Gladstone Land Worth A Look With Shares Trading Below Net Asset Value

Jul.18.14 | About: Gladstone Land (LAND)

Summary

Gladstone shares trading 15% below net asset value.

Shares are down 25% in 2014.

Three new acquisitions show strength of portfolio and will lead to increased rents.

Recent renewals are strong and adding to revenue.

Shares of Gladstone Land (NASDAQ:LAND) are now down 25% in 2014. With the recent beat down for shares, investors should consider the strong potential for gains in the farmland play. Gladstone has seen strong recent renewals and a series of acquisitions that will power the company's portfolio going forward.

Gladstone Land has 26 farms in five states with 6,439 acres. The company leases the land to farmers for various crops. Farms are located in California, Florida, Michigan, Oregon and Arizona.

In June, Gladstone released a statement that it has renewed three deals in the last nine months. All three deals had increased rental rates, with an average increase of 21%. The deals will add $470,000 per year in rental payments.

To go along with its renewals, here is a look at recent acquisitions:

· June 23rd: Buys two Florida farms with 94 acres, which have row crops of fruits and vegetables, in a deal was valued at $2.7 million, and leases end in three years and could have strong renewal rates.

· June 16th: Buys a 145 acre California farm for $5.9 million. Farm has row crops, on-site water, and 2.5 years remain on lease.

· June 2nd: Buys 2 Oregon farms totaling 200 acres. The acquired land has 157 farmable acres, Gladstone paid $2.6 million for the acquisition, on-site water is included, and land currently used for blueberries.

At the end of March, Gladstone Land had a net asset value of $14.03 per share. Current share prices are 15% below that level. With the increased rent rates and new acquisitions, I expect the net asset value to rise closer to $15 when second quarter earnings are reported.

Shares of Gladstone Land now have a yield of 3%, with a monthly payout of $0.03. In 2013, the monthly payout was $0.12. Many people thought that Gladstone cut its dividend payout with the newly announced $0.03 per month. The higher payout was in fact a necessity to hit REIT status by paying out current earnings and also back earnings to shareholders. Gladstone is in the process of converting to a REIT, which would give shareholders payouts of 90% of earnings.

Gladstone Land will announce second quarter earnings on August 4th. This is when I expect Gladstone to post net asset value of $15.00 or higher. I believe investors will send shares higher by at least 10% between now and the week of second quarter earnings.

Shares of Gladstone are down over 25% in 2014. The shares have traded as high as $17.40 over the last 52 weeks. I believe shares are undervalued and investors will get back in when a higher dividend payment is announced or from strong second quarter earnings.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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