We estimate that the net proceeds to us from this offering will be approximately
$45.3 million ($52.3 million if the underwriters exercise their over-allotment
option in full), after deducting the underwriting discount and estimated
offering expenses payable by us. We expect to use the net proceeds of this
offering to buy farms and farm-related properties, such as coolers, processing
plants, packing buildings and distribution centers, for lease to tenants and, to
a lesser extent, make loans secured by agricultural real estate and to make
payments to our Adviser and our Administrator pursuant to our agreements with
them. As of the date of this prospectus, we do not have commitments to purchase
any properties. We will invest the net proceeds in accordance with our
investment objectives and policies.
We estimate that it will take approximately 12 months for us to substantially
invest the net proceeds of this offering, depending on the availability of
appropriate opportunities and market conditions. Pending such investment, we
will primarily invest the net proceeds in securities that are not REIT-qualified
investments, as well as REIT-qualified investments such as money market
instruments, short-term repurchase agreements or other cash equivalents. The
non-REIT-qualified investments are expected to provide a current return that
will be greater than the REIT-qualified investments. We may also temporarily
invest in securities that qualify as “real estate assets” under the REIT
provisions of the Code, such as mortgage-backed securities. There can be no
assurance that we will be able to achieve our targeted investment pace.
A tabular presentation of our estimated use of the proceeds to us from this
offering, assuming no exercise of the underwriters’ over-allotment option, is
set forth below:
Amount Percentage
Gross offering proceeds $ 50,000,010 100.00 %
Less offering expenses:
Underwriting discount 3,500,001 7.00
SEC registration fee 6,590 0.01
FINRA filing fees 9,125 0.02
NASDAQ initial listing fee 125,000 0.25
Printing and engraving expenses(1) 150,000 0.30
Legal fees and expenses(1) 700,000 1.40
Accounting fees and expenses(1) 150,000 0.30
Transfer agent and registrar fees(1) 25,000 0.05
Miscellaneous offering expenses(1) 84,285 0.17
Estimated net proceeds to us to be used to
acquire properties and for general corporate
and working capital purposes(2) $ 45,250,009 90.50 %
(1) Estimated.
(2) We do not intend to make any payments to our Adviser or any of its
affiliates from the proceeds of the offering. While we will make payments to
our Adviser and Administrator pursuant to the terms of our agreements with
these entities, such payments will come from rental revenues, rather than
offering proceeds. We will not pay acquisition fees to our Adviser when we
acquire real estate, and we will not pay fees to our Adviser when we lease
properties to tenants or when we sell real estate.
Competition to our efforts to acquire farmland can come from many different
entities. Developers, municipalities, individual farmers, agriculture
corporations, institutional investors and others compete for farmland acreage.
Other investment firms that we might compete directly against could include
agricultural investment firms such as Hancock Agricultural Investment Group,
or Hancock, Prudential Agricultural Investments, or Prudential, and UBS
Agrivest LLC, or UBS Agrivest. These firms engage in the acquisition, asset
management, valuation and disposition of farmland properties. In addition to
competition for direct investment in farmland we also expect to compete for
mortgages with many local and national banks such as Rabobank, N.A., Bank of
America, N.A., Wells Fargo Foothill, Inc., and others.
others, which are planted
and harvested annually or more frequently. We may also acquire property related
to farming, such as storage facilities utilized for cooling crops, processing
plants, packaging buildings and distribution centers. We currently own twelve
farms, leased to six separate corporate and independent farmer tenants, in
California and Florida. Additionally we own two cooler buildings and a facility
utilized for storage and packing. Our objective is to maximize the long-term
value of these assets.
