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Gladstone Land(LAND) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2023 Condensed Consolidated Balance Sheets Total assets decreased to $1.41 billion while total equity remained stable at $731.5 million as of September 30, 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $1,406,112 | $1,457,251 | | Total real estate, net | $1,304,031 | $1,325,428 | | Cash and cash equivalents | $25,080 | $61,141 | | Total Liabilities | $674,626 | $725,889 | | Notes and bonds payable, net | $584,098 | $626,400 | | Total Equity | $731,486 | $731,362 | Condensed Consolidated Statements of Operations and Comprehensive Income Nine-month net income rose to $12.7 million, driven by gains on real estate dispositions, improving net loss per common share Operating Results for the Nine Months Ended September 30 (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Lease revenue, net | $65,946 | $64,445 | | Total operating expenses | $41,276 | $40,091 | | Gain (loss) on dispositions | $5,910 | $(2,100) | | Net income | $12,746 | $3,606 | | Net loss attributable to common stockholders | $(5,557) | $(10,204) | | Loss per common share (Basic and diluted) | $(0.16) | $(0.30) | Operating Results for the Three Months Ended September 30 (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Lease revenue, net | $23,534 | $24,209 | | Total operating expenses | $14,136 | $14,566 | | Net income | $3,141 | $1,806 | | Net loss attributable to common stockholders | $(2,964) | $(3,594) | | Loss per common share (Basic and diluted) | $(0.08) | $(0.10) | Condensed Consolidated Statements of Equity Total equity remained stable at $731.5 million, supported by common and preferred stock issuances net of distributions - For the nine months ended September 30, 2023, the company issued 788,045 shares of common stock, raising net proceeds of approximately $15.1 million28 - The company issued 223,081 shares of Series E Preferred Stock for net proceeds of approximately $5.0 million and redeemed 48,913 shares of Series C Preferred Stock for approximately $1.2 million during the first nine months of 202328 - Total distributions on common stock were $14.8 million, and dividends on cumulative redeemable preferred stock were $18.3 million for the nine months ended September 30, 202328 Condensed Consolidated Statements of Cash Flows A halt in real estate acquisitions led to a significant decrease in investing cash outflow and an overall net decrease in cash Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,657 | $23,073 | | Net cash used in investing activities | $(1,086) | $(78,627) | | Net cash (used in) provided by financing activities | $(57,632) | $75,852 | | Net (decrease) increase in cash | $(36,061) | $20,298 | Notes to Condensed Consolidated Financial Statements The notes detail the company's 169-farm portfolio, debt facilities, equity offerings, and related-party transactions - As of September 30, 2023, the company owned 169 farms across 15 states, totaling 115,593 acres; California and Florida represent 65.1% and 17.1% of lease revenue, respectively4561 - On June 23, 2023, the company sold a 138-acre parcel of unfarmed land in Florida for $9.6 million, recognizing a net gain of approximately $6.4 million55 - Subsequent to the quarter end, on October 9, 2023, the company entered an agreement to purchase up to 15,000 acre-feet of water per year and made an initial purchase of 7,000 acre-feet for approximately $1.2 million119 - On October 10, 2023, the Board of Directors declared monthly cash distributions for its common and preferred stock for October, November, and December 2023123125 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses portfolio performance, operating results, liquidity, and non-GAAP metrics like NAV per share Overview and Portfolio The company owns a diversified portfolio of 169 farms across 15 states, with a concentration in California and Florida - The company owns 169 farms with 115,593 acres across 15 states, leased to 92 unrelated third-party tenants129 Geographic Diversification by Lease Revenue (Nine Months Ended Sep 30, 2023) | State | % of Total Lease Revenue | | :--- | :--- | | California | 65.1% | | Florida | 17.1% | | Washington | 5.3% | | All Others | 12.5% | Upcoming Lease Expirations by Revenue | Year of Expiration | % of Total Lease Revenues | | :--- | :--- | | 2023 (remaining) | 7.2% | | 2024 | 7.8% | | 2025 | 8.4% | | 2026 | 7.0% | | Thereafter | 57.3% | Results of Operations Nine-month operating revenues grew 2.3%, while net income surged due to a significant gain on a land sale Comparison of Operating Results (Nine Months Ended Sep 30) | (in thousands) | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Total operating revenues | $65,946 | $64,445 | 2.3% | | Operating income | $24,670 | $24,354 | 1.3% | | Net income | $12,746 | $3,606 | 253.5% | - Lease revenue from same-property fixed payments increased by $0.4 million (0.7%), while participation rents on a same-property basis decreased by $0.5 million (16.2%) in the first nine months of 2023 compared to 2022166 - Base management and incentive fees paid to the Adviser decreased by 7.2% to $7.2 million for the nine months ended Sep 30, 2023, due to a lower incentive fee earned165179 - A net property and casualty loss of $1.0 million was recorded in the first nine months of 2023 due to flooding damage in California184185 Liquidity and Capital Resources The company maintains adequate liquidity of $174.4 million, with over 99.9% of its debt at fixed interest rates - Current available liquidity is approximately $174.4 million, consisting of cash on hand and availability under its credit facility with MetLife187 - Over 99.9% of borrowings are at fixed rates, with a weighted-average effective interest rate of 3.35% and a remaining fixed-rate term of 4.3 years187 - The company has committed to provide capital for improvements on certain farms, with a total remaining commitment of approximately $4.3 million as of September 30, 2023189190 Equity Sales since January 1, 2023 (in thousands) | Type of Issuance | Shares Sold | Gross Proceeds | Net Proceeds | | :--- | :--- | :--- | :--- | | Series E Preferred Stock | 225,281 | $5,621 | $5,069 | | Common Stock – ATM Program | 788,045 | $15,240 | $15,087 | Non-GAAP Financial Information and Net Asset Value Diluted AFFO per share was $0.15 for Q3 2023, and the estimated Net Asset Value per common share rose to $20.33 Non-GAAP Performance Per Share | Per Share Data | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Diluted FFO | $0.18 | $0.18 | $0.45 | $0.52 | | Diluted CFFO | $0.18 | $0.21 | $0.49 | $0.54 | | Diluted AFFO | $0.15 | $0.21 | $0.43 | $0.52 | - The estimated Net Asset Value (NAV) per common share was $20.33 as of September 30, 2023221222 - The NAV per share increased from $19.15 at June 30, 2023, to $20.33 at September 30, 2023, driven by a $1.36 per share net increase from valuation changes223 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk from interest rates is significantly mitigated by its high proportion of fixed-rate debt - The company's primary market risk exposure is to interest rate changes227 - Risk is mitigated as over 99.9% of borrowings are at fixed rates, with a weighted-average effective interest rate of 3.35% for a remaining term of 4.3 years227 Interest Rate Sensitivity on Fixed-Rate Borrowings (as of Sep 30, 2023) | Change in Market Interest Rates | Fair Value (in thousands) | | :--- | :--- | | -1% | $542,939 | | No change | $527,100 | | +1% | $512,043 | Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023229 - No material changes to the internal control over financial reporting occurred during the third quarter of 2023231 PART II OTHER INFORMATION Legal Proceedings The company is not currently subject to any material legal proceedings - As of the filing date, the company is not subject to any material legal proceedings233 Risk Factors There have been no material changes to the company's previously disclosed risk factors - There have been no material changes to the company's risk factors since its 2022 Form 10-K filing234 Other Information No officer or director adopted or terminated a Rule 10b5-1 trading arrangement during the third quarter of 2023 - No officer or director adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended September 30, 2023237 Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents and officer certifications