GLADSTONE LAND CORPORATION All statements contained herein, other than historical facts, may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements may relate to, among other things, future events or our future performance or financial condition. In some cases, you can identify forward-looking statements by terminology such as "may," "might," "believe," "will," "provided," "anticipate," "future," "could," "growth," "plan," "intend," "expect," "should," "would," "if," "seek," "possible," "potential," "likely," or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our business, financial condition, liquidity, results of operations, funds from operations or prospects to be materially different from any future business, financial condition, liquidity, results of operations, funds from operations or prospects expressed or implied by such forward-looking statements. For further information about these and other factors that could affect our future results, please see the captions titled "Forward-Looking Statements" and "Risk Factors" in this report and our Annual Report on Form 10-K for the year endedDecember 31, 2019 (the "Form 10-K"). We caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q (the "Quarterly Report"), except as required by law. All references to "we," "our," "us" and the "Company" in this Quarterly Report meanGladstone Land Corporation and its consolidated subsidiaries, except where it is made clear that the term refers only toGladstone Land Corporation . OVERVIEW General We are an externally-managed, agricultural real estate investment trust ("REIT") that is engaged in the business of owning and leasing farmland. We are not a grower of crops, nor do we typically farm the properties we own. We currently own 115 farms comprised of 89,128 acres located across 10 states in theU.S. We also own several farm-related facilities, such as cooling facilities, packinghouses, processing facilities, and various storage facilities. We conduct substantially all of our activities through, and all of our properties are held, directly or indirectly, by,Gladstone Land Limited Partnership (the "Operating Partnership").Gladstone Land Corporation controls the sole general partner of theOperating Partnership and currently owns, directly or indirectly, 100.0% of the units of limited partnership interest in theOperating Partnership ("OP Units"). In addition, we have elected forGladstone Land Advisers, Inc. ("Land Advisers"), a wholly-owned subsidiary of ours, to be treated as a taxable REIT subsidiary ("TRS").Gladstone Management Corporation (our "Adviser") manages our real estate portfolio pursuant to an advisory agreement, andGladstone Administration, LLC (our "Administrator"), provides administrative services to us pursuant to an administration agreement. Our Adviser and our Administrator collectively employ all of our personnel and directly pay their salaries, benefits, and general expenses. Impact of COVID-19 on our Business and Operations The novel coronavirus ("COVID-19") pandemic continues to evolve and is currently impacting most countries, communities, and markets. InJune 2020 , theNational Bureau of Economic Research officially declared thatthe United States economy had fallen into a recession. Global recessionary conditions are currently expected for the remainder of 2020 as a direct result of the COVID-19 pandemic, although the actual impact and duration are unknown. Much ofthe United States economy is now in the process of re-opening, but at the same time, the COVID-19 pandemic is intensifying in many areas of the country. The extent to which the COVID-19 pandemic may impact our business, financial condition, liquidity, results of operations, or prospects will depend on numerous evolving factors that are out of our control and that we are not able to predict at this time, including, but not limited to: (i) the nature, duration, and scope of the pandemic; (ii) governmental, business, and individuals' actions that have been and continue to be taken in response to the pandemic; (iii) the impact on economic activity from the pandemic (including the effect on market rental rates and farmland values, if any) and actions taken in response; (iv) the effect on our tenants and their farming operations, including any disruptions that would impact their ability to make rental payments to us (including, but not limited to, labor shortages and supply chain disruptions); and (v) the impact on credit markets and our ability to continue to secure debt financing. 31
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We do not believe that the ongoing COVID-19 pandemic has materially affected our operations or those of our tenants at this point in time. Most of our farmers initially experienced increased sales volumes and higher-than-average prices because the pandemic led the public to stockpile food and other necessities. However, such volumes and prices have recently returned to more normalized levels. InJuly 2020 , we granted extensions of up to 123 days to two tenants who owed semi-annual rental payments totaling approximately$343,000 (approximately 0.7% of annual portfolio cash rents). These payments were originally scheduled to be paid onJuly 1, 2020 , and the rent deferrals we granted to these tenants extend the new due dates to be on or beforeNovember 1, 2020 , with all other terms of the existing lease agreements remaining unchanged. Additional time was granted to these tenants due to delays in payments owed to them from their respective processors, which were primarily caused by the strict government-mandated lockdowns in the state ofMichigan in response to COVID-19. In addition, we are currently awaiting payment from one other tenant who owed an annual rental payment of approximately$53,000 (approximately 0.1% of annual portfolio cash rents) inJuly 2020 . The delay in this payment is primarily due to a delay in our farmer's receipt of certain insurance payouts, which are expected to be settled duringAugust 2020 , at which time we would expect to collect the rent owed to us. Based on the payment histories and current operational statuses of each of the respective tenants, we currently anticipate being able to collect these rental payments in full within the aforementioned timeframes. We have not received any further requests from tenants seeking relief as a result of COVID-19, and all other tenants are current in their rental payments to us. While we do not currently anticipate any additional requests from tenants for rent deferrals, if we do receive additional rent relief requests in the future from tenants that have directly been materially and adversely impacted by the ongoing COVID-19 pandemic, as assessed by us, in exchange for granting any such relief, we intend to seek certain favorable lease modification terms in exchange for granting such relief, if any, including, but not limited to, extended lease terms, increased rent, and near-term rent deferral repayments. In addition, if we were to grant any rent deferrals or modifications, we anticipate that any such agreements would include partial payments in exchange for rent deferrals of varying terms, with all deferred amounts to be paid back to us over a specified, short-term period. At this time, we are unable to quantify the success of any tenant's financial prospects, the amount of any future relief requests from tenants, or the outcome of any future relief package negotiations, if such relief is granted. In addition, while public equity markets have experienced significant volatility lately, we do not believe there will be a credit freeze in agricultural lending in the near term that will have a material adverse impact on us. Further, we are in compliance with all of our debt covenants, and we believe we currently have adequate liquidity to cover all near-term debt obligations and operating expenses. We currently expect values of our farmland portfolio to remain stable, and with the exception of the rent deferrals granted to the two aforementioned tenants inJuly 2020 , we expect rental payments to continue to be paid on time for at least the foreseeable future. However, we will continue to monitor the overall situation and our portfolio and may take actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our personnel, tenants, or stockholders. There can be no assurance that our business and financial and operational results will not be impacted by the COVID-19 pandemic or that we will be able to pay distributions to our stockholders in the future at the same rate, or at all. Portfolio Diversity Since our initial public offering inJanuary 2013 (the "IPO"), we have expanded our portfolio from 12 farms leased to 7 different, unrelated tenants to a current portfolio of 115 farms leased to 70 different, unrelated third-party tenants who grow over 45 different types of crops on our farms. While our focus remains in farmland suitable for growing fresh produce annual row crops, we have also diversified our portfolio into farmland suitable for other crop types, including permanent crops (e.g., almonds, blueberries, pistachios, and wine grapes) and, to a lesser extent, certain commodity crops (e.g., beans and corn). The acquisition of additional farms since our IPO has also allowed us to further diversify our portfolio geographically. The following table summarizes the different geographic locations (by state) of our farms owned and with leases in place as of and for the six months endedJune 30, 2020 and 2019 (dollars in thousands): 32
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As of and For the six months ended June 30, 2020 As of and For the six months ended June 30, 2019
Number % of % of Total Number % of % of Total
of Total Total Lease Lease of Total Total Lease Lease
State Farms Acres Acres Revenue Revenue Farms Acres Acres Revenue Revenue
California(1) 43 15,420 17.3% $ 13,815 49.5% 35 11,617 15.3% $ 7,906 48.8%
Florida 23 20,770 23.3% 6,669 23.9% 22 17,184 22.6% 4,689 29.0%
Arizona 6 6,280 7.1% 3,805 13.6% 6 6,280 8.3% 1,077 6.7%
Colorado 12 32,773 36.8% 1,662 6.0% 10 31,448 41.4% 1,411 8.7%
Nebraska 9 7,782 8.7% 762 2.7% 3 3,254 4.3% 162 1.0%
Michigan 15 962 1.1% 384 1.4% 15 962 1.3% 89 0.5%
Oregon 3 418 0.5% 263 0.9% 3 418 0.6% 257 1.6%
Washington 1 746 0.8% 245 0.9% 1 746 1.0% 245 1.5%
Texas 1 3,667 4.1% 225 0.8% 1 3,667 4.8% 263 1.6%
North Carolina 2 310 0.3% 88 0.3% 2 310 0.4% 93 0.6%
TOTALS 115 89,128 100.0% $ 27,918 100.0% 98 75,886 100.0% $ 16,192 100.0%
(1) According to the
and Rural Appraisers, there are eight distinct growing regions within
We believe that our geographic diversity mitigates our exposure to certain economic issues (including those as a result of COVID-19) in any one geographic market or area. LeasesGeneral Most of our leases are on a triple-net basis, an arrangement under which, in addition to rent, the tenant is required to pay the related taxes, insurance costs, maintenance, and other operating costs. Our leases generally have original terms ranging from 3 to 10 years for farms growing row crops and 7 to 15 years for farms growing permanent crops (in each case, often with options to extend the lease further). Rent is generally payable to us in advance on either an annual or semi-annual basis, with such rent typically subject to periodic escalation clauses included within the lease. Currently, 89 of our farms are leased on a pure, triple-net basis and 26 farms are leased on a partial-net basis (with us, as landlord, responsible for all or a portion of the related property taxes). In the past, certain of our leases had been on a single-net basis, with us, as landlord, responsible for the related property taxes, as well as certain maintenance, repairs, and insurance costs. Additionally, 29 of our farms are leased under agreements that include a participation rent component based on the gross revenues earned on the respective farms. Lease Expirations Agricultural leases are often shorter term in nature (relative to leases of other types of real estate assets), so in any given year, we may have multiple leases up for extension or renewal. The following table summarizes the lease expirations by year for the farms owned and with leases in place as ofJune 30, 2020 (dollars in thousands): Number of Expiring Lease Revenues for the % of Total Expiring Leased % of Total Six Months Ended Lease Year Leases(1) Acreage Acreage June 30, 2020 Revenues 2020 4 24,531 27.5% $ 1,381 4.9% 2021 10 (2) 8,849 9.9% 1,343 4.8% 2022 3 330 0.4% 383 1.4% 2023 9 6,171 6.9% 2,936 10.5% 2024 5 6,243 7.0% 1,143 4.1% Thereafter 45 43,004 48.3% 17,869 64.0% Other(3) 7 - -% 2,863 10.3% Totals 83 89,128 100.0% $ 27,918 100.0% (1) Certain lease agreements encompass multiple farms.
