Summary
Gladstone Land has a history of delivering strong growth from quarter-to-quarter and this one certainly did not disappoint.
The company looks poised to continue this growth trajectory well into the future.
The investment case for farmland appears to be quite strong due to favorable fundamentals.
The company raised its distribution and appears able to easily afford it.
The valuation is incredibly high so caution may be urged.
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Thomas Barwick/DigitalVision via Getty Images On Tuesday, November 9, 2021, farmland-focused real estate investment trust Gladstone Land ( LAND ) announced its third quarter 2021 earnings results. This is certainly one of the more unique trusts on the market as it is one of only two that invests exclusively in farmland and Gladstone Land is arguably the better of the two. One of the nicest things about this trust is that it has a long history of steady growth. In fact, almost every quarter sees improved financial performance from the quarter before it. This one was certainly no exception as the company’s revenue and funds from operations showed year-over-year growth. The company also once again raised its per share distribution, which is likewise a relatively common occurrence for it. Overall, this is a solid report from a very attractive company.
As my regular readers are no doubt well aware, it is my usual practice to share the highlights from a company’s earnings report before delving into an analysis of its results. This is because these highlights provide a background for the remainder of the article as well as serve as a framework for the resultant analysis. Therefore, here are the highlights from Gladstone Land’s third quarter 2021 earnings results: Gladstone Land reported total operating revenues of $19.591 million in the third quarter of 2021. This represents a 15.97% increase over the $16.893 million that the company brought in during the previous quarter.
The company had total funds from operations of $5.323 million during the current quarter. This represents a 37.65% increase over the $3.867 million that the company reported last quarter.
Gladstone Land acquired five new farms in three different states for a total of $62.3 million. These properties boast a weighted average capitalization rate of 6.0%.
The company had a net asset value of $13.80 per share at the end of the quarter.
Gladstone Land reported a net income of $1.503 million in the third quarter of 2021. This compares quite favorably to the $531,000 net loss that the company reported in the second quarter of 2021.
It seems certain that the first thing anyone reviewing these highlights is likely to notice is that Gladstone Land managed to improve in every measure of financial performance compared to the second quarter of this year. The company’s performance was also much better than in the year-ago quarter. This is not atypical for Gladstone Land as the company usually delivers growth in every quarter. This growth was driven primarily by the new farms that the company acquired during the second quarter. Gladstone Land was on something of an acquisition spree during that period and purchased thirteen farms, which would then naturally begin paying rent to the trust. As Gladstone Land acquire those properties during the second quarter, they would have contributed rental revenue to the company for the entire quarter. This was not the case in the third quarter as they would have been contributing rent during each and every month. This incremental rental revenue boosted the revenue of the entire trust.
Gladstone Land is poised to continue this growth going forward. As noted in the highlights, the trust acquired five new farms during the quarter. These farms are located in California, Florida, and Oregon and consist of a total of 1516 acres of land and 5,000 acre-feet of water. The total purchase price of these properties was $62.3 million. As these farms were acquired during the third quarter, they were unable to contribute rental revenue to the company for the entire quarter, which will not be the case during the fourth. We do not know exactly how much they will boost the company’s revenue and funds from operations, however. One of the most important metrics in real estate is the capitalization rate, which tells us the rate of return that is expected to be generated by a property. This is the return that is expected after all […]
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