Gladstone Land(LAND) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related disclosures for the reporting period ITEM 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive income, statements of equity, and statements of cash flows, along with their accompanying notes, providing a detailed financial overview for the quarter ended March 31, 2025, and comparative periods Condensed Consolidated Balance Sheets This statement presents the company's financial position, including assets, liabilities, and equity, at specific points in time Condensed Consolidated Balance Sheet Highlights (In thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,281,736 | $1,312,195 | | Total Liabilities | $591,858 | $625,013 | | Total Equity | $689,878 | $687,182 | Condensed Consolidated Statements of Operations and Comprehensive Income This statement details the company's revenues, expenses, net income, and comprehensive income over a specific reporting period Condensed Consolidated Statements of Operations and Comprehensive Income Highlights (In thousands, except per-share data) | Metric | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total operating revenues | $16,804 | $20,252 | | Total operating expenses, net of credits to fees | $13,127 | $12,991 | | Net income | $15,108 | $13,567 | | Net income attributable to common stockholders | $9,106 | $7,449 | | Basic and diluted net income per common share | $0.25 | $0.21 | | Comprehensive income attributable to the Company | $13,790 | $14,575 | - Total operating revenues decreased by 17.0% YoY, from $20,252 thousand in Q1 2024 to $16,804 thousand in Q1 2025[11] - Net income increased by 11.4% YoY, from $13,567 thousand in Q1 2024 to $15,108 thousand in Q1 2025[11] - Gain on dispositions of real estate assets, net, increased by 50.0% YoY, from $10,273 thousand in Q1 2024 to $15,410 thousand in Q1 2025[11] Condensed Consolidated Statements of Equity This statement outlines changes in the company's equity accounts, including net income, dividends, and stock transactions, over a period Condensed Consolidated Statements of Equity Highlights (In thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Stockholders' Equity | $689,878 | $687,182 | | Net income | $15,108 | $13,567 | | Dividends—cumulative redeemable preferred stock | $(6,002) | $(6,118) | | Distributions—OP Units and common stock | $(5,070) | $(5,000) | Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities for the reporting period Condensed Consolidated Statements of Cash Flows Highlights (In thousands) | Cash Flow Activity | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,467 | $3,420 | | Net cash provided by investing activities | $60,216 | $62,519 | | Net cash used in financing activities | $(40,041) | $(32,955) | | Net increase in cash and cash equivalents | $24,642 | $32,984 | | Cash and cash equivalents at end of period | $42,917 | $51,555 | - Net cash provided by operating activities increased by 30.6% YoY, from $3,420 thousand in Q1 2024 to $4,467 thousand in Q1 2025[17] - Net cash used in financing activities increased by 21.5% YoY, from $(32,955) thousand in Q1 2024 to $(40,041) thousand in Q1 2025[17] Notes to Condensed Consolidated Financial Statements This section provides essential supplementary information and detailed explanations for the figures presented in the primary financial statements NOTE 1. BUSINESS AND ORGANIZATION This note describes the company's primary business activities, organizational structure, and external management arrangements - Gladstone Land Corporation is an agricultural real estate investment trust (REIT) primarily owning and leasing farmland[20] - As of March 31, 2025, the Company owned 150 farms totaling 103,001 acres across 15 states and 55,350 acre-feet of water assets in California[20] - The Company conducts substantially all operations through its subsidiary, Gladstone Land Limited Partnership (Operating Partnership), and is externally managed by Gladstone Management Corporation and Gladstone Administration, LLC, both affiliates[21][23] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing the interim financial statements - Interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and Regulation S-X[25] - The Company's business strategy includes one operating segment: Real Estate Rental Operations[28] - The Company is assessing the impact of ASU 2024-03, effective for annual periods after December 15, 2026, which requires disaggregation of income statement expenses[30] NOTE 3. REAL ESTATE AND INTANGIBLE ASSETS This note provides details on the company's real estate portfolio, including acquisitions, dispositions, and water assets Summary of Farms Owned as of March 31, 2025 (dollars in thousands) | Location | No. of Farms | Acres | Acre-feet of Water Assets | Net Cost Basis | Encumbrances | | :--- | :--- | :--- | :--- | :--- | :--- | | California | 63 | 34,845 | 55,350 | $833,896 | $364,788 | | Florida | 20 | 13,090 | 0 | $129,003 | $57,155 | | Total | 150 | 103,001 | 55,350 | $1,204,803 | $500,964 | - No new farms were acquired during the three months ended March 31, 2025 or 2024[37] - In January 2025, the Company sold five farms in Florida for $52.5 million, recognizing a net gain of $14.1 million[38] - In February 2025, the Company sold two farms in Nebraska for $12.0 million, recognizing a net gain of $1.6 million[39] - As of March 31, 2025, total long-term water assets amounted to 55,350 acre-feet with an aggregate carrying value of approximately $37.2 million[49] - Tenant A accounted for 14.2% of total lease revenue in Q1 2025 (lease terminated); Tenant B accounted for 11.2% of total lease revenue[52] - Farms in California (62.4%) and Florida (15.3%) accounted for the majority of total lease revenue in Q1 2025[53] NOTE 4. BORROWINGS This note details the company's debt structure, including types of borrowings, interest rates, and hedging instruments Summary of Borrowings (In thousands) | Type of Borrowing | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Variable-rate revolving lines of credit | $200 | $3,600 | | Notes and bonds payable, net | $498,631 | $523,922 | | Total borrowings, net | $498,831 | $527,522 | - The weighted-average stated interest rate on borrowings was 3.79% for Q1 2025, compared to 3.81% for Q1 2024[58] - 2024 interest patronage from Farm Credit Notes Payable resulted in a 21.9% reduction (101 basis points) to stated interest rates[66] - Scheduled principal payments for notes and bonds payable for the remaining nine months of 2025 are $31,710 thousand[67] - As of March 31, 2025, the aggregate fair value of notes and bonds payable was approximately $472.0 million, compared to a carrying value of $500.8 million[68] - The Company had 4 outstanding interest rate swap agreements with an aggregate notional amount of $66,647 thousand as of March 31, 2025, designated as cash flow hedges[73] - Change in fair value related to interest rate hedging instruments resulted in a $(1,318) thousand loss in Q1 2025, compared to a $1,008 thousand gain in Q1 2024[73] NOTE 5. CUMULATIVE TERM PREFERRED STOCK This note describes the terms, classification, and fair value of the company's cumulative term preferred stock - The 5.00% Series D Cumulative Term Preferred Stock (LANDM) was issued in January 2021 with a mandatory redemption date of January 31, 2026[75][77] - The Series D Term Preferred Stock is classified as a liability, and related dividend payments are treated as interest expense[78] - As of March 31, 2025, the fair value was approximately $60.1 million, compared to a carrying value of $60.4 million[79] NOTE 6. RELATED-PARTY TRANSACTIONS This note discloses transactions and compensation arrangements with affiliated entities and management - The Company is externally managed by Gladstone Management Corporation (Adviser) and Gladstone Administration, LLC (Administrator), both affiliates[80] - Adviser compensation includes a base management fee (0.60% annually of Gross Tangible Real Estate), an incentive fee (based on Pre-Incentive Fee FFO exceeding hurdle rates), and a capital gains fee (15% of cumulative net realized capital gains)[83][84][88] - Gladstone Securities, an affiliate, acts as a non-exclusive agent for financing (0.5%-1.0% fee) and exclusive dealer-manager for Series E Preferred Stock offering (up to 7.0% selling commissions and 3.0% dealer-manager fees)[93][97] Related-Party Fees Paid or Accrued (In thousands) | Fee Type | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Base management fee | $2,058 | $2,156 | | Capital gains fee | $188 | $— | | Administration fee | $642 | $603 | | Selling Commissions and Dealer-Manager Fees | $— | $28 | - Total amounts due to related parties as of March 31, 2025, were $3,349 thousand[101] NOTE 7. COMMITMENTS AND CONTINGENCIES This note outlines the company's material commitments and any known or threatened litigation - The Company is not currently subject to any material known or threatened litigation[102] NOTE 8. EQUITY This note provides information on the company's equity structure, including preferred and common stock, share programs, and distributions - The 2023 Registration Statement permits the Company to issue up to $1.5 billion in various securities[103] - No shares of Series E Preferred Stock were sold during Q1 2025; 800 shares were redeemed for approximately $18 thousand[105] - No shares of common stock were sold under the ATM Program during Q1 2025 or Q1 2024[107] - A share repurchase program for up to $20.0 