A Farmland REIT is Now Publicly Traded
Gladstone Land Corporation (LAND) just recently raised $50 million in their IPO at a $15.50 price to invest solely in farmland. To date, they have purchased acreage in California and Florida (primarily berry related) and just closed on a blueberry farm in Michigan. Since its IPO, the price has increased almost 10% to close at $16.80 on May 20, 2013.
The company intends to elect Real Estate Investment Trust (REIT) status which allows the company to pay no income taxes assuming at least 90% of its taxable income is distributed as dividends each year. In reviewing their balance sheet, it does appear their farmland purchases to date are fairly leveraged. As of March 31, 2013, they have incurred total purchases of about $40 million with almost $30 million of long-term debt. Their current long-term debt bears interest at 3.5%, but is scheduled to reset in another year or so.
Their margin is in good shape now, however, if rates rise a couple of points, it may be difficult for them to maintain their expected dividend payout.
I have seen many private farmland investment funds get capitalized over the last few years, but this is the first publicly traded farmland REIT in the US that I am aware of. There are many similar companies in Europe and Asia. Normally, if we see a flood of these type investments on the public market, a top in the market may not be far off. We shall see.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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