ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All statements contained herein, other than historical facts, may constitute forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These statements may relate to, among other things, future events or
our future performance or financial condition. In some cases, you can identify forward-looking statements by terminology such as may, might, believe, will, provided, anticipate,
future, could, growth, plan, intend, expect, should, would, if, seek, possible, potential,
likely or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our business, financial condition, liquidity, results of
operations, funds from operations or prospects to be materially different from any future business, financial condition, liquidity, results of operations, funds from operations or prospects expressed or implied by such forward-looking statements and
include, but are not limited to:
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Changes in our industry, interest rates or the general economy;
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Natural disasters or climactic changes impacting the regions in which our tenants operate;
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The degree and nature of our competition;
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Failure to maintain our qualification as a REIT;
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Changes in our business strategy; and
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Loss of our key personnel.
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For further information about these and other factors that could
affect our future results, please see the caption titled Risk Factors in our Annual Report on Form 10-K (the Form 10-K) for the year ended December 31, 2015, which we filed with the Securities and Exchange Commission
(the SEC) on February 23, 2016. We caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of
the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q (the Quarterly
Report), except as required by law.
All references to we, our, us and the Company in this
Quarterly Report mean Gladstone Land Corporation and its consolidated subsidiaries, except where it is made clear that the term refers only to Gladstone Land Corporation.
OVERVIEW
General
We are an externally-managed real estate investment trust (REIT) that is engaged primarily in the business of owning and leasing farmland; we are
not a grower, nor do we farm the properties we own. We currently own 47 farms comprised of 23,456 acres across seven states in the U.S. (Arizona, California, Colorado, Florida, Michigan, Nebraska and Oregon). We also own several farm-related
facilities, such as cooling facilities, box barns, packinghouses, processing facilities and various storage facilities. These farms and facilities are leased to 35 different, unrelated tenants that are either independent or corporate farming
operations. We intend to acquire more farmland in these and other states in our regions of focus that is already or will be leased to farmers, and we expect that most of our future tenants will also be independent or corporate farming operations
that are unrelated to us. We also expect to acquire more property related to farming, such as cooling facilities, freezer buildings, packinghouses, box barns, silos, storage facilities, greenhouses, processing plants and distribution centers. We
generally lease our properties on a triple-net basis, an arrangement under which, in addition to rent, the tenant is required to pay the related taxes, insurance costs (including drought insurance if we were to acquire properties that depend upon
rainwater for irrigation), maintenance and other operating costs. We may also elect to sell farmland at certain times, such as when the land could be developed by others for urban or suburban uses.
We were incorporated in 1997, primarily for the purpose of operating strawberry farms through our former subsidiary, Coastal Berry Company, LLC (Coastal
Berry), an entity that provided growing, packaging, marketing and distribution of fresh berries and other agricultural products. We operated Coastal Berry as our primary business until 2004, when it was sold to Dole Food Company
(Dole). Since 2004, our operations have consisted of leasing our farms to third-party tenants. We do not currently intend to enter into the business of growing, packing or marketing farmed products; however, if we do so in the future, we
expect that it would be through a taxable REIT subsidiary (TRS).
23
We conduct substantially all of our investment activities through, and all of our properties are held, directly
or indirectly, by, Gladstone Land Limited Partnership (the Operating Partnership). Gladstone Land Corporation controls the Operating Partnership as its sole general partner and currently owns approximately 93.1% of the units of limited
partnership interest in the Operating Partnership (OP Units).
We intend to continue to lease our farms and farm-related facilities to
independent or corporate farming operations that sell their products through national corporate marketers-distributors. We expect to continue to earn rental and interest income from our investments.
Gladstone Management Corporation (our Adviser) manages our real estate portfolio pursuant to an advisory agreement, and Gladstone Administration,
LLC (our Administrator) provides administrative services to us pursuant to an administration agreement. Our Adviser and our Administrator collectively employ all of our personnel and pay directly their salaries, benefits and general
expenses.
Leases
Most of our agricultural leases
are on a triple-net basis and have original terms ranging from 3 to 10 years for farms growing row crops and 5 to 15 years for farms growing permanent crops, often with options to extend the lease further. Rent is generally payable to us up front on
either an annual or semi-annual basis. Further, most of our leases contain provisions that provide for annual increases in the rental amounts payable by the tenants, often referred to as escalation clauses. The escalation clauses may specify fixed
dollar amount or percentage increases each year, or it may be variable, based on standard cost of living or inflation indices. In addition, some leases that are longer-term in nature may require a regular survey of comparable land rents, with the
rent owed per the lease being adjusted to reflect then-current market rents. We also have leases that include variable rents based on the success of the harvest each year. In these types of agreements, we will generally require the lease to include
the guarantee of a minimum amount of rental income that satisfies our investment return criteria. Currently, our 47 farms are leased under agricultural leases with original terms ranging from 3 to 15 years, with 31 farms leased on a pure triple-net
basis, and 16 farms leased on a partial-net basis, with the landlord responsible for all or a portion of the related property taxes. Additionally, four of our farms are leased under agreements that include a variable rent component.
We monitor our tenants credit quality on an ongoing basis by, among other things, periodically conducting site visits of the properties to ensure
farming operations are taking place and to assess the general maintenance of the properties. To date, we have not identified any changes to credit quality of our tenants, and all tenants continue to pay pursuant to the terms of their respective
leases.
Lease Expirations
Farm leases are often
short-term in nature, so in any given year, we may have multiple leases up for renewal or extension. As of January 1, 2016, we had two agricultural leases that were originally due to expire in 2016. We renewed one lease prior to its expiration
for an additional three years at an annualized, straight-line rental rate representing an increase of 17.9% over that of the previous lease. This lease was renewed prior to its expiration and with the existing tenant, thus incurring no downtime on
the farm.
We have one remaining agricultural lease due to expire in 2016. We have begun negotiations with the existing tenant on the farm, and we
anticipate renewing the lease prior to its expiration. Further, given the current market conditions in the region where the farm is located, we expect to be able to renew the lease at a higher rental rate than that of the existing lease. However,
there can be no assurance that we will be able to renew the lease at a rate favorable to us, if at all, or be able to find a replacement tenant, if necessary.
24
The following table summarizes the lease expirations by year for our properties with leases in place as of
March 31, 2016:
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Number of
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Expiring
|
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% of
|
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Rental Revenue for the
|
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% of Total
|
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Expiring
|
|
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Leased
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Total
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Three Months Ended
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Rental
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Year
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Leases
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Acreage
|
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|
Acreage
|
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March 31, 2016
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Revenue
|
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2016
|
|
|
3
|
(1)
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|
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331
|
|
|
|
1.5
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%
|
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$
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202,601
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5.5
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%
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2017
|
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8
|
|
|
|
647
|
|
|
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2.8
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%
|
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544,190
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14.8
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%
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2018
|
|
|
5
|
|
|
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2,929
|
|
|
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12.7
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%
|
|
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237,722
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6.5
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%
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2019
|
|
|
1
|
|
|
|
37
|
|
|
|
0.2
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%
|
|
|
14,759
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|
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0.4
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%
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2020
|
|
|
6
|
|
|
|
3,890
|
|
|
|
16.9
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%
|
|
|
1,064,324
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|
|
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28.9
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%
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2021
|
|
|
3
|
|
|
|
6,882
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|
|
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29.9
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%
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|
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186,931
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|
|
|
5.1
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%
|
Thereafter
|
|
|
13
|
|
|
|
8,287
|
|
|
|
36.0
|
%
|
|
|
1,428,947
|
|
|
|
38.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
39
|
|
|
|
23,003
|
|
|
|
100.0
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%
|
|
$
|
3,679,474
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|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1)
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Includes: (i) the agricultural lease mentioned above, (ii) a surface area lease on a portion of one property leased to an oil company that is renewed on a
year-to-year basis, for which we recorded $8,016 of rental revenue during the three months ended March 31, 2016, and (iii) a residential lease on one of our properties that is not expected to be renewed upon its expiration in 2016 and for
which no rental revenue was recorded during the three months ended March 31, 2016.
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Recent Developments
Investment and Leasing Activity
Property
Acquisitions
Since January 1, 2016, we have acquired four farms in two separate transactions, which are summarized in the table below:
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Property
Name
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Property
Location
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Acquisition
Date
|
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Total
Acreage
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Number
of
Farms
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Primary
Crop(s)
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|
Lease
Term
|
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Renewal
Options
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|
Total
Purchase
Price
|
|
|
Acquisition
Costs
|
|
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Annualized
Straight-line
Cash Rent
(1)
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Gunbarrel Road
(2)
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Alamosa, CO
|
|
3/3/2016
|
|
6,191
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|
3
|
|
Potatoes
|
|
5 years
|
|
1 (5 years)
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|
$
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25,735,815
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|
|
$
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88,889
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(3)
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|
$
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1,590,614
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|
Calaveras Avenue
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Coalinga, CA
|
|
4/5/2016
|
|
453
|
|
1
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|
Pistachios
|
|
10 years
|
|
1 (5 years)
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|
|
15,470,000
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|
|
|
24,568
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(4)
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|
773,500
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(5)
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(1)
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Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease.
