McLEAN, VA—Gladstone Land Corp. has closed on one of many pending transactions in its pipeline. The locally-based REIT just announced it has acquired 1,239 acres of land with 840 irrigated, farmable acres near Willcox, AZ, for approximately $5.7 million in a sale leaseback. It is a 10-year, triple-net lease with annual rent escalations and two, 5-year extension options.

It was, presumably, one of the seven farms worth about $17 million under signed purchase agreements that CEO David Gladstone told shareholders about in its quarterly earnings call in November. These deals, he said, are expected to close within the next few months. In addition, he added, the REIT has "couple of extra farms worth about $26 million" signed in nonbinding Letters of Intent.

Gladstone Land is a specialty REIT in a category that is small but gaining more notice from mainstream investors. It invests in farmland, usually via a sale leaseback, but it will also buy land from farmers who then become tenants.

In the previous quarter, the REIT broadened its geographical footprint by investing in the Midwest for the first time. It invested $11 million in two farms in Nebraska that will be growing potatoes and edible beans and then on the off-season alfalfa.

In another first, last quarter it moved into development for the first time, investing $19 million in three farms in California that will be converted into almond orchards.

The conversion will cost about $8 million, then Gladstone earns additional rent on every time the farmer plants new trees, Gladstone explained. "…[W]e advance money for those new trees, they'll be paying us even though those trees are not yet ready to yield any almonds," he said.

The properties in Gladstone Land's portfolio are fully occupied by tenants that are current in their lease payments, Gladstone says. Since its IPO in 2013, the REIT has averaged about a 16% increase in rental rates for its lease renewals. The REIT has only two leases set to expire in 2016 and it has begun negotiations with the current tenants. It "expect to be able to renew both of those leases at increased rates without any downtime," according to CFO Lewis Parrish.

Instant Insights /

Gladstone Land Executes on Strong Pipeline

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