The table below sets forth information regarding our current portfolio of
properties:
GAAP
Straight-
Lease Crop Appraised Farmable Total line
Property Name Location Acquired Expirations Type Cost Basis Value Acres Acres Rent (1)(2)
San Andreas Watsonville, CA 1997 12/31/2014 Fruits &
Vegetables $ 4,929,307 (3) $ 9,730,000 237 306 $ 431,655
West Gonzales Oxnard, CA 1998 12/31/2013 Fruits &
Vegetables 15,185,928 (4) 45,500,000 501 653 2,181,507
West Beach Farms Watsonville, CA 2011 10/31/2013 Fruits &
Vegetables 8,472,073 8,490,000 195 198 423,602
Dalton Lane Watsonville, CA 2011 11/1/2015 Fruits &
Vegetables 2,808,000 2,840,000 70 72 144,076
Keysville Road Farms Plant City, FL 2011 7/1/2016 Fruits &
Vegetables 1,227,816 1,412,000 50 59 68,335
Colding Loop Wimauma, FL 2012 6/14/2013 Fruits &
Vegetables 3,400,836 3,550,000 181 219 141,274 (2)
Trapnell Road Farms Plant City, FL 2012 6/30/2017 Fruits &
Vegetables 4,000,000 3,937,000 110 124 241,145
Total: $ 40,023,960 $ 75,459,000 1,344 1,631 $ 3,631,594
(1) For properties we have owned for less than 12 months other than Colding Loop
Farm, the straight-line rent is annualized, based on the rent currently in
effect, as we acquired these properties with leases in place with remaining
terms of at least 12 months. The GAAP straight-line rent also includes the
amortization of below-market lease intangibles.
(2) The rental income reflected in the table for the Colding Loop Farm is the
GAAP straight-line rent we will recognize over the life of the current lease,
which is 10 months (which translates to $166,000 on an annual basis).
(3) Cost basis of $4.9 million includes the acquisition price of $4.4 million
plus approximately $0.5 million of subsequent improvements.
(4) Cost basis of $15.2 million includes the acquisition price of $9.9 million
plus approximately $5.3 million of subsequent improvements.
We intend to use the net proceeds from this offering primarily to purchase more
farmland. In addition to acquiring properties with cash, we plan to acquire
farmland in exchange for limited partnership units, or Units, of Gladstone Land
Limited Partnership, which we refer to in this prospectus as our Operating
Partnership, or a combination of cash and Units, thereby deferring some or all
of the seller’s potential taxable gain, which we believe will enhance our
ability to consummate transactions and to structure more competitive
acquisitions than other real estate companies in the market that may lack our
access to capital and the ability to acquire farmland for Units.
We expect that most of our future tenants will continue to be medium-sized
independent farming operations or large corporate farming operations that are
unrelated to us. We intend to lease our properties under triple-net leases, an
arrangement under which the tenant maintains the property while paying us rent.
Under a triple-net lease, the tenant is also responsible for paying taxes and
insurance payments directly. We are actively seeking and evaluating farm
properties to potentially purchase with the net proceeds we will receive from
this offering, although we have not yet entered into binding agreements to
acquire these properties, and there is no guarantee that we will be able to
acquire any of them. We may also elect to sell farmland at such times as the
land could be developed by others for urban or suburban uses. To a lesser
extent, we may provide senior secured first lien mortgages to farmers for the
purchase of farmland and properties related to farming, although we expect that
no more than 5% of the net proceeds of this offering would be used for this
purpose.
We may also acquire properties related to farming, such as storage facilities
utilized for cooling crops, known as coolers, as well as processing plants,
packing buildings and distribution centers. As part of our existing farming
properties, we currently own two cooler buildings and a facility utilized for
storage and assembling boxes, known as a box barn.
We were incorporated in 1997. Prior to 2004, we engaged in the owning and
leasing of farmland, as well as an agricultural operating business whereby we
engaged in the farming, contract growing, packaging, marketing and distribution
of fresh berries, including commission selling and contract cooling services to
independent berry growers. In 2004 we sold our agricultural operating business
to Dole Food Company, or Dole. Since 2004, our operations have consisted solely
of leasing our farms, of which five are located in or near Watsonville,
California, one is near Oxnard, California, five are near Plant City, Florida
and one is near Wimauma, Florida. We also lease a small parcel on our Oxnard
farm to an oil company. We do not currently intend to enter the business of
growing, packing or marketing farmed products. However, if we do so in the
future we expect that it would be through a taxable REIT subsidiary.
Gladstone Management Corporation, a registered investment adviser owned and
controlled by our chief executive officer and controlling stockholder, David
Gladstone, serves as our Adviser and manages our real estate portfolio.
We intend to elect to be taxed as a real estate investment trust, or REIT, under
federal tax laws beginning with our taxable year ending December 31, 2013 or
December 31, 2014.
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We were originally incorporated in California in 1997. In 2004, we
re-incorporated in Delaware. In March 2011, we re-incorporated in Maryland.
Our executive offices are located at 1521 Westbranch Drive, Second Floor,
McLean, Virginia 22102. Our telephone number at our executive offices is
(703) 287-5800 and our corporate website is www.GladstoneLand.com.