Farmland Partners(FPI) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company's financial statements reflect a slight asset increase and a decrease in Q1 2024 net income to $1.4 million Note 1—Organization and Significant Accounting Policies Farmland Partners Inc. (FPI) is an internally managed REIT owning approximately 134,700 acres of North American farmland - FPI is a REIT owning a portfolio of approximately 134,700 acres of farmland and serves as property manager for an additional 42,700 acres as of March 31, 2024[28] - The company's Taxable REIT Subsidiary (TRS) performs direct farming operations on 2,103 acres in California and provides property management, auction, and brokerage services[29] - The company manages liquidity through cash balances, available credit lines ($178.9 million as of March 31, 2024), and a history of refinancing debt[36] Note 2—Revenue Recognition Revenue is primarily from rental income, totaling $10.2 million in Q1 2024, with $120 million in future fixed rent payments Rental Income by Source (in thousands) | Source | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Fixed Farm Rent | $8,624 | $8,794 | | Solar, Wind and Recreation Rent | $653 | $770 | | Tenant Reimbursements | $721 | $1,038 | | Variable Rent | $209 | $124 | | Total | $10,207 | $10,726 | Future Minimum Fixed Rent Payments (in thousands) | Period | Amount | | :--- | :--- | | 2024 (remaining) | $16,351 | | 2025 | $24,114 | | 2026 | $18,020 | | 2027 | $8,229 | | 2028 | $3,885 | | Thereafter | $49,377 | | Total | $119,976 | - Deferred revenue increased significantly to $9.9 million as of March 31, 2024, from $2.1 million at year-end 2023[51] Note 3—Concentration Risk FPI had no single tenant representing 10% or more of Q1 2024 revenue, with the Corn Belt as the largest region - For the three months ended March 31, 2024, the company had no tenant concentration of 10% or greater of period revenue[60] Geographic Concentration by Acres and Rental Income (Q1 2024) | Region | % of Total Acres | % of Rental Income | | :--- | :--- | :--- | | Corn Belt | 34.5% | 46.7% | | Delta and South | 19.6% | 10.8% | | High Plains | 16.2% | 6.4% | | Southeast | 21.4% | 21.9% | | West Coast | 8.3% | 14.2% | Note 4—Related Party Transactions The company holds a 9.97% equity interest in the OZ Fund and earned $0.1 million in management fees from it - The company holds a 9.97% interest in the OZ Fund, with an aggregate equity method investment balance of approximately $4.1 million as of March 31, 2024[63] - FPI earned management fees of $0.1 million from the OZ Fund during each of the three-month periods ended March 31, 2024 and 2023[66] - A lease agreement with American Ag Aviation, owned by the company's Executive Chairman, was terminated in November 2023[62] Note 5—Real Estate In Q1 2024, the company acquired three properties for $16.3 million, with no dispositions during the period - In Q1 2024, the company acquired three properties in the Corn Belt for an aggregate consideration of $16.3 million[67] - There were no property dispositions during Q1 2024[68] - In Q1 2023, the company completed two dispositions for $7.1 million in cash, recognizing a gain of $1.8 million[68] Note 6—Loans and Financing Receivables Total net loans and financing receivables increased to $31.17 million as of March 31, 2024, with minimal credit loss allowance Loans and Financing Receivables, Net (in thousands) | Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Loans under FPI Loan Program | $14,039 | $13,894 | | Financing Receivables | $17,131 | $17,126 | | Total Net Receivables | $31,170 | $31,020 | - The allowance for credit losses was stable at $168,000 as of March 31, 2024 and December 31, 2023[74][77] - All payments under loans and financing receivables were current as of March 31, 2024[72] Note 7—Mortgage Notes, Lines of Credit and Bonds Payable Total net mortgage notes and bonds payable increased to $380.9 million, with $178.9 million available on credit lines Total Indebtedness (in thousands) | Component | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total outstanding principal | $382,963 | $363,095 | | Debt issuance costs | $(2,073) | $(2,236) | | Total mortgage notes and bonds payable, net | $380,890 | $360,859 | - As of March 31, 2024, the company had $75.0 million available under its MetLife revolving credit facility and $85.8 million available under its Rutledge facility[83][87] - The company was in compliance with all applicable debt covenants as of March 31, 2024[81][83][85][87] Note 8—Commitments and Contingencies The company is engaged in ongoing litigation against Sabrepoint and recognized $1.2 million income from forfeited deposits - The company is pursuing a lawsuit against Sabrepoint for an alleged 'short and distort' scheme, currently under review by the