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Farmland Partners, Gladstone Land snap up Florida farms

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Farmland Partners followed peer Gladstone Land in buying land in Florida, in a deal which will see a timber plantation and quail preserve converted into a farm growing feed for dairy cows.

Farmland Partners revealed it had paid $9.4m for the 2,400-acre farm, in a deal which will take its total portfolio above 113,000 acres, in 14 US states from Colorado in the west to North Carolina on the east coast.

And the group is to spend a further $6.5m converting the land from forestry and reserve "into a row crop farm that will produce forage for a major dairy operation.

"The conversion process will consist primarily of timber removal and the installation of irrigation improvements."

Returns prospects

The development costs raise the effect purchase price of the deal - which represents Farmland Partners' first acquisition in three months, after string of purchases last year – to the equivalent of $6,625 per acre.

Nonetheless, Farmland Partners said that "using conservative assumptions" of commodity prices and crop yields, the acquisition would bring a return "on total investment" of 4.0-4.5%.

"Once the conversion is complete, the company expects the return on total investment to increase to approximately 5.75%," the group said, adding that the development of the farm to arable use "will substantially increase the value of the land".

Paul Pittman said that the acquisition "demonstrates our ability to source… deals that help grow our portfolio and achieve attractive rates of return.

"Moreover, having a successful dairy as a long-term tenant provides security and diversification to our portfolio."

'Good place for business'

The deal comes two day after Gladstone Land revealed it had purchased 401 acres of farmland in south east Florida for $5.1m – the equivalent of $12,700 per acre.

However, Gladstone Land, whose portfolio is now some 24,000 acres strong, buys more expensive, vegetable and fruit growing operations, with Tuesday's acquisition used for growing bell peppers and green beans.

Both Gladstone Land and Farmland Partners operate on a model of leasing land to farmers, and benefiting from rents, besides growth in farm prices.

David Gladstone, the Gladstone Land chief executive, added: "We have built our farmland portfolio based on the idea that the produce section of the grocery store is a good place to base our business.

"Returns on fruits, vegetables and nuts have been growing at a stronger pace than other areas of the food sector, and we believe that trend will continue."

Farmland Partners shares stood 0.3% higher at $11.60 in morning deals in New York, after earlier hitting a one-year high of $11.62.


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