January 11, 2018

Real Estate Investment Trust (REIT) Gladstone Land announced it has filed a prospectus supplement with the U.S. Securities and Exchange Commission (SEC) for a continuous public offering of six million shares of its Series B Cumulative Redeemable Preferred Stock at an offering price of $25 per share. The filing allows for up to $150 million in gross proceeds, or $131.3 million in net proceeds after the payment of fees, commissions, and expenses.

Gladstone conducted its initial IPO in 2013, and between that offering and September 21, 2017, the REIT has seen a total return of 12.57 percent, according to Seeking Alpha, and including 2017, the company has seen three consecutive years of dividend increases.

“We believe this is a nice way to raise capital at a pace to allow for it to be invested in a more timely manner,” said David Gladstone, president and CEO of the company.  “Over the next five years, we intend to sell some or all of the $150 million allotted for in this offering.  We believe this offering will provide the Company with access to the additional capital needed to grow our Company in a way that is not as dilutive to existing common stockholders.”

Organic Growth

Deals concluded by the company in the ending months of 2017 reflected Gladstone’s strategic expansion of its organic holdings. In September of last year, the company purchased a 746-acre organic apple, grape, and cherry operation located in Walla Walla, Washington, for $9.5 million, followed two months later with by its acquisition of an organic almond orchard in California for $5.9 million.

With these deals, as of December 2017, Gladstone’s farmland portfolio includes 73 farms totaling 63,014 acres across nine U.S. states, carrying a value of $534 million. The majority of the portfolio consists of fresh produce annual row crops such as vegetables and berries, along with a growing range of permanent crops includes pistachios, almonds, and blueberries.

Turning its sights toward integrating more organic operations into its portfolio will enable Gladstone to tap into a high growth niche.

Organic sales on the U.S. market reached $47 billion last year, according to the 2017 Organic Industry Survey conducted by the Organic Trade Association. Of all organic categories, organic food sales saw the greatest increase – jumping by $3.3 billion or 8.4 percent over the previous year; but more importantly – of all organic foods, organic fruits and vegetables accounted for 40 percent of all sales.

Furthermore, Food Dive reports that TechSci Research expects the global organic food market will see a compounded annual growth rate (CAGR) of 14 percent between now and 2021, and a report issued by the Organic Trade Association in March of this year found that organic food sales in the U.S. topped $40 billion per year in 2016, and that more than 80 percent of U.S. kitchens now contain organic food items.

Armed with these numbers and newly released data, Gladstone is able to gain exposure to the organic segment by acquiring established organic fruit and vegetable operations with multi-year leases, without having to invest the multiple years and capital associated with transitioning mainstream farmland to organic production.

“We are excited to add another organic, high-yielding farm to our farmland holdings,” said Gladstone in a press release announcing the purchase of the organic almond orchards. “Recently, pricing for organic almonds has been at a premium of more than 100 percent over that of conventional pricing, with forecasted demand continuing to outpace supply.”

Indeed, almond handlers at the 2015 Almond Conference noted that producers of organic almonds can realistically expect twice the going rate of traditionally produced almonds.

“Our hope is that the additional income from this new almond orchard and the added ability to acquire more farms from the facility expansion will allow us to continue to increase the distributions we pay to our shareholders,” said Gladstone.

DRIP

Concurrently, Gladstone is also offering up to 500,000 additional shares of Series B Preferred Stock pursuant to the company’s dividend reinvestment plan (DRIP) to holders who elect to participate in the plan, with company affiliate Gladstone Securities LLC managing the offering.

Because there is no current public market for Series B stock, Gladstone is planning to apply to list the Series B Preferred Stock on NASDAQ, or possibly another national securities exchange within a year of the termination date, however this is not a guaranteed achievement.

The company is planning to use the funds gained from such offerings to pay down debt, to fund future acquisitions, and to support corporate activities.

“Shares of the Series B Preferred Stock will be sold on a ‘reasonable best efforts’ basis over a certain period, which should allow us to invest the new capital as the small amounts are received, as opposed to receiving a large amount of capital all at once from a typical offering, which can often create a drag on earnings until the new capital is fully invested,” said Gladstone. “We believe this offering will allow us to continue growing our Company well into the future at a steady rate, which we hope will also lead to increases in the value of our common stock.”

-Lynda Kiernan