Farmland Partners Inc. 2023 Q1 SEC Filing Summary
Business context and reporting period
Farmland Partners Inc. is an internally managed REIT that owns and leases agricultural land throughout North America. As of March 31, 2023, the company owned approximately 163,700 acres, managed approximately 31,000 additional acres, operated 2,108 acres through its taxable REIT subsidiary, and owned land and buildings for four Ohio agricultural equipment dealerships. The filing covers the unaudited three months ended March 31, 2023, compared with the three months ended March 31, 2022.
Financial performance and key metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Total operating revenues | $12.7 million | $13.9 million | Down 8.8% |
| Operating income | $4.8 million | $4.3 million | Up 12.0% |
| Operating margin | 38.2% | 31.1% | Improved |
| Net income | $1.7 million | $1.1 million | Up 50.5% |
| Net income attributable to common stockholders | $0.9 million | $0.2 million | Up $0.6 million |
| EPS, basic and diluted | $0.02 | $0.00 | Improved |
| FFO | $1.7 million | $2.2 million | Down 24.6% |
| AFFO | $1.6 million | $2.1 million | Down 26.9% |
| AFFO per diluted share | $0.03 | $0.04 | Down $0.01 |
| Adjusted EBITDAre | $7.1 million | $6.8 million | Up 4.8% |
Rental income increased 1.5% to $9.7 million, primarily from higher fixed farm rent, partly offset by lower variable rent. Tenant reimbursements rose 33.4% to $1.0 million. Crop sales declined 48.2% to $0.4 million, and other revenue declined 44.7% to $1.6 million, primarily because of lower crop insurance proceeds and auction and brokerage income.
Operating expenses decreased 18.1% to $7.8 million. Legal and accounting expense declined $1.0 million because the prior-year period included costs related to shareholder litigation. General and administrative expense declined 16.0%. These savings more than offset higher property operating expenses and interest expense. Interest expense increased 28.7% to $4.9 million as a result of higher interest rates, partly offset by lower debt balances.
Net cash provided by operating activities was $15.8 million, compared with $10.3 million in the prior-year period. Investing activities provided $5.9 million, including $7.1 million of property-sale proceeds and only $0.1 million of acquisitions. Financing activities used $17.2 million, including $14.6 million of common-stock repurchases, $3.3 million of common dividends, and $3.2 million of Series A preferred-unit distributions. Cash increased to $12.2 million from $7.7 million at December 31, 2022.
Balance sheet, debt and liquidity
- Total assets were $1.15 billion at March 31, 2023, including $1.10 billion of net real estate.
- Mortgage notes and bonds payable, net, were $441.0 million, compared with $436.9 million at December 31, 2022. Principal debt outstanding was $443.6 million.
- Debt maturities were reported as $2.1 million in 2024, $102.1 million in 2025, $84.6 million in 2026, $69.7 million in 2027, and $185.1 million thereafter. No material debt maturities were due before 2025, according to management.
- Cash and undrawn credit-line availability totaled approximately $171.4 million, consisting of $12.2 million of cash and $159.2 million of available lines of credit. The ATM program had approximately $50.5 million of remaining capacity, and the shelf registration statement had approximately $100 million of capacity.
- Approximately 35.3% of debt, or $156.7 million, carried variable interest rates at March 31, 2023. Management estimated that a 1.0% increase in rates would reduce annual cash flow by approximately $1.2 million, assuming unchanged debt spreads.
- The company reported compliance with applicable debt covenants. It had one interest-rate swap with a $33.2 million notional amount and a $1.6 million derivative asset.
Material changes versus the prior comparable period
- Revenue decreased despite modestly higher rental income, due primarily to lower crop sales, crop insurance proceeds, and auction and brokerage revenue.
- Operating income and GAAP net income increased because of lower legal and accounting costs, lower general and administrative expense, and a larger gain on asset dispositions.
- FFO and AFFO declined because the prior-year period benefited from different operating activity and the current period included higher interest expense; the filing presents no single recurring operating explanation for the full decline.
- The company completed one small acquisition for approximately $0.1 million and two dispositions for approximately $7.1 million, recognizing a $1.8 million gain. In Q1 2022, acquisitions totaled $8.0 million and dispositions totaled $4.6 million.
- The company repurchased 1.46 million shares for approximately $14.6 million at a weighted-average price of $9.99 per share. Common shares issued and outstanding declined from 54.3 million at year-end 2022 to 53.1 million at March 31, 2023.
- The common dividend increased to $0.06 per share from $0.05 in the prior-year period. The board subsequently declared another $0.06 per-share dividend payable July 17, 2023.
Guidance, outlook, risks and unusual items
The filing does not provide formal full-year earnings or AFFO guidance. Management expects long-term food demand, limited high-quality farmland supply, and strong agricultural fundamentals to support farmland values and rental rates. Management also expects to continue selective acquisitions, dispositions, share repurchases, and use of debt, equity issuance, and operating cash flow to fund liquidity needs.
Subsequent to quarter-end, the company acquired one farm for $8.9 million, sold three farms for approximately $3.3 million with an aggregate gain of approximately $0.6 million, borrowed net $21.5 million against credit facilities, and repurchased an additional 1.18 million shares at a weighted-average price of $10.75. The company was under contract to sell 11 farms for approximately $42 million, with estimated aggregate gains of $9 million to $11 million, and planned to auction an additional $37 million to $42 million of properties. Management cautioned that auctions and closings may not occur.
Principal risks include higher interest rates and refinancing risk, floating-rate debt exposure, changes in farmland values and rental rates, tenant credit risk, commodity prices, crop yields, drought and other extreme weather, water availability, inflation, geopolitical disruptions including the war in Ukraine, capital-market volatility, and the outcome of ongoing litigation. The company reported no known material business contingencies other than disclosed matters. The appeal of litigation against Sabrepoint remained pending, and the filing states that there were no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether rental-rate growth and lease renewals offset lower variable rent, crop-related revenue, and seasonal volatility later in 2023.
- The effect of higher rates and scheduled repricing on the $443.6 million debt balance, including the planned transition of the Rabobank debt from LIBOR to SOFR.
- Refinancing plans for the $102.1 million of debt maturing in 2025 and the company’s ability to maintain covenant compliance.
- Whether the contracted and planned farm dispositions close at the stated values and estimated gains, including any like-kind-exchange requirements.
- The sustainability of share repurchases and the $0.06 per-share dividend relative to AFFO, debt service, and capital requirements.
- Actual FFO and AFFO trends, recognizing that these are non-GAAP measures and are not substitutes for operating cash flow or liquidity.
- Developments in the Sabrepoint litigation and any resulting financial exposure.