June 8, 2020

By Lynda Kiernan, Global AgInvesting Media

Real estate investment trust (REIT) Gladstone Land has added a new permanent crop to its portfolio through its latest $14.2 million deal.

Adding to its holdings, Gladstone has acquired 590 gross acres of farmland in Kern County, California, of which 554 acres are planted in mature pecan trees, for approximately $14.2 million.

In connection with the deal, Gladstone has entered into a 15-year, triple-net leaseback arrangement with the seller. 

“The acquisition of this pecan orchard adds a new permanent crop type to our portfolio and should result in another good, long-term investment for us,” said David Gladstone, president and CEO, Gladstone Land. “In addition, in connection with this transaction, we are forming a new relationship with a very seasoned grower who has been in the pecan business for many years.”

Pecan production is a savvy move. Last year, U.S. pecan growers experienced the “largest demand in the history of the pecan industry,” according to Matrthew Bailey with the Pecan Report. 

And as the global pandemic causes havoc among much of the ag and food supply chains, the April 2020 Pecan Position Report found that the effects on pecan growers has been minimal. 

“Both the global supply chain as well as the marketing strategies currently undertaken by the American growers have been able to continue the historic rise in demand for pecans,” noted Bailey, who went on to state that pecan supply chains have remained steady as demand continues to climb even beyond last year’s record. 

Further minimizing their exposure, according to the terms of this latest deal, Gladstone agreed to buy the land, but not the trees, gaining diversification of its California portfolio with marginal risk.

“We like sale-leaseback transactions, as it is a wonderful way for us to grow our portfolio, and it also frees up cash for our tenants to further grow their businesses,” said Bill Reiman, managing director of Gladstone Land.”

“This acquisition is just that, and it gets us into a desirable farming region we have not entered before and forges a new relationship with a long-time farmer in the business. We are excited about this farm because of its good water, soil, and microclimate. In addition, since we did not buy the trees but only the land, we view this as a lower-risk investment, further diversifying our California portfolio.”

This expansion into a new permanent crop and a new region follows one month after Gladstone announced it had closed on a $3.5 million irrigation farmland deal in Chase, County, Nebraska. The 648-acre, mixed-crop operation currently grows a rotation of potatoes, edible beans, and corn with good access to water via on-site wells. 

Indeed, another land deal that appears to offer Gladstone exposure to a crop that is weathering the pandemic. Nebraska’s soil is highly-suited to potato production, and the crop has seen significant growth in the state in recent years. In 2017, the state planted 19,000 acres of potatoes, up 15 percent year-on-year from 2016. That same year Nebraska harvested 9.03 million cwt – an increase of 22 percent over the prior season. Since then, demand has continued to climb, (largely on higher demand for french fries), and COVID-19 has only intensified demand, as consumers are stocking up on foods that store well, resulting in retail prices for bags of fresh potatoes to nearly double.

With the addition of the pecan orchards in Kern County, Gladstone’s portfolio now stands at 115 farms consisting of 89,000 acres across 10 U.S. states, with a value of approximately $909 million. 

Over the years Gladstone has diversified its portfolio to include fresh produce annual row crops, such as berries and vegetables; and permanent crops such as almonds, apples, figs, olives, pistachios, (and now pecans) as well as vineyards, and blueberry groves.

However, according to David Gladstone, the firm still has a health pipeline of potential acquisitions under consideration.

“We are continuing to evaluate a good list of potential farms to buy, as we work towards another strong year in 2020 after a record year of acquisitions in 2019,” said Gladstone. “Our goal is to continue to buy great farms with strong tenants and to increase the distributions on our common stock each quarter.”

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.