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(2)
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As partial consideration for the acquisition of this property, we issued 745,879 OP Units, constituting an aggregate fair value of approximately $6.5 million as of the acquisition date.
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(3)
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Acquisition accounted for as a business combination under ASC 805. As such, all acquisition-related costs were expensed as incurred, other than direct leasing costs, which were capitalized. In aggregate, we
incurred $4,670 of direct leasing costs in connection with this acquisition.
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(4)
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Acquisition will be accounted for as an asset acquisition under ASC 360. As such, all acquisition-related costs will be capitalized and allocated among the identifiable assets acquired. The figure above
represents only costs accrued for as of the date of this filing.
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(5)
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This lease provides for a variable rent component based on the gross crop revenues earned on the property. The figure above represents only the minimum cash rents guaranteed under the lease.
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Existing Properties
Since January 1, 2016, the
following significant events occurred with regard to our already-existing properties:
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Sycamore Road
. On February 1, 2016, we completed certain irrigation improvements on Sycamore Road to increase overall water availability at a total cost to us of $993,319. As stipulated in the lease
agreement, we will earn additional rent on the total cost commensurate with the annual yield on the farmland, which will result in additional straight-line rental income of $53,550 per year throughout the remaining lease term.
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McIntosh Road
. On February 8, 2016, we renewed the lease with the tenant occupying one of our McIntosh Road farms, which was set to expire on June 30, 2016. The lease was renewed for an additional three
years, through June 30, 2019, with annualized, straight-line rental income of $63,000, representing a 17.9% increase over that of the previous lease.
|
25
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Wauchula Road
. On April 5, 2016, we reimbursed the tenant for $569,607 of costs incurred to construct certain irrigation improvements on the farm. As stipulated in the lease, beginning with the three months
ending June 30, 2016, we will earn an additional $92,634 of annualized, straight-line rental income on this farm throughout the remaining lease term.
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Parrish Road.
On April 5, 2016, we reimbursed the tenant $500,000, which represented our portion of the costs incurred to construct certain irrigation improvements on the farm. As stipulated in the lease,
beginning with the three months ending June 30, 2016, we will earn an additional $139,073 of annualized, straight-line rental income on this farm throughout the remaining lease term.
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Financing Activity
MetLife Facility
During the three months ended March 31, 2016, certain of our properties pledged as collateral under our credit facility with Metropolitan Life Insurance
Company (MetLife), which consists of a $100.0 million long-term note payable (the MetLife Note Payable) and a $25.0 million revolving equity line of credit (the MetLife Line of Credit and, together with the
MetLife Note Payable, the MetLife Facility) were re-appraised, which resulted in an overall increase in the valuation of our collateral pool under the facility, providing us with approximately $12.5 million of additional borrowing
availability. Based on current borrowings outstanding under the MetLife Facility, our total current borrowing availability is approximately $9.5 million.
Farm Credit CFL
During the three months ended
March 31, 2016, we received interest patronage, or refunded interest, from Farm Credit of Central Florida, FLCA (Farm Credit CFL) representing a 16.1% refund of the interest accrued on all borrowings from Farm Credit CFL during the
year ended December 31, 2015. This interest patronage reduced the interest rates on our borrowings from Farm Credit CFL during the year ended December 31, 2015, from a weighted-average stated interest rate of 3.42% to a weighted-average
effective interest rate of 2.87%. However, we are unable to estimate the amount of interest patronage to be received, if any, related to interest accrued during 2016 on our Farm Credit CFL borrowings.
Farm Credit West
On April 4, 2016, we closed on a
loan from Farm Credit West, FLCA (Farm Credit West) for approximately $9.3 million. Terms of this note are summarized in the following table:
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|
|
|
Date of
Issuance
|
|
Initial
Commitment
|
|
|
Maturity
Date
|
|
Principal
Amortization
|
|
Interest Rate
Terms
(1)
|
4/4/2016
|
|
$
|
9,282,000
|
|
|
11/1/2040
|
|
25 years
|
|
3.54% fixed through 4/30/2021, variable thereafter
|
(1)
|
Rate represents the stated interest rate, before interest patronage.
|
Proceeds from this note were used to fund new property acquisitions.
26
Farmer Mac
Pursuant to a bond purchase agreement we entered into on December 5, 2014, with Federal Agricultural Mortgage Corporation (Farmer Mac) and
Farmer Mac Mortgage Securities Corporation for a secured note purchase facility that provides for bond issuances up to an aggregate principal amount of $75.0 million (the Farmer Mac Facility), we issued two bonds since January 1,
2016, the terms of which are summarized in the following table:
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|
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|
|
|
|
|
|
|
|
Date of
Issuance
|
|
Amount
|
|
|
Maturity
Date
|
|
Principal
Amortization
|
|
Interest Rate Terms
|
3/3/2016
|
|
$
|
11,100,000
|
|
|
2/24/2023
|
|
None
|
|
3.08%, fixed throughout term
|
3/3/2016
|
|
|
4,431,000
|
|
|
2/24/2023
|
|
10 years
|
|
2.98%, fixed throughout term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,531,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from these bond issuances were used to fund new property acquisitions.
Portfolio Diversity
Since our initial public offering in
January 2013 (the IPO), we have expanded our original portfolio of 12 farms leased to 7 different, unrelated tenants to a current portfolio of 47 farms leased to 35 different, unrelated tenants. While our focus remains in farmland
suitable for growing fresh produce annual row crops, we have also begun to diversify our portfolio into farmland suitable for other crop types, including permanent crops, consisting primarily of almonds, blueberries and pistachios, and certain
commodity crops, consisting primarily of corn and beans. The following table summarizes the different sources of revenues for our properties with leases in place as of and for the three months ended March 31, 2016 and 2015:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the
Three Months Ended March 31, 2016
|
|
|
As of and For the
Three Months Ended March 31, 2015
|
|
|
Annualized GAAP
Rental Revenue as of
March 31, 2016
|
|
Revenue Source
|
|
Total
Farmable
Acres
|
|
|
% of Total
Farmable
Acres
|
|
|
Rental
Revenue
|
|
|
% of Total
Revenue
|
|
|
Total
Farmable
Acres
|
|
|
% of Total
Farmable
Acres
|
|
|
Rental
Revenue
|
|
|
% of Total
Revenue
|
|
|
Total Rental
Revenue
|
|
|
% of Total
Revenue
|
|
Annual row crops fresh
produce
(1)
|
|
|
9,294
|
|
|
|
51.9
|
%
|
|
$
|
2,637,753
|
|
|
|
71.7
|
%
|
|
|
5,259
|
|
|
|
73.2
|
%
|
|
$
|
2,083,911
|
|
|
|
79.5
|
%
|
|
$
|
11,484,656
|
|
|
|
72.6
|
%
|
Annual row crops commodity
crops
(2)
|
|
|
7,316
|
|
|
|
40.9
|
%
|
|
|
368,489
|
|
|
|
10.0
|
%
|
|
|
1,469
|
|
|
|
20.4
|
%
|
|
|
110,964
|
|
|
|
4.2
|
%
|
|
|
1,641,443
|
|
|
|
10.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Total annual row crops
|
|
|
16,610
|
|
|
|
92.8
|
%
|
|
|
3,006,242
|
|
|
|
81.7
|
%
|
|
|
6,728
|
|
|
|
93.6
|
%
|
|
|
2,194,875
|
|
|
|
83.7
|
%
|
|
|
13,126,099
|
|
|
|
83.0
|
%
|
Permanent crops
(3)
|
|
|
1,293
|
|
|
|
7.2
|
%
|
|
|
350,694
|
|
|
|
9.5
|
%
|
|
|
457
|
|
|
|
6.4
|
%
|
|
|
138,092
|
|
|
|
5.3
|
%
|
|
|
1,408,509
|
|
|
|
8.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Total crops
|
|
|
17,903
|
|
|
|
100.0
|
%
|
|
|
3,356,936
|
|
|
|
91.2
|
%
|
|
|
7,185
|
|
|
|
100.0
|
%
|
|
|
2,332,967
|
|
|
|
89.0
|
%
|
|
|
14,534,608
|
|
|
|
91.9
|
%
|
Facilities and other
(4)
|
|
|
|
|
|
|
0.0
|
%
|
|
|
322,538
|
|
|
|
8.8
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
289,360
|
|
|
|
11.0
|
%
|
|
|
1,277,872
|
|
|
|
8.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
17,903
|
|
|
|
100.0
|
%
|
|
$
|
3,679,474
|
|
|
|
100.0
|
%
|
|
|
7,185
|
|
|
|
100.0
|
%
|
|
$
|
2,622,327
|
|
|
|
100.0
|
%
|
|
$
|
15,812,480
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes berries and other fruits, such as strawberries, raspberries and melons, and vegetables, such as cabbage, carrots, celery, cucumbers, green beans, lettuce, onions, peas, peppers, potatoes, radicchio,
spinach and tomatoes.
|
(2)
|
Includes alfalfa, barley, corn, edible beans, grass, mint, popcorn, soybeans and wheat.
|
(3)
|
Includes almonds, avocados, blueberries, lemons and pistachios.
|
(4)
|
Consists primarily of rental revenue from: (i) farm-related facilities, such as coolers, packinghouses, distribution centers, residential houses for tenant farmers and other minor, farm-related buildings;
(ii) a surface area lease with an oil company on a small parcel of one of our properties; and (iii) unimproved acreage on certain of our farms.
|
27
Our acquisition of 35 farms since our IPO has also allowed us to further diversify our portfolio geographically.
