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Gladstone expects up to $200m in 2019 acquisitions

David Gladstone says the NASDAQ-traded REIT’s pipeline of potential acquisitions is 'as strong as we’ve ever seen', as he hopes to get the company's farmland portfolio to $1bn in 2020.

Gladstone Land expects to purchase as much as $200 million of US farmland this year after “minor” issues slowed the pace of its acquisitions during the first quarter, according to its chief executive.

The company’s farmland is currently valued at $649 million, for 75,000 acres across 87 farms in 10 states, chief executive David Gladstone said on a first-quarter earnings call.

“I’ll go out on a limb and say that we’ll probably be over $800 million – and if we get it all closed, we’d be $850 million – in 2019. I am hopeful that we hit the magic number that I like so much in 2020, which is $1 billion,” Gladstone said. “That gives you a heads up of where we’re going.”

Its first quarter acquisitions were a $2 million Nebraska property devoted to popcorn and beans and a $28.6 million purchase of a California pistachio property last month.

“The second quarter has already started off okay and our current backlog of potential acquisitions is, well, as strong as we’ve ever seen,” said Gladstone. “We’re looking at all the crops, across everything.”

Gladstone added the company is exploring opportunities in the Midwest, a region where the REIT had been less active.

“There have been more bankruptcies of farmers in the Midwest that are growing corn and wheat and soy than at any time other than the Great Recession that we had in [19]29 and [19]30,” he said. “So, I just think there are opportunities out there.”

Over the longer-term, Gladstone said, his ambition is to grow the company’s total portfolio to “mirror” the $10.4 billion NCREIF index.

The company’s focus on fresh produce reflects a strategy of providing investors with a hedge against inflation, Gladstone added. He said while total food inflation has generally kept pace with overall annual consumer price inflation over the past 20 years, the fresh fruits and vegetables segment  has seen 1.7 times more inflation.

“We expect inflation, particularly in the food sector, and we expect it to grow and we expect the values of underlying farmland to increase as a result, which is especially true in the fresh produce section, which has been demonstrated over the past 15 years,” said Gladstone. “Inflation is heavier on the fresh food side.”