June 6, 2017

Public real estate investment trust (REIT) Gladstone Land has acquired two contiguous organic farms totaling 310 acres in North Carolina for approximately $2.2 million – marking its second land deal within a week and third for the year.

This deal brings Gladstone’s portfolio to 65 farms stretching across eight U.S. states, valued at $490 million.

Only days before, Gladstone announced it had acquired four farms in southwest Arizona totaling 3,253 gross acres with 3,032 irrigated, of which a portion is certified organic for a total consideration of $27.5 million, bringing the company’s capital investment for the week to just under $30 million.

Under the terms of the North Carolina deal, upon completion of the transaction, Gladstone will enter into a 10-year lease agreement with Southern Belle Organics LLC – a leading local producer of organic berries and vegetables on the two properties.

“The capital infusion from this sale-leaseback will be invested in the latest harvesting and packing technologies that will enable greater efficiency and higher food safety standards for our operation,” said Bricklyn Rooks, owner of Southern Belle.

The lease will include yearly escalations on base rent and an additional component calling for revenue-sharing based on the crops harvested.

“We are extremely pleased to make our first acquisition in the Carolinas, one of the premier growing regions in the eastern U.S. for fruits and vegetables,” said Bill Frisbie, the company’s managing director for the Eastern U.S.  “We hope to partner with many of the other great farmers in the Carolinas to acquire more farms growing blueberries, sweet potatoes, and many other crop types.”

The Organic Track

These two deals reflect Gladstone Land’s strategic focus on adding organic land to its portfolio. Organic sales on the U.S. market reached $47 billion last year, according to the 2017 Organic Industry Survey conducted by the Organic Trade Association.

Of all organic categories, organic food sales saw the greatest increase – jumping by $3.3 billion or 8.4 percent over the previous year; but more importantly – of all organic foods, organic fruits and vegetables accounted for 40 percent of all sales.

Food Dive reports that TechSci Research expects the global organic food market to see a compounded annual growth rate (CAGR) of 14 percent between now and 2021, but that organic agricultural production may face challenges when trying to keep pace with demand due to land transition barriers.

By acquiring established organic fruit and vegetable operations with multi-year leases, Gladstone is able to gain exposure to the organic segment without having to invest the multiple years and capital associated with transitioning mainstream farmland to organic production.

“This acquisition increases our organic acreage and further expands the diversification within our portfolio, as we now own farms in eight states across the U.S.,” said David Gladstone, president and CEO of Gladstone Land. “We are putting to work the equity we raised a couple of months ago, and with the strong returns expected from these new farms, we believe this acquisition will help us achieve our goal of being able to regularly increase the distributions we pay to our shareholders, as we have over the past few years.”

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.