(2) Includes two leases that were renewed for an additional two years subsequent
to
Properties-Leasing Activity" below for a summary of this and other recent
leasing activities).
(3) Consists of ancillary leases (e.g., oil, gas, and mineral leases,telecommunications leases, etc.) with varying expirations on certain of our
farms. In addition, includes a net amount of approximately
lease revenue recorded as a result of an early lease termination on one of
our properties (see below, under "Recent Developments-Portfolio
Activity-Existing Properties-Leasing Activity-Lease Termination" for
additional information).
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We currently have four agricultural leases scheduled to expire within the next six months (two on farms located inCalifornia and two on farms located inColorado ). We are currently in negotiations with the existing tenants on each of the farms, as well as other potential tenants, and we anticipate being able to renew each of the lease at their respective current market rental rates without incurring any downtime on any of the farms. Compared to the respective existing leases, we currently anticipate an increase in rental rates on theCalifornia lease renewals, while theColorado leases are expected to be renewed at lower rental rates. Regarding all upcoming lease expirations, there can be no assurance that we will be able to renew the existing leases or execute new leases at rental rates favorable to us, if at all, or be able to find replacement tenants, if necessary. Recent Developments Portfolio Activity Property Acquisitions SinceApril 1, 2020 , through the date of this filing, we have acquired two farms, which are summarized in the table below (dollars in thousands, except for footnotes): Total Annualized Property Property Acquisition Total No. of Primary Lease Renewal Purchase Acquisition Straight-line Name Location Date Acreage Farms Crop(s) Term Options Price Costs(1) Rent(2) Potatoes, Lamar Valley Chase, NE 5/7/2020 678 1 edible 6.7 years 2 (5 years)$ 3,500 $ 47 $ 204 beans, & corn Driver Road(3) Kern, CA 6/5/2020 590 1 Pecans 4.7 years 2 (10 years) 14,169 53 784 1,268 2$ 17,669 $ 100 $ 988
(1) Includes approximately
with negotiating and originating the leases associated with these
acquisitions, which costs were expensed in the period incurred.
(2) Annualized straight-line rent is based on the minimum cash rental payments
guaranteed under the applicable leases, as required under GAAP, and excludes
contingent rental payments, such as participation rents.
(3) The lease provides for an initial term of 14.7 years and includes six tenant
termination options throughout the initial term. The lease term stated above
represents the term through the first available termination option, and the
annualized straight-line rent amount represents the rent guaranteed through
the noncancelable term of the lease.
Existing Properties Property Add-on In connection with the acquisition of a 366-acre vineyard located inNapa, California ("Withers Road"), onAugust 28, 2019 , we committed to provide up to approximately$4.0 million as additional compensation, contingent upon the County ofNapa approving the planting of additional vineyards on up to 47 acres of the property byFebruary 25, 2020 (the "Permit Deadline"). In addition, if approval was obtained, we also committed to contribute up to$40,000 per approved acre for the development of such vineyards. While approval of the additional plantings was not received from the County ofNapa by the Permit Deadline, inMarch 2020 , we executed an agreement with the tenant onWithers Road to extend the Permit Deadline untilAugust 24, 2020 . InApril 2020 , we received notification from the County ofNapa informing us that it had approved of additional vineyard plantings on 38.7 acres of the property. As such, inMay 2020 , we paid additional compensation related to this acquisition of approximately$3.2 million . As a result, and pursuant to a lease amendment, we will earn additional straight-line rental income of approximately$335,000 per year throughout the remaining term of the lease, which expires onDecember 31, 2029 . We will also earn additional rent on any of the aforementioned development costs as they are incurred by us. Leasing Activity The following table summarizes certain leasing activity that has occurred on our existing properties sinceApril 1, 2020 , through the date of this filing (dollars in thousands, except for footnotes): PRIOR LEASES NEW LEASES Total # of Leases Lease Total # of Leases Lease Number Total Annualized with Structures Annualized Wtd. Avg. with Structures Farm of Farm Straight-line Participation (# of
NNN Straight-line Term Participation (# of NNN
Locations Leases Acres Rent(1) Rents / NN / N)(2) Rent(1) (Years) Rents / NN / N)(2) CA & FL 3 316 $ 719 0 3 / 0 / 0 $ 891 7.2 0 3 / 0 / 0
(1) Annualized straight-line rent is based on the minimum cash rental payments
guaranteed under the applicable leases (presented on an annualized basis),
as required under GAAP, and excludes contingent rental payments, such as
participation rents.
(2) "NNN" refers to leases under triple-net lease arrangements, "NN" refers to
leases under partial-net lease arrangements, and "N" refers to leases under
single-net lease arrangements, in each case, as described above under
"Leases-General."
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Financing Activity Debt Activity SinceApril 1, 2020 , through the date of this filing, we have incurred the following new, long-term borrowings (dollars in thousands, except for footnotes; for further discussion on certain defined terms used below, refer to Note 4, "Borrowings," within the accompanying notes to our condensed consolidated financial statements): Expected Stated Effective Date of Principal Maturity Principal Interest Interest
Lender Issuance Amount Date Amortization Rate Rate(1)
Fixed through December
Credit, FLCA 5/14/2020 4,500,000 1/1/2045 24.6 years 4.00% 3.00% 31, 2029 (variable
thereafter)
Conterra
Fixed through July 31 ,
West, FLCA
thereafter)
Farm Credit Fixed through August
West, FLCA
thereafter)
Farm Credit Fixed through June 30,
West, FLCA 6/25/2020 8,500,000 11/1/2045 25.0 years 3.75% 2.75% 2030 (variable
thereafter)
(1) On borrowings from the various
patronage, or refunded interest, which is typically received in the calendar
year following the year in which the related interest expense was accrued.
The expected effective interest rates reflected in the table above are the
interest rates net of expected interest patronage, which is based on either
historical patronage actually received (for pre-existing lenders whom we
have received interest patronage from) or indications from the respective
lenders of estimated patronage to be paid (for new lenders). See Note 4,
"Borrowings," in the accompanying notes to our condensed consolidated
financial statements for additional information on interest patronage
received in current and prior years.