Texas Supreme Court[96] - As of March 31, 2024, assets with an aggregate net book value of $5.1 million were subject to unexercised repurchase options[99] - During Q1 2024, a repurchase option and lease agreement were terminated, allowing the company to retain approximately $1.2 million in income from forfeited deposits[99] Note 9—Stockholders' Equity and Non-controlling Interests FPI owned 97.5% of its Operating Partnership, declared a $0.06 quarterly dividend, and reported $0.01 EPS for Q1 2024 - The company's share repurchase program had approximately $83.3 million of capacity remaining as of March 31, 2024, with no shares repurchased during the quarter[116] - A quarterly dividend of $0.06 per common share/OP unit was declared for Q1 2024, consistent with the prior year[113] Earnings Per Share (EPS) Calculation - Q1 2024 (in thousands, except per share) | Metric | Amount | | :--- | :--- | | Net income available to common stockholders | $606 | | Weighted-average common shares - basic & diluted | 47,704 | | Income per share - basic & diluted | $0.01 | Note 10—Hedge Accounting The company uses an interest rate swap with a $33.2 million notional amount to manage interest rate risk - The company uses an interest rate swap, designated as a cash flow hedge, to manage exposure to interest rate movements on its variable-rate debt[133] - As of March 31, 2024, the total notional amount of the receive-variable/pay-fixed interest rate swap was $33.2 million[139] - The fair value of the interest rate swap was a derivative asset of $1.6 million as of March 31, 2024[140] Note 11—Income Taxes The TRS reported a Q1 2024 pre-tax loss of $0.97 million, with a full valuation allowance against deferred tax assets - The TRS reported a pre-tax loss of $972,000 for Q1 2024, compared to an $84,000 profit in Q1 2023[145] - A valuation allowance of $2.14 million has been recorded against the TRS's net deferred tax assets[147] Net Operating Loss (NOL) Carryforwards (in thousands) | Type | Amount | Expiration | | :--- | :--- | :--- | | Federal | $8,490 | Does not expire | | State | $6,189 | Various | Note 12—Subsequent Events Post-quarter-end, a $0.06 per share quarterly cash dividend was declared, and $5.0 million was borrowed on credit lines - On April 29, 2024, the Board of Directors declared a quarterly cash dividend of $0.06 per share, payable on July 15, 2024[152] - Subsequent to March 31, 2024, the company borrowed $5.0 million against its lines of credit[153] Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,031,074 | $1,022,002 | | Total real estate, net | $976,767 | $961,531 | | Cash and cash equivalents | $6,228 | $5,489 | | Total Liabilities | $404,656 | $391,192 | | Mortgage notes and bonds payable, net | $380,890 | $360,859 | | Total Equity | $526,675 | $528,840 | Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total operating revenues | $11,990 | $12,672 | | Total operating expenses | $6,843 | $7,835 | | (Gain) loss on disposition of assets, net | $86 | $(1,826) | | (Income) from forfeited deposits | $(1,205) | $— | | Net Income | $1,408 | $1,714 | | Net income available to common stockholders | $606 | $857 | | Basic & Diluted EPS | $0.01 | $0.02 | | Dividends declared per common share | $0.06 | $0.06 | Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,897 | $15,839 | | Net cash (used in) provided by investing activities | $(14,497) | $5,911 | | Net cash provided by (used in) financing activities | $3,339 | $(17,175) | | Net increase in cash | $739 | $4,575 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's diversified farmland portfolio, Q1 2024 net income decrease, and strong liquidity Overview and Background FPI is a leading institutional owner and manager of high-quality North American farmland, diversified across crop types - As of March 31, 2024, the company owned approximately 134,700 acres and managed an additional 42,700 acres of farmland[157][166] - The portfolio is valued at approximately 70% primary crops (corn, soybeans, etc.) and 30% specialty crops (almonds, citrus, etc.)[158] - Business activities include leasing farmland, providing loans to farmers, and offering agricultural services through its TRS[160][163] Factors That May Influence Future Results of Operations and Farmland Values Future results are influenced by global food demand, commodity prices, rising interest rates, and appreciating land values - The war in Ukraine has disrupted global food trade, stressing supply and supporting high commodity prices, benefiting U.S. farmers[168][169] - High inflation and rising interest rates have increased the cost of the company's floating rate debt and debt with upcoming rate resets[170] - Long-term drivers like global population growth and decreasing arable land per capita are expected to support farmland values and