Gladstone Land Shares Have A Big Hurdle Rate, With Preferreds Yielding 7.1%

Company Overview - Gladstone Land (NASDAQ:LAND) is a farmland owning REIT with a portfolio of 111,836 acres across the US, primarily in California, Florida, and Colorado, producing grains, fruits, tree nuts, and wine grapes [2] - The total portfolio value has increased from $75 million at its IPO in 2013 to approximately $1.5 billion today, representing a 15-fold growth [4] Company Performance - Despite significant portfolio growth, Gladstone Land has produced a negative 7.2% price return since its IPO, with total returns being modestly positive due to dividends [4][6] - The REIT has seen a 489.1% increase in shares outstanding and a 1,670% increase in total long-term debt from 2014 to 2024 [6] Market Demand and Yield - Farmland demand remains high globally, with a downward trend in arable land per capita, while yields per acre for crops like corn and wheat continue to rise [7] - Gladstone Land maintains high occupancy levels, with a weighted average of 99.8%, although it recently hit its lowest level since the IPO at 98.8% [8] Rental Income and Financial Stability - Rental income growth has been inconsistent, with no net gains in 2022 and 2023, but 2024 is projected to improve [8] - The REIT has a stable debt maturity profile and lease expirations, navigating interest rate changes without significant disruption [10][14] Valuation and Returns - The REIT trades at about 23 times funds from operations (FFO), with expectations of flat growth from 2023 to 2026 [14][17] - Preferred shares of Gladstone Land yield 7.1% and are currently undervalued, providing a more attractive return compared to common shares, which have returned about 4% [20]