News & Analysis

Gladstone buys pair of California cherry orchards

The NASDAQ-listed farmland REIT says it hopes the $7m deal will be the first of many in a region well-suited to benefit from growing demand for healthy produce.

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Virginia-headquartered Gladstone Land has purchased two farms totaling 194 acres in Kings County, California for $6.9 million.

The NASDAQ-listed farmland REIT assumed a 15-year triple-net lease for the farms, both of which are devoted to cherries.

Bill Reiman, Gladstone’s managing director in the Western US, said that the San Joaquin Valley region in which the farms are located enjoys a combination of fertile soil and ample water, which makes it well-suited for production of many crops. Reiman added that Gladstone hopes to make many acquisitions in the region.

“The cherry orchards on these two farms are being grown with the most advanced technology and cutting-edge horticultural expertise and are expected to produce for the next 20-plus years.”

On Gladstone’s second-quarter earnings call in August, president and chief executive David Gladstone acknowledged that cherries are among the crops currently impacted by the ongoing trade dispute between China and the US. However, in order for tariffs to have a significant impact on Gladstone’s business, he said, they would have to be sustained for two or three years – longer than the six to nine months Gladstone expects them to remain in place.

“We don’t have a lot in cherries, so it’s not going to be a big hit for us,” Gladstone said. “The reason its impact is going to be slight to us is that the farmers – while [they] may not be making what they wanted to make – the bottom line is, they’re going to pay their rent.”

Earlier this month, the USDA’s Foreign Agricultural Service said an increase in cherry plantings in the Southern Hemisphere – Chile especially – has helped drive a rise in global cherry production and exports. For the US, the USDA reported that overall cherry production is expected to fall 64,000 tons to 444,000 tons, largely as a result of frost in California and cool wet weather in Washington and Oregon.

“Imports are forecast to increase slightly to 15,000 tons while exports are projected at 85,000 tons, down 25 percent from last year’s record, as high retaliatory tariffs suppress shipments to China,” the USDA said. “Though a significant fall, total 2018/19 exports are still forecast to exceed the previous five-year average.”