmers to grow their operations by renting or leasing more land. While this strategy works well for some farmers, others would prefer to grow through increased land ownership. Skyline offers farmers the opportunity to do the latter, and to acquire the optimal number of acres to own and operate for the long-term.

What type of capital does Skyline require in order to achieve its goal of financing the next generation of farmers?

Skyline’s goal was to become a Canadian financial institution providing flexible financing terms to farmers in Saskatchewan and elsewhere.  It was also the Company’s intention that the farmer, not Skyline, owns and controls the sale of land as this best aligns the interests of the investor with that of the farmer. Therefore, Skyline must be able to access more permanent and long-term capital given the farmer may hold the land for years, if not decades. There are two ways to access this sort of capital:

1. Become a public company - by becoming a public company Skyline could offer farmers permanent capital so that they could farm the land for as long as desired, and investors could access liquidity through a mechanism other than the sale of land (i.e. investors could liquidate shares on the public market, having no impact on land values or the farmer);
2. Partnering with pension plans, endowments and other long-term institutional investors - capital invested from these types of investors is very long-term in nature and could be lent to farmers wishing to grow their operations. 

The Farm Land Security Board (‘FLSB’) issued an Order against Skyline, which was appealed by the Company and heard before the Saskatchewan Court of Queen’s Bench. What were the primary concerns of the FLSB?

The Saskatchewan Farm Security Act (‘Act’) prohibits foreign entities from holding Saskatchewan farmland. Skyline is a Canadian financial institution and approximately 8% of its outstanding shares are held by non-Canadian shareholders. The FLSB felt that Skyline’s financing model created a land holding under the Act and given the Company has shares held by non-Canadians the FLSB issued an Order against Skyline claiming it was in violation of the Act as it pertains to foreign ownership.

Skyline appealed the Order on the basis that the Company does not own or operate farmland and therefore no land holding can exist. Rather, Skyline is a Canadian financial institution which offers farmers flexible financing terms such that they may purchase the optimal amount of farmland to meet their goals. Skyline’s goal is to finance the next generation of farmers and to ensure that Saskatchewan farmland continues to be owned and operated by Canadian farmers.

What was the outcome of the court proceedings?

Initially the court ruled that the FLSB did not provide transparent or justifiable reasons to support its Order; however, the judge gave the FLSB an opportunity to issue a new Order with increased analysis, which it did.

In situations like this it is not unusual for the courts to give significant deference to government tribunals like the FLSB, which is ultimately what the court decided to do in this case as well.  The court ruled that the FLSB acted reasonably and deferred the decision to them.

Do you believe that Skyline is in compliance with the legislation pertaining to land ownership in Saskatchewan?

Yes, Skyline believes it is fully compliant with the legal text of the legislation in that the Company does not and has no intention to own farmland. In addition, Skyline has no additional rights to the farmland it finances than any other Canadian bank or financial institution would. As such, Skyline chose to pursue a legal interpretation in court.

As important as being compliant with the legal text of the legislation, Skyline believes it fully adheres to the spirit or intent of the legislation. By limiting speculation in farmland and concentration of foreign ownership, the legislation is intended to support two major goals:

1. To maintain opportunities for Saskatchewan residents to acquire farm land in Saskatchewan for agricultural purposes;
2. To support the development of strong rural communities in Saskatchewan.

Skyline believes its financing model is not only perfectly aligned with these stated objectives, but plays an important role in furthering them by creating new opportunities for the next generation of Saskatchewan farmers to purchase, own and operate farmland located in their communities.

Are you going to appeal the decision passed down from the Saskatchewan Court of Queen’s Bench?

Yes. Skyline’s goal is to finance the next generation of farmers in Saskatchewan, and across the Prairies, as the large intergenerational transfer of land unfolds over the coming decades. Currently, there are very few options, if any, in the market place that adequately address this need. Skyline’s goal is not to own farmland, but rather to finance its purchase by local farmers, and we believe that the company is structured to ensure compliance with not only the text, but also the spirit of the legislation. As such, we felt it was important for the province that we appeal as Skyline provides a practical solution to transition land from one generation to the next.

Also, after the last court decision was rendered, Skyline had a 30-day window with which to appeal, or it would lose the right indefinitely. And given there is a government consultation process currently underway and Skyline has no way of knowing what the final farmland ownership legislation may or may not look like, appealing ensures the Company keeps all options available to it.

On May 20, 2015 the government of Saskatchewan announced it was launching a public consultation process to assist in its review of farmland ownership rules under The Saskatchewan Farm Security Act. Do you believe the legislation pertaining to farmland ownership should be amended?

Skyline cannot comment on that specifically, but what we can say is that the Company has no intentions of owning or operating farmland. Rather its goal is to finance Canadian farmers to own and operate the land. The legislation has specific goals and objectives, and Skyline believes it has a structure that achieves these objectives and complies with the legislation as it is written today.

Skyline would like to encourage all stakeholders to participate in the government’s consultation process by visiting www.saskatchewan.ca/farmland and completing the online survey.

What are next steps for Skyline?

Skyline’s goal remains unchanged: to finance the next generation of Canadian farmers and to ensure Canadians continue to own and operate Saskatchewan’s farmland as a significant inter-generational land transfer unfolds over the next decade. We hope to work with the government in order to achieve these goals, and to make Skyline’s financing model available to interested farmers in the near-term.