Farmland Partners Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
Farmland Partners Inc. is an internally managed REIT that owns and leases agricultural farmland across North America. As of March 31, 2024, the Company owned approximately 134,700 acres, managed approximately 42,700 additional acres, operated four Ohio agricultural equipment dealerships through financing arrangements, and directly farmed approximately 2,100 California acres through its taxable REIT subsidiary. The portfolio was approximately 70% primary-crop farmland and 30% specialty-crop farmland.
The filing covers the three months ended March 31, 2024. The interim financial statements are unaudited, and management states that quarterly results are not necessarily indicative of full-year results.
Financial performance and key metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total operating revenue | $12.0 million | $12.7 million | Down 5.4% |
| Rental income | $10.2 million | $10.7 million | Down 4.8% |
| Crop sales | $0.7 million | $0.4 million | Up 83.3% |
| Operating expenses | $6.8 million | $7.8 million | Down 12.7% |
| Net income | $1.4 million | $1.7 million | Down 17.9% |
| Net income attributable to common stockholders | $0.6 million | $0.9 million | Down 29.3% |
| Basic and diluted EPS | $0.01 | $0.02 | Declined |
| FFO | $3.0 million | $1.7 million | Up 76.9% |
| AFFO | $2.8 million | $1.6 million | Up 79.6% |
| AFFO per diluted share | $0.06 | $0.03 | Up |
| Adjusted EBITDAre | $8.6 million | $7.1 million | Up 21.1% |
The implied operating margin was approximately 42.9% in Q1 2024 versus 38.2% in Q1 2023; the implied net margin was approximately 11.7% versus 13.5%. FFO, AFFO and Adjusted EBITDAre are non-GAAP measures and include approximately $1.2 million of income from forfeited deposits in Q1 2024.
Net cash provided by operating activities was $11.9 million, compared with $15.8 million in Q1 2023. Investing cash flow was negative $14.5 million, primarily reflecting $16.3 million of farmland acquisitions. Financing cash flow was positive $3.3 million, including $30.0 million of mortgage borrowings, $10.1 million of debt repayments, $13.0 million of common dividends, and $3.0 million of Series A preferred-unit distributions. Cash increased to $6.2 million from $5.5 million at December 31, 2023.
At March 31, 2024, total real estate assets at cost were $1.010 billion and total real estate, net, was $976.8 million. Mortgage notes and bonds payable, net, were $380.9 million, against total assets of $1.031 billion and total equity of $526.7 million. The Company reported $178.9 million of undrawn line availability and $31.2 million of net loans and financing receivables.
The common dividend remained $0.06 per share for the quarter. The Board subsequently declared another $0.06 per-share dividend payable July 15, 2024.
Material changes versus the prior comparable period
- Revenue declined primarily because of 2023 property dispositions and lower crop-insurance proceeds, auction and brokerage revenue, and tenant reimbursements.
- Crop sales increased because of higher walnut sales from directly operated properties.
- Operating expenses decreased because of lower depreciation, property taxes, insurance, repairs and cost of goods sold.
- Interest expense increased modestly to $5.0 million from $4.9 million despite changes in the debt portfolio.
- The Company completed three Corn Belt acquisitions for aggregate consideration of $16.3 million, compared with one acquisition totaling $0.1 million in Q1 2023.
- No property dispositions occurred in Q1 2024. Q1 2023 included $7.1 million of property-sale proceeds and a $1.8 million gain.
- Q1 2024 included $1.2 million of income from forfeited deposits and an $0.8 million lease termination fee related to a terminated repurchase option.
- Debt increased from $360.9 million at December 31, 2023 to $380.9 million at March 31, 2024, primarily reflecting new borrowings used in part to fund acquisitions.
- Weighted-average common shares declined to 47.7 million from 54.0 million, largely affecting per-share comparisons.
Guidance, outlook, risks and unusual items
The filing does not provide formal earnings or revenue guidance. Management expects to continue selectively acquiring farmland, disposing of assets when capital can be redeployed advantageously, making agricultural loans, and exploring additional equity financing. The prior ATM program and shelf registration statement expired April 9, 2024; management expects to file another shelf registration statement and may establish a new ATM program.
Management believes liquidity is supported by operating cash flow, $6.2 million of cash, $178.9 million of undrawn credit availability, potential borrowings, equity issuances and asset dispositions. The Company states that it has no material debt maturities before 2025 and has historically refinanced or extended maturing obligations. Subsequent to quarter-end, it borrowed $5.0 million under its credit facilities.
Interest-rate exposure remains material. Approximately $100.4 million, or 26.2%, of debt was floating-rate before considering the $33.2 million Rabobank interest-rate swap; adjusted floating-rate exposure was 17.5% of total debt. Management estimates that a 1.0% increase in SOFR would reduce annual cash flow by approximately $0.7 million. Debt agreements generally include covenants, including loan-to-value requirements; the Company reported compliance at March 31, 2024.
Key operating risks include lower commodity prices, tenant financial stress, extreme weather, drought and water restrictions, changing agricultural trade policies, elevated interest rates, farmland-value declines, refinancing risk, capital-market volatility and geopolitical disruptions. Approximately 31.1% of owned acres and 31.5% of annual fixed rents expire during the remaining nine months of 2024; approximately 32.5% of acres and 28.2% of fixed rents expire in 2026.
The Company is pursuing litigation against Sabrepoint defendants concerning an alleged 2018 “short and distort” scheme. The Texas Supreme Court requested merits briefing on the defendants’ petition for review. The Company states that it is not subject to other known material contingencies or litigation, but the ultimate outcome and potential financial impact of the Sabrepoint matter are not clear from the filing.
Most important facts for investors to verify
- Whether the $1.2 million forfeited-deposit income is nonrecurring and how much of Q1 AFFO and Adjusted EBITDAre it represents.
- The tenant-renewal and rent-reset results for the 41,941 acres expiring in 2024 and the 43,809 acres expiring in 2026.
- Refinancing plans and pricing for $80.0 million of Farmer Mac debt maturing or requiring attention in 2025, as well as other 2025 maturities totaling approximately $80.0 million.
- The effect of elevated SOFR and scheduled interest-rate resets, including the May 2024 repricing of MetLife Term Loan #9 to 6.37%.
- Progress on replacing the expired shelf registration statement and ATM program.
- The status, legal costs and potential exposure associated with the Sabrepoint litigation.
- The quality and valuation of the three newly acquired Corn Belt properties and the Company’s ability to maintain leverage and covenant compliance.
- Reconciliation and comparability of non-GAAP FFO, AFFO and Adjusted EBITDAre, particularly because Q1 2024 benefited from the forfeited-deposit item.