Gladstone Land Is Launching Real Estate Investment Trust

Gladstone Land Is Launching Real Estate Investment Trust

Investment firm Gladstone Land Corp (NASDAQ:LAND) plans to acquire farmland on the West Coast and elsewhere in the US with the $51.5 million (₤34.1 million) it raised through the January 29 initial public offering of its stock. The Virginia-based company is launching a real estate investment trust for farmland, a concept that has previously been applied mainly to commercial buildings and timber properties.

Gladstone already has about 12 farms in its portfolio worth about $75.5 million (₤50 million) that are devoted to growing annual row crops like lettuce and strawberries. Chief executive David Gladstone told investors during a conference call that the company is planning to purchase another 15 properties and will spend all of its IPO money, as well as borrowed funds, by the end of 2013.

A vital part of the company’s strategy is classifying as a real estate investment trust – a move that will allow it to avoid federal corporate taxes as long as at least 90 percent of the profits are passed through to shareholders, among other conditions. David Gladstone expects the firm to qualify for a real estate investment trust status in 2013.

Gladstone Land intends to buy land and then lease it out to farmers who want cash but prefer not to take out mortgages. “Many farmers, big or small, don’t wish to tie up their capital in owning real estate,” the company CEO said. “They make much more putting it to work in growing.”
Most leases with Gladstone Land have to be renewed every two to five years, which makes some investors nervous but allows the company to increase rents more often. CEO Gladstone, who has a background in the berry industry, considers farmland as a source of stable income and appreciation for shareholders. For now Gladstone Land intends to remain focused on row crops and has no immediate plans to consider grain, tree or vine properties. “Row crops have a lower risk profile,” said Bill Frisbie, principal. “Grains are commodity crops subject to global influences.

**Gladstone Land Sees FFO Rise by 110 Percent in 2012**
The company reported its full year financial results on March 27, showing funds from operations (FFO) increased by 110 percent to $1.1 million (₤728,000), or $0.39 (₤0.26) per share. The surge in FFO was primarily a result of the acquisition of four farms and one cooling facility in 2012 for $7.4 million (₤4.9 million).

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“Our financial results for the year reflect increased revenues from our farm acquisitions made during 2012. We are excited about our initial public offering, which closed in January 2013, and are working hard to deploy this additional capital in 2013,” CEO Gladstone said in a press release.
This year the firm may buy some packing, processing, cooling or storage facilities, but only in relation to land acquisition, CEO Gladstone said. “You’ll mostly see farms in our portfolio, not buildings.”
Gladstone Land’s share price has risen by 5.67 percent since its IPO, closing at $15.85 on Tuesday, April 2.
**Gladstone Land’s share price was $15.85 as of 14.15 GMT, 03.04.2013.**

By James Navarro de Paz
James is one of our real estate development analysts. James ensures we're constantly reporting on the latest information regarding Real Estate Investment Trusts (REITs).

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