Gladstone Land Corporation (LAND) just recently raised $50 million in their IPO at a $15.50 price to invest solely in farmland. To date, they have purchased acreage in California and Florida (primarily berry related) and just closed on a blueberry farm in Michigan. Since its IPO, the price has increased almost 10% to close at $16.80 on May 20, 2013.
The company intends to elect Real Estate Investment Trust (REIT) status which allows the company to pay no income taxes assuming at least 90% of its taxable income is distributed as dividends each year. In reviewing their balance sheet, it does appear their farmland purchases to date are fairly leveraged. As of March 31, 2013, they have incurred total purchases of about $40 million with almost $30 million of long-term debt. Their current long-term debt bears interest at 3.5%, but is scheduled to reset in another year or so.
Their margin is in good shape now, however, if rates rise a couple of points, it may be difficult for them to maintain their expected dividend payout.
I have seen many private farmland investment funds get capitalized over the last few years, but this is the first publicly traded farmland REIT in the US that I am aware of. There are many similar companies in Europe and Asia. Normally, if we see a flood of these type investments on the public market, a top in the market may not be far off. We shall see.
What's the next wild card for corn in the US?
Farmland Values Increase by 20% in Plains States