The following table summarizes the different geographic locations of our properties with leases in place as of and for the three months ended March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Three
Months Ended March 31, 2016
|
|
|
As of and For the Three
Months Ended March 31, 2015
|
|
|
Annualized GAAP
Rental Revenue as of
March 31, 2016
(1)
|
|
State
|
|
Total
Acres
|
|
|
% of
Total
Acres
|
|
|
Rental
Revenue
|
|
|
% of Total
Rental
Revenue
|
|
|
Total
Acres
|
|
|
% of
Total
Acres
|
|
|
Rental
Revenue
|
|
|
% of Total
Rental
Revenue
|
|
|
Total
Rental
Revenue
|
|
|
% of Total
Rental
Revenue
|
|
California
|
|
|
3,576
|
|
|
|
15.6
|
%
|
|
$
|
2,140,166
|
|
|
|
58.2
|
%
|
|
|
2,722
|
|
|
|
31.0
|
%
|
|
$
|
1,839,707
|
|
|
|
70.2
|
%
|
|
$
|
8,584,126
|
|
|
|
54.3
|
%
|
Florida
|
|
|
5,094
|
|
|
|
22.1
|
%
|
|
|
743,087
|
|
|
|
20.2
|
%
|
|
|
1,723
|
|
|
|
19.6
|
%
|
|
|
349,488
|
|
|
|
13.3
|
%
|
|
|
2,975,115
|
|
|
|
18.8
|
%
|
Oregon
|
|
|
2,313
|
|
|
|
10.1
|
%
|
|
|
292,481
|
|
|
|
7.9
|
%
|
|
|
2,313
|
|
|
|
26.3
|
%
|
|
|
291,537
|
|
|
|
11.1
|
%
|
|
|
1,169,925
|
|
|
|
7.4
|
%
|
Arizona
|
|
|
3,000
|
|
|
|
13.0
|
%
|
|
|
172,461
|
|
|
|
4.7
|
%
|
|
|
1,761
|
|
|
|
20.0
|
%
|
|
|
79,916
|
|
|
|
3.0
|
%
|
|
|
663,583
|
|
|
|
4.2
|
%
|
Nebraska
|
|
|
2,559
|
|
|
|
11.1
|
%
|
|
|
144,907
|
|
|
|
3.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
579,630
|
|
|
|
3.7
|
%
|
Colorado
|
|
|
6,191
|
|
|
|
26.9
|
%
|
|
|
124,000
|
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,590,614
|
|
|
|
10.0
|
%
|
Michigan
|
|
|
270
|
|
|
|
1.2
|
%
|
|
|
62,372
|
|
|
|
1.7
|
%
|
|
|
270
|
|
|
|
3.1
|
%
|
|
|
61,679
|
|
|
|
2.4
|
%
|
|
|
249,487
|
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,003
|
|
|
|
100.0
|
%
|
|
$
|
3,679,474
|
|
|
|
100.0
|
%
|
|
|
8,789
|
|
|
|
100.0
|
%
|
|
$
|
2,622,327
|
|
|
|
100.0
|
%
|
|
$
|
15,812,480
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Annualized GAAP Rental Revenue is based on the minimum rental payments required per the leases in place as of March 31, 2016, and includes the amortization of
any above- market lease values or accretion of any below-market lease values, deferred revenue and tenant improvements.
|
Our Adviser and
Administrator
We are externally managed pursuant to a contractual investment advisory arrangement (the Advisory Agreement) with our
Adviser, under which our Adviser directly employs certain of our personnel and pays their payroll, benefits and general expenses directly, and our Administrator provides administrative services to us pursuant to a separate administration agreement
with our Administrator (the Administration Agreement). Both our Adviser and Administrator are affiliates of ours, as their parent company is owned and controlled by Mr. David Gladstone, our chairman and chief executive officer. In
addition, two of our executive officers, Mr. Gladstone and Mr. Terry Brubaker (our vice chairman and chief operating officer), serve as directors and executive officers of each of our Adviser and Administrator. Mr. Michael LiCalsi,
our general counsel and secretary, also serves as our Administrators president. A summary of each of these agreements is provided in Note 4 to our consolidated financial statements in our 2015 Form 10-K. There were no material changes to
either of these agreements during the three months ended March 31, 2016.
Critical Accounting Policies
The preparation of our financial statements in accordance with U.S. generally accepted accounting principles (GAAP) requires management to make
judgments that are subjective in nature to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and, as a result, actual
results could materially differ from these estimates. A summary of our significant accounting policies is provided in Note 2 to our consolidated financial statements in our 2015 Form 10-K. There were no material changes to our critical accounting
policies during the three months ended March 31, 2016.
28
RESULTS OF OPERATIONS
A comparison of our operating results for the three months ended March 31, 2016 and 2015 is below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
$ Change
|
|
|
% Change
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental revenues
|
|
$
|
3,679,474
|
|
|
$
|
2,622,327
|
|
|
$
|
1,057,147
|
|
|
|
40.3
|
%
|
Tenant recovery revenue
|
|
|
3,203
|
|
|
|
3,397
|
|
|
|
(194
|
)
|
|
|
-5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
|
3,682,677
|
|
|
|
2,625,724
|
|
|
|
1,056,953
|
|
|
|
40.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
976,710
|
|
|
|
791,632
|
|
|
|
185,078
|
|
|
|
23.4
|
%
|
Property operating expenses
|
|
|
180,203
|
|
|
|
205,766
|
|
|
|
(25,563
|
)
|
|
|
-12.4
|
%
|
Acquisition-related expenses
|
|
|
95,224
|
|
|
|
170,680
|
|
|
|
(75,456
|
)
|
|
|
-44.2
|
%
|
Management fee, net of fee credits
|
|
|
387,154
|
|
|
|
(25,157
|
)
|
|
|
412,311
|
|
|
|
1639.0
|
%
|
Administration fee
|
|
|
211,860
|
|
|
|
130,936
|
|
|
|
80,924
|
|
|
|
61.8
|
%
|
General and administrative
|
|
|
431,326
|
|
|
|
397,354
|
|
|
|
33,972
|
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
2,282,477
|
|
|
|
1,671,211
|
|
|
|
611,266
|
|
|
|
36.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,400,200
|
|
|
|
954,513
|
|
|
|
445,687
|
|
|
|
46.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
94,641
|
|
|
|
19,430
|
|
|
|
75,211
|
|
|
|
387.1
|
%
|
Interest expense
|
|
|
(1,254,849
|
)
|
|
|
(949,369
|
)
|
|
|
(305,480
|
)
|
|
|
-32.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
(1,160,208
|
)
|
|
|
(929,939
|
)
|
|
|
(230,269
|
)
|
|
|
-24.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
239,992
|
|
|
|
24,574
|
|
|
|
215,418
|
|
|
|
876.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less net income attributable to non-controlling interests
|
|
|
(5,576
|
)
|
|
|
|
|
|
|
(5,576
|
)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the Company
|
|
$
|
234,416
|
|
|
$
|
24,574
|
|
|
$
|
209,842
|
|
|
|
853.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A = Not Applicable
Operating Revenues
Rental revenues increased for
the three months ended March 31, 2016, as compared to the prior-year period, primarily as a result of acquiring new farms, as well as our ability to renew existing leases at higher rental rates and earning additional revenue on capital
improvements made to certain properties. For the three months ended March 31, 2016, we recorded approximately $861,000 of rental revenue attributable to 12 new farms that we acquired since March 31, 2015. In addition, during the three
months ended March 31, 2016, we recorded additional rental revenue of approximately $58,000 over that of the prior-year period attributable to the farms we acquired during the three months ended March 31, 2015, primarily due to owning
these farms for the full period. On a same-property basis, which only includes properties owned for the entirety of both periods presented, rental revenues increased by approximately $138,000, or 5.7%, for the three months ended March 31, 2016,
primarily due to our ability to renew existing leases at higher rates and earning additional revenue on capital improvements constructed on certain properties.