million of Series B and $35.0 million of Series C Preferred Stock was approved, expiring May 17, 2025; no repurchases occurred in Q1 2025 or Q1 2024[108][109] - The Company owned 100.0% of the outstanding OP Units as of March 31, 2025, and December 31, 2024[110] Per-Share Distributions Declared (Q1 2025 vs Q1 2024) | Issuance | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Series B Preferred Stock | $0.375 | $0.375 | | Series C Preferred Stock | $0.375 | $0.375 | | Series D Term Preferred Stock | $0.312501 | $0.312501 | | Series E Term Preferred Stock | $0.312501 | $0.312501 | | Common Stock | $0.1401 | $0.1395 | NOTE 9. LEASE REVENUES This note details the components of lease revenue, including fixed and variable payments, and significant changes Components of Lease Revenue (In thousands) | Component | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Fixed lease payments | $13,927 | $19,593 | | Variable lease payments | $2,876 | $233 | | Lease revenue, net | $16,803 | $19,826 | - Lease revenue, net, decreased by 15.2% YoY, from $19,826 thousand in Q1 2024 to $16,803 thousand in Q1 2025[116] - Variable lease payments significantly increased due to approximately $2.4 million from a lease termination fee in Q1 2025[116] NOTE 10. EARNINGS PER SHARE OF COMMON STOCK This note presents the calculation of basic and diluted earnings per common share for the reporting period Earnings Per Common Share (In thousands, except per-share amounts) | Metric | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $9,106 | $7,449 | | Weighted average shares of common stock outstanding – basic and diluted | 36,184,658 | 35,838,442 | | Income per common share – basic and diluted | $0.25 | $0.21 | - Basic and diluted EPS increased to $0.25 in Q1 2025 from $0.21 in Q1 2024[118] NOTE 11. SUBSEQUENT EVENTS This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On April 8, 2025, the Board of Directors declared monthly cash distributions for preferred and common stock for April, May, and June 2025[119] Total Distributions Declared per Share for Q2 2025 | Issuance | Total Distribution per Share | | :--- | :--- | | Series B Preferred Stock | $0.375 | | Series C Preferred Stock | $0.375 | | Series D Term Preferred Stock | $0.312501 | | Series E Preferred Stock | $0.312501 | | Common Stock | $0.1401 | ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, covering business overview, operational performance, liquidity, capital resources, and non-GAAP financial measures OVERVIEW This section provides a comprehensive introduction to the company's business, portfolio diversification, and market environment - Gladstone Land Corporation is an externally-managed agricultural REIT, owning 150 farms (103,001 acres) and 55,350 acre-feet of water assets in California as of March 31, 2025[123] - The portfolio is diversified across 15 states, leased to 84 tenants, growing over 60 different crop types, with a focus on fresh produce and permanent crops[126] Geographic Distribution of Farms and Lease Revenue (Q1 2025) | State | No. of Farms | Total Acres | % of Total Acres | Lease Revenue ($ thousands) | % of Total Lease Revenue | | :--- | :--- | :--- | :--- | :--- | :--- | | California | 63 | 34,845 | 33.8% | $10,491 | 62.4% | | Florida | 20 | 13,090 | 12.7% | $2,574 | 15.3% | | Total | 150 | 103,001 | 100.0% | $16,803 | 100.0% | - Most leases are triple-net, with terms ranging from 3-10 years for row crops and 7-15 years for permanent crops; 24 farms include variable 'participation rents'[129] - 16 leases are expiring in 2025, representing 17.2% of total acreage and (6.6)% of total lease revenue (due to net cash lease incentives)[131] - Inflation (CPI 2.4% annually) and food price increases (3.0% annually) continue, with high input costs for farm operators[132] - Over 99.9% of borrowings are at fixed rates, with a weighted-average effective interest rate of 3.41% for another 3.4 years, insulating against interest rate volatility[134] - New tariffs introduce uncertainty for U.S. agricultural exports, particularly almonds and pistachios, which are highly export-dependent[135] - California's water outlook is favorable with average/above-average precipitation, supporting strong snowmelt runoff and reservoir levels, but groundwater pumping restrictions under SGMA continue[137][138][140] - In Q1 2025, the Company sold five farms in Florida for $52.5 million (net gain $14.1 million) and two farms in Nebraska for $12.0 million (net gain $1.6 million)[141][142] - 15 farms were vacant, direct-operated, or on non-accrual status in Q1 2025 (vs 9 in Q1 2024), generating $3.7 million in lease revenue (including a $2.4 million lease termination fee)[145] - Approximately $19.4 million of loans were repaid in Q1 2025, bearing