rental rates[171][172][177] - Farmland values have remained strong, with significant rent increases on leases renegotiated in 2021-2023, though appreciation slowed in early 2024[179] Results of Operations Net income decreased to $1.4 million in Q1 2024, primarily due to a swing in asset disposition gains/losses Comparison of Operating Results (in thousands) | Line Item | Q1 2024 | Q1 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $11,990 | $12,672 | $(682) | (5.4)% | | Total operating expenses | $6,843 | $7,835 | $(992) | (12.7)% | | (Gain) loss on disposition of assets, net | $86 | $(1,826) | $1,912 | NM | | (Income) from forfeited deposits | $(1,205) | $— | $(1,205) | NM | | NET INCOME | $1,408 | $1,714 | $(306) | (17.9)% | - The decrease in net income was primarily driven by the absence of a large gain on asset disposition that occurred in Q1 2023[209] - A $1.2 million income from forfeited deposits, resulting from a terminated repurchase agreement, positively impacted Q1 2024 results[209] Liquidity and Capital Resources The company maintains strong liquidity with $178.9 million available on credit lines, despite shifts in cash flow activities - As of March 31, 2024, the company had $178.9 million in availability under its lines of credit[213] Summary of Cash Flows (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash from Operating | $11,897 | $15,839 | | Net cash from Investing | $(14,497) | $5,911 | | Net cash from Financing | $3,339 | $(17,175) | - The company's at-the-market (ATM) offering program expired in April 2024, and it intends to explore additional financing alternatives[214] Non-GAAP Financial Measures Non-GAAP measures like FFO and AFFO improved in Q1 2024, with AFFO rising to $2.8 million from $1.6 million Reconciliation of Net Income to FFO and AFFO (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income | $1,408 | $1,714 | | Adjustments (Depreciation, Gain/Loss on sale) | $1,567 | $(32) | | FFO | $2,975 | $1,682 | | Other Adjustments (Stock comp, etc.) | $(191) | $(132) | | AFFO | $2,784 | $1,550 | Reconciliation of Net Income to Adjusted EBITDAre (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income | $1,408 | $1,714 | | Adjustments (Interest, Tax, D&A, etc.) | $6,622 | $4,901 | | EBITDAre | $8,030 | $6,615 | | Other Adjustments (Stock comp, etc.) | $552 | $473 | | Adjusted EBITDAre | $8,582 | $7,088 | Seasonality The company's business is highly seasonal, with significant rent payments concentrated in the first and fourth quarters - The business is highly seasonal, with a significant portion of rent payments received in the first and fourth quarters[244] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk related to SOFR, with a 1.0% change impacting cash flow by $0.7 million - The primary market risk is interest rate risk tied to SOFR[245] - After accounting for an interest rate swap, the company's floating rate debt exposure is reduced from 26.2% to 17.5% of total debt[246] - A 1.0% change in SOFR is estimated to impact annual cash flow by approximately $0.7 million[246] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[249] - There were no changes in the company's internal controls over financial reporting during Q1 2024 that have materially affected, or are reasonably likely to materially affect, the controls[251] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers readers to Note 8 of the Consolidated Financial Statements for details on legal proceedings - For information on legal proceedings, the report refers to Note 8 of the Consolidated Financial Statements[252] Item 1A. Risk Factors There were no material changes to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There were no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023[253] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales or open market share repurchases occurred in Q1 2024, though shares were acquired for tax withholding - No unregistered sales of equity securities occurred during the quarter[253] - The company did not repurchase any shares of its common stock under its repurchase program during Q1 2024, with $83.3 million of capacity remaining[255] - A total of 15,000 shares were acquired to satisfy tax withholding obligations for employees upon the vesting of restricted stock awards[256] Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None[257] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[257] Item 5. Other Information The company reported no adoptions or modifications of Rule 10b5-1 trading plans during the quarter - None[257] Item 6. Exhibits This section provides an index of exhibits, including CEO and CFO certifications and Inline XBRL data files - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[261] - Financial statements and notes were filed with embedded Inline XBRL tags[260]