Farmland Partners(US:FPI)2020-08-10 20:39Farmland Ownership and Operations - The company owns approximately 156,500 acres of farmland across various states, with 70% dedicated to primary crops and 30% to specialty crops[132]. - As of June 30, 2020, the company has a portfolio breakdown of acreage: Corn Belt (43,988 acres), Delta and South (27,871 acres), High Plains (29,566 acres), Southeast (43,499 acres), and West Coast (11,586 acres)[135]. - The company engages in farming through its taxable REIT subsidiary, FPI Agribusiness, which operates on 3,676 acres and provides services to tenants[136]. Revenue and Rental Income - The principal source of revenue is rent from tenants, with a mix of fixed and variable rental agreements to mitigate credit risk[137]. - As of June 30, 2020, the company had approximately 155,981 acres leased, generating annual rents of $54,252,000, with 46.1% of annual cash rents coming from leases expiring in 2025 and beyond[155]. - The company expects flat to modestly higher rent rates for primary crop farmland in 2020 lease renewals, reflecting tenant demand despite headwinds in primary crop markets[153]. - The company anticipates continued ability to collect rents in full and on time despite the ongoing COVID-19 pandemic, with measures in place to mitigate tenant credit risk[158]. - Rental rates for farmland are influenced by the long-term profitability outlook of farmland, with a near-zero vacancy rate indicating strong demand[163]. Market Demand and Food Production - The company expects global food demand to increase significantly, requiring over one billion additional tons of grain production by 2050, a 43% increase from 2005-2007 levels[148]. - Global cropland area is projected to increase by only 173 million acres (approximately 5%) from 2005-2007 to 2050, while the world population is expected to grow by nearly 40% to 9.1 billion during the same period[149]. - The company believes that the stability of farmland values and food demand will help mitigate the effects of the pandemic on its business[145]. Financial Performance - Total operating revenues for the three months ended June 30, 2020, were $10.517 million, a decrease of $431,000 or 3.9% from $10.948 million in the same period of 2019[170]. - Net income for the three months ended June 30, 2020, was $172,000, a significant decrease of $6.353 million or 97.4% compared to $6.525 million in the same period of 2019[170]. - Operating income for the three months ended June 30, 2020, was $3.689 million, down $265,000 or 6.7% from $3.954 million in the same period of 2019[170]. - For the six months ended June 30, 2020, rental income was $19.215 million, a decrease of $154,000 or 0.8% from $19.369 million in the same period of 2019[179]. - Operating income for the six months ended June 30, 2020, was $8.979 million, an increase of $504,000 or 5.9% from $8.475 million in the same period of 2019[179]. COVID-19 Impact and Response - The company has experienced limited direct impact from COVID-19, maintaining operations while prioritizing employee health and safety[143]. - The company is prepared for potential medium-term challenges but expects its tenant base's quality and federal support measures to prevent significant creditworthiness degradation[141]. - The company anticipates that the long-term demand for food will drive higher rental rates and farmland values, despite short-term disruptions from COVID-19[141]. Costs and Expenses - The company incurs costs associated with running a public company and managing farmland, but expects these expenses to remain manageable as the portfolio grows[160]. - Total operating expenses decreased by $166,000, or 2.4%, for the three months ended June 30, 2020, totaling $6.828 million compared to $6.994 million in the same period of 2019[170]. - Legal and accounting expenses decreased by $0.7 million, or 34.0%, for the six months ended June 30, 2020, due to lower legal fees related to litigation[184]. Debt and Interest Rates - The company has secured an extension for refinancing $48.3 million of debt to October 31, 2020, due to travel restrictions caused by the COVID-19 pandemic[144]. - As of June 30, 2020, $181.0 million, or 35.3%, of the company's debt had variable interest rates[218]. - A 1.0% increase in interest rates would decrease the company's cash flow by approximately $0.9 million per year[218]. Stock and Shareholder Distributions - The company repurchased $3.2 million worth of common stock and $3.1 million of Series B Participating preferred stock during the six months ended June 30, 2020[191]. - The company’s total distributions on preferred units for the three months ended June 30, 2020, were $(3.088) million, compared to $(3.125) million for the same period in 2019[213].