Equity Activity
Series C Preferred Stock
On April 3, 2020 , we filed a new prospectus supplement (which superseded and
replaced a previously-filed prospectus supplement) with the SEC for a continuous
public offering (the "Series C Offering") of up to 26,000,000 shares of our
newly-designated 6.00% Series C Cumulative Redeemable Preferred Stock (the
"Series C Preferred Stock"). Under the Series C Offering, we may sell up to
20,000,000 shares of our Series C Preferred Stock on a "reasonable best efforts"
basis through Gladstone Securities at an offering price of $25.00 per share (the
"Primary Series C Offering") and up to 6,000,000 additional shares of our Series
C Preferred Stock pursuant to our dividend reinvestment plan (the "DRIP") to
those holders of the Series C Preferred Stock who do not elect to opt-out of
such plan.
Assuming all shares of the Series C Preferred Stock are sold in both the Primary
Series C Offering and through the DRIP, we expect the Series C Offering to
result in gross proceeds of up to $636.5 million and net proceeds, after
deducting selling commissions, dealer-manager fees, and estimated expenses of
the offering payable by us, of up to approximately $591.5 million . We intend to
use the net proceeds from the Series C Offering to repay existing indebtedness,
to fund future acquisitions, and for other general corporate purposes.
See Note 6, "Related-Party Transactions-Gladstone Securities-Series C
Dealer-Manager Agreement," within the accompanying notes to our condensed
consolidated financial statements for more details on the dealer-manager
agreement entered into with Gladstone Securities in connection with the Series C
Offering.
The following table summarizes the sales of our Series C Preferred Stock that
occurred since April 1, 2020 , through the date of this filing (dollars in
thousands, except per-share amounts and footnotes):
Number of Weighted-average
Shares Sold Sales Price per Share Gross Proceeds Net Proceeds(1)
278,384 $ 24.93 $ 6,940 $ 6,333
(1) Net of selling commissions and dealer-manager fees borne by us. Aggregate
selling commissions and dealer-manager fees paid to
a result of these sales was approximately
involved in the offering, such as participating broker-dealers and
wholesalers).
The Primary Series C Offering will terminate on the date (the "Series C Termination Date") that is the earlier of eitherJune 1, 2025 (unless terminated earlier or extended by our Board of Directors), or the date on which all 20,000,000 shares in the Primary Series C Offering are sold. There is currently no public market for shares of the Series C Preferred Stock; however, we intend to apply to list the Series C Preferred Stock on Nasdaq or another national securities exchange within one calendar year after the Series C Termination Date, though there can be no assurance that a listing will be achieved in such timeframe, or at all. 35
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Common Stock At-the-Market Program OnMay 12, 2020 , we terminated the Prior ATM Program (as defined in Note 8, "Equity-Equity Issuances-Common Stock-At-the-Market-Program," within the accompanying notes to our condensed consolidated financial statements) and entered into new equity distribution agreements withVirtu Americas, LLC , andLadenburg & Co., Inc. (each a "Sales Agent"), under which we may issue and sell, from time to time and through new Sales Agents, shares of our common stock having an aggregate offering price of up to$100.0 million (the "Current ATM Program," and collectively with the Prior ATM Program, the "ATM Programs"). The following table summarizes the activity under the Current ATM Program fromApril 1, 2020 , through the date of this filing (dollars in thousands): Number of Weighted-average Shares Sold Offering Price per Share Gross Proceeds Net Proceeds(1) 388,054 $ 16.23 $ 6,298 $ 6,235
(1) Net of underwriter commissions and discounts.
LIBOR Transition
The majority of our debt is at fixed rates, and we currently have very limited
exposure to variable-rate debt based upon the London Interbank Offered Rate
("LIBOR"), which is anticipated to be phased out during late 2021. LIBOR is
currently expected to transition to a new standard rate, the Secured Overnight
Financing Rate ("SOFR"), which will incorporate certain overnight repo market
data collected from multiple data sets. The current intent is to adjust the SOFR
to minimize the differences between the interest that a borrower would be paying
using LIBOR versus what it will be paying SOFR. We are currently monitoring the
transition and cannot yet assess whether SOFR will become a standard rate for
variable-rate debt. However, as our lines of credit with MetLife are currently
based upon one-month LIBOR, we expect we will need to renegotiate this agreement
in the future. Assuming that SOFR replaces LIBOR and is appropriately adjusted,
we expect the transition to result in a minimal impact to our overall
operations.
Our Adviser and Administrator
We are externally managed pursuant to contractual arrangements with our Adviser
and our Administrator (both affiliates of ours), which collectively employ all
of our personnel and pay their salaries, benefits, and general expenses
directly. The investment advisory agreement with our Adviser that was in effect
through March 31, 2017 , and the current administration agreement with our
Administrator (the "Administration Agreement") each became effective February 1,
2013 . The advisory agreement with our Adviser that was in effect through June
30, 2019 (the "Prior Advisory Agreement"), was amended and restated on July 9,
2019 (as amended, the "2019 Advisory Agreement"), and again amended and restated
on January 14, 2020 (as amended, the "2020 Advisory Agreement," and, together
with the Prior Advisory Agreement and the 2019 Advisory Agreement, the "Advisory
Agreements"). The Administration Agreement and each of the Advisory Agreements
were approved unanimously by our board of directors, including our independent
directors.
A summary of the 2019 Advisory Agreement is provided in Note 6 to our
consolidated financial statements included in our Form 10-K. A summary of the
compensation terms for each of the Prior Advisory Agreement, the 2020 Advisory
Agreement, and the Administration Agreement is below.
Advisory Agreements
Pursuant to each of the Prior Advisory Agreement (which was in effect from April
1, 2017 , through June 30, 2019 ), the 2019 Advisory Agreement (which was in
effect from July 1, 2019 , through December 31, 2019 ), and the 2020 Advisory
Agreement (which has been in effect since January 1, 2020 ), our Adviser is
compensated in the form of a base management fee and, each as applicable, an
incentive fee, a capital gains fee, and a termination fee. Our Adviser does not
charge acquisition or disposition fees when we acquire or dispose of properties,
as is common in other externally-managed REITs. The 2019 Advisory Agreement
modified the calculation of the base management and incentive fees to exclude
preferred equity from such calculations, while the capital gains and termination
fees remained unchanged. The 2020 Advisory Agreement revised and replaced the
previous calculation of the base management fee, which was previously based on
equity, with a calculation based on gross real estate assets (in each case, as
further described below), while all other fees remained unchanged. The base
management and incentive fees are described below. For information on the
capital gains and termination fees, refer to Note 6, "Related-Party
Transactions-Our Adviser and Administrator-Advisory Agreements," within the
accompanying notes to our condensed consolidated financial statements.
Base Management Fee
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Pursuant to the Prior Advisory Agreement, a base management fee was paid
quarterly and was calculated as 2.0% per annum (0.50% per quarter) of the
calendar quarter's total adjusted equity, which was defined as total equity plus
total mezzanine equity, if any (each as reported on our balance sheet), adjusted
to exclude unrealized gains and losses and certain other one-time events and
non-cash items ("Total Adjusted Equity").
Under the 2020 Advisory Agreement, a base management fee is paid quarterly and
is calculated at an annual rate of 0.50% (0.125% per quarter) of the prior
calendar quarter's "Gross Tangible Real Estate ," defined as the gross cost of
tangible real estate owned by us (including land and land improvements,
irrigation and drainage systems, horticulture, farm-related facilities, and
other tangible site improvements), prior to any accumulated depreciation, and as
shown on our balance sheet or the notes thereto for the applicable quarter.
Relevant to prior agreements with our Adviser, which calculated the management
fee based on an equity component, management believes the updated fee
calculation pursuant to the 2020 Advisory Agreement provides for a more direct
correlation between the fee paid to our Adviser and the assets our Adviser is
responsible for managing. The following table compares what the historical base
management fee has been on an actual basis for the years ended December 31,
2019 , 2018, and 2017, versus what it would have been had the 2020 Advisory
Agreement been in place during each of those years (dollars in thousands):
For the Years
Ended
2019 2018 2017
Actual gross base management fee(1) $ 3,623 $ 2,837 $ 2,041
Hypothetical gross base management
fee(2) 3,150 2,433 2,010
Hypothetical increase (decrease) in
base management fee $ (473 ) $
(404 )
(1) Actual figures calculated pursuant to the agreements with our Adviser in
place during the respective periods.
(2) Calculated as if the 2020 Advisory Agreement had been in place as of January
1, 2017.
