November 26, 2018

Real Estate Investment Trust (REIT) Gladstone Land announced its second acquisition this month, buying a 3,667-acre potato farm in Hartley County, Texas, for $8.5 million.

The farm, which primarily grows chip potatoes, includes 2,200 acres of irrigated land, and brings with it very reliable water, with 12 wells and 19 pivots on site.

“We have been seeking farms in Texas for some time now, and the right opportunity finally presented itself,” said Bill Hughes, managing director of Gladstone Land.

Currently, the farm is being leased to national agribusiness company CSS Farms, LLC – a leader in the market of chip, seed, and specialty potatoes.

“While the main crop grown on the farm is chip potatoes, the tenant also grows some corn and wheat in their regular rotation,” said Hughes. “We are really excited about our new partnership with CSS Farms and hope to expand on the relationship across the country.”

Like a Rollin’ Stone

Gladstone has been busy. This is the second deal announced by the company this month, following the acquisition of a 951-acre farm in Madera County, California, that includes 715 acres of mature fig orchards, and 224 acres of mature pistachio orchards for $23 million.

“This acquisition allows us to enter into a new crop type and further diversify our portfolio,” said David Gladstone, president and CEO of Gladstone Land, at the time. “Both fig and pistachio trees can potentially remain in peak production for hundreds of years, and most of the crop is consumed domestically within the United States.”

Prior to this, Gladstone had been completing deals at a breakneck pace. In September Gladstone announced three deals. First, the acquisition of a 547-acre farm in northern Florida growing peanuts and melons for $2.6 million, followed days later by the additional acquisition of two more permanent crop farms totaling 194 acres of cherry orchards in Kings County, California, for approximately $6.9 million.

In July of this year the company announced the acquisition of five farms in southern Florida totaling 5,630 acres, for a combined $37.4 million.

Helping to make these deals possible, Gladstone announced on July 12 the successful sale of one of its Oregon-based farming assets for $20.5 million.

Although the company’s strategy is to hold portfolio assets for the long-term, the tenant currently managing the property made Gladstone an offer for the farm that drew the company’s attention.

“Our sale in Oregon was driven by a very compelling purchase offer from our current tenant,” said Frisbie.  “Our strategy is to buy and hold for the long term, but occasionally we receive an offer that warrants serious consideration.”

The offer of $20.5 million reflects a premium of 22 percent above the farm’s most recent valuation, and resulted in a 22 cent increase to Gladstone’s estimated net asset value per common share; a 20 percent internal rate of return on its initial equity investment; and a gain of $6.4 million on the sale.

“We were able to quickly reinvest the proceeds from the recent sale of an Oregon farm into these larger and higher-yielding farms,” said Gladstone at the time, “…and by executing this acquisition in conjunction with our recent sale of an Oregon farm through a like-kind exchange, we have deferred recognition of the capital gain we achieved on the sale.”

Continued Focus

The addition of the potato farming operation in Texas and the relationship with CSS Farms further build upon Gladstone’s investment goals.

“This acquisition allows us to continue to diversify and expand the number of properties we own, while continuing to maintain our focus on farms that have strong water sources and grow healthy foods, such as fresh produce like potatoes,” said Gladstone.  

This deal brings Gladstone’s portfolio to 84 farms, totaling 72,444 acres across 10 U.S. states, and lifts the value of its holdings to $610 million.

“This is our second significant acquisition of November, and we hope to continue this trend and finish 2018 on a high note,” said Gladstone.

-Lynda Kiernan