Nearly 3 years after the initial launch (in 1/2018) Gladstone Land (LAND) has listed their 6% perpetual preferred stock under ticker LANDO.
The issue began to trade today and closed the day at $23.99. After trading in the $25/share area at the open today a big ‘dump’ came midday and large orders throughout the afternoon continued as holders decided it was time to exit. Holders of the shares, which previously had no exchange trading, were able to tender shares back shares previously at $23.50–so of course a premium today looked good to them.
Gladstone Land had initially offered these shares in 1/2018 acting as their own underwriter. When 6 million shares were sold the promise was to list the shares and they had sold near 6 million by 3/9/2020.
These shares will have an optional redemption period starting 6/1/2022. This is a monthly payor–which we always like.
I caution folks to not compare these to LANDP which is a 6.375% TERM preferred with a mandatory redemption on 9/30/2021. Being a term preferred the share price has a floor and is not likely to trade under $25/share prior to redemption.
Folks have been discussing this issue on the reader alerts page today if you want some opinions on the issue you can get them here.
The detail on the issue is here.
The initial prospectus can be read here.
I like it because it’s not energy, financial or Regular real estate. It mainly buys farmland in Calif and Florida that mainly raises fruit, veggies and nuts. I also have some Farmland Partners preferred, FPI-B. I don’t like the common for that one. The prospectus on FPI-B is a fascinating piece of structuring which suggests that the investment bankers thought that FPI investors needed added protections. The liquidation value of this preferred increases with an index for farmland. By next Summer the dividend will start to pay out on the increased liquidation. Value. A couple of other features go into force after next Summer which make it more expensive for the company to not call. I expect the issue to be called next Summer for cash or stock. You would get the 6 percent yield plus about $.75 in enhanced liquidation value.
Potter – Right now that FPI-B Cumulative Farmland Value Appreciation (“FVA”) is $.80 and it’s adjusted annually in August based on stats issued by National Agricultural Statistics Service (NASS). Here’s the link to this year’s stats – https://release.nass.usda.gov/reports/land0820.pdf. So there’s one more report to go before the call date..
Thanks 2whiteroses. Seems to me this is like getting an embedded call option on farmland, an idea I like– let me know if I am missing something of course.
The FPI-B prospectus says “Prior to September 30, 2024, no dividends will accrue or be paid on any FVA Amount. On and after September 30, 2024, in lieu of the prior dividend rate, a dividend rate of 10.00% per annum will be paid on the initial liquidation preference per share of Series B Participating Preferred Stock plus the FVA Amount, if any”
Does this mean that regardless of FVA value, they will likely call this no later than 9/30/24?
Thanks
llabs – You betcha. However it will not be called at $25. It will be called at the FVA amount… In other words, were it 2024 now, it would be called at $25.80. however, don’t forget FPI also has the option to convert B to common shares after 9/30/21 also but that too will have to be done for the FVA amount.
Interesting to see LAND itself up 3% on the day…..
Thanks for LandO update. Don’t know what I would do without this site.
Picked up Lando at $24.10 this morning and pretty happy with that. I don’t trade them so putting in the “sock drawer”
Thanks for the introduction to LANDO. I think some of the discussion on the site is based on an old draft prospectus. The final one has the first call date as June 2022. FWIW.
Ionian, You just had to stir it up and keep it going didnt ya, lol.. And yes you are correct it appears from reading the links to last filing, October 15th, last week….Page 5 on the first link below, which was a link from the link below it.
Optional Redemption.
(i) The Series B Preferred Stock is not redeemable prior to the later of (1) the first anniversary of the Termination Date and (2) June 1, 2022. However, in order to ensure that the Corporation will continue to meet the requirements for qualification as a REIT, the Series B Preferred Stock will be subject to the transfer and ownership restrictions in the Charter, including the provisions whereby shares
https://www.sec.gov/Archives/edgar/data/1495240/000119312518180329/d594616dex31.htm
https://www.sec.gov/Archives/edgar/data/1495240/000119312520270267/d88303d8a12b.htm
Good catch, Ionian….. With Grid’s documentation, it does look as though June 1, 2022 is the definitive answer as to first call for LANDO and this is an update from the prospectus that QOL links to…. Thanks!
Thanks Ionian
Thanks for the summary, Tim, and esp for the reminder that LANDP is a term pfd. I hadn’t noticed that and was indeed comparing the two. If I’m doing the math right (?), that would leave about $1.46 to go for divs on LANDP vs. closing price of $26.08 today = $0.62 net once it redeems next Fall (plus the tax savings on the cap loss I guess)?
Bur, I have 12 monthly payments or $1.59 in payments. That would leave 51 cents at todays $26.08 close it they redeem on time which they have alluded to doing previously in Series B prospectus. Its a small issuance also. Yes it is very important to realize B really cant be compared to P because those term dated features are generally prized at issuance for the mitigation of any interest rate spike risk. Series B has the asymmetric risk associated with it that most traditional preferreds have.
thanks Grid, I was assuming only 11 pmts remaining but regardless, you’ve confirmed my understanding.
LANDP is a small issue (only 1.15 million shares outstanding), but one must keep in mind that LAND can redeem it at anytime now. There is no guarantee they will wait until 9/30/21.
If you examine LAND’s balance sheet in their quarterly filings, the company lists the LANDP preferred as a $28 million liability. It is not underneath the equity line like most preferreds.
They have every motivation to redeem it well before next September. I was down to a very nominal amount of LANDP and am replacing it with LANDO today. Seems like an easy decision, especially with LANDO trading below $25.
Must thanks Tim for the heads up on this one. Can’t emphasize enough the value of this website to income investors.