In addition, had the 2019 Advisory Agreement been in place during the three and six months endedJune 30, 2020 , the hypothetical base management fee would have been approximately$884,000 and$1.8 million , respectively, as compared to the actual base management fee calculated under the 2020 Advisory Agreement of approximately$1.0 million and$2.1 million , respectively. We are unable to project the impact of the 2020 Advisory Agreement on the base management fee going forward and how it might compare to that of the 2019 Advisory Agreement or the Prior Advisory Agreement, as we are unable to estimate the amount of equity to be issued or new tangible assets to be acquired in future periods. During the three and six months endedJune 30, 2019 , our Adviser granted us certain non-contractual, unconditional, and irrevocable waivers (as discussed further below, under "-Results of Operations-Operating Expenses-Related-Party Fees"), which were applied as credits against the base management fee for the period. We did not have any such waivers for the three or six months endedJune 30, 2020 . Incentive Fee Pursuant to the Prior Advisory Agreement, an incentive fee was calculated and payable quarterly in arrears if the Pre-Incentive Fee FFO for a particular quarter exceeded a hurdle rate of 1.75% (7.0% annualized) of the prior calendar quarter's Total Adjusted Equity. Under the 2020 Advisory Agreement, an incentive fee is calculated and payable quarterly in arrears if the Pre-Incentive Fee FFO for a particular quarter exceeds a hurdle rate of 1.75% (7.0% annualized) of the prior calendar quarter's "Total Adjusted Common Equity," defined as common stockholders' equity plus non-controlling common interests in theOperating Partnership , if any (each as reported on our balance sheet), adjusted to exclude unrealized gains and losses and certain other one-time events and non-cash items. For purposes of the calculation of the Incentive Fee, Pre-Incentive Fee FFO was defined in each of the Advisory Agreements as FFO (also as defined in each of the Advisory Agreements) accrued by the Company during the current calendar quarter (prior to any incentive fee calculation for the current calendar quarter), less any dividends paid on preferred stock securities that were not treated as a liability for GAAP purposes. Our Adviser would receive: (i) no Incentive Fee in any calendar quarter in which the Pre-Incentive Fee FFO did not exceed the hurdle rate; (ii) 100% of the Pre-Incentive Fee FFO with respect to that portion of such Pre-Incentive Fee FFO, if any, that exceeded the hurdle rate but was less than 2.1875% in any calendar quarter (8.75% annualized); and (iii) 20% of the amount of the Pre-Incentive Fee FFO, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized). Critical Accounting Policies The preparation of our financial statements in accordance withU.S. generally accepted accounting principles ("GAAP") requires management to make judgments that are subjective in nature to make certain estimates and assumptions. Application 37
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of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and, as a result, actual results could materially differ from these estimates. A summary of our significant accounting policies is provided in Note 2 to our consolidated financial statements in our Form 10-K. There were no material changes to our critical accounting policies during the six months endedJune 30, 2020 . Smaller Reporting Company Status We currently qualify as a "smaller reporting company" under Rule 12b-2 of the Exchange Act, which is defined as a company with a public equity float of less than$250 million or less than$100 million in annual revenues for the previous year and no public float. Companies can also qualify as a smaller reporting company if they have annual revenues of less than$100 million for the previous year and a public float of less than$700 million . As a smaller reporting company, we have reduced disclosure requirements for our public filings, including the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. RESULTS OF OPERATIONS For the purposes of the following discussions on certain operating revenues and expenses: • With regard to the comparison between the three months endedJune 30, 2020
versus 2019:
• Same-property basis represents farms owned as of
were not vacant at any point during either period presented;
• Properties acquired or disposed of are farms that were either acquired
or disposed of at any point subsequent to
2019, through
any farm dispositions; and
• Vacant or self-operated properties represent farms that were either
vacant (either wholly or partially) at any point during either period
presented or operated by a wholly-owned subsidiary of ours. We did not
have any vacant farms during either of the three months ended
2020 or 2019.
• With regard to the comparison between the six months ended
versus 2019:
• Same-property basis represents farms owned as of
were not vacant at any point during either period presented;
• Properties acquired or disposed of are farms that were either acquired
or disposed of at any point subsequent to December 31, 2018 . From
January 1, 2019 , through June 30, 2020 , we acquired 30 new farms and
did not have any farm dispositions; and
• Vacant or self-operated properties represent farms that were either
vacant (either wholly or partially) at any point during either period
presented or operated by a wholly-owned subsidiary of ours. We had two
farms that were vacant for a portion of the six months ended June 30,
2019 .
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A comparison of our operating results for the three and six months ended
For the Three Months Ended June 30,
2020 2019 $ Change % Change
Operating revenues:
Lease revenue:
Fixed lease payments $ 12,350 $ 8,332 $ 4,018 48.2%
Variable lease payments - participation
rents 44 - 44 NM
Variable lease payments - tenant
reimbursements 244 30 214 713.3%
Total operating revenues 12,638 8,362 4,276 51.1%
Operating expenses:
Depreciation and amortization 3,843 2,936 907 30.9%
Property operating expenses 717 586 131 22.4%
Base management and incentive fees, net
of credits 1,047 - 1,047 NM
Administration fee 357 250 107 42.8%
General and administrative expenses 490 469 21 4.5%
Total operating expenses, net of
credits 6,454 4,241 2,213 52.2%
Operating income 6,184 4,121 2,063 50.1%
Other income (expense):
Other income 21 48 (27 ) (56.3)%
Interest expense (4,990 ) (3,543 ) (1,447 ) 40.8%
Dividends declared on Series A Term
Preferred Stock (458 ) (458 ) - -%
(Loss) gain on dispositions of real
estate assets, net (567 ) 13 (580 ) NM
Property and casualty loss, net - (7 ) 7 NM
Loss from investments in unconsolidated
entities (8 ) - (8 ) NM
Total other expense, net (6,002 ) (3,947 ) (2,055 ) 52.1%
Net income 182 174 8 4.6%
Net loss (income) attributable to
non-controlling interests 2 (1 ) 3 NM
Net income attributable to the Company 184 173 11 6.4%
Aggregate dividends declared on Series
B and Series C Preferred Stock (2,262 ) (893 ) (1,369 ) 153.3%
Net loss attributable to common
stockholders $ (2,078 ) $ (720 ) $ (1,358 ) 188.6%
NM = Not Meaningful
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For the Six Months Ended June 30,
2020 2019 $ Change % Change
Operating revenues:
Lease revenue:
Fixed lease payments $ 24,612 $ 16,105 $ 8,507 52.8%
Variable lease payments - participation
rents 74 27 47 174.1%
Variable lease payments - tenant
reimbursements 422 60 362 603.3%
Lease termination income, net 2,810 - 2,810 NM
Total operating revenues 27,918 16,192 11,726 72.4%
Operating expenses:
Depreciation and amortization 8,100 5,533 2,567 46.4%
Property operating expenses 1,238 1,403 (165 ) (11.8)%
Base management and incentive fees, net
of credits 3,415 336 3,079 916.4%
Administration fee 740 556 184 33.1%
General and administrative expenses 1,044 1,018 26 2.6%
Total operating expenses, net of
credits 14,537 8,846 5,691 64.3%
Operating income 13,381 7,346 6,035 82.2%
Other income (expense):
Other income 1,345 874 471 53.9%
Interest expense (9,953 ) (6,996 ) (2,957 ) 42.3%
Dividends declared on Series A Term
Preferred Stock (916 ) (916 ) - -%
Loss on dispositions of real estate
assets, net (666 ) (19 ) (647 ) 3,405.3%
Property and casualty recovery (loss),
net 66 (7 ) 73 NM
Income from investments in
unconsolidated entities 26 - 26 NM
Total other expense, net (10,098 ) (7,064 ) (3,034 ) 43.0%
Net income 3,283 282 3,001 1,064.2%
Net income attributable to
non-controlling interests (39 ) (3 ) (36 ) 1,200.0%
Net income attributable to the Company 3,244 279 2,965 1,062.7%
Aggregate dividends declared on Series
B and Series C Preferred Stock (4,388 ) (1,494 ) (2,894 ) 193.7%
Net loss attributable to common
stockholders $ (1,144 ) $ (1,215 ) $ 71 (5.8)%
NM = Not Meaningful
Operating Revenues
Lease Revenue
The following table provides a summary of our lease revenues during the three
and six months ended June 30, 2020 and 2019 (dollars in thousands):
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For the Three Months Ended June 30, For the Six Months Ended June 30,
2020 2019 $ Change % Change
2020 2019 $ Change % Change
Same-property basis:
Fixed lease payments
$ 15,897 $ 15,472 $ 425 2.7% Participation rents 44 - 44 -% 74 27 47 174.1% Lease termination income, net - - - -% 2,810 - 2,810 -% Total - Same-property basis 8,071 7,861 210 2.7% 18,781 15,499 3,282 21.2% Properties acquired or disposed of 4,323 471 3,852 817.8% 8,583 527 8,056 1,528.7% Vacant or self-operated properties - - - -% 132 106 26 24.5% Tenant reimbursements(1) 244 30 214 713.3% 422 60 362 603.3% Total Lease revenue$ 12,638 $ 8,362 $ 4,276 51.1%