Tenant recovery revenue, which represents real estate taxes and insurance premiums paid on certain of our properties that, per the leases, are required to be
reimbursed by the tenant, remained relatively flat for the three months ended March 31, 2016, as compared to the prior-year period. A corresponding amount was also recorded as property operating expenses during the respective periods.
Operating Expenses
Depreciation and amortization
expenses increased for the three months ended March 31, 2016, as compared to the prior-year period, as a result of the additional farms we acquired, as mentioned above, and additional site improvements constructed on
29
existing properties since March 31, 2015. For the three months ended March 31, 2016, we recorded additional depreciation and amortization expense of approximately $279,000 as a result
of the 12 farms we acquired since March 31, 2015. In addition, during the three months ended March 31, 2016, we recorded additional depreciation and amortization expense of approximately $44,000 over that of the prior-year period
attributable to the farms we acquired during the three months ended March 31, 2015, primarily due to owning these farms for the full period. On a same-property portfolio basis, depreciation and amortization expense decreased by approximately
$138,000, or 19.7%, for the three months ended March 31, 2016, primarily as a result of certain lease intangible amortization periods expiring.
Property operating expenses consist primarily of real estate taxes, insurance expense and other overhead expenses paid for certain of our
properties. Property operating expenses decreased for the three months ended March 31, 2016, as compared to the prior-year period, primarily as a result of lower repairs and maintenance expenses incurred on certain of our properties, as
well as a decrease in aggregate property tax expense on our overall portfolio. During the three months ended December 31, 2015, two of our partial-net leases converted to pure, triple-net leases, and, beginning in 2016, certain of our
properties were entered into land conservation contracts under the California Land Conservation Act, restricting the land to agricultural use and reducing the property tax assessments on those properties. For the three months ended March 31,
2016, we accrued approximately $144,000 of real estate taxes related to certain of our farms, which included the recognition of certain prior-period supplemental taxes as a result of stepped-up tax assessments of those properties after our
acquisitions of them, as compared to approximately $152,000 during the prior-year period.
Acquisition-related expenses generally consist of legal fees
and fees incurred for third-party reports prepared in connection with potential acquisitions and the related due diligence analyses. Acquisition-related expenses decreased for the three months ended March 31, 2016, as compared to the
prior-year period, primarily due to closing on more separate acquisitions in the prior-year period. In connection with the three farms acquired during the three months ended March 31, 2016, we incurred $88,889 of aggregate acquisition-related
costs. Of this amount, during the three months ended March 31, 2016, $84,219 was expensed as incurred, while $4,670 was capitalized and allocated among the assets acquired. For the two farms acquired during the three months ended March 31,
2015, we incurred $193,495 of aggregate acquisition-related costs. Of this amount, during the three months ended March 31, 2015, $175,528 was expensed as incurred, while $2,625 was capitalized and allocated among the assets acquired. In
addition, in connection with the farms we acquired during the three months ended March 31, 2015, $7,642 of the acquisition-related costs incurred was expensed during prior periods, and $7,700 was expensed during subsequent periods.
The net management fee paid to our Adviser increased for the three months ended March 31, 2016, as compared to the prior-year period, primarily as a
result of a $320,905 finders fee earned by our Adviser from a third party in connection with one of our acquisitions during the three months ended March 31, 2015, which the Adviser applied as a credit to the base management fee we owed to
our Adviser for the three months ended March 31, 2015. In addition, we have raised approximately $21.5 million of net proceeds from follow-on common stock offerings completed since March 31, 2015, increasing the base (the cost basis of our
stockholders equity) on which the management fee is calculated.
The administration fee paid to our Administrator increased for the three months
ended March 31, 2016, as compared to the prior-year period, primarily due to us using a higher share of our Administrators resources in relation to those used by other funds engaged by our Administrator during the three months ended
March 31, 2016.
General and administrative expenses increased for the three months ended March 31, 2016, as compared to the prior-year period,
primarily as a result of increased state filing fees and additional costs associated with updating the valuations of certain of our farms, partially offset by lower overhead insurance expense.
Other Income (Expense)
Other income, which
consists primarily of interest earned on short-term investments and interest patronage received from Farm Credit CFL, increased for the three months ended March 31, 2016, as compared to the prior-year period, primarily due to additional
interest patronage received from Farm Credit CFL. During the three months ended March 31, 2016, we received $93,760 from Farm Credit CFL of interest patronage related to interest accrued during 2015, compared to $14,856 of interest patronage
received during the prior-year period. The receipt of this interest patronage resulted in a 16.1% decrease in our effective interest rate on our aggregate borrowings from Farm Credit CFL during the year ended December 31, 2015.
30
Interest expense increased for the three months ended March 31, 2016, as compared to the prior-year period,
primarily due to increased overall borrowings. The weighted-average balance of our aggregate borrowings for the three months ended March 31, 2016, was approximately $148.5 million, as compared to $104.5 million for the prior-year period.
Including patronage received on our Farm Credit CFL borrowings, the overall effective interest rate charged on our aggregate borrowings, excluding the impact of deferred financing costs, was 3.04% for the three months ended March 31, 2016, as
compared to 3.50% for the prior-year period.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Since our IPO in January 2013, we have invested
approximately $224.7 million into 35 new farms, and we have expended or accrued an additional $10.9 million for capital improvements on existing properties. Our current short- and long-term sources of funds include cash and cash equivalents, cash
flows from operations, borrowings, including the undrawn commitments available under the MetLife Facility and the Farmer Mac Facility, and issuances of additional equity securities. Our current available liquidity is approximately $11.9 million,
consisting of $2.4 million in cash and, based on the current level of collateral pledged, $9.5 million of availability under the MetLife Facility, subject to compliance with covenants.
As of March 31, 2016, our total-debt-to-total-capitalization ratio, at book value, was 65.8%, which is up from 64.7% as of December 31, 2015.
However, on a fair value basis, our total-debt-to-total capitalization ratio as of March 31, 2016, was 51.9%, which is up from 50.2% as of December 31, 2015 (see Non-GAAP Financial InformationNet Asset Value below for an
explanation of our fair value process). We are currently exploring additional options for further access to capital, including negotiations with several lenders.
Future Capital Needs
Our short- and long-term liquidity
requirements consist primarily of making distributions to stockholders to maintain our qualification as a REIT, funding our general operating costs, making principal and interest payments on outstanding borrowings and funding new farmland
acquisitions and other investments consistent with our investment strategy. We intend to use a significant portion of our available liquidity to purchase additional farms and farm-related properties. Based on our current liquidity and loan-to-value
borrowing rates available to us, and considering certain operating obligations for which we are responsible, we estimate that our current maximum buying power for acquisitions not involving the issuance of additional OP Units is approximately $25.1
million, and we are currently working towards solutions to increase this figure. We continue to actively seek and evaluate acquisitions of additional farms that satisfy our investment criteria, and our pipeline of potential acquisitions remains
healthy. We currently have two farms under either a signed purchase and sale agreement or a signed, non-binding letter of intent for an aggregate proposed purchase price of approximately $12.1 million, a portion of which may be paid in OP Units, and
we have many other properties that are in various other stages of our due diligence process. However, all potential acquisitions will be subject to our due diligence investigation of such properties, and there can be no assurance that we will be
successful in identifying or acquiring any properties in the future.
We believe that our current and short-term cash resources will be sufficient to fund
our distributions to stockholders, service our debt and fund our current operating costs in the near term. We expect to meet our long-term liquidity requirements through various sources of capital, including future equity issuances (including OP
Units through our Operating Partnership as consideration for future acquisitions), long-term mortgage indebtedness and bond issuances and other secured and unsecured borrowings.
31
Cash Flow Resources
The following table summarizes total cash flows for operating, investing and financing activities for the three months ended March 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change ($ )
|
|
|
Change (%)
|
|
Net change in cash from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
4,233,768
|
|
|
$
|
265,306
|
|
|
$
|
3,968,462
|
|
|
|
1495.8
|
%
|
Investing activities
|
|
|
(21,149,732
|
)
|
|
|
(20,034,728
|
)
|
|
|
(1,115,004
|
)
|
|
|
-5.6
|
%
|
Financing activities
|
|
|
16,576,802
|
|
|
|
19,330,420
|
|
|
|
(2,753,618
|
)
|
|
|
-14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in Cash and cash equivalents
|
|
$
|
(339,162
|
)
|
|
$
|
(439,002
|
)
|
|
$
|
99,840
|
|
|
|
22.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
The majority of cash from operating activities is generated from the rental payments we receive from our tenants, which is utilized to fund our property-level
operating expenses, with any excess cash being primarily used for principal and interest payments on our borrowings, management fees to our Adviser, administrative fees to our Administrator and other corporate-level expenses. The increase in cash
provided by operating activities during the three months ended March 31, 2016, as compared to the prior-year period, was primarily due to additional rental payments received from farms we have acquired during the past 12 months, particularly
prepaid rent received on the three farms acquired during the three months ended March 31, 2016. This increase was partially offset by increases in certain operating expenses as a result of increased acquisition activity, as well as an increase
in cash paid for interest due to increased borrowings during the three months ended March 31, 2016.
