Janney/LAND: 3Q16 LAND Earnings REITView: In-Line 3Q16

REITS

Robert Stevenson,

Gladstone Land Corporation (LAND) - BUY

3Q16 LAND Earnings REITView: In-Line 3Q16

Flash Takeaways:

LAND reported 3Q16 FFOPS of $0.13 ($0.15 CORE). We were at $0.12 as was Consensus. Beyond earnings, the incremental information was that LAND’s NAV (as calculated by management) remained at $13.68 at 9/30/16 (+29% versus the close) compared to $13.68 at 6/30/16, $13.87 at 3/31/16, and $14.20 at 12/31/15, and the acquisition of 9 farms for $40.4M in 3Q16.

Analysts Notes:

Renews 1 lease in 3Q16. In 3Q16, LAND renewed its final 2016 lease expiration with the existing tenant in Salinas, CA, resulting in a 9.0% net increase in annualized income.

$40.4M of investments in 3Q16. During 3Q16, LAND closed on the acquisitions of 9 new farms, totaling 10,344 acres, for $40.4M. LAND acquired these farms at an initial overall capitalization rate of 4.8%, which is expected to increase due to certain lease provisions. These acquisitions were partially financed through the issuance of 469,427 OP units at a weighted average price of $11.31, amounting to roughly $5.3M.

$6.5M of investments closed thus far in 4Q16. So far in 4Q16, LAND has acquired a 197 acre almond orchard in CA for $6.5M at a 5.0% initial cap rate, but is expected to yield between 7.0% and 10.0% when accounting for the revenue-sharing portion of the lease.

Issued $28.8M of preferred and upsized credit facility to $200M. In 3Q16, LAND issued $28.8M of 6.375% term preferred stock and raised $4.1M in long-term borrowings at an average rate of 3.1%. Subsequent to 3Q16, LAND amended its credit facility, which increased the facility size from $125M to $200M, fixed the interest rate on ~$86M of borrowings for 10 years at 3.16% ($163K savings per year), and also obtained $25.5M in new 10 year date at 3.16%.

No changes to our thesis or estimates ahead of the call.