a weighted-average stated interest rate of 5.38%[148] - Interest patronage of approximately $1.7 million was recorded in Q1 2025 related to 2024 interest accrued on Farm Credit Notes Payable[149] RESULTS OF OPERATIONS This section analyzes the company's financial performance, comparing revenues, expenses, and net income across periods Operating Income Comparison (In thousands) | Metric | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $16,804 | $20,252 | $(3,448) | (17.0)% | | Total operating expenses | $13,127 | $12,991 | $136 | 1.0% | | Operating income | $3,677 | $7,261 | $(3,584) | (49.4)% | Lease Revenue Summary (Same-property basis, In thousands) | Component | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Fixed lease payments | $13,920 | $19,385 | $(5,465) | (28.2)% | | Participation rents | $465 | $— | $465 | NM | | Lease termination and other income | $2,380 | $— | $2,380 | NM | | Total – Same-property basis | $16,765 | $19,385 | $(2,620) | (13.5)% | - Fixed lease payments decreased primarily due to lease agreements with reduced or eliminated fixed base rent in exchange for increased participation rent components, expected in Q4 2025[165] - A lease termination payment of approximately $2.4 million was recognized in Q1 2025[166] - Depreciation and amortization decreased by 4.1% to $8,429 thousand, mainly due to asset dispositions and assets reaching end of useful lives[170] - Property operating expenses increased by 28.6% to $1,128 thousand, driven by costs for vacant/direct-operated/non-accrual farms and legal fees for water rights[171][172] - The Adviser earned a capital gains fee of $188 thousand in Q1 2025 due to gains on seven farm sales[178] - Other income decreased by 19.6% to $1,952 thousand, primarily due to less interest earned on short-term investments and decreased Farm Credit interest patronage[182] - Interest expense decreased by 6.8% to $(5,177) thousand, primarily due to a decrease in overall borrowings[185] - Net capital gain on dispositions of real estate assets increased by 50.0% to $15,410 thousand, driven by sales of five Florida farms and two Nebraska farms[186] - Net income attributable to common stockholders increased by 22.2% to $9,106 thousand[181] LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's ability to meet its short-term and long-term financial obligations and fund operations - Current available liquidity is approximately $183.8 million, comprising $38.1 million in cash and $145.7 million available under credit facilities[189] - Over 99.9% of borrowings are at fixed rates, with a weighted-average effective interest rate of 3.41% for another 3.4 years[190] - Future capital needs include debt service, operating costs, preferred dividends, common distributions, capital improvements, preferred stock repurchases, and new acquisitions[191] - Long-term liquidity will be met through current lines of credit, long-term mortgage indebtedness, bond issuances, future equity issuances (Series E Preferred Stock, OP Units, common stock via ATM Program), and other borrowings[192] Operating Commitments for Capital Improvements (In thousands) | Farm Location(s) | Total Commitment | Net Amount Expended or Accrued as of March 31, 2025 | | :--- | :--- | :--- | | St. Lucie, FL | $230 | $185 | | Monterey, CA | $1,100 | $30 | | Ventura, CA | $1,000 | $458 | | Hartley, TX | $1,300 | $982 | | Franklin & Grant, WA, & Umatilla, OR | $4,203 | $2,977 | | Wicomico & Caroline, MD, and Sussex, DE | $155 | $49 | | Total | $7,998 | $4,681 | - Total undiscounted ground lease obligations are $1,196 thousand[196] Net Change in Cash Flows (In thousands) | Cash Flow Activity | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Operating activities | $4,467 | $3,420 | $1,047 | 30.6% | | Investing activities | $60,216 | $62,519 | $(2,303) | (3.7)% | | Financing activities | $(40,041) | $(32,955) | $(7,086) | 21.5% | | Net change in Cash and cash equivalents | $24,642 | $32,984 | $(8,342) | (25.3)% | - Cash provided by operating activities increased due to higher participation rents and a lease termination fee, partially offset by decreased fixed lease payments[198] - Cash used in financing activities increased primarily due to approximately $6.9 million in aggregate debt repayments[200] - The MetLife Facility has approximately $110.0 million of availability[201] - The Farmer Mac Facility provides for bond issuances up to an aggregate of $225.0 million by December 31, 2026[202] - The 2023 Registration Statement allows for the issuance of up to $1.5 billion in securities[204] - No material off-balance sheet arrangements existed as of March 31, 2025[206] NON-GAAP FINANCIAL INFORMATION This section presents and reconciles non-GAAP financial measures used