Investing Activities
The increase in cash used in investing activities during the three months ended March 31, 2016, as compared to the prior-year period, was primarily due to
additional capital improvements made on existing properties during the three months ended March 31, 2016, which exceeded that of the prior-year period by approximately $1.5 million.
Financing Activities
The decrease in cash
provided by financing activities during the three months ended March 31, 2016, as compared to the prior-year period, was primarily due to a decrease in our net borrowings during the three months ended March 31, 2016, which were
approximately $2.2 million less than that of the prior-year period, as well as increased overall distributions paid out on our common stock OP Units held outside of the Company.
Debt Capital
MetLife Facility
Under our MetLife Facility, the MetLife Note Payable bears interest at a fixed rate of 3.35% per annum, plus an unused line fee of 0.20% on undrawn
amounts, and interest rates for subsequent disbursements will be based on prevailing market rates at the time of such disbursements. The interest rates on the current balance and any subsequent disbursements will be subject to adjustment in August
2020. If the full commitment amount of $100.0 million is not drawn by December 31, 2017, MetLife has the option to be relieved of its obligation to disburse the additional funds under this loan. Advances under the MetLife Line of Credit bear
interest at a variable rate equal to the three-month LIBOR plus a spread of 2.25%, with a minimum annualized rate of 2.50%, plus an unused fee of 0.20% on undrawn amounts. The interest rate spread on borrowings under the MetLife Line of Credit will
be subject to adjustment on April 5, 2017.
Currently, there is approximately $87.5 million outstanding under the MetLife Note Payable that bears
interest at a fixed rate of 3.35% per annum and $12.0 million outstanding under the MetLife Line of Credit that bears interest at a rate of 2.88% per annum. While approximately $25.5 million of the full commitment amount remains undrawn,
based on the current level of collateral pledged, we currently have approximately $9.5 million of availability under the MetLife Facility.
32
In addition, we have been in discussions with MetLife to expand the MetLife Facility and modify certain terms of
the agreement that would result in additional borrowing availability based on the current collateral pool. However, there can be no assurance that we will be able to enter into any agreement with terms favorable to us, or at all.
Farm Credit CFL Notes Payable
Since
September 19, 2014, we have closed on eight separate loans with Farm Credit CFL for an aggregate amount of approximately $22.2 million (collectively, the Farm Credit CFL Notes Payable). We currently have $21.3 million outstanding
under the Farm Credit CFL Notes Payable that bear interest at an expected weighted-average effective rate (net of expected interest patronage) of 2.87% and have a weighted-average maturity date of April 2031. While we do not currently have any
additional availability under our program with Farm Credit CFL based on the properties currently pledged as collateral, we expect to enter into additional borrowing agreements with Farm Credit CFL in connection with certain potential new
acquisitions.
Additionally, we have been in discussions with and have received a non-binding term sheet from Farm Credit CFL for a new borrowing facility
that would provide us with additional borrowing availability based on our existing collateral pledged under our existing borrowings with them. However, there can be no assurance that we will be able to enter into any agreements with terms favorable
to us, or at all.
Farm Credit West Note Payable
On April 4, 2016, we closed on a loan from Farm Credit West for approximately $9.3 million that bears interest at an expected effective interest rate (net
of expected interest patronage) of 2.79% and has a maturity date of November 1, 2040. While we do not currently have any additional availability under our program with Farm Credit West based on the property currently pledged as collateral, we
expect to enter into additional borrowing agreements with Farm Credit West in connection with certain potential new acquisitions.
Farmer Mac
Facility
On December 5, 2014, we entered into an agreement with Farmer Mac that provides for bond issuances up to an aggregate amount of
$75.0 million. To date, we have issued aggregate bonds of approximately $49.2 million under the facility, and we currently have $49.1 million outstanding that bear interest at a weighted-average interest rate of 2.93% and have a weighted-average
maturity date of September 2020. While approximately $25.8 million of the full commitment balance remains undrawn, based on the current level of collateral pledged, we currently have no availability under the Farmer Mac Facility. However, we expect
to pledge certain potential new property acquisitions as collateral under the Farmer Mac Facility to utilize some or all of this remaining commitment balance. If we have not issued bonds such that the aggregate bond issuances total $75.0 million by
December 11, 2016, Farmer Mac has the option to be relieved of its obligation to purchase additional bonds under this facility.
In addition, we are
currently in discussions with Farmer Mac regarding the expansion of the Farmer Mac Facility; however, there can be no assurance that we will be able to expand this facility on terms favorable to us, or at all.
Equity Capital
Including approximately $29.7 million
reserved for issuance under our ATM Program, we currently have the ability to raise up to $276.7 million of additional equity capital through the sale and issuance of securities that are registered under our registration statement on Form S-3 (File
No. 333-194539) in one or more future offerings. However, in the future, we may be limited in the amount of securities we may sell on Form S-3 should the market value of our common stock held by non-affiliates decrease below $75.0 million, as
has been the case at certain times during the past 12 months. As we are currently above the $75.0 million threshold, this limitation will not impact us until the next measurement period, which will be when we file our 2016 Form 10-K. However, there
can be no assurance that we will be above the $75.0 million threshold at that time.
In addition, we have the ability, and may do so in the future, to
issue additional OP Units to third parties as consideration in future property acquisitions.
33
Off-Balance Sheet Arrangements
As of March 31, 2016, we did not have any off-balance sheet arrangements.
NON-GAAP FINANCIAL INFORMATION
Funds from Operations,
Core Funds from Operations and Adjusted Funds from Operations
The National Association of Real Estate Investment Trusts (NAREIT) developed
funds from operations (FFO) as a relative non-GAAP supplemental measure of operating performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the same basis determined under GAAP.
FFO, as defined by NAREIT, is net income (computed in accordance with GAAP), excluding gains or losses from sales of property and impairment losses on property, plus depreciation and amortization of real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. We further present core FFO (CFFO) and adjusted FFO (AFFO) as additional non-GAAP financial measures, as we believe both CFFO and AFFO improve comparability on a
period-over-period basis and are more useful supplemental metrics for investors to use in assessing our operational performance on a more sustainable basis than FFO.
We calculate CFFO by adjusting FFO for the following items:
|
|
|
Acquisition-related expenses
. Acquisition-related expenses (i.e., due diligence costs) are incurred for investment purposes and do not correlate with the ongoing operations of our existing portfolio. Further, due
to the inconsistency in which these costs are incurred and how they are treated for accounting purposes, we believe the exclusion of these expenses improves comparability of our results on a period-to-period basis.
|
|
|
|
Acquisition-related accounting fees
. Certain auditing and accounting fees we incur are directly related to acquisitions and vary depending on the number and complexity of acquisitions completed during a period.
Due to the inconsistency in which these costs are incurred, we believe the exclusion of these expenses improves comparability of our results on a period-to-period basis.
|
|
|
|
Other adjustments
. We will adjust for certain non-recurring charges and receipts and will explain such adjustments accordingly.
|
Further, we calculate AFFO by adjusting CFFO for the following items:
|
|
|
Cash rent adjustment.
This adjustment removes the effects of straight-lining rental income, as well as the amortization related to above-market lease values and accretion related to below-market lease values,
deferred revenue and tenant improvements, resulting in rental income reflected on a modified accrual cash basis. In addition to these adjustments, beginning with the three months ended June 30, 2015, we modified our calculation in our
definition of AFFO to provide greater consistency and comparability due to the period-to-period volatility in which cash rents are received. To coincide with our tenants harvest seasons, our leases typically provide for cash rents to be paid
at various points throughout the lease year, usually annually or semi-annually. As a result, cash rents received during a particular period may not necessarily be comparable to other periods and do not represent the cash rents indicative of a given
lease year. Therefore, we have adjusted AFFO to normalize the cash rent received pertaining to a lease year over that respective lease year on a straight-line basis. We will apply the same modified definition of AFFO for all prior-year periods
presented to provide consistency and better comparability.
|
|
|
|
Amortization of deferred financing costs
. The amortization of costs incurred to obtain financing is excluded from AFFO, as it is a non-cash expense item.
|
34
The following table provides a reconciliation of our FFO, CFFO and AFFO for the three months ended March 31,
2016 and 2015 to the most directly-comparable GAAP measure, net income, and a computation of diluted FFO, CFFO and AFFO per share, computed using the weighted-average number of total shares (including shares of our common stock and OP Units held by
non-controlling limited partners) outstanding during the respective periods.
