Gladstone Land has agreed to acquire an almond orchard in Fresno County, California totaling 197 acres for $6.5 million. The announcement comes only one month after the real estate investment trust (REIT) announced it had acquired two large-scale almond orchards in Stanislaus County, California totaling a combined 2,485 acres for $23.4 million in cash and 343,750 common units of limited partnership interest in its operating partnership.
Much like the deal for the Stanislaus County orchards, the deal for the Fresno orchard includes a 10-year, triple-net lease agreement with the seller, who remains unnamed but is known as one of the top organic almond producers in the world. Included in the lease are options for two five-year extensions and a fixed cash rent component and a variable rent component which will be based on the property’s gross crop revenue.
Upon the addition of the Stanislaus orchards in September, Bill Reiman, Gladstone Land’s Western Managing Director, stated that the company saw the acquisition of the almond orchards as being low-risk additions as the deal is structured with two long-term triple-net leases that include annual CPI increases and upward rent adjustments every five years.
“The lease terms provide for rent escalations that we feel confident will provide for excellent, safe returns for many more years,” said Reiman.
Over the life of the lease for the Fresno almond orchards, Gladstone Land estimates that the company will see an annual cap rate on the property of between eight and 10 percent over the life of the lease.
“We are pleased to announce the acquisition of a really nice almond orchard that is just now heading into its peak production years,” said Bill Reiman. “Due to the age of the trees, we should begin earning significant rental returns from the participating rent component of the lease with next year’s crop.”
Rollin’ like a Gladstone
As 2016 continues to be a dynamic year for Gladstone, this acquisition brings the company’s farmland portfolio to a total of 57 farms totaling 33,997 acres across seven U.S. states while also deepening the portfolio’s diversification.
Other acquisitions announced by the company this year include, 7,384 acres of farmland in Colorado that produces high-fiber, low-protein hay for the cattle feed lot industry, a 70-acre strawberry farm in Florida for $1.7 million, and the acquisition of 401 acres of farmland in St. Lucie County, Florida producing green beans and bell peppers for $5.1 million. In April the firm acquires 453 acres in Fresno, California, of which 435 were planted in pistachio trees (another new crop for the company), for $15.5 million, and in March Gladstone acquired 6,190 acres of organic, and soon to be organic farmland in Colorado for a total deal consideration of $25.9 million.
“Such acquisitions have allowed us to increase the monthly distributions on our common stock twice over the past year for a total increase of 6.3%,” said David Gladstone, President and CEO of Gladstone Land. “This farm is another acquisition we’re excited about, as the trees are in their prime production period, and we expect the participating rent component to provide us with nice returns that will aid in our goal of increasing distributions to stockholders every year.”
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Lynda Kiernan
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