Please note that the limited information that follows in this press release is a summary and is not adequate for making an informed investment decision.
Gladstone Land Corporation (NASDAQ:LAND) (“Gladstone Land” or the “Company”) today reported financial results for the first quarter ended March 31, 2022. A description of funds from operations (“FFO”), core FFO (“CFFO”), adjusted FFO (“AFFO”), and net asset value (“NAV”), all non-GAAP (generally accepted accounting principles in the United States) financial measures, appear at the end of this press release. All per-share references are to fully-diluted, weighted-average shares of the Company’s common stock, unless noted otherwise. For further detail, please refer to the Company’s Quarterly Report on Form 10-Q (the “Form 10-Q”), which is available on the Investors section of the Company’s website at www.GladstoneLand.com.
First Quarter 2022 Activity:
• Portfolio Activity-Lease Renewals: Executed seven new lease agreements on certain of our farms in four different states (CA, CO, MI, and NE) that are expected to result in an aggregate decrease in annual net operating income of approximately $580,000 from that of the prior leases. The majority of this decrease is due to one lease renewal pursuant to which we agreed to pay a fixed amount to cover the majority of the farm’s operating expenses in exchange for adding a significant participation rent component to the lease, the result of which will not be known until later in 2022. Excluding this lease renewal, the other lease renewals executed during the quarter are expected to result in an aggregate increase in annual net operating income of approximately $55,000, or 2.8%, from that of the prior leases.
• Debt Activity:
• New Long-term Borrowings: Received approximately $5.1 million in total proceeds from new long-term borrowings secured from two different lenders. On a weighted-average basis, these loans will bear interest at an expected effective interest rate of 3.46% and are fixed for the next 9.2 years.
• MetLife Facility: Increased the size of our credit facility with Metropolitan Life Insurance Company (“MetLife”) through the addition of a new $100.0 million long-term note payable.
• Interest Patronage: Recorded approximately $2.8 million of interest patronage, or refunded interest, related to our 2021 borrowings from various Farm Credit associations (collectively, “Farm Credit”), which resulted in a 29.9% reduction (approximately 137 basis points) to the stated interest rate on such borrowings.
• Equity Activity:
• Series C Preferred Stock: Sold 1,548,931 shares of our 6.00% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) for net proceeds of approximately $35.2 million.
• Common Stock-ATM Program: Sold 310,055 shares of our common stock for net proceeds of approximately $10.3 million under our “at-the-market” program (the “ATM Program”).
• Increased and Paid Distributions: Increased the distribution run rate on our common stock (including OP Units held by non-controlling OP Unitholders) by a total of 0.22% and paid monthly cash distributions totaling $0.1359 per share of common stock during the three months ended March 31, 2022.
First Quarter 2022 Results:
Net income for the quarter was approximately $1.2 million, compared to approximately $2.0 million in the prior quarter. Net loss to common stockholders during the quarter was approximately $2.7 million, or $0.08 per share, compared to approximately $1.4 million, or $0.04 per share, in the prior quarter. AFFO was approximately $6.4 million for the current quarter, compared to $6.7 million in the prior quarter, while AFFO per common share was approximately $0.19 for the current quarter, compared to $0.20 for the prior quarter. Common stock dividends declared were approximately $0.136 per share for both quarters. The decrease in AFFO was primarily driven by higher participation rents recorded during the prior quarter, partially offset by interest patronage recorded during the current quarter.
Total cash lease revenues decreased by approximately $2.7 million, primarily driven by approximately $3.4 million of participation rents recorded during the prior quarter (versus none in the current quarter), partially offset by a quarter-over-quarter increase in fixed base cash rents of approximately $707,000, or 3.8%, primarily due to additional rental receipts from recent acquisitions. Aggregate related-party fees decreased by approximately $409,000 from the prior quarter, primarily driven by a lower incentive fee earned by our investment adviser during the current quarter (due to our pre-incentive fee FFO surpassing the required hurdle rate by a lower margin than in the prior quarter), partially offset by a higher base management fee incurred during the current quarter (due to additional asset acquisitions completed during the prior quarter). Excluding related-party fees, our recurring core operating expenses increased by approximately $416,000 from the prior quarter due to increases in certain property operating expenses and general and administrative costs. The increase in property operating expenses was primarily driven by higher property tax obligations on certain properties and annual state filing fees incurred during the current quarter. General and administrative expenses were higher primarily due to an increase in professional fees, particularly audit and appraisal fees, and additional director fees expensed during the current quarter. The overall decrease in net operating income was partially offset by approximately $2.8 million of interest patronage recorded during the current quarter, versus none in the prior quarter. Additionally, dividends declared on our Series C Preferred Stock increased due to additional stock issuances during and since the prior quarter.
Cash flows from operations for the current quarter decreased by approximately $4.5 million from the prior quarter, primarily due to the timing of when certain rental payments are scheduled to be paid pursuant to their respective leases (particularly with respect to certain participation rent payments), partially offset by interest patronage received during the current quarter from Farm Credit. Our estimated NAV per share increased by $1.23 from the prior quarter to $15.54 at March 31, 2022, primarily driven by a decrease in the fair value of our fixed, long-term borrowings due to increases in market interest rates, valuation increases in certain of our farms that were re-appraised during the current quarter, and common equity issuances at net offering prices above our estimated NAV per common share at December 31, 2021.
Subsequent to March 31, 2022:
• Debt Activity-New Long-term Borrowings: Received $4.8 million in proceeds from new long-term borrowings previously secured from an existing lender. This loan will bear interest at an expected effective interest rate of 2.89% and is fixed for the next 4.9 years.
• Equity Activity:
• Series C Preferred Stock: Sold 665,138 shares of our Series C Preferred Stock for net proceeds of approximately $15.1 million.
• OP Units: Paid approximately $7.7 million to redeem 204,778 OP Units.
• Increased Distributions: Increased our distribution run rate by 0.22%, declaring monthly cash distributions of $0.0454 per share of common stock (including OP Units held by non-controlling OP Unitholders, if any) for each of April, May, and June 2022. This marks our 26th distribution increase over the past 29 quarters, during which time we have increased the distribution run rate by 51.3%.
Comments from David Gladstone, President and CEO of Gladstone Land: “The results this quarter showed the full impact of about $147 million of acquisitions that occurred during the last quarter of 2021. While we were not active on the acquisition front this past quarter, we have been busy replenishing our backlog of potential farm acquisitions. Given the level of uncertainty surrounding the current economic environment, we believe now is a time to be somewhat conservative with our capital and thus have been a bit more selective with our acquisitions recently. However, we do have few farms that we are hopeful of closing on over the next several months. We continue to see appreciation in the value of most of our farms, particularly those in the western U.S. We believe this reflects strongly on our pre-acquisition due diligence process, which always starts with a comprehensive water analysis. We continue to actively monitor the ongoing drought in the western U.S., and all of our farms continue to have sufficient water at this time. We are looking forward to the participation rents coming in towards the end of this year and to another successful year overall.”
