Gladstone Land Corporation
Feb 20, 2018

Gladstone Land Announces Fourth Quarter and Year End 2017 Results

MCLEAN, Va., Feb. 20, 2018 (GLOBE NEWSWIRE) -- Gladstone Land Corporation (Nasdaq:LAND) ("Gladstone Land" or the "Company") today reported financial results for the fourth quarter and year ended December 31, 2017.

A reconciliation of funds from operations ("FFO"), core FFO ("CFFO"), and adjusted FFO ("AFFO"), all non-GAAP (generally accepted accounting principles in the United States) financial measures, to net (loss) income, which the Company believes is the most directly-comparable GAAP measure for each, and a computation of fully-diluted net (loss) income, FFO, CFFO, and AFFO per weighted-average share is set forth in the Quarterly Summary Information tables below, and a description of each of FFO, CFFO, and AFFO is located at the end of this press release.  In addition, a description of net asset value ("NAV"), a non-GAAP financial measure, and a reconciliation to total equity, which the Company believes is its most directly-comparable GAAP measure, is also located at the end of this press release.  All per-share references are to fully-diluted, weighted-average shares of common stock of the Company unless otherwise noted.  For further detail, please refer to the Company's Annual Report on Form 10-K (the "Form 10-K"), filed today with the U.S. Securities and Exchange Commission (the "SEC"), which is available on the SEC's website at www.SEC.gov and the Company's website at www.GladstoneLand.com.

Please note that the limited information that follows in this press release is a summary and is not adequate for making an informed investment judgment.

 
Quarterly Summary Information
(Dollars in thousands, except per-share amounts)
      
 For and As of the Quarters Ended Change Change
 12/31/2017 9/30/2017 ($ / #) (%)
Operating Data:       
Total operating revenues$6,812  $6,564  $248  3.8%
Total operating expenses, net of credits(3,864) (3,645) (219) 6.0%
Other expenses, net(3,164) (3,166) 2  (0.1)%
Net (loss) income available to common stockholders and OP Unitholders$(216) $(247) $31  (12.6)%
Plus:  Real estate and intangible depreciation and amortization2,114  2,051  63  3.1%
(Less) plus:  (Gains) losses on disposals of real estate assets(56) 78  (134) (171.8)%
FFO available to common stockholders and OP Unitholders$1,842  $1,882  $(40) (2.1)%
Plus:  Acquisition-related expenses60  22  38  172.7%
Plus:  Acquisition-related accounting fees14  47  (33) (70.2)%
CFFO available to common stockholders and OP Unitholders$1,916  $1,951  $(35) (1.8)%
Net rent adjustment(1)(45) (174) 129  (74.1)%
Plus:  Amortization of deferred financing costs159  130  29  22.3%
AFFO available to common stockholders and OP Unitholders$2,030  $1,907  $123  6.4%
        
Share and Per-Share Data:       
Weighted-average common shares outstanding — basic and diluted13,666,560  12,271,925  1,394,635  11.4%
Weighted-average OP Units outstanding(2)1,095,159  1,444,435  (349,276) (24.2)%
Weighted-average total shares outstanding14,761,719  13,716,360  1,045,359  7.6%
        
Diluted net (loss) income per weighted-average total share$(0.015) $(0.018) $0.003  18.7%
Diluted FFO per weighted-average total share$0.125  $0.137  $(0.012) (9.1)%
Diluted CFFO per weighted-average total share$0.130  $0.142  $(0.012) (8.7)%
Diluted AFFO per weighted-average total share$0.138  $0.139  $(0.002) (1.1)%
Cash distributions declared per total share$0.132  $0.132  $0.000  0.2%
        
Balance Sheet Data:       
Net investments in real estate, at cost(3)$451,864  $447,332  $4,532  1.0%
Total assets$462,278  $456,560  $5,718  1.3%
Total indebtedness(4)$331,738  $325,986  $5,752  1.8%
Total equity$117,951  $118,986  $(1,035) (0.9)%
Total common shares + OP Units outstanding(2)14,799,679  14,712,408  87,271  0.6%
        