$ 27,918 $ 16,192 $ 11,726 72.4% (1) Tenant reimbursements generally represent tenant-reimbursed property operating expenses on certain of our farms, including property taxes, insurance premiums, and other property-related expenses. Corresponding amounts were also recorded as property operating expenses during the respective periods. Same-property Basis - 2020 compared to 2019 Lease revenue from fixed lease payments increased for each of the three and six months endedJune 30, 2020 , primarily due to recent lease renewals and amendments at net higher rental rates, as well as additional rents earned on recent capital improvements completed on certain of our farms. These increases were partially offset by the renewals of certain other leases, in which we decreased the fixed base rent component in exchange for adding a participation rent component into the lease structure. Lease revenue from participation rents increased for each of the three and six months endedJune 30, 2020 , primarily due to the first crop share payment received from a farm on which we recently amended the lease to include a participation rent component. During the six months endedJune 30, 2020 , we received an early lease termination payment from an outgoing tenant on a property of approximately$3.0 million , which we recognized as additional lease revenue upon receipt, less a net balance of approximately$165,000 of aggregate prepaid rent and deferred rent assets balances that were written off against this amount. For further discussion on this lease termination, see above, under "Overview-Recent Developments-Portfolio Activity-Existing Properties-Leasing Activity-Lease Termination." Other - 2020 compared to 2019 Lease revenue from properties acquired or disposed of increased for each of the three and six months endedJune 30, 2020 , primarily due to additional revenues earned on new farms acquired subsequent toDecember 31, 2018 . Lease revenue for vacant or self-operated properties increased for the six months endedJune 30, 2020 , primarily due to additional revenues earned during 2020 on farms that were vacant for a portion of 2019. The increase in tenant reimbursements for each of the three and six months endedJune 30, 2020 , was due to additional contractual reimbursements of property taxes and other operating costs. Tenant reimbursements during the three and six months endedJune 30, 2020 , also included payments made by a tenant on our behalf (pursuant to the lease agreement) to an unconsolidated entity of ours that conveys water to the respective property. Operating Expenses Depreciation and Amortization The following table provides a summary of the depreciation and amortization expense recorded during the three and six months endedJune 30, 2020 and 2019 (dollars in thousands): For the Three Months Ended June 30,
For the Six Months Ended
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Same-property basis $ 2,656 $ 2,721 $ (65 ) (2.4)% $ 5,673 $ 5,229 $ 444 8.5%
Properties acquired or
disposed of 1,187 215 972 452.1% 2,355 231 2,124 919.5%
Vacant or self-operated
properties - - - -% 72 73 (1 ) (1.4)%
Total depreciation and
amortization $ 3,843 $ 2,936 $ 907 30.9% $ 8,100 $ 5,533 $ 2,567 46.4%
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Depreciation and amortization expense on a same-property basis decreased for the three months endedJune 30, 2020 , as compared to the prior-year period, primarily due to the expiration of certain lease intangible amortization periods or tangible depreciation periods subsequent toMarch 31, 2019 , partially offset by additional depreciation on site improvements completed on certain properties subsequent toMarch 31, 2019 . Depreciation and amortization expense on a same-property basis increased for the six months endedJune 30, 2020 , as compared to the prior-year period, primarily due to accelerated amortization expense recognized due to an early lease termination (see above, under "Overview-Recent Developments-Portfolio Activity-Existing Properties-Leasing Activity-Lease Termination"), as well as additional depreciation on site improvements completed on certain properties subsequent toDecember 31, 2018 , and partially offset by the expiration of certain lease intangible amortization periods subsequent toDecember 31, 2018 . Depreciation and amortization expense on properties acquired or disposed of increased for each of the three and six months endedJune 30, 2020 , as compared to the respective prior-year periods, primarily due to the additional depreciation and amortization expense incurred on the new farms acquired subsequent toDecember 31, 2018 . Depreciation and amortization expense on vacant or self-operated properties for each of the three and six months endedJune 30, 2020 , remained flat when compared to the respective prior-year periods. Property-operating Expenses Property operating expenses consist primarily of real estate taxes, repair and maintenance expense, insurance premiums, and other miscellaneous operating expenses paid for certain of our properties. In addition, from approximatelyJuly 2018 throughJune 2019 , we incurred additional expenses related to temporary generator rental costs to power newly-drilled wells on one of our properties. During the second half of 2019, these wells were connected to permanent power sources, and the generators were no longer needed. The following table provides a summary of the property-operating expenses recorded during the three and six months endedJune 30, 2020 and 2019 (dollars in thousands): For the Three Months EndedJune 30 ,
For the Six Months Ended
2020 2019 $ Change % Change 2020 2019 $ Change % Change
Same-property basis $ 424 $ 543 $ (119 ) (21.9)% $ 737 $ 1,308 $ (571 ) (43.7)%
Properties acquired or
disposed of 49 13 36 276.9% 62 18 44 244.4%
Vacant or
self-operated
properties - - - -% 17 17 - -%
Tenant-reimbursed
property operating
expenses(1) 244 30 214 713.3% 422 60 362 603.3%
Total Property
operating expenses $ 717 $ 586 $ 131 22.4% $ 1,238 $ 1,403 $ (165 ) (11.8)%
(1) Represents certain operating expenses (property taxes, insurance premiums,
and other property-related expenses) paid by us that, per the respective
leases, are required to be reimbursed to us by the tenant. Corresponding
amounts were also recorded as lease revenues during the respective periods.
Same-property Basis - 2020 compared to 2019 Property operating expenses decreased for each of the three and six months endedJune 30, 2020 . For the three months endedJune 30, 2020 , the decrease was primarily due to the change in lease structure on four of our farms from a single-net basis to a partial-net basis, thus reducing landlord responsibility for certain property operating expenses (specifically, repairs and maintenance expense). For the six months endedJune 30, 2020 , the decrease was further due to additional costs incurred during the prior-year period for the above-referenced generator rentals and for obtaining certain permits on one of ourCalifornia properties. Other - 2020 compared to 2019 Property operating expenses on properties acquired or disposed of increased for each of the three and six months endedJune 30, 2020 , primarily due to additional miscellaneous property operating expenses incurred on certain of the new farms we acquired subsequent toDecember 31, 2018 . Property operating expenses on vacant or self-operated properties remained flat for the six months endedJune 30, 2020 , as compared to the prior-year period. The increase in tenant-reimbursed property operating expenses for each of the three and six months endedJune 30, 2020 , was due to additional property taxes paid by us on certain of our properties and miscellaneous operating costs incurred by us in connection with our ownership interest in an unconsolidated entity. In both of these situations, the respective tenants are contractually obligated to reimburse us per the respective leases. Related-Party Fees Certain fee calculations changed pursuant to amendments to the agreements with our Adviser that were approved onJuly 9, 2019 , andJanuary 14, 2020 . For a discussion of the changes to these fees, see above, under "Overview-Our Adviser and Administrator-Advisory Agreements." The following table summarizes the base management, incentive, and capital gains fees 42
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due to our Adviser, in each case, as applicable, net of the respective credits, for the three and six months endedJune 30, 2020 and 2019 (dollars in thousands): For the Three Months Ended June 30, For the Six Months Ended June 30, 2020 2019 $ Change % Change 2020 2019 $ Change % Change Base management fee, gross(1)$ 1,047 $ 974 $ 73 7.5% 2,081 1,879$ 202 10.8% Credits granted by Adviser's board of directors applied against the base management fee(2) - (974 ) 974 (100.0)% - (1,543 ) 1,543 (100.0)% Base management fee, net 1,047 - 1,047 -% 2,081 336 1,745 519.3% Incentive fee, gross(1) - - - -% 1,334 - 1,334 -% Credits granted by Adviser's board of directors applied against the incentive fee(2) - - - -% - -% Incentive fee, net - - - -% 1,334 - 1,334 -% Capital gains fee, gross(1) - - - -% - -% Credits granted by Adviser's board of directors applied against the capital gains fee(2) - - - -% - -% Capital gains fee, net - - - -% - -% Total fees to Adviser, gross 1,047 974 73 7.5% 3,415 1,879 1,536 81.7% Total credits granted by Adviser's board of directors(1) - (974 ) 974 (100.0)% - (1,543 ) 1,543 (100.0)% Total fees to Adviser, net$ 1,047 $ -$ 1,047 -%
(1) Reflected as a line item on our accompanying Consolidated Statements of
Operations and Comprehensive Income.
