Gladstone Land Announces First Quarter 2020 Results
Please note that the limited information that follows in this press release is a summary and is not adequate for making an informed investment decision.
First Quarter 2020 Activity:
• Portfolio Activity:
- Property Acquisition: Acquired two new farms, consisting of 1,325 total acres, for
$7.5 million. These farms were acquired at an initial, minimum net capitalization rate of 5.5%. However, the lease on these farms contains certain provisions (e.g., annual rent escalations) that are expected to drive cash rents higher in future years.
- Leasing Activity:
-- New Leases: Executed nine new lease agreements on certain of our farms in three different states (AZ, CA, & NE) that are expected to result in an aggregate increase in annual net operating income of approximately
$401,000, or 11.2%, over that of the prior leases.
-- Lease Termination: Terminated two leases encompassing four farms in
Arizona, for which we received a termination payment of approximately $3.0 million, resulting in additional lease revenue recorded during the quarter (after netting out certain balances related to the terminated lease) of approximately $2.8 million. The four farms were immediately re-leased to a new, unrelated third-party tenant.
• Financing Activity:
- New Long-term Borrowing: Secured
$8.1 millionof new, long-term borrowings at an interest rate of 2.66%, which rate is fixed for the next 4.0 years.
- Facility Amendment: Modified our credit facility with
Metropolitan Life Insurance Company(“MetLife”) to provide us with an additional $75.0 millionof borrowing capacity.
- Interest Patronage: Recorded approximately
$1.3 millionof interest patronage, or refunded interest, related to our borrowings from various Farm Creditassociations (collectively, “Farm Credit”), which resulted in a 20.4% reduction (approximately 98 basis points) to the stated interest rates on such borrowings.
• Equity Activity:
- Series B Preferred Stock: Issued and sold 1,229,531 shares of our 6.00% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) for net proceeds of approximately
$27.7 million, completing the 6,000,000-share offering of our Series B Preferred Stock.
- Common Stock: Issued and sold 409,800 shares of our common stock for net proceeds of approximately
$5.4 millionunder our “at-the-market” program.
• Increased and Paid Distributions: Increased the monthly distribution run rate on our common stock by 0.11% and paid total cash distributions of
First Quarter 2020 Results:
Net income for the quarter was approximately
AFFO for the quarter was approximately
Total lease revenues increased by approximately
Cash flows from operations for the current quarter decreased, primarily due to the timing of when certain rental payments are scheduled to be paid pursuant to their respective leases (particularly participation rents) and additional fees paid to related parties, partially offset by the receipt of an early lease termination payment. Our NAV per share increased by
- Portfolio Activity—Leasing Activity: Executed two new lease agreements on certain of our farms in
Californiathat are expected to result in an aggregate increase in annual net operating income of approximately $247,000, or 20.4%, over that of the prior leases.
- Equity Activity—Series C Preferred Stock: Commenced sales of our 6.00% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”). Issued and sold 15,600 shares of the Series C Preferred Stock for net proceeds of approximately
- Increased Distributions: Increased our distribution run rate by 0.11%, declaring monthly cash distributions of
$0.0447per share of common stock (including OP Units held by non-controlling OP Unitholders) for each of April, May, and June March 2020. This marks our 18th distribution increase over the past 21 quarters, during which time we have increased the distribution run rate by 49.0%.
Quarterly Summary Information
(Dollars in thousands, except per-share amounts)
|For and As of the Quarters Ended||Change||Change|
|($ / #)||(%)|
|Total operating revenues||$||15,280||$||13,489||$||1,791||13.3||%|
|Total operating expenses, net of credits||(8,083||)||(6,965||)||(1,118||)||16.1||%|
|Other expenses, net||(4,096||)||(5,566||)||1,470||(26.4||)%|
|Less: Dividends declared on Series B Preferred Stock||(2,125||)||(1,585||)||(540||)||34.1||%|
|Net income (loss) available to common stockholders and non-controlling OP Unitholders||976||(627||)||1,603||(255.7||)%|
|Plus: Real estate and intangible depreciation and amortization||4,257||3,838||419||10.9||%|
|Plus: Losses on dispositions of real estate assets, net||99||174||(75||)||(43.1||)%|
|Adjustments for unconsolidated entities(1)||4||1||3||300.0||%|
|FFO available to common stockholders and non-controlling OP Unitholders||5,336||3,386||1,950||57.6||%|
|Plus: Acquisition- and disposition-related expenses||10||109||(99||)||(90.8||)%|
|Less: Other receipts, net(2)||(79||)||—||(79||)||N/A|
|CFFO available to common stockholders and non-controlling OP Unitholders||5,267||3,495||1,772||50.7||%|
|Net adjustment for normalized cash rents(3)||(4||)||(117||)||113||(96.6||)%|
|Plus: Amortization of debt issuance costs||179||169||10||5.9||%|
