Gladstone Land(LAND) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) For the six months ended June 30, 2022, total assets increased to $1.41 billion, operating revenues grew 22.2% to $40.2 million, and net income reached $1.8 million, significantly improving from the prior year Condensed Consolidated Balance Sheets As of June 30, 2022, total assets increased to $1.41 billion, primarily due to a $32.8 million rise in real estate assets, while total equity grew by $62.9 million to $651.9 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total real estate, net | $1,300,940 | $1,283,798 | | Cash and cash equivalents | $48,444 | $16,708 | | Total Assets | $1,410,321 | $1,351,550 | | Notes and bonds payable, net | $661,846 | $667,882 | | Total Liabilities | $758,389 | $762,484 | | Total Equity | $651,932 | $589,066 | | Total Liabilities and Equity | $1,410,321 | $1,351,550 | Condensed Consolidated Statements of Operations and Comprehensive Income For Q2 2022, lease revenue grew 20.1% to $20.3 million, resulting in net income of $0.6 million, while for the six-month period, lease revenue increased 22.2% to $40.2 million, with net income reaching $1.8 million Statement of Operations Highlights (in thousands) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Lease revenue, net | $20,293 | $16,893 | $40,236 | $32,927 | | Total operating expenses | $12,160 | $9,495 | $25,525 | $19,402 | | Net Income (Loss) Attributable to the Company | $616 | $(530) | $1,794 | $23 | | Net Loss Attributable to Common Stockholders | $(3,873) | $(3,469) | $(6,610) | $(5,679) | | Loss Per Common Share (Basic and diluted) | $(0.11) | $(0.12) | $(0.19) | $(0.20) | Condensed Consolidated Statements of Equity Total equity increased from $589.1 million to $651.9 million, primarily driven by net proceeds from Series C Preferred Stock and common stock issuances, alongside comprehensive income - Key drivers for the increase in total equity during the first six months of 2022 include net proceeds from the issuance of Series C Preferred Stock ($69.0 million) and common stock ($10.3 million)[25] - Net income for the six months ended June 30, 2022 was $1.8 million, while dividends on preferred stock and distributions on common stock totaled $8.4 million and $9.4 million, respectively[25] - Accumulated other comprehensive income improved significantly from a loss of $(1.0) million to a gain of $6.3 million, primarily due to a $7.3 million change in fair value of interest rate hedging instruments[25] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash from operating activities was $19.4 million, investing activities used $35.1 million, and financing activities provided $47.5 million, resulting in a net cash increase of $31.7 million Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,355 | $16,965 | | Net cash used in investing activities | $(35,147) | $(84,950) | | Net cash provided by financing activities | $47,528 | $125,556 | | Net increase in cash and cash equivalents | $31,736 | $57,571 | | Cash and cash equivalents at end of period | $48,444 | $66,789 | Notes to Condensed Consolidated Financial Statements The notes detail the company's portfolio of 165 farms, $662 million in borrowings including a new MetLife facility, and significant capital raises from Series C Preferred Stock and ATM program, with subsequent acquisitions and loan repayments NOTE 3. REAL ESTATE AND INTANGIBLE ASSETS As of June 30, 2022, the company owned 165 farms totaling 113,931 acres with a net cost basis of $1.34 billion, primarily concentrated in California and Florida, and acquired two properties for $24.6 million in H1 2022 - As of June 30, 2022, the company owned 165 farms with a total net cost basis of approximately $1.34 billion[45] - Farms in California and Florida accounted for 66.5% and 17.9% of total lease revenue, respectively, for the six months ended June 30, 2022[63] - During the first six months of 2022, the company acquired two properties in Florida and California for a total purchase price of $24.6 million[53] NOTE 4. BORROWINGS As of June 30, 2022, total borrowings were $661.9 million with a 3.73% weighted-average interest rate, including a new $100 million MetLife term note and $2.8 million in interest patronage from Farm Credit borrowings Borrowings Summary (in thousands) | Borrowing Type | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Fixed-rate notes payable | $583,114 | $582,665 | | Fixed-rate bonds payable | $81,342 | $86,052 | | Total notes and bonds payable, net | $661,846 | $667,882 | - In February 2022, the company amended its credit facility with MetLife, adding a new $100.0 million long-term note payable, bringing the total facility size to $250.0 million[67] - During Q1 2022, the company recorded interest patronage of approximately $2.8 million from its Farm Credit borrowings, which related to interest accrued in 2021[73] NOTE 6. RELATED-PARTY TRANSACTIONS For the six months ended June 30, 2022, fees to the Adviser totaled $5.2 million, administration fees were $0.9 million, and Gladstone Securities received $6.2 million in commissions and fees Related-Party Fees for Six Months Ended June 30 (in thousands) | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Total fees to our Adviser, net | $5,210 | $3,908 | | Administration fee | $926 | $703 | | Total fees to Gladstone Securities | $6,163 | $2,004 | - The advisory agreement was amended effective July 1, 2021, increasing the base management fee from an annual rate of 0.50% to 0.60% of the prior quarter's Gross Tangible Real Estate[86][87] NOTE 8. EQUITY The company raised $68.9 million in net proceeds from Series C Preferred Stock and $10.3 million from common stock via its ATM program, while also redeeming $7.7 million in OP Units and declaring regular distributions Equity Issuances for Six Months Ended June 30, 2022 (in thousands) | Issuance | Shares Sold | Net Proceeds | | :--- | :--- | :--- | | Series C Preferred Stock | 3,028,475 | $68,898 | | Common Stock (ATM Program) | 310,055 | $10,327 | - During the six months ended June 30, 2022, the company redeemed all 204,778 outstanding OP Units with a cash payment of approximately $7.7 million[108] NOTE 11. SUBSEQUENT EVENTS Subsequent to June 30, 2022, the company acquired four new farms for $37.4 million, repaid $16.9 million in loans, and continued equity raising with $35.9 million in Series C Preferred Stock net proceeds - Acquired four new farms for a total purchase price of $37.4 million[114][115] - Repaid approximately $16.9 million of maturing loans that had a weighted-average effective interest rate of 2.89%[116] - Sold approximately 1.6 million shares of Series C Preferred Stock for net proceeds of $35.9 million[118] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports owning 169 farms, with H1 2022 operating revenue up 22.2% to $40.2 million and operating income up 8.8% to $14.7 million, maintaining strong liquidity of $133.3 million and a NAV per common share of $15.60 Overview The company is an externally-managed agricultural REIT owning 169 diversified farms across 15 states, primarily with triple-net leases, and anticipates renewing the single agricultural lease expiring in the next six months - As of the filing date, the company owns 169 farms comprised of 115,288 acres in 15 states, leased to 90 different tenants[125][126] - Geographic diversification is led by California (66.5% of lease revenue) and Florida (17.9% of lease revenue) for the six months ended June 30, 2022[128] - Only one agricultural lease is scheduled to expire within the next six months, and the company anticipates renewing it at a rate flat to the existing lease[132] Results of Operations For the six months ended June 30, 2022, total operating revenues increased 22.2% to $40.2 million, driven by acquisitions, while total operating expenses rose 31.6% to $25.5 million, resulting in an 8.8% increase in operating income to $14.7 million Operating Results for the Six Months Ended June 30 (in thousands) | Metric | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $40,236 | $32,927 | $7,309 | 22.2% | | Total operating expenses | $25,525 | $19,402 | $6,123 | 31.6% | | Operating income | $14,711 | $13,525 | $1,186 | 8.8% | - The increase in lease revenue was primarily driven by properties acquired after December 31, 2020, which contributed an additional $7.4 million in revenue for H1 2022 compared to H1 2021[157][159] - Related-party fees to the Adviser increased due to additional assets acquired and an increase in the base management fee rate from 0.50% to 0.60% effective July 1, 2021[169] Liquidity and Capital Resources The company maintains $133.3 million in available liquidity, with over 99% of borrowings at fixed rates, and primarily sources capital from operations, debt facilities, and equity issuances through its ATM program and Series C Preferred Stock offering - Current available liquidity is approximately $133.3 million, consisting of $21.0 million in cash and $112.3 million of availability under the MetLife credit facility[175] - Over 99% of the company's borrowings are at fixed rates, with a weighted-average effective interest rate of 3.26% for a term of over five years, providing protection against interest rate increases[175] - Since January 1, 2022, the company has raised approximately $104.8 million in net proceeds from its Series C Preferred Stock offering and $10.3 million from its common stock ATM program[189][190] Non-GAAP Financial Information The company uses FFO, CFFO, and AFFO to measure performance, with Diluted AFFO per share at $0.13 for Q2 2022 and $0.31 for the six-month period, and an estimated NAV per common share of $15.60 as of June 30, 2022 Non-GAAP Metrics Per Share | Metric per Share | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Diluted FFO | $0.14 | $0.13 | $0.33 | $0.30 | | Diluted CFFO | $0.14 | $0.13 | $0.33 | $0.31 | | Diluted AFFO | $0.13 | $0.13 | $0.31 | $0.30 | Estimated NAV per Common Share Roll-Forward | Description | Per Share Amount | | :--- | :--- | | NAV as of March 31, 2022 | $15.54 | | Net loss attributable to common stockholders | $(0.11) | | Net change in unrealized fair value of portfolio | $0.53 | | Distributions on common stock | $(0.14) | | Net dilutive effect of equity issuances | $(0.22) | | NAV as of June 30, 2022 | $15.60 | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - This item is not applicable to smaller reporting companies[212] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022[213] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[214] PART II - OTHER INFORMATION Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings, nor are any known to be threatened[216] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to risks associated with the business from those previously set forth in the Annual Report on Form 10-K for the year ended December 31, 2021[217] Other Items (Items 2-6) Items 2-5 are reported as 'None' or 'Not applicable', while Item 6 provides a list of exhibits filed with the report - Items 2, 3, 4, and 5 are reported as 'None' or 'Not applicable'[218] - Item 6 lists the exhibits filed with the Form 10-Q, including certifications and XBRL data[220]