(2) Represent non-contractual, unconditional, and irrevocable waivers granted to
us by our Adviser.
The base management fee increased during each of the three and six months endedJune 30, 2020 , as compared to the respective prior-year periods, primarily due to a change in the calculation of the base management fee. For each of the three and six months endedJune 30, 2020 , the base management fee was calculated as 0.125% (0.5% per annum) of the respective prior calendar quarter'sGross Tangible Real Estate , which base was increased due to a large volume of acquisitions during 2019, whereas the base management fee for each of the three and six months endedJune 30, 2019 , was calculated as 0.5% (2.0% per annum) of the Total Adjusted Equity as of the end of the respective prior calendar quarters. See above, under "Overview-Our Adviser and Administrator-Advisory Agreements-Base Management Fee," for further discussion on the calculation of the base management fee for each period. In addition, our Adviser granted us a non-contractual, unconditional, and irrevocable waiver to be applied against the base management fee during each of the three and six months endedJune 30, 2019 . Our Adviser earned an incentive fee during the six months endedJune 30, 2020 , due to our Pre-Incentive Fee FFO (as defined in the respective agreement with our Adviser) exceeding the required hurdle rate of the applicable base during the three months endedMarch 31, 2020 . No incentive fee was earned by our Adviser during the six months endedJune 30, 2019 . Our Adviser did not earn a capital gains fee during either of the three or six months endedJune 30, 2020 or 2019, as we did not sell any of our properties during any period presented. The administration fee paid to our Administrator increased for each of the three and six months endedJune 30, 2020 , as compared to the respective prior-year periods, primarily due to hiring additional personnel and us using a higher overall share of our Administrator's resources in relation to those used by other funds and affiliated companies serviced by our Administrator. Other Operating Expenses General and administrative expenses consist primarily of professional fees, director fees, stockholder-related expenses, overhead insurance, acquisition-related costs for investments no longer being pursued, and other miscellaneous expenses. General and administrative expenses increased for each of the three and six months endedJune 30, 2020 , as compared to the respective prior-year periods, primarily due to increased stockholder-related expenses. Other Income (Expense) Other income, which generally consists of interest patronage received fromFarm Credit (as defined in Note 4, "Borrowings," in the accompanying notes to our condensed consolidated financial statements) and interest earned on short-term investments, increased for each of the three and six months endedJune 30, 2020 , as compared to the respective prior-year periods, primarily driven by additional interest patronage received fromFarm Credit (due to increased borrowings fromFarm Credit ). During the six months endedJune 30, 2020 , we recorded approximately$1.3 million of interest patronage fromFarm Credit related to 43
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interest accrued during 2019, compared to approximately$700,000 of interest patronage recorded during the prior-year period. The receipt of interest patronage received fromFarm Credit during 2020 resulted in a 20.4% decrease (approximately 98 basis points) to our effective interest rate on our aggregate borrowings fromFarm Credit during the year endedDecember 31, 2019 . In addition, during the three and six months endedJune 30, 2019 , we recognized$45,000 and$155,000 of income as a result of accumulated deferred revenue related to a sale agreement for one of our farms that was terminated. Interest expense increased for each of the three and six months endedJune 30, 2020 , as compared to the respective prior-year periods, primarily due to increased overall borrowings. The weighted-average principal balance of our aggregate borrowings (excluding our Series A Term Preferred Stock) outstanding for the three and six months endedJune 30, 2020 , was approximately$483.1 million and$482.2 million , respectively, as compared to approximately$345.0 million and$340.6 million for the respective prior-year periods. Excluding interest patronage received on certain of ourFarm Credit borrowings and the impact of debt issuance costs, the overall effective interest rate charged on our aggregate borrowings was 3.98% for each of the three and six months endedJune 30, 2020 , respectively, as compared to 3.93% for each of the respective prior-year periods. During each of the three and six months endedJune 30, 2020 and 2019, we paid aggregate distributions on our Series A Term Preferred Stock (which distributions are treated similar to interest expense) of approximately$458,000 . During the three and six months endedJune 30, 2020 , we recorded a net loss of approximately$567,000 and$666,000 , respectively, primarily due to the disposal of certain irrigation improvements on certain of our farms, partially offset by net gains recognized on the sale of irrigation pivots on one of our farms that were replaced. During the prior-year periods, we recorded a net gain on the sale of unused irrigation pivots, which was offset by a net loss recorded due to the disposal of certain irrigation improvements on one of our farms. The net property and casualty recovery recorded during the six months endedJune 30, 2020 , related to insurance recoveries received for certain irrigation improvements that were damaged due to natural disasters during 2019. During the three and six months endedJune 30, 2020 , we recognized (loss) income in an unconsolidated entity of approximately$(8,000) and$26,000 , respectively. We acquired an interest in this entity during the three months endedSeptember 30, 2019 . During the three and six months endedJune 30, 2020 , the aggregate dividends paid on our Series B Preferred Stock and Series C Preferred Stock increased due to additional shares issued and outstanding during each of the periods. LIQUIDITY AND CAPITAL RESOURCES Overview Our current short- and long-term sources of funds include cash and cash equivalents, cash flows from operations, borrowings (including the undrawn commitments available under the New MetLife Facility), and issuances of additional equity securities. Our current available liquidity is approximately$53.5 million , consisting of approximately$29.3 million in cash on hand and, based on the current level of collateral pledged, approximately$24.2 million of availability under the MetLife Facility (subject to compliance with covenants). Future Capital Needs Our short- and long-term liquidity requirements consist primarily of making distributions to stockholders (including to non-controlling OP Unitholders, if any) to maintain our qualification as a REIT, funding our general operating costs, making principal and interest payments on outstanding borrowings, making dividend payments on our Series A Term Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, and, as capital is available, funding new farmland and farm-related acquisitions consistent with our investment strategy. Notwithstanding the current COVID-19 pandemic, we believe that our current and short-term cash resources will be sufficient to fund our distributions to stockholders (including non-controlling OP Unitholders), service our debt, pay dividends on our Series A Term Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, and fund our current operating costs in the near term. We expect to meet our long-term liquidity requirements through various sources of capital, including future equity issuances (including, but not limited to, shares of common stock through our ATM Program, OP Units through ourOperating Partnership as consideration for future acquisitions, and shares of our Series C Preferred Stock), long-term mortgage indebtedness and bond issuances, and other secured and unsecured borrowings. While public equity markets have experienced significant volatility lately, based on discussions with our lenders, we do not believe there will be a credit freeze in the near term. We are in compliance with all of our debt covenants under our respective credit facilities, and we believe we currently have adequate liquidity to cover all near-term debt obligations and operating expenses. 44
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We intend to use a significant portion of any current and future available liquidity to purchase additional farms and farm-related facilities. We continue to actively seek and evaluate acquisitions of additional farms and farm-related facilities that satisfy our investment criteria, and despite the current COVID-19 pandemic, our pipeline of potential acquisitions remains healthy. We have several properties under signed purchase and sale agreements or non-binding letters of intent that we hope to consummate over the next six months. We also have many other properties that are in various other stages of our due diligence process. However, all potential acquisitions will be subject to our due diligence investigation of such properties, and there can be no assurance that we will be successful in identifying or acquiring any properties in the future. Cash Flow Resources The following table summarizes total net cash flows from operating, investing, and financing activities for the six months endedJune 30, 2020 and 2019 (dollars in thousands): For the Six Months Ended June 30, 2020 2019 $ Change % Change Net change in cash from: Operating activities $ 9,937 $ 4,256$ 5,681 133.5% Investing activities (35,100 ) (54,603 ) 19,503 (35.7)% Financing activities 36,254
64,322 (28,068 ) (43.6)%
Net change in Cash and cash equivalents