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Net income
|
|
$
|
239,992
|
|
|
$
|
24,574
|
|
Plus: Real estate and intangible depreciation and amortization
|
|
|
976,710
|
|
|
|
791,632
|
|
|
|
|
|
|
|
|
|
|
FFO available to common stockholders and OP Unit holders
|
|
|
1,216,702
|
|
|
|
816,206
|
|
|
|
|
|
|
|
|
|
|
Plus: Acquisition-related expenses
|
|
|
95,224
|
|
|
|
170,680
|
|
Plus: Acquisition-related accounting fees
|
|
|
14,500
|
|
|
|
35,000
|
|
(Minus) plus: Other one-time (receipts) charges, net
(1)
|
|
|
|
|
|
|
(310,939
|
)
|
|
|
|
|
|
|
|
|
|
CFFO available to common stockholders and OP Unit holders
|
|
|
1,326,426
|
|
|
|
710,947
|
|
|
|
|
|
|
|
|
|
|
Net adjustment for cash rents
|
|
|
(102,757
|
)
|
|
|
(96,596
|
)
|
Plus: Amortization of deferred financing costs
|
|
|
34,354
|
|
|
|
21,026
|
|
|
|
|
|
|
|
|
|
|
AFFO available to common stockholders and OP Unit holders
|
|
$
|
1,258,023
|
|
|
$
|
635,377
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding basic and diluted
|
|
|
9,992,941
|
|
|
|
7,753,717
|
|
Weighted-average OP Units
outstanding
(2)
|
|
|
237,698
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Weighted-average total shares outstanding
|
|
|
10,230,639
|
|
|
|
7,753,717
|
|
|
|
|
|
|
|
|
|
|
Diluted FFO per weighted-average total share
|
|
$
|
0.12
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
Diluted CFFO per weighted-average total share
|
|
$
|
0.13
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
Diluted AFFO per weighted-average total share
|
|
$
|
0.12
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
(1)
|
2015 adjustments consist of the removal of (i) a credit we received from our Advisor related to a new property acquisition and (ii) repairs incurred as a result of the fire that were expensed during the
year.
|
(2)
|
Includes only OP Units held by third parties. As of March 31, 2016, there were 745,879 OP Units held by non-controlling limited partners, representing 6.9% of all OP Units issued and outstanding. There were
no OP Units held by anyone other than the Company during 2015.
|
FFO, CFFO and AFFO do not represent cash flows from operating activities in
accordance with GAAP, which, unlike FFO, CFFO and AFFO, generally reflects all cash effects of transactions and other events in the determination of net income, and should not be considered an alternative to net income as an indication of our
performance or to cash flows from operations as a measure of liquidity or ability to make distributions. Comparisons of FFO, CFFO and AFFO, using the NAREIT definition for FFO and the definitions above for CFFO and AFFO, to similarly-titled measures
for other REITs may not necessarily be meaningful due to possible differences in the definitions used by such REITs.
We believe that net income is the
most directly-comparable GAAP measure to each FFO, CFFO and AFFO. Diluted funds from operations (Diluted FFO), diluted core funds from operations (Diluted CFFO) and diluted adjusted funds from operations (Diluted
AFFO) per share are FFO, CFFO and AFFO, respectively, divided by the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling limited partners) outstanding on a fully-diluted basis
during a period. We believe that net income is the most directly-comparable GAAP measure to each FFO, CFFO and AFFO, and diluted earnings per share is the most directly-comparable GAAP measure to each Diluted FFO, CFFO and AFFO per share.
We believe that FFO, CFFO and AFFO and Diluted FFO, CFFO and AFFO per share are useful to investors because they provide investors with a further context for
evaluating our FFO, CFFO and AFFO results in the same manner that investors use net income and EPS in evaluating net income. In addition, because many REITs provide FFO, CFFO and AFFO and Diluted FFO, CFFO and AFFO per share information to the
investment community, we believe these are useful supplemental measures when comparing us to other REITs.
35
Net Asset Value
The following table provides certain summary information about our 46 farm properties held as of March 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
No. of
|
|
Total
|
|
Farm
|
|
Net Cost
|
|
|
Prior Fair
|
|
|
Current Fair
|
|
Property Name
|
|
Location
|
|
Acquired
|
|
Farms
|
|
Acres
|
|
Acres
|
|
Basis
(1)
|
|
|
Value
(2)
|
|
|
Value
|
|
San Andreas
|
|
Watsonville, CA
|
|
6/16/1997
|
|
1
|
|
307
|
|
238
|
|
$
|
4,776,750
|
|
|
$
|
13,600,000
|
|
|
$
|
13,600,000
|
(5)
|
West Gonzales
|
|
Oxnard, CA
|
|
9/15/1998
|
|
1
|
|
653
|
|
502
|
|
|
12,142,787
|
|
|
|
53,000,000
|
|
|
|
53,000,000
|
(5)
|
West Beach
|
|
Watsonville, CA
|
|
1/3/2011
|
|
3
|
|
196
|
|
195
|
|
|
9,292,113
|
|
|
|
11,860,000
|
|
|
|
11,860,000
|
(5)
|
Dalton Lane
|
|
Watsonville, CA
|
|
7/7/2011
|
|
1
|
|
72
|
|
70
|
|
|
2,681,288
|
|
|
|
3,172,000
|
|
|
|
3,172,000
|
(
4)
|
Keysville Road
|
|
Plant City, FL
|
|
10/26/2011
|
|
2
|
|
61
|
|
56
|
|
|
1,240,187
|
|
|
|
1,548,000
|
|
|
|
1,582,000
|
(4)
|
Colding Loop
|
|
Wimauma, FL
|
|
8/9/2012
|
|
1
|
|
219
|
|
181
|
|
|
3,929,122
|
|
|
|
4,400,000
|
|
|
|
4,457,000
|
(4)
|
Trapnell Road
|
|
Plant City, FL
|
|
9/12/2012
|
|
3
|
|
124
|
|
110
|
|
|
3,903,277
|
|
|
|
4,856,000
|
|
|
|
4,856,000
|
(
4)
|
38th Avenue
|
|
Covert, MI
|
|
4/5/2013
|
|
1
|
|
119
|
|
89
|
|
|
1,265,366
|
|
|
|
1,476,000
|
|
|
|
1,476,000
|
(4)
|
Sequoia Street
|
|
Brooks, OR
|
|
5/31/2013
|
|
1
|
|
218
|
|
206
|
|
|
3,100,817
|
|
|
|
3,352,000
|
|
|
|
3,352,000
|
(4)
|
Natividad Road
|
|
Salinas, CA
|
|
10/21/2013
|
|
1
|
|
166
|
|
166
|
|
|
8,846,432
|
|
|
|
8,500,000
|
|
|
|
8,500,000
|
(5)
|
20th Avenue
|
|
South Haven, MI
|
|
11/5/2013
|
|
3
|
|
151
|
|
94
|
|
|
1,871,211
|
|
|
|
2,195,000
|
|
|
|
2,195,000
|
(4)
|
Broadway Road
|
|
Moorpark, CA
|
|
12/16/2013
|
|
1
|
|
60
|
|
46
|
|
|
2,878,356
|
|
|
|
3,524,000
|
|
|
|
3,524,000
|
(4)
|
Oregon Trail
|
|
Echo, OR
|
|
12/27/2013
|
|
1
|
|
1,895
|
|
1,640
|
|
|
13,898,699
|
|
|
|
14,740,000
|
|
|
|
14,740,000
|
(4)
|
East Shelton
|
|
Willcox, AZ
|
|
12/27/2013
|
|
1
|
|
1,761
|
|
1,320
|
|
|
7,827,371
|
|
|
|
8,330,000
|
|
|
|
8,330,000
|
(
5)
|
Collins Road
|
|
Clatskanie, OR
|
|
5/30/2014
|
|
2
|
|
200
|
|
157
|
|
|
2,396,272
|
|
|
|
2,729,000
|
|
|
|
2,901,000
|
(4)
|
Spring Valley
|
|
Watsonville, CA
|
|
6/13/2014
|
|
1
|
|
145
|
|
110
|
|
|
5,761,971
|
|
|
|
6,925,000
|
|
|
|
6,925,000
|
(5)
|
McIntosh Road
|
|
Dover, FL
|
|
6/20/2014
|
|
2
|
|
94
|
|
78
|
|
|
2,464,544
|
|
|
|
2,722,000
|
|
|
|
2,722,000
|
(4)
|
Naumann Road
|
|
Oxnard, CA
|
|
7/23/2014
|
|
1
|
|
68
|
|
66
|
|
|
6,799,261
|
|
|
|
7,048,000
|
|
|
|
7,048,000
|
(4)
|
Sycamore Road
|
|
Arvin, CA
|
|
7/25/2014
|
|
1
|
|
326
|
|
322
|
|
|
6,868,186
|
|
|
|
7,733,000
|
|
|
|
7,733,000
|
(5)
|
Wauchula Road
|
|
Duette, FL
|
|
9/29/2014
|
|
1
|
|
808
|
|
590
|
|
|
13,713,300
|
|
|
|
14,562,000
|
|
|
|
16,800,000
|
(5)
|
Santa Clara Avenue
|
|
Oxnard, CA
|
|
10/29/2014
|
|
2
|
|
333
|
|
331
|
|
|
24,206,436
|
|
|
|
26,694,000
|
|
|
|
26,694,000
|
(4)
|
Dufau Road
|
|
Oxnard, CA
|
|
11/4/2014
|
|
1
|
|
65
|
|
64
|
|
|
6,046,279
|
|
|
|
6,383,000
|
|
|
|
6,383,000
|
(
4)
|
Espinosa Road
|
|
Salinas, CA
|
|
1/5/2015
|
|
1
|
|
331
|
|
329
|
|
|
16,450,268
|
|
|
|
16,905,500
|
|
|
|
18,212,000
|
(4)
|
Parrish Road
|
|
Duette, FL
|
|
3/10/2015
|
|
1
|
|
419
|
|
412
|
|
|
4,235,980
|
|
|
|
3,913,280
|
|
|
|
7,000,000
|
(5)
|
Immokalee Exchange
|
|
Immokalee, FL
|
|
6/25/2015
|
|
2
|
|
2,678
|
|
1,644
|
|
|
15,585,280
|
|
|
|
15,757,700
|
|
|
|
15,757,700
