Gladstone Land Corporation has expanded its presence in Florida with its largest farmland transaction to date.
The publicly-traded REIT announced Thursday that it has acquired 3,750 acres of organic farmland in South Florida from an unidentified seller for $54 million. In addition, Gladstone has entered into a seven-year lease agreement with a vegetable grower and marketer who has operated the farm for years which includes annual rent increases and three five-year extension options.
The acquisition comes as Gladstone and others note increased pressure from real estate development on neighboring land, which has increased asking rents in recent years. Gladstone managing director Bill Frisbie noted that the property, farmed for organic vegetables, lies in a region with significant development pressure from home builders.
“We have built our farmland portfolio on the thesis that the continued growing demand for fresh fruits and vegetables and nuts will make the finite supply of farms that produce these crops more valuable over time,” he said.
Gladstone chairman David Gladstone added that he expects the acquisition to provide “a significant amount [of] additional earnings, which we hope to be able to pass on to our stockholders in the form of increased distributions. He said the REIT has increased distributions on its common stock five times over the past 24 months for a total increase of 43.3 percent. “Our goal is to continue this trend… and these distributions we pay out to our stockholders are fully covered by our funds from operations.”
During the company’s November third-quarter earnings call, Gladstone noted that the increased conversion of farmland into suburban uses, what he called a “megatrend,” is shrinking the number of farms in key regions, playing a role in driving an average 17 percent increase in rental rates over the past three years.
Caleb McDow, a Florida land specialist for farm and ranch brokerage Crosby & Associates, agreed during an interview with Agri Investor that pressure from real estate developers is driving farmland prices up throughout the state. “In Florida, there is almost always development pressure in most areas, especially adjacent to areas that are already built out,” he said.
Gladstone’s portfolio consists of 54,340 acres on 59 farms spread across seven US states, with a focus on partnering with tenants on the production of fresh produce as well as crops such as berries, almonds, pistachios and others. According to an email from chairman David Gladstone, approximately 20 percent of the company’s acreage is designated organic.
Recently, the company has expanded its holdings into pastureland, including a $12.5 million acquisition of 16,595 acres in Baca County, Colorado announced earlier this month.