Operating Activities The majority of cash from operating activities is generated from the rental payments we receive from our tenants, which is first used to fund our property-level operating expenses, with any excess cash being primarily used for principal and interest payments on our borrowings, management fees to our Adviser, administrative fees to our Administrator, and other corporate-level expenses. Cash provided by operating activities increased for the six months endedJune 30, 2020 , as compared to the prior-year period, primarily due to an early lease termination payment of approximately$3.0 million received from the outgoing tenant on four of our farms inArizona and additional rental payments received from recent acquisitions, partially offset by increases in the amounts of fees paid to our Adviser and interest payments made during the six months endedJune 30, 2020 . As of the date of this filing, with the exception of approximately$396,000 of rental payments owed by three tenants that we expect to collect within the next 90 days (which payments were originally due onJuly 1, 2020 ; see above under "-Overview-Impact of COVID-19 on our Business and Operations" for further discussion on these rent deferrals and late payments), all of our tenants are current in their rental payments to us, and we have not received any additional requests from tenants seeking rent relief as a result of COVID-19. Further, the aforementioned delayed collections notwithstanding, we currently expect rental payments to continue to be paid on time for at least the foreseeable future. However, there can be no assurance that our business and financial and operational results will not be impacted by the COVID-19 pandemic or that we will be able to pay distributions to our stockholders in the future at the same rate, or at all. Investing Activities The decrease in cash used in investing activities during the six months endedJune 30, 2020 , as compared to the prior-year period, was primarily due to a decrease in aggregate cash paid for acquisitions of new farms and capital improvements on existing farms during the six months endedJune 30, 2020 , which was approximately$19.0 million less than the prior-year period. Financing Activities The decrease in cash provided by financing activities during the six months endedJune 30, 2020 , as compared to the prior-year period, was primarily due to less net cash proceeds from equity issuances (including the Series B Preferred Stock, the Series C Preferred Stock, and our common stock) of approximately$20.2 million and a decrease in net borrowings of approximately$4.1 million for the six months endedJune 30, 2020 , as compared to that of the prior-year period.Debt Capital New MetLife Facility As amended onFebruary 20, 2020 , the New MetLife Facility currently consists of the$75.0 million New MetLife Term Note and the$75.0 million MetLife Lines of Credit. We currently have no outstanding balance on the New MetLife Term Note and 45
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$100,000 outstanding under the MetLife Lines of Credit. While$149.9 million of the full commitment amount under the New MetLife Facility remains undrawn, based on the current level of collateral pledged, we currently have approximately$24.2 million of availability under the New MetLife Facility. The draw period for the New MetLife Term Note expires onDecember 31, 2022 , after which time MetLife has the option to be relieved of its obligation to disburse any additional undrawn funds under the New MetLife Term Note. FarmerMac Facility As amended onJune 16, 2016 , our agreement with Federal Agricultural Mortgage Corporation ("Farmer Mac") provided for bond issuances up to an aggregate amount of$125.0 million (the "FarmerMac Facility ") byDecember 11, 2018 , after which Farmer Mac had the option to be relieved of its obligation to purchase additional bonds under this facility. As ofDecember 11, 2018 , we had issued aggregate bonds of approximately$108.7 million under the FarmerMac Facility , and Farmer Mac is not obligated to purchase the remaining unissued bonds. However, sinceDecember 11, 2018 , we have refinanced three bonds previously issued under the FarmerMac Facility for total proceeds of approximately$22.0 million , which equaled the aggregate value of the previously-issued bonds. We expect to continue to be able to refinance existing bonds under the facility as they mature (so long as we remain in compliance with the applicable covenants, as we currently are), though Farmer Mac is under no obligation to do so. We are also continuing discussions with Farmer Mac for other borrowing opportunities, including expanding the size of the existing facility and extending its borrowing period; however, there is no guarantee that we will be able to reach terms favorable to us, if at all.Farm Credit and Other Lenders SinceSeptember 2014 , we have closed on 34 separate loans with 10 differentFarm Credit associations (for additional information on these associations, see Note 4, "Borrowings," within the accompanying notes to our condensed consolidated financial statements). We also currently have borrowing relationships with four other agricultural lenders and are continuously reaching out to other lenders to establish prospective new relationships. While we do not have any additional availability under any of these programs based on the properties currently pledged as collateral, we expect to enter into additional borrowing agreements with existing and new lenders in connection with certain potential new acquisitions in the future. In addition, we currently have one farm appraised at approximately$1.6 million that is unencumbered and eligible to be pledged as collateral. Equity Capital The following table provides information on equity sales that have occurred sinceJanuary 1, 2020 (dollars in thousands, except per-share amounts): Weighted-average Number of Offering Price Type of Issuance Shares Sold Per Share Gross Proceeds Net Proceeds(1) Series B Preferred Stock(2) 1,229,531 $ 24.52$ 30,148 $ 27,664 Series C Preferred Stock 278,384 24.93 6,940 6,333 Common Stock - ATM Program 797,854 14.71 11,738 11,621
(1) Net of selling commissions and dealer-manager fees or underwriting discounts
(in each case, as applicable).
(2) Excludes share redemptions during the applicable time period.
Our 2020 Registration Statement (as defined in Note 8, "Equity-Registration Statement," within the accompanying notes to our condensed consolidated financial statements) permits us to issue up to an aggregate of$1.0 billion in securities (including up to$650.0 million reserved for issuance of shares of the Series C Preferred Stock), consisting of common stock, preferred stock, warrants, debt securities, depository shares, subscription rights, and units, including through separate, concurrent offerings of two or more of such securities. To date, we have issued approximately$6.9 million of Series C Preferred Stock and approximately$6.3 million of common stock under the 2020 Registration Statement. In addition, we have the ability to, and expect to in the future, issue additional OP Units to third parties as consideration in future property acquisitions. Off-Balance Sheet Arrangements As ofJune 30, 2020 , we did not have any material off-balance sheet arrangements. NON-GAAP FINANCIAL INFORMATION Funds from Operations, Core Funds from Operations, and Adjusted Funds from Operations 46
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The National Association of Real Estate Investment Trusts ("NAREIT") developed funds from operations ("FFO") as a relative non-GAAP supplemental measure of operating performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the same basis as determined under GAAP. FFO, as defined by NAREIT, is net income (computed in accordance with GAAP), excluding gains or losses from sales of property and impairment losses on property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. We further present core FFO ("CFFO") and adjusted FFO ("AFFO") as additional non-GAAP financial measures of our operational performance, as we believe both CFFO and AFFO improve comparability on a period-over-period basis and are more useful supplemental metrics for investors to use in assessing our operational performance on a more sustainable basis than FFO. We believe that these additional performance metrics, along with the most directly-comparable GAAP measures, provide investors with helpful insight regarding how management measures our ongoing performance, as each of CFFO and AFFO (and their respective per-share amounts) are used by management and our board of directors, as appropriate, in assessing overall performance, as well as in certain decision-making analysis, including, but not limited to, the timing of acquisitions and potential equity raises (and the type of securities to offer in any such equity raises), the determination of any fee credits, and declarations of distributions on our common stock. The non-GAAP financial measures presented herein have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. We believe that net income is the most directly-comparable GAAP measure to each of FFO, CFFO, and AFFO. Specifically, we believe that FFO is helpful to investors in better understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets, as we believe that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, particularly with farmland real estate, the value of which does not diminish in a predictable manner over time, as historical cost depreciation implies. Further, we believe that CFFO and AFFO are helpful in understanding our operating performance in that it removes certain items that, by their nature, are not comparable on a period-over-period basis and therefore tend to obscure actual operating performance. In addition, we believe that providing CFFO and AFFO as additional performance metrics allows investors to gauge our overall performance in a manner that is more similar to how our performance is measured by management (including their respective per-share amounts), as well as by analysts and the overall investment community. We calculate CFFO by adjusting FFO for the following items:
• Acquisition- and disposition-related expenses. Acquisition- and
disposition-related expenses (including due diligence costs on acquisitions
not consummated and certain auditing and accounting fees incurred that were
directly related to completed acquisitions or dispositions) are incurred
for investment purposes and do not correlate with the ongoing operations of
our existing portfolio. Further, certain auditing and accounting fees
incurred vary depending on the number and complexity of acquisitions or
dispositions completed during the period. Due to the inconsistency in which
these costs are incurred and how they have historically been treated for
accounting purposes, we believe the exclusion of these expenses improves
comparability of our operating results on a period-to-period basis.