Other Data:       
Cash flows from operations$(1,155) $2,993  $(4,148) (138.6)%
Farms owned73  72  1  1.4%
Acres owned63,014  61,794  1,220  2.0%
Occupancy rate(5)100.0% 100.0%   %
Farmland portfolio value$533,297  $531,664  $1,633  0.3%
Net asset value per share$13.96  $14.15  $(0.19) (1.3)%

(1)        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.  The effect to AFFO is that cash rents received pertaining to a lease year are normalized over that respective lease year on a straight-line basis, resulting in cash rent being recognized ratably over the period in which the cash rent is earned.
(2)        There were 1,008,105 and 1,227,383 OP Units (as defined below) held by non-controlling limited partners as of December 31, 2017, and September 30, 2017, respectively.
(3)        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.
(4)        Includes the principal balances outstanding of all indebtedness, including our lines of credit, mortgage notes and bonds payable, and our Series A Term Preferred Stock.
(5)        Includes one farm currently leased (on a temporary basis) to our taxable REIT subsidiary.


 
Annual Summary Information
(Dollars in thousands, except per-share amounts)
      
 For and As of the Years Ended Change Change
 12/31/2017 12/31/2016 ($ / #) (%)
Operating Data:       
Total operating revenues$25,122  $17,317  $7,805  45.1%
Total operating expenses, net of credits(13,746) (10,261) (3,485) 34.0%
Other expenses, net(11,410) (6,583) (4,827) 73.3%
Net (loss) income available to common stockholders and OP Unitholders$(34) $473  $(507) (107.2)%
Plus:  Real estate and intangible depreciation and amortization7,237  5,187  2,050  39.5%
Plus:  Loss on dispositions of real estate assets, net21    21  NM
FFO available to common stockholders and OP Unitholders$7,224  $5,660  $1,564  27.6%
Plus:  Acquisition-related expenses127  246  (119) (48.4)%
Plus:  Acquisition-related accounting fees97  115  (18) (15.7)%
CFFO available to common stockholders and OP Unitholders$7,448  $6,021  $1,427  23.7%
Net rent adjustment(1)(509) (439) (70) 15.9%
Plus:  Amortization of deferred financing costs524  241  283  117.4%
AFFO available to common stockholders and OP Unitholders$7,463  $5,823  $1,640  28.2%
        
Share and Per-Share Data:       
Weighted-average common shares outstanding — basic and diluted12,055,791  10,007,350  2,048,441  20.5%
Weighted-average OP Units outstanding(2)1,358,790  766,351  592,439  77.3%
Weighted-average total shares outstanding13,414,581  10,773,701  2,640,880  24.5%
        
Diluted net (loss) income per weighted-average total share$(0.003) $0.044  $(0.046) (105.8)%
Diluted FFO per weighted-average total share$0.539  $0.525  $0.013  2.5%
Diluted CFFO per weighted-average total share$0.555  $0.559  $(0.004) (0.7)%
Diluted AFFO per weighted-average total share$0.556  $0.540  $0.016  2.9%
Cash distributions declared per total share$0.524  $0.495  $0.029  5.8%
        
Balance Sheet Data:       
Net investments in real estate, at cost(3)$451,864  $325,747  $126,117  38.7%
Total assets$462,278  $333,985  $128,293  38.4%
Total indebtedness(4)$331,738  $237,509  $94,229  39.7%
Total equity$117,951  $87,777  $30,174  34.4%
Total common shares + OP Units outstanding(2)14,799,679  11,474,133  3,325,546  29.0%
        
Other Data:       
Cash flows from operations$6,515  $8,403  $(1,888) (22.5)%
Farms owned73  58  15  25.9%
Acres owned63,014  50,592  12,422  24.6%
Occupancy rate(5)100.0% 100.0%   %
Farmland portfolio value$533,297  $401,122  $132,175  33.0%
Net asset value per share$13.96  $14.21  $(0.25) (1.8)%