|AFFO available to common stockholders and non-controlling OP Unitholders||$||5,442||$||3,547||$||1,895||53.4||%|
|Share and Per-Share Data:|
|Weighted-average common stock outstanding—basic and diluted||21,262,080||20,931,296||330,784||1.6||%|
|Weighted-average common non-controlling OP Units outstanding||288,303||288,303||—||—||%|
|Weighted-average total common shares outstanding||21,550,383||21,219,599||330,784||1.6||%|
|Diluted net income (loss) per weighted-average total common share||$||0.045||$||(0.030||)||$||0.075||(253.6||)%|
|Diluted FFO per weighted-average total common share||$||0.248||$||0.160||$||0.088||55.1||%|
|Diluted CFFO per weighted-average total common share||$||0.244||$||0.165||$||0.079||48.4||%|
|Diluted AFFO per weighted-average total common share||$||0.253||$||0.167||$||0.086||51.0||%|
|Cash distributions declared per total common share||$||0.134||$||0.134||$||0.000||0.1||%|
|Balance Sheet Data:|
|Net investments in real estate, at cost(4)||$||801,510||$||794,769||$||6,741||0.8||%|
|Total common shares outstanding||21,634,761||21,224,961||409,800||1.9||%|
|Cash flows from operations||$||3,496||$||7,467||$||(3,971||)||(53.2||)%|
|Farmland portfolio value||$||891,555||$||877,485||$||14,070||1.6||%|
|NAV per common share||$||11.46||$||11.41||$||0.05||0.4||%|
(1) Represents our pro-rata share of depreciation expense recorded in unconsolidated entities during the period.
(2) Consists primarily of (i) net property and casualty recoveries recorded and the cost of related repairs expensed as a result of the damage caused to certain irrigation improvements by natural disasters on certain of our properties and (ii) our pro-rata share of income recorded from investments in unconsolidated entities.
(3) This adjustment removes the effects of straight-lining rental income, as well as the amortization related to above-market lease values and lease incentives 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.
(4) 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.
(5) Consists of the principal balances outstanding of all indebtedness, including our lines of credit, notes and bonds payable, and our Series A Term Preferred Stock.
(6) Based on gross acreage.
Conference Call for Stockholders: The Company will hold a conference call on
Founded in 1997,
Owners or brokers who have farmland for sale in the
Eastern U.S.– Bill Frisbieat (703) 287-5839 or Bill.F@GladstoneLand.com;
U.S.– Bill Hughesat (618) 606-2887 or Bill.H@GladstoneLand.com; or Western U.S.– Bill Reimanat (805) 263-4778 or Bill.R@GladstoneLand.com, or Tony Marciat (831) 225-0883 or Tony.M@GladstoneLand.com.
Lenders who are interested in providing us with long-term financing on farmland should contact
For stockholder information on
Non-GAAP Financial Measures:
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- and disposition-related expenses, the net incremental impact of operations conducted through our taxable REIT subsidiary, 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-Q, filed today with the
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-Q, filed today with the
A reconciliation of FFO (as defined by NAREIT), CFFO, and AFFO (each as defined above) to net income (loss), which the Company believes is the most directly-comparable GAAP measure for each, and a computation of fully-diluted net income (loss), FFO, CFFO, and AFFO per weighted-average share is set forth in the Quarterly Summary Information table above. The Company’s presentation of FFO, CFFO, or AFFO, 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 independent, third-party appraisers; 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, 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 available to common stockholders and non-controlling OP Unitholders, 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 by non-controlling third parties). 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||$||308,055|
|Fair value adjustment for long-term assets:|
|Less: net cost basis of tangible and intangible real estate holdings(1)||$||(801,510||)|
|Plus: estimated fair value of real estate holdings(2)||891,555|
|Net fair value adjustment for real estate holdings||90,045|
|Fair value adjustment for long-term liabilities:|
|Plus: book value of aggregate long-term indebtedness(3)||509,312|
|Less: fair value of aggregate long-term indebtedness(3)(4)||(509,978||)|
|Net fair value adjustment for long-term indebtedness||(666||)|
|Less: fair value of Series B Preferred Stock(5)||(149,441||)|
|Estimated NAV available to common stockholders and non-controlling OP Unitholders||$||247,993|
|Total common shares and OP Units outstanding(6)||21,634,761|
|Estimated NAV per common share and OP Unit||$||11.46|
(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 notes and bonds payable) and the Series A Term Preferred Stock.
(4) Long-term 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
(5) Valued at the security's liquidation value.
(6) Includes 21,346,458 shares of common stock and 288,303 OP Units held by non-controlling OP Unitholders.
Comparison of our 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
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 NAV 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
Source: Gladstone Land Corporation