Comparing Agriculture Real Estate Investment Trusts and Direct Agricultural Land Investments

Investing in agriculture land has a new avenue with the initial public offerings of Gladstone Land Company and Farmland Partners Incorporated. In this paper, both companies are evaluated by their investment strategies and financial standing. The major analysis is to compare the companies against a direct agriculture land investment, and also against major Real Estate Investment Trust (REIT) indexes in the stock market. Each investment avenue provides varying risk profiles and volatility given market conditions, offering opportunities based on the motives of investors. Inevitably, these characteristics dictate the investment chosen. As realtors stress “location, location, location”, it appears that for the investor there is an added aspect of “timing, timing, timing”. When we evaluated the lifespan of each company compared to a weighted average investment in agriculture land the historical outcome appear different had both Gladstone and Farmland Partners done their initial public offering at a different time. We found that total returns to agriculture REITs are much more variable than those of direct land investments. Additionally, the risk-adjusted returns of REITs are substantially lower than direct land investment. In conclusion, it is the goal of this paper to evaluate the agriculture-based REITs performance and timing as an investment in agriculture land, when compared to a direct land investment