|
(3)
|
Holt County
|
|
Stuart, NE
|
|
8/20/2015
|
|
1
|
|
1,276
|
|
1,052
|
|
|
5,460,180
|
|
|
|
5,504,000
|
|
|
|
5,504,000
|
(3)
|
Rock County
|
|
Bassett, NE
|
|
8/20/2015
|
|
1
|
|
1,283
|
|
1,049
|
|
|
5,450,906
|
|
|
|
5,504,000
|
|
|
|
5,504,000
|
(3)
|
Bear Mountain
|
|
Arvin, CA
|
|
9/3/2015
|
|
3
|
|
854
|
|
841
|
|
|
22,656,128
|
|
|
|
18,922,500
|
|
|
|
18,922,500
|
(3)(7)
|
Corbitt Road
|
|
Immokalee, FL
|
|
11/2/2015
|
|
1
|
|
691
|
|
390
|
|
|
3,800,181
|
|
|
|
3,760,000
|
|
|
|
3,760,000
|
(3)
|
Reagan Road
|
|
Willcox, AZ
|
|
12/22/2015
|
|
1
|
|
1,239
|
|
875
|
|
|
5,708,898
|
|
|
|
5,700,000
|
|
|
|
5,700,000
|
(3)
|
Gunbarrel Road
|
|
Alamosa, CO
|
|
3/3/2016
|
|
3
|
|
6,191
|
|
4,730
|
|
|
25,637,561
|
|
|
|
|
|
|
|
25,884,991
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
23,003
|
|
17,953
|
|
$
|
250,895,407
|
|
|
$
|
285,315,980
|
|
|
$
|
318,095,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets acquired and liabilities assumed), plus subsequent improvements and other capitalized costs
associated with the properties, and adjusted for accumulated depreciation and amortization. Includes Investments in real estate, net and Lease intangibles, net; plus net above-market lease values included in Other assets; and less net below-market
lease values, deferred revenue and unamortized tenant improvements included in Other liabilities, each as shown on the accompanying
Condensed Consolidated Balance Sheet
.
|
(2)
|
As reported in our Annual Report on Form 10-K for the year ended December 31, 2015.
|
(3)
|
Valued at the purchase price paid.
|
(4)
|
Represents values as determined by our internal valuation process, as described below.
|
(5)
|
Represents values as determined by third-party appraisals performed between April 2015 and April 2016.
|
(6)
|
Valued at the agreed-upon purchase price, as reported in the related Agreements of Purchase and Sale and Contribution Agreements for the property.
|
(7)
|
Value excludes approximately $3.7 million of capitalized costs incurred related to the development of an almond orchard on the property. The property will be re-appraised upon completion of the project, which is
expected to be by June 30, 2016.
|
36
Real estate companies are required to record real estate using the historical cost basis of the real estate,
adjusted for accumulated depreciation and amortization, and, as a result, the carrying value of the real estate does not typically change as the fair value of the assets change. Thus, a difficulty in owning shares of an asset-based company is
determining the fair value of the assets so that stockholders can see the value of the assets increase or decrease over time. For this reason, we believe determining the fair value of our real estate assets is useful to our investors.
Determination of Fair Value
Our Board of
Directors reviews and approves the valuations of our properties pursuant to a valuation policy approved by our Board of Directors (the Valuation Policy). Such review and approval occurs in three phases: (i) prior to its quarterly
meetings, the Board of Directors receives written valuation recommendations and supporting materials that are provided by professionals of the Adviser and Administrator, with oversight and direction from the chief valuation officer, who is also
employed by the Administrator (collectively, the Valuation Team); (ii) the valuation committee of the Board of Directors (the Valuation Committee), which is comprised entirely of independent directors, meets to review
the valuation recommendations and supporting materials; and (iii) after the Valuation Committee concludes its meeting, it and the chief valuation officer present the Valuation Committees findings to the entire Board of Directors so that
the full Board of Directors may review and approve the fair values of our properties in accordance with the Valuation Policy. Further, on a quarterly basis, the Board of Directors reviews the Valuation Policy to determine if changes thereto are
advisable and also reviews whether the Valuation Team has applied the Valuation Policy consistently.
For properties acquired within 12 months prior to
the date of valuation, the purchase price of the property generally is used as the current fair value. For real estate we acquired more than one year prior to the date of valuation, we have determined the fair value either by relying on estimates
provided by independent, third-party appraisers or through an internal valuation process. In addition, if significant capital improvements take place on a property, we will generally have those properties reappraised upon completion of the project
by an independent, third-party appraiser. In any case, we intend to have each property valued by an independent, third-party appraiser at least once every three years, with interim values generally being determined by our internal valuation process.
Various methodologies were used, both by the appraisers and in our internal valuations, to determine the fair value of our real estate on an As
Is basis, including the sales comparison, income capitalization (or a discounted cash flow analysis) and cost approaches of valuation. In performing their analyses, the appraisers (i) performed site visits to the properties,
(ii) discussed each property with our Adviser and reviewed property-level information, including, but not limited to, property operating data, prior appraisals (as available), existing lease agreements, farm acreage, location, access to water
and water rights, potential for future development and other property-level information, and (iii) reviewed information from a variety of sources about regional market conditions applicable to each of our properties, including, but not limited
to, recent sale prices of comparable farmland, market rents for similar farmland, estimated marketing and exposure time, market capitalization rates and the current economic environment, among others. In performing our internal valuations, we will
consider the most recent appraisal available and use similar methodologies in determining an updated fair value. We will also obtain updated market data related to the property, such as updated sales and market rent comparisons and market
capitalization rates, and perform an updated assessment of the tenants credit risk profiles, among others. Sources of this data may come from market inputs from recent acquisitions of our own portfolio of real estate, recent appraisals of
properties we own that are similar in nature and in the same region (as applicable) as the property being valued, market conditions and trends we observe in our due diligence process and conversations with appraisers, brokers and farmers.
37
A breakdown of the methodologies used to value our properties and the aggregate value as of March 31, 2016,
determined by each method is shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
Valuation Method
|
|
No. of
Farms
|
|
Total Portfolio
Fair Value
|
|
|
% of Total
Fair Value
|
|
Purchase Price
|
|
12
|
|
$
|
81,033,191
|
|
|
|
25.5
|
%
|
Internal Valuation
|
|
23
|
|
|
103,314,000
|
(1)
|
|
|
32.5
|
%
|
Third-party Appraisal
|
|
11
|
|
|
133,748,000
|
|
|
|
42.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
46
|
|
$
|
318,095,191
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
94.7% of this valuation, or approximately $97.8 million, is supported by values as determined by third-party appraisals performed between January 2013 and April 2015.
