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Farmland Partners expands into fruit, as Gladstone buys too

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Farmland Partners made its first investment into permanent crop land, with a purchase of a blueberry farm, as peer Gladstone Land expanded its vegetable farm portfolio with two purchases in Florida.

Farmland Partners - which has through a rapid expansion drive lifted its portfolio from less than 8,000 acres when it floated in April last year to more than 70,000 acres – said that it had purchased 125 acres of blueberry land in Michigan for $1.2m.

The deal, while small, represented the group's first foray into permanent cropland, which offers the potential for higher yields, but is a sector with some extra risks.

Growers of tree crops are not as agile as their field crop peers, which can change sowings annually as market prices dictate.

Returns vs volatility

However, Farmland Partners said that the small size of the deal meant that any risks were small in comparison to the group's overall holdings.

"Having built a 70,000-acres plus portfolio of row crop farms in 10 states, we are comfortable gradually adding higher return and higher risk specialty crop properties," said Paul Pittman, the group's chief executive.

"When blended into our portfolio," the new farm "should enhance returns without materially increasing volatility".

Rental income is expected at some 8-10% of the purchase price, roughly twice could be expected from a row crop farm.

Vegetable land purchase

The price of such land is greater too, with Monday's deal averaging out at $9,600 per acre, compared with the $6,000-8,000 per acre that Farmland Partners has been paying for row crop farms.

Indeed, the discount of grain land to farms growing fruit and vegetables was highlighted separately by an acquisition by Gladstone Land of 2,668 acres of land in Florida, on which it has already signed a five-year lease agreement with a vegetables grower.

Taking into account only the 1,664 acres of the land deemed "farmable", the acquisition price works out at some $9,500 per acre.

Gladstone Land now owns 36 farms, all of higher-value fruit and vegetable land, totalling about 11,500 acres.

Both groups have continued to expand their portfolios, despite signs of a slowdown in the US land market.


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