We Are a Buyer of This New Term Preferred Stock
By: Tim McPartland,
OTC TICKER HAS BEEN ANNOUNCED—GLLTP
Gladstone Land Corp. (NASDAQ:LAND) has sold a new preferred offering with a relatively decent coupon of 6.375%. Additionally this issue will pay monthly dividends and a “bird in hand is worth 2 in the bush”.
LAND is a REIT which owns agricultural land throughout the U.S. which it leases to fruit and vegetable growers. While we are not a fan of this type of business and would not buy the common shares, we are a fan of term preferred stock. Longtime readers will recall that term preferred stock has a mandatory redemption date attached to it, which makes it very much like a bond. In the case of this new issue it must be redeemed by September 30, 2021 and has an optional redemption period starting September 30, 2018. As with most all preferred stock the shares would be redeemed at $25/share plus accrued and unpaid dividends. Shares are cumulative in respects to dividends.
Term preferred stock generally trades like a short to medium duration bond meaning that shares should trade with less volatility than perpetual preferreds since there is a date certain for redemption. When possible we always try to reduce volatility in our holdings.
The various Gladstone controlled companies (Gladstone Investment, Gladstone Commercial and Gladstone Capital) have used term preferred shares for years and they have performed well even though most of the Gladstone companies are very mediocre companies. You can peruse the currently outstanding Gladstone preferreds on our “swaps” page.
OTC trading has not been announced as of yet, but we expect a ticker to emerge today (Friday) and we will post it when it is announced.
We will be a buyer of this new issue when it begins to trade. We would expect strong trading and good demand in this issue.