Farm REIT Gladstone Land (LAND) will be selling a new term preferred stock. The proceeds will be used to redeem LANDP
Of course a ‘term’ preferred differs from most preferred issues as it will have a mandatory redemption date. In this case the issue will have a mandatory redemption date in 2026. In 2023 the issue will become optionally redeemable.
The new issue will pay dividends monthly.
The company currently has 2 preferred issues outstanding. LANDP is a 6.375% ‘term’ preferred which is currently optionally redeemable and has a mandatory redemption on 9/30/2021–the issue trades at a silly $26.21 right now. Investors are going to get a ‘wake up call’ this morning on the redemption.
There is also a 6% perpetual preferred (LANDO) outstanding which trades in the $25.05 area.
The preliminary prospectus can be read here. The ticker will be LANDM on the new issue.
Disclosure—I own the LANDO perpetual issue.
J was right on this one this morning
Why would anybody pay 5% when they have a 6% issue? The termination date isn’t worth a full percent. Remeber last month when they were giving LANDO away.
The issue matures 9/2021, the company has to repay them. The took advantage of a strong market to refinance what are effectively bonds and lowered their cost by 1%. Good for the company bad for investors seeking yield.
Martin – You do realize that what you’re saying is equivalent to asking why anyone would buy a 5 Year Treasury bond at .52% when they can buy the 30 year at 1.90% right???? Even though they’re issued by the same issuer, they’re different animals potentially appealing to different people with different needs, different views of the future, and different levels of risk tolerance. The yield curve is a real thing.
Price talk 5%
ugh
Just literally got off the phone with their Attorney. He said if you want in on the “Ground Floor” you have to open an account and buy it thru “Janney Montgomery Scott” their brokerage firm. Otherwise he said you can wait 2 weeks and just buy it thru your own account once it starts trading on the Nasdaq. I couldn’t “Pry” the coupon rate out of him. It is cumulative.
I sure hope you’re info is wrong, Chuck. If this prices with a 5 handle and somebody finds a way to participate without having to open another account somewhere, please do post what you find out…. though I own LANDO, this would fit well for my needs. Also long LAND
It’ll be OTC tomorrow …
2WR, I hope MCG is correct. Piecing together everything I own, the lower coupon term is much more appealing for me than the perpetual. LAND doesnt have what I call great coverage spreads, but because the assets are what they are, it makes that issue not a real concern or worry for me.
I still dont get the reason for this when they could just used the open ATM Series C to eat it up long ago. P is not a very big issuance….But it sure was a great friend of mine through the years including the March blow up. Havent been in it in 6 months or so though.
Grid – I’m hoping too…… It looks as though we probably got out of LANDP at about the same time as I exited in July at 26.35. I don’t remember if anyone actually rates this but from the point of view of credit worthiness, I can imagine a ratings type entity viewing this issue as a credit neutral event given it’s to retire P, so then in a way the question is reversed, not why did they not just use LANDO money but why are they continuing to ATM LANDO when they can easily do much better with another structure as this one will prove? Wanting both long term preferreds and mid term ones on their books must be the answer…
Its the difference between capital and liability. This issue will not be considered capital, it has to be thrown on the books as a liability. Your reasons would be as good as mine or better. LANDP was a liability also, so I guess this just slides in that spot…. LANDO is closed and not an ATM. They have a series C doing that job, now. Last CC he said they issued $11 million out of it. They are financing a long term asset with a short duration instrument, here. Risk reward assuming they could get 6% to market as a perpetual does not make sense to go 5% term to me. They had a bit north of 50% debt on assets, at last conference call. But they have bought some farms since then so I dont know updated number. The coverage ratio including preferreds is not good by my standards but the income streams and land asset mitigate that concern for me.
Sorry, misspoke on LANDO still being the one open but the point remains the same as C is essentially the same terms as LANDO. And I get what you’re saying about financing a long term asset with a short duration instrument, but in a narrowly defined sense, they’re not doing that. They’re refinancing a maturing instrument with a midterm instrument, taking advantage of the savings available now of 5% plus or minus vs 6 3/8% and leaving the door open to do it again in 5 years using ATM money. Given the existence of the ATM program and all they’ve said about how they love it being in existence, they’re hedging their bet about being able to refinance economically in 2026, because they expect to have raised enough 6% money to just pay off in cash if not economical at that time. It makes sense to me.. then again, I was never good at chess and this sounds like trying to think a number of steps ahead as one would in that game.
Yes, I get that, but its a peanuts thing.. Series B is $150 million, Series C has already ~$12 million and wont close until $600 million is filled…And they are keeping a $28 million issue as term dated? I guess I am also looking at this through the traditional purpose of these instruments. Usually a term dated (or extremely penal payment premiums if not redeemed) issue like this is IPOd from a fledgling new little company as a bit of a safety mechanism for purchaser.
Then they redeem and move on. It just seems odd for its size and lack of meaningful benefit. It actually benefits the buyer as the asymmetric risk is greatly minimized (though muted a bit through a bit smaller yield).
Of course that begets the problem of 6% preferreds being used to finance a large part of the funding process for acquisitions. Thats pretty high cost for a land type investment…Not being exactly bought at fire sale prices. But I guess that is the common stock shareholders problem (FPI and LAND have been very poor common stock investments if bought at IPO) not the preferreds, ha.
David is a bit of a yapper on CC’s so he may shed some color on it next CC.
Well I guess we’ve now flogged this issue to its demise so I’ve only got 3 points to make: Here’s hoping David’s is not on III and you’ve talked him out of this offering. Here’s hoping mcg is right about tomorrow and here’s hoping we see a 5+ handle..
2WR, No! Its never done, the floggings will continue…
Ok, here is the juice, Its about a $60 million issue at 5%.
https://www.sec.gov/Archives/edgar/data/1495240/000119312521007689/d71576dfwp.htm
Thanks.. just saw it too…. now let’s see if there’s a way to buy it…. I do like the 3% penalty if they don’t redeem but of course in practice it’s probably meaningless.
What are you thinking .. 6%??
6% would be excellent for a term preferred considering LANDO is also 6%. I’d make that swap right away.
Not 6% with the 2026 mandatory redemption date and LANDO still attracting interest over $25…… It should be a lot lower than that…. Stellus pricing its 2026 institutional issue at 4.875% should be more of a guideline but maybe retail market is not as strong as that……
2WR, I guessing lower than 6% too. Not really sure the value of why they are even doing this one anyways with an open till C Series going. I may be interested over plus 5%.
Me too…. I’d be interested, very interested in a 5%+ pricing…. The real trouble with this issuance is that with RILY being a book running manager on it, the pricing might just get RILY more thinking about their own outstanding currently callable note issues such as RILYZ.
Grid – the other thought might be that this could be a commentary by LAND regarding future interest rates and they think it worthwhile to refinance LANDP and extend maturity now rather than waiting… who knows.. but you should be right, this one should only be worth doing for them if they can prove a level much lower than LANDO’s 6% and probably at least 5.375% or 100 basis lower than LANDP.
2WR:
I believe you are spot-on here. No reason for LAND to wait, especially if the 10-year Treasury yield spikes another 50 basis points higher.
Anyone that was still holding LANDP at $26.20+ just hasn’t been paying attention to the fact that this preferred had a mandatory redemption in September.
My guess is 5.5% – 5.75% for LANDM. No way it gets done at 5%. Only a few REITs can pull that off – like PSA.
Like the craps dealer says at my favorite locals casino….”set your bets”.
Hi SDMarc–with the perpetual at 6%, logically it will be 5.50% or so because of the short dated maturity in 2026.