Other adjustments. We will adjust for certain non-recurring charges and receipts and will explain such adjustments accordingly. We believe the exclusion of such non-recurring amounts improves comparability of our operating results on a period-to-period basis and will apply consistent definitions of CFFO and AFFO for all prior-year periods presented to provide consistency and better comparability. Further, we calculate AFFO by adjusting CFFO for the following items:
• Rent adjustments. This adjustment removes the effects of straight-lining
rental income, as well as the amortization related to above-market lease
values and lease incentives and accretion related to below-market lease
values, other deferred revenue, and tenant improvements, resulting in
rental income reflected on a modified accrual cash basis. In addition to
these adjustments, we also modify the calculation of cash rents within our
definition of AFFO to provide greater consistency and comparability due to
the period-to-period volatility in which cash rents are received. To
coincide with our tenants' harvest seasons, our leases typically provide
for cash rents to be paid at various points throughout the lease year,
usually annually or semi-annually. As a result, cash rents received during
a particular period may not necessarily be comparable to other periods or
represent the cash rents indicative of a given lease year. Therefore, we
further adjust AFFO to normalize the cash rent received pertaining to a
lease year over that respective lease year on a straight-line basis,resulting in cash rent being recognized ratably over the period in which
the cash rent is earned.
• Amortization of debt issuance costs. The amortization of costs incurred to
obtain financing is excluded from AFFO, as it is a non-cash expense item
that is not directly related to the operating performance of our
properties.
We believe the foregoing adjustments aid our investors' understanding of our ongoing operational performance.
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FFO, CFFO and AFFO do not represent cash flows from operating activities in
accordance with GAAP, which, unlike FFO, CFFO, and AFFO, generally reflects all
cash effects of transactions and other events in the determination of net
income, and should not be considered an alternative to net income as an
indication of our performance or to cash flows from operations as a measure of
liquidity or ability to make distributions. Comparisons of FFO, CFFO, and AFFO,
using the NAREIT definition for
FFO and the definitions above for CFFO and AFFO, to similarly-titled measures
for other REITs may not necessarily be meaningful due to possible differences in
the definitions used by such REITs.
Diluted funds from operations ("Diluted FFO"), diluted core funds from
operations ("Diluted CFFO"), and diluted adjusted funds from operations
("Diluted AFFO") per share are FFO, CFFO, and AFFO, respectively, divided by the
weighted-average number of total shares (including shares of our common stock
and OP Units held by non-controlling limited partners) outstanding on a
fully-diluted basis during a period. We believe that diluted earnings per share
is the most directly-comparable GAAP measure to each of Diluted FFO, CFFO, and
AFFO per share. Because many REITs provide Diluted FFO, CFFO, and AFFO per share
information to the investment community, we believe these are useful
supplemental measures when comparing us to other REITs.
We believe that FFO, CFFO, and AFFO and Diluted FFO, CFFO, and AFFO per share
are useful to investors because they provide investors with a further context
for evaluating our FFO, CFFO, and AFFO results in the same manner that investors
use net income and EPS in evaluating net income.
The following table provides a reconciliation of our FFO, CFFO, and AFFO for the
three and six months ended June 30, 2020 and 2019 to the most
directly-comparable GAAP measure, net income, and a computation of diluted FFO,
CFFO, and AFFO per share, using the weighted-average number of total shares
(including shares of our common stock and OP Units held by non-controlling OP
Unitholders) outstanding during the respective periods (dollars in thousands,
except per-share amounts):
For the Three Months Ended June 30, For the Six Months Ended June 30,
2020 2019 2020 2019
Net income $ 182 $ 174 $ 3,283 $ 282
Less: Aggregate dividends declared on Series
B Preferred Stock and Series C Preferred
Stock (2,262 ) (893 ) (4,388 ) (1,494 )
Net income (loss) available to common
stockholders and non-controlling OP
Unitholders (2,080 ) (719 ) (1,105 ) (1,212 )
Plus: Real estate and intangible
depreciation and amortization 3,843 2,936 8,100 5,533
Plus (less): Losses (gains) on dispositions
of real estate assets, net 567 (13 ) 666 19
Adjustments for unconsolidated entities(1) 4 - 9 -
FFO available to common stockholders and
non-controlling OP Unitholders 2,334 2,204 7,670 4,340
Plus: Acquisition- and disposition-related
expenses 64 14 74 153
Plus: Other charges, net(2) 16 7 (63 ) 10
CFFO available to common stockholders and
non-controlling OP Unitholders 2,414 2,225 7,681 4,503
Net rent adjustment (411 ) (40 ) (414 ) (5 )
Plus: Amortization of debt issuance costs 186 150 365 299
AFFO available to common stockholders and
non-controlling OP Unitholders 2,189 2,335 7,632 4,797
Weighted-average common stock
outstanding-basic and diluted 21,418,455 18,641,738 21,340,268 18,336,975
Weighted-average common non-controlling OP
Units outstanding 224,940 0 256,621 215,499
Weighted-average total common shares
outstanding 21,643,395 18,641,738 21,596,889 18,552,474
Diluted FFO per weighted-average total
common share $ 0.11 $ 0.12 $ 0.36 $ 0.23
Diluted CFFO per weighted-average total
common share $ 0.11 $ 0.12 $ 0.36 $ 0.24
Diluted AFFO per weighted-average total
common share $ 0.10 $ 0.13 $ 0.35 $ 0.26
(1) Represents our pro-rata share of depreciation expense recorded in
unconsolidated entities during the period.
(2) Consists primarily of net property and casualty recoveries recorded and the
cost of related repairs expensed during each period as a result of the
damage to certain irrigation improvements and, for the three and six months
ended
investments in unconsolidated entities during the period.
Net Asset Value
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Real estate companies are required to record real estate using the historical cost basis of the real estate, adjusted for accumulated depreciation and amortization, and, as a result, the carrying value of the real estate does not typically change as the fair value of the assets change. Thus, one challenge is determining the fair value of the real estate in order to allow stockholders to see the value of the real estate increase or decrease over time, which we believe is useful to our investors. Determination of Fair Value Our Board of Directors reviews and approves the valuations of our properties pursuant to a valuation policy approved by our Board of Directors (the "Valuation Policy"). Such review and approval occurs in three phases: (i) prior to its quarterly meetings, the Board of Directors receives written valuation recommendations and supporting materials that are provided by professionals of the Adviser and Administrator, with oversight and direction from the chief valuation officer, who is also employed by the Administrator (collectively, the "Valuation Team"); (ii) the valuation committee of the Board of Directors (the "Valuation Committee"), which is comprised entirely of independent directors, meets to review the valuation recommendations and supporting materials; and (iii) after the Valuation Committee concludes its meeting, it and the chief valuation officer present the Valuation Committee's findings to the entire Board of Directors so that the full Board of Directors may review and approve the fair values of our properties in accordance with the Valuation Policy. Further, on a quarterly basis, the Board of Directors reviews the Valuation Policy to determine if changes thereto are advisable and also reviews whether the Valuation Team has applied the Valuation Policy consistently. Per the Valuation Policy, our valuations are generally derived based on the following: • For properties acquired within 12 months prior to the date of valuation, the
purchase price of the property will generally be used as the current fair
value unless overriding factors apply. In situations where OP Units are
issued as partial or whole consideration in connection with the acquisition
of a property, the fair value of the property will generally be the lower
of: (i) the agreed-upon purchase price between the seller and the buyer (as
shown in the purchase and sale agreement or contribution agreement and using
the agreed-upon pricing of the OP Units, if applicable), or (ii) the value
as determined by an independent, third-party appraiser.
• For real estate we acquired more than one year prior to the date of
valuation, we determine the fair value either by relying on estimates
provided by independent, third-party appraisers or through an internal
valuation process. In addition, if significant capital improvements take
place on a property, we will typically have those properties reappraised
upon completion of the project by an independent, third-party appraiser. In
any case, we intend to have each property valued by an independent,
third-party appraiser via a full appraisal at least once every three years,
with interim values generally being determined by either: (i) a restricted
appraisal (a "desk appraisal") performed by an independent, third-party
appraiser, or (ii) our internal valuation process.
Various methodologies were used, both by the appraisers and in our internal valuations, to determine the fair value of our real estate, including the sales comparison, income capitalization (or a discounted cash flow analysis), and cost approaches of valuation. In performing their analyses, the appraisers typically (i) conducted site visits to the properties (where full appraisals were performed), (ii) discussed each property with our Adviser and reviewed property-level information, including, but not limited to, property operating data, prior appraisals (as available), existing lease agreements, farm acreage, location, access to water and water rights, potential for future development, and