Farmland Partners Inc. 2020 Form 10-K Summary
Business Context and Reporting Period
Annual report for the fiscal year ended December 31, 2020, filed March 19, 2021. Farmland Partners is an internally managed farmland REIT owning approximately 155,000 acres across 16 states, leased to more than 100 tenant farmers producing over 26 commercial crops. Approximately 70% of the portfolio by value supports primary crops and 30% specialty crops. The company also operates a small custom-farming business through its taxable REIT subsidiary and provides secured agricultural loans.
Financial Performance and Key Metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Operating revenues | $50.7 million | $53.6 million | -5.4% |
| Operating income | $22.3 million | $26.3 million | -15.2% |
| Net income | $7.5 million | $14.9 million | -49.3% |
| Net income attributable to the company | $7.1 million | $13.9 million | -48.7% |
| Net loss available to common stockholders | $5.3 million loss | $1.3 million income | Declined to a loss |
| Basic and diluted EPS | $(0.18) | $0.04 | Declined |
| FFO | $12.5 million | $15.3 million | -18.4% |
| AFFO | $1.8 million | $4.4 million | -59.5% |
| AFFO per diluted share | $0.06 | $0.13 | Declined |
| Net cash from operating activities | $19.7 million | $18.0 million | +$1.7 million |
Operating margin was approximately 44.0% in 2020 versus 49.2% in 2019; net margin was approximately 14.9% versus 27.7%. Rental income decreased 9.2% to $43.7 million, while tenant reimbursements increased 15.6% to $3.6 million and crop sales increased 94.5% to $1.9 million. Interest expense declined 9.8% to $17.7 million due to lower rates and debt paydown.
At December 31, 2020, total assets were $1.09 billion, including $1.05 billion of net real estate. Cash and cash equivalents were $27.2 million, compared with $12.6 million at year-end 2019. Outstanding debt principal was approximately $508.2 million, or about 46.6% of total assets, and net mortgage notes and bonds payable were $506.6 million. The filing reports compliance with applicable debt covenants at year-end.
Cash provided by investing activities was $18.7 million, including $20.5 million of property-sale proceeds, partially offset by $0.9 million of acquisitions and $2.7 million of real-estate improvements. Financing activities used $23.7 million, including $59.0 million of debt repayments, $6.8 million of common-stock repurchases, $3.1 million of preferred-stock repurchases and approximately $18.3 million of common, Series A preferred-unit and Series B preferred-stock distributions.
Material Changes Versus 2019
- Revenue and profitability declined primarily because of lower specialty-crop and crop-share revenue, asset dispositions and COVID-19- and trade-related disruption affecting lemons, blueberries and almonds.
- Same-property rental income declined 7.1%, from $45.4 million to $42.2 million.
- Operating expenses increased 4.2% to $28.4 million, mainly because cost of goods sold increased $2.5 million as the company directly operated more acreage.
- Gain on asset sales fell to $3.0 million from $7.8 million in 2019.
- The company completed three acquisitions for $1.4 million and seven dispositions involving eleven farms for approximately $20.5 million, generating a $3.2 million gain.
- Debt activity included a $54.4 million MetLife refinancing used to retire nearer-term obligations. The company repaid $59.0 million of debt and reduced outstanding principal modestly year over year.
- The company repurchased approximately 1.0 million common shares for $6.8 million and 140,000 Series B preferred shares for $3.1 million.
Guidance, Outlook, Commentary, Risks and Unusual Items
Management expects the COVID-19 impact to lessen during the 2021 crop-marketing cycle and believes its effects on profitability will be temporary, although restaurant and bar demand might not approach pre-pandemic levels until mid-to-late 2021 at the earliest. Management reported that tenants generally maintained their financial commitments and expected rents to continue to be collected in full and on time, but acknowledged continuing uncertainty.
Management reported modestly higher rents on primary-row-crop lease renewals and expected rent growth into 2022. Specialty-crop profitability remained under pressure, with base rents generally consistent with or somewhat below 2020 levels. The filing does not provide formal earnings or AFFO guidance.
On January 29, 2021, the maturity of $112.0 million of Rutledge debt was extended from January 1, 2022 to April 1, 2022. The contractual-obligations table shows $114.1 million of principal payments due during 2022-2024, including $112.0 million in 2022. Approximately $174.4 million of debt had floating rates tied to LIBOR, including debt maturing after 2021; LIBOR discontinuation could affect borrowing costs.
Material risks include tenant defaults, weather and crop-price volatility, specialty-crop concentration, short-term lease renewals, substantial secured debt, refinancing and foreclosure risk, interest-rate risk, COVID-19 effects, litigation, environmental liabilities, agricultural-land ownership restrictions and the requirement to maintain REIT status. The company is defending shareholder litigation related to disclosures concerning the FPI Loan Program and is pursuing separate litigation concerning alleged false or misleading short-selling-related publications. The filing states that outcomes and potential damages cannot currently be estimated.
Subsequent events include an agreement to sell twelve opportunity-zone farms and provide management services, the March 2021 sale of nine farms for $18.3 million, additional March dispositions, and a March 2021 gain of $1.8 million on the opportunity-zone sale. These transactions were not reflected in 2020 results.
Important Facts for Investors to Verify
- Whether the company refinances or otherwise funds the $112.0 million Rutledge maturity extended to April 1, 2022.
- Actual 2021 rent collections, lease renewals and realized variable-rent revenue versus management estimates.
- The effect of COVID-19, trade conditions and crop prices on specialty-crop tenants and crop-share revenue.
- Debt covenant compliance, floating-rate exposure and the financial effects of the transition away from LIBOR.
- Potential costs, insurance recoveries and outcomes of the Turner/Mariconda, derivative stockholder and Rota Fortunae litigation.
- Cash proceeds, note terms, management-fee economics and any remaining dispositions under the opportunity-zone agreement.
- Sustainability of common-stock distributions given 2020 AFFO of $1.8 million, annual common distributions of approximately $5.9 million and senior preferred distribution obligations.
- The filing reports no real-estate impairments and effective internal controls at December 31, 2020; investors should confirm these conclusions against subsequent filings and audit disclosures.