by management to evaluate performance - The Company uses FFO, CFFO, and AFFO as non-GAAP supplemental measures to assess operating performance and improve period-over-period comparability[207][208] - FFO is net income excluding gains/losses from property sales and impairment, plus real estate depreciation/amortization[207] - CFFO adjusts FFO for acquisition- and disposition-related expenses and other non-recurring charges/receipts[210] - AFFO further adjusts CFFO for rent adjustments (straight-lining, amortization/accretion of lease values/incentives, normalized cash rent), amortization of debt issuance costs, and other non-cash charges/receipts[209][217] Reconciliation of FFO, CFFO, and AFFO (In thousands, except per-share amounts) | Metric | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $15,108 | $13,567 | | FFO available to common stockholders and non-controlling OP Unitholders | $2,139 | $5,988 | | CFFO available to common stockholders and non-controlling OP Unitholders | $2,333 | $5,999 | | AFFO available to common stockholders and non-controlling OP Unitholders | $2,035 | $5,130 | | Diluted FFO per weighted-average common share | $0.06 | $0.17 | | Diluted CFFO per weighted-average common share | $0.06 | $0.17 | | Diluted AFFO per weighted-average common share | $0.06 | $0.14 | ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate risk, and strategies to mitigate it - The primary market risk is interest rate risk, although over 99.9% of borrowings are at fixed rates, with an effective interest rate of 3.41% for another 3.4 years[220][221] - As of March 31, 2025, the fair value of fixed-rate borrowings was approximately $472.0 million[221] Hypothetical Change in Fair Value of Fixed-Rate Borrowings (March 31, 2025, In thousands) | Change in Market Interest Rates | Carrying Value | Fair Value | Difference | | :--- | :--- | :--- | :--- | | 2% decrease | $500,764 | $494,129 | $(6,635) | | 1% decrease | $500,764 | $482,853 | $(17,911) | | No change | $500,764 | $472,032 | $(28,732) | | 1% increase | $500,764 | $461,710 | $(39,054) | | 2% increase | $500,764 | $451,791 | $(48,973) | - The Company's objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs, potentially using interest rate swaps and caps[222] ITEM 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2025[224] - No changes in internal control over financial reporting occurred during Q1 2025 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[226] PART II – OTHER INFORMATION This section includes non-financial disclosures such as legal proceedings, risk factors, and other miscellaneous information ITEM 1. Legal Proceedings The company is not currently involved in any material legal proceedings, nor is it aware of any threatened material litigation - The Company is not currently subject to any material known or threatened litigation[228] ITEM 1A. Risk Factors This section highlights key risks, including the potential adverse effects of tariffs on agricultural exports and the elevated credit and concentration risks associated with tenants accounting for a significant portion of total lease revenue - Tariffs on U.S. agricultural exports could increase growing costs for tenants or reduce demand for crops, potentially affecting their ability to pay rent[230] - The Company is exposed to elevated credit and concentration risks from tenants accounting for a relatively high percentage of total lease revenue (e.g., one tenant accounted for approximately 11.2% in Q1 2025)[231][232] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[234] ITEM 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - Not applicable[235] ITEM 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - Not applicable[236] ITEM 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by officers or directors during the three months ended March 31, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by officers or directors during the three months ended March 31, 2025[237] ITEM 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, preferred stock certificates, officer certifications, and XBRL-formatted financial statements - Exhibits include Articles of Incorporation, Bylaws, Preferred Stock Certificates, Form of Indenture, Officer Certifications (Sarbanes-Oxley Act), and XBRL Instance Document for financial statements[239][240] SIGNATURES The report is signed by Lewis Parrish, Chief Financial Officer and Assistant Treasurer, and David Gladstone, President, Chief Executive Officer, and Chairman of the Board of Directors, on May 12, 2025 - The report was signed on May 12, 2025, by Lewis Parrish (Chief Financial Officer and Assistant Treasurer) and David Gladstone (President, Chief Executive Officer, and Chairman of the Board of Directors)[244]