(1)        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.  The effect to AFFO is that cash rents received pertaining to a lease year are normalized over that respective lease year on a straight-line basis, resulting in cash rent being recognized ratably over the period in which the cash rent is earned.
(2)        There were 1,008,105 and 1,449,258 OP Units (as defined below) held by non-controlling limited partners as of December 31, 2017, and December 31, 2016, respectively.
(3)        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.
(4)        Includes the principal balances outstanding of all indebtedness, including our lines of credit, mortgage notes and bonds payable, and our Series A Term Preferred Stock.
(5)        Includes one farm currently leased (on a temporary basis) to our taxable REIT subsidiary.

Highlights for fiscal year 2017:

Q4 2017 Results:  Net loss for the quarter was approximately $216,000, or $0.01 per share, compared to approximately $247,000, or $0.02 per share, in the prior quarter.  AFFO for the quarter was approximately $2.0 million, or $0.14 per share, and increased by 6.4% from the prior quarter, primarily as a result of a crop share payment received from one of our pistachio farms in California and additional rental revenues earned on our recent acquisitions, partially offset by the lost rental income from the one farm currently leased (on a temporary basis) to our taxable REIT subsidiary ("TRS") (which rental income was eliminated in consolidation).  AFFO per share decreased by 1.1% from the prior quarter, primarily as a result of the additional shares issued in connection with an overnight common stock offering completed in September 2017 and through our ATM Program during the quarter.  Our core operating expenses (which we define as our total operating expenses, less depreciation and amortization expense, acquisition-related expenses, and certain other one-time expenses) increased by approximately $64,000 from the prior quarter, primarily due to approximately $149,000 of aggregate deferred rent balances written off due to two early lease terminations and increased repairs and maintenance expenses incurred on our sole gross-leased farm, partially offset by a decrease in related-party fees.  The aggregate amount of fees recorded as due to our adviser and administrator decreased by approximately $142,000 from the prior quarter, primarily due to no performance-based incentive fee being earned by our adviser during the current quarter.  Cash flows from operations for the quarter and year ended December 31, 2017, were impacted by the following:  (i) the receipt of two years of prepaid rent upon the closing of three farms we acquired during the three months ended March 31, 2016 (approximately $1.6 million of which prepaid rent related to cash rent earned during the year ended December 31, 2017), and (ii) approximately $1.3 million of costs paid during the three months ended December 31, 2017, in connection with the initial operations on the farm leased by our TRS.  Our NAV per share decreased by $0.19 from the prior quarter to $13.96 at December 31, 2017, primarily driven by ongoing capital improvements made on certain of our farms, which won't be reflected in the properties' fair values until the respective projects are completed.

FY 2017 Results:

Net loss for the year was approximately $34,000, or $0.00 per share, compared to net income of approximately $473,000, or $0.04 per share, in the prior year.  AFFO for the year was approximately $7.5 million, or $0.56 per share, compared to approximately $5.8 million, or $0.54 per share, in the prior year.  AFFO increased primarily due to additional rental income earned on our recent acquisitions, partially offset by additional interest expense due to increased overall borrowings (including our Series A Term Preferred Stock).

Subsequent to December 31, 2017:

Comments from David Gladstone, President and CEO of the Gladstone Land:  "2017 was a year of strong growth for us, as we added $129 million of new farms and further diversified our farmland holdings by expanding into two new states and increasing both the number of tenants who lease farms from us and the number of different crops grown on our farms.  We are looking forward to continuing this momentum into the new year, and we also have several farms with revenue-sharing rent components that are scheduled to come online during 2018.  We increased our distributions to shareholders four times during 2017 for a total increase in our distribution run rate of 3.8%, and we've already increased it once in 2018, as well.  We hope to be able to continue to meet our goal of frequently increasing our distributions in order to stay ahead of inflation."