The difference of $5.5 million represents the net appreciation of those properties since the time of such appraisals, as determined according to our Valuation Policy .
|
Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as of March 31, 2016, include land values per
farmable acre, market rental rates per farmable acre and capitalization rates, among others. These assumptions were applied on a farm-by-farm basis and were selected based on several factors, including comparable land sales, surveys of both existing
and current market rates, discussions with other brokers and farmers, soil quality, size, location and other factors deemed appropriate. A summary of these significant assumptions is provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appraisal Assumptions
|
|
|
Internal Valuation Assumptions
|
|
|
|
Range
|
|
|
Weighted
|
|
|
Range
|
|
|
Weighted
|
|
|
|
(Low - High)
|
|
|
Average
|
|
|
(Low - High)
|
|
|
Average
|
|
Land Value (per farmable acre)
|
|
|
$4,630 - $105,000
|
|
|
$
|
64,994
|
|
|
|
$8,854 - $100,705
|
|
|
$
|
53,678
|
|
Market Rent (per farmable acre)
|
|
|
$260 - $3,700
|
|
|
$
|
2,555
|
|
|
|
$452 - $5,019
|
|
|
$
|
2,545
|
|
Market Capitalization Rate
|
|
|
3.12% - 5.00
|
%
|
|
|
3.91
|
%
|
|
|
3.37% - 6.50
|
%
|
|
|
4.39
|
%
|
The table above applies only to the farmland portion of our portfolio and exclude assumptions made relating to farm-related
property, such as cooling facilities and box barns, and other structures on our properties, including residential housing and horticulture, as their aggregate value was deemed to be immaterial in relation to that of the farmland.
Our Valuation Team reviews the appraisals, including the significant assumptions and inputs used in determining the appraised values, and considers any
developments that may have occurred since the time the appraisals were performed. Developments considered that may have an impact on the fair value of our real estate include, but are not limited to, changes in tenant credit profiles; changes in
lease terms, such as expirations and notices of non-renewals or to vacate; and potential asset sales, particularly those at prices different from the appraised values of our properties.
Management believes that the purchase prices of the farms acquired during the previous 12 months, the most recent appraisals available for the farms acquired
prior to the previous 12 months that were not valued internally, which appraisals were performed between the periods of October 2015 and April 2016, and the farms that were valued internally during the previous 12 months, fairly represent the
current market values of the properties as of March 31, 2016, and, accordingly, did not make any adjustment to these values.
38
A quarterly roll-forward of the change in our portfolio value for the three months ended March 31, 2016,
from the prior value basis as of December 31, 2015, is provided in the table below:
|
|
|
|
|
|
|
|
|
Total portfolio fair value as of December 31, 2015
|
|
|
|
|
|
$
|
285,315,980
|
|
Plus Acquisitions:
|
|
|
|
|
|
|
|
|
Gunbarrel Road
|
|
$
|
25,884,991
|
|
|
|
|
|
Total acquisitions for the three months ended March 31, 2016
|
|
|
|
|
|
|
25,884,991
|
|
Plus Value Appreciation:
|
|
|
|
|
|
|
|
|
Keysville Road
|
|
|
34,000
|
|
|
|
|
|
Colding Loop Road
|
|
|
57,000
|
|
|
|
|
|
Collings Road
|
|
|
172,000
|
|
|
|
|
|
Wauchula Road
|
|
|
2,238,000
|
|
|
|
|
|
Espinosa Road
|
|
|
1,306,500
|
|
|
|
|
|
Parrish Road
|
|
|
3,086,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total appreciation for the three months ended March 31, 2016
|
|
|
|
|
|
|
6,894,220
|
|
|
|
|
|
|
|
|
|
|
Total portfolio fair value as of March 31, 2016
|
|
|
|
|
|
$
|
318,095,191
|
|
|
|
|
|
|
|
|
|
|
In addition, using a discounted cash flow analysis, management determined that the fair value of all encumbrances on our
properties as of March 31, 2016, was approximately $162.5 million, as compared to a carrying value (excluding unamortized related debt issuance costs) of $160.8 million.
Calculation of Estimated Net Asset Value
To
provide our stockholders with an estimate of the fair value of our real estate assets, we intend to estimate the fair value of our farm properties, expressed in terms of net asset value (NAV) per share, and provide that to our
stockholders on a quarterly basis. NAV is a non-GAAP, supplemental measure of financial position of an equity REIT. NAV is calculated as total stockholders equity, adjusted for the increase or decrease in fair value of our real estate assets
and encumbrances relative to their respective costs bases (Estimated Net Worth). Estimated Net Worth is then divided by our total common shares outstanding to calculate the NAV per share.
The fair values presented above and their usage in the calculation of net asset value per share presented below have been prepared by, and is the
responsibility of, management. PricewaterhouseCoopers LLP has neither examined, compiled nor performed any procedures with respect to the fair values or the calculation of net asset value per share, which utilizes information that is not disclosed
within the financial statements, and, accordingly, does not express an opinion or any other form of assurance with respect thereto.
39
As of March 31, 2016, we estimate our NAV per share to be $13.87, as detailed below
:
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
256,970,629
|
|
|
|
|
|
Less: net cost basis of tangible real estate and intangible lease assets
(1)
|
|
|
(252,219,687
|
)
|
|
|
|
|
Plus: estimated fair value of property
portfolio
(2)
|
|
|
318,095,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated fair value of total assets
|
|
|
|
|
|
$
|
322,846,133
|
|
Total liabilities
|
|
|
173,530,422
|
|
|
|
|
|
Less: net cost basis of intangible lease liabilities
(3)
|
|
|
(1,324,280
|
)
|
|
|
|
|
Less: book value of aggregate
borrowings
(4)
|
|
|
(160,776,919
|
)
|
|
|
|
|
Plus: fair value of aggregate
borrowings
(5)
|
|
|
162,461,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated fair value of total liabilities
|
|
|
|
|
|
|
173,891,039
|
|
|
|
|
|
|
|
|
|
|
Estimated Net Worth
|
|
|
|
|
|
$
|
148,955,094
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
(6)
|
|
|
|
|
|
|
10,738,820
|
|
|
|
|
|
|
|
|
|
|
Estimated NAV per share
|
|
|
|
|
|
$
|
13.87
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Adjusted for $10,361 of net above-market lease values, included in Other assets on the accompanying
Condensed
Consolidated Balance Sheet.
|
(2)
|
Per current value basis presented in the table above.
|
(3)
|
Adjusted for $172,044 of net below-market lease values and deferred revenue and $1,152,236 of unamortized tenant improvements, both included in Other liabilities on the accompanying
Condensed Consolidated
Balance Sheet
.
|
(4)
|
Excludes $1,048,864 of deferred financing costs related to mortgage notes and bonds payable included in Mortgage notes and bonds payable, net on the accompanying
Condensed Consolidated Balance Sheet
.
|
(5)
|
Valued using a discounted cash flow model.
|
(6)
|
Includes 745,879 OP Units held by non-controlling limited partners, representing 6.9% of all OP Units issued and outstanding.
|
A quarterly roll-forward in the estimated NAV per share for the three months ended March 31, 2016, is provided below:
|
|
|
|
|
|
|
|
|
Estimated NAV per share as of December 31, 2015
|
|
|
|
|
|
$
|
14.20
|
|
Plus net income
|
|
|
|
|
|
|
0.02
|
|
Plus change in valuations:
|
|
|
|
|
|
|
|
|
Net change in unrealized appreciation of farmland portfolio
(1)
|
|
$
|
0.38
|
|
|
|
|
|
Net change in unrealized fair value of borrowings
|
|
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in valuations
|
|
|
|
|
|
|
0.16
|
|
Less distributions
|
|
|
|
|
|
|
(0.12
|
)
|
Less dilutive effect of OP Unit issuances
|
|
|
|
|
|
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
Estimated NAV per share as of March 31, 2016
|
|
|
|
|
|
$
|
13.87
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The net change in unrealized appreciation of farmland portfolio consists of three components: (i) an increase of $0.64 due to the appreciation in value of eight
farms that were valued during the three months ended March 31, 2016, (ii) an increase of $0.09 due to the aggregate depreciation and amortization expense recorded during the three months ended March 31, 2016, and (iii) a decrease
of $0.35 due to capital improvements made on certain properties that have not yet been included as a corresponding increase to the respective properties estimated fair values.
|
Comparison of estimated NAV, using the above definition, to similarly-titled measures for other REITs, may not necessarily be meaningful, due to possible
differences in the calculation or application of the definition of NAV used by such REITs. In
40
addition, the trading price of our common shares may differ significantly from our most recent estimated NAV per share calculation. For example, while we estimated the NAV per share as of
March 31, 2016, to be $13.87 per the calculation above, the closing price of our common stock on March 31, 2016, was $10.07, and it has subsequently traded, through April 29, 2016, between $9.61 and $10.61 per share.
While management believes the values presented reflect current market conditions, the ultimate amount realized on any asset will be based on the timing of
such dispositions and the then-current market conditions. There can be no assurance that the ultimate realized value upon disposition of an asset will approximate the estimated fair value above.
We intend to report any adjustments to the estimated NAV, as well as to the values of our properties, in this section on a quarterly basis, but in no case
less than annually. However, the determination of estimated NAV is subjective and involves a number of assumptions, judgments and estimates, and minor inaccuracies in our assumptions may have a material impact on our overall portfolio valuation. In
addition, many of the assumptions used are sensitive to market conditions and can change frequently. Changes in the market environment and other events that may occur during our ownership of these properties may cause the values reported above to
vary from the actual fair value that may be obtained in the open market.
41