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Investment firm increases land buys

Mateusz Perkowski

Capital Press

A farmland real estate investment trust recently bought new properties in Oregon, bringing the land under its control to 6,200 acres.

A farmland investment firm has nearly quadrupled the acreage under its control since selling its shares to the public last year.

Most recently, in early June, the Gladstone Farm Corp. bought two blueberry farms on 200 acres in Oregon’s Columbia County.

With this purchase, the company now owns 23 properties totaling 6,200 acres in California, Florida, Oregon, Michigan and Arizona.

Prior to its initial public offering in early 2013, the company owned 12 properties on 1,600 acres in California and Florida.

Gladstone has spent most of the $50 million raised through the IPO on buying land, improving properties and distributing funds to shareholders, among other expenses, according to financial reports filed with federal regulators.

The company originally cultivated farmland itself, but shifted its business model a decade ago to leasing properties to other growers.

After making the switch in 2004, the firm began adding to its farmland properties at a slow pace, said David Gladstone, its CEO.

“We’re now beginning to move a lot faster,” he said during a recent conference call with investors.

Traditionally, Gladstone focused on properties that produced high-value row crops such as strawberries and lettuce, but over the past year the company has diversified into permanent crops like blueberries.

“We like the blueberry business because some of the varieties can be harvested by machinery, and labor is a constant cost in this business,” Gladstone said.

It’s also looking into buying vineyards or orchards, as well as issuing mortgages to growers with farmland serving as collateral.

The firm intends to continue investing in new properties with borrowed money, Gladstone said. Its borrowing capacity recently expanded by $75 million due to a new line of credit.

Diversification within the fruit and vegetable industry is intended to reduce risks, Gladstone said. “That’s a protection for investors.”

In its 2013 fiscal year, Gladstone’s revenues topped $4 million, an increase of nearly 19 percent from the prior year, according to filings with the U.S. Securities and Exchange Commission.

However, the company lost $1.2 million last year, primarily because it had to pay deferred taxes as part of its conversion to a “real estate investment trust,” or REIT, the document said.

As a REIT, the company does not have to pay federal corporate taxes as long as its profits are passed on to shareholders.

The REIT structure has historically been adopted by businesses that own commercial properties, and has become increasingly popular in the timber industry.

Revenues have continued climbing during the first quarter of Gladstone’s 2014 fiscal year, rising 27 percent over the previous quarter, according to an SEC filing.

The company has also returned to profitability, reporting net income of about $21,000 for the quarter.

Gladstone said his company is a similar to an investment in gold because it’s a hedge against inflation.

Unlike gold, however, the company is an “active asset” that generates dividends, he said.

“Purchasing this stock is a long-term investment in farmland,” Gladstone said.


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