Conference Call for Stockholders:  The Company will hold a conference call on Wednesday, February 21, 2018, at 8:30 a.m. EST to discuss its earnings results.  Please call (855) 363-1762 to enter the conference.  An operator will monitor the call and set a queue for any questions.  A conference call replay will be available beginning one hour after the call and will be accessible through February 28, 2018.  To hear the replay, please dial (855) 859-2056, and use playback conference number 54452575.  The live audio broadcast of the Company's conference call will also be available online at the Company's website, www.GladstoneLand.com.  The event will be archived and available for replay on the Company's website through April 21, 2018.

About Gladstone Land Corporation:
Gladstone Land is a publicly-traded real estate investment trust that invests in farmland and farm-related properties located in major agricultural markets in the U.S., which it leases to farmers, and pays monthly distributions to its stockholders.  The Company reports the current fair value of its farmland on a quarterly basis; as of December 31, 2017, the estimated net asset value of the Company was $13.96 per share.  Gladstone Land currently owns 74 farms, comprised of 63,175 acres in 9 different states across the U.S., valued at approximately $536 million.  Its acreage is predominantly concentrated in locations where its tenants are able to grow fresh produce annual row crops, such as berries and vegetables, which are generally planted and harvested annually, as well as permanent crops, such as almonds, blueberries, and pistachios, which are planted every 10 to 20-plus years.  The Company may also acquire property related to farming, such as cooling facilities, processing buildings, packaging facilities, and distribution centers.  Gladstone Land has paid 60 consecutive monthly cash distributions on its common stock since its initial public offering in January 2013.  The current per-share distribution is $0.04425 per month, or $0.531 per year.  Additional information can be found at www.GladstoneLand.com and www.GladstoneFarms.com.

Owners or brokers who have farmland for sale in the U.S. should contact:

Lenders who are interested in providing us with long-term financing on farmland should contact Jay Beckhorn at (703) 587-5823 or Jay.Beckhorn@GladstoneCompanies.com.

For stockholder information on Gladstone Land, call (703) 287-5893.  For Investor Relations inquiries related to any of the monthly dividend-paying Gladstone funds, please visit www.Gladstone.com.

Non-GAAP Financial Measures:

FFO:  The National Association of Real Estate Investment Trusts ("NAREIT") developed FFO as a relative non-GAAP supplemental measure of operating performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the 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.  The Company believes that FFO per share provides investors with an additional context for evaluating its financial performance and as a supplemental measure to compare it to other REITs; however, comparisons of its FFO to the FFO of other REITs may not necessarily be meaningful due to potential differences in the application of the NAREIT definition used by such other REITs.

CFFO:  CFFO is FFO, adjusted for items that are not indicative of the results provided by the Company's operating portfolio and affect the comparability of the Company's period-over-period performance.  These items include certain non-recurring items, such as acquisition-related expenses, income tax provisions and property and casualty losses or recoveries.  Although the Company's calculation of CFFO differs from NAREIT's definition of FFO and may not be comparable to that of other REITs, the Company believes it is a meaningful supplemental measure of its sustainable operating performance.  Accordingly, CFFO should be considered a supplement to net income computed in accordance with GAAP as a measure of our performance.  For a full explanation of the adjustments made to arrive at CFFO, please read the Company's Form 10-K, filed today with the SEC.

AFFO:  AFFO is CFFO, adjusted for certain non-cash items, such as the straight-lining of rents and amortizations into rental income (resulting in cash rent being recognized ratably over the period in which the cash rent is earned).  Although the Company's calculation of AFFO differs from NAREIT's definition of FFO and may not be comparable to that of other REITs, the Company believes it is a meaningful supplemental measure of its sustainable operating performance on a cash basis.  Accordingly, AFFO should be considered a supplement to net income computed in accordance with GAAP as a measure of our performance.  For a full explanation of the adjustments made to arrive at AFFO, please read the Company's Form 10-K, filed today with the SEC.

The Company's presentation of FFO, as defined by NAREIT, or CFFO or AFFO, as defined above, does not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an alternative to net income as an indication of its performance or to cash flow from operations as a measure of liquidity or ability to make distributions.

NAV:  Pursuant to a valuation policy approved by our board of directors, our valuation team, with oversight from the chief valuation officer, provides recommendations of value for our properties to our board of directors, who then review and approve the fair values of our properties.  Per our valuation policy, our valuations are derived based on either the purchase price of the property; values as determined by an independent, third-party appraiser; or through an internal valuation process, which process is, in turn, based on values as determined by independent, third-party appraisers.  In any case, we intend to have each property valued by an independent, third-party appraiser at least once every three years, or more frequently in some instances.  Various methodologies are used, both by the appraisers and in our internal valuations, to determine the fair value of our real estate on a fee simple, "As Is" basis, including the sales comparison, income capitalization (or a discounted cash flow analysis), and cost approaches of valuation.  NAV is a non-GAAP, supplemental measure of financial position of an equity REIT and is calculated as total equity, adjusted for the increase or decrease in fair value of our real estate assets and encumbrances relative to their respective costs bases.  Further, we calculate NAV per share by dividing NAV by our total shares outstanding (inclusive of both our common stock and OP Units held outside of the Company).  A reconciliation of NAV to total equity, to which the Company believes is the most directly-comparable GAAP measure, is provided below (dollars in thousands, except per-share amount):

Total equity per balance sheet  $117,951 
Fair value adjustment for long-term assets:   
Less:  net cost basis of tangible and intangible real estate holdings(1)$(451,864)  
Plus:  estimated fair value of real estate holdings(2)533,297   
Net fair value adjustment for real estate holdings  81,433 
Fair value adjustment for long-term liabilities:   
Plus:  book value of aggregate long-term indebtedness(3)321,738   
Less:  fair value of aggregate long-term indebtedness(3)(4)(314,511)  
Net fair value adjustment for long-term indebtedness  7,227 
Estimated NAV  $206,611 
    
Total shares outstanding(5)  14,799,679 
    
Estimated NAV per share  $13.96 

(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.
(2)       As determined by the Company's valuation policy and approved by its board of directors.
(3)       Includes the principal balances outstanding of all long-term borrowings (consisting of mortgage notes and bonds payable) and the Series A Term Preferred Stock.
(4)       Long-term mortgage notes and bonds payable were valued using a discounted cash flow model.  The Series A Term Preferred Stock was valued based on its closing stock price as of December 31, 2017.
(5)       Includes 13,791,574 shares of common stock and 1,008,105 OP Units held by non-controlling limited partners (representing 6.8% of all OP Units issued and outstanding as of December 31, 2017).

Comparison of estimated NAV and estimated NAV per share 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 addition, the trading price of our common shares may differ significantly from our most recent estimated NAV per share calculation.  The Company's independent auditors have neither audited nor reviewed our calculation of NAV or NAV per share.  For a full explanation of our valuation policy, please read the Company's Form 10-K, filed today with the SEC.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS:
Certain statements in this press release, including, but not limited to, the Company's ability to maintain or grow its portfolio and FFO, expected increases in capitalization rates, benefits from increases in farmland values, increases in operating revenues, and the increase in net asset value per share, are "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.  These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans that are believed to be reasonable as of the date of this press release.  Factors that may cause actual results to differ materially from these forward-looking statements include, but are not limited to, the Company's ability to procure financing for investments, downturns in the current economic environment, the performance of its tenants, the impact of competition on its efforts to renew existing leases or re-lease real property, and significant changes in interest rates.  Additional factors that could cause actual results to differ materially from those stated or implied by its forward-looking statements are disclosed under the caption "Risk Factors" within the Company's Form 10-K for the fiscal year ended December 31, 2017, as filed with the SEC on February 20, 2018, and certain other documents filed with the SEC from time to time.  The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Gladstone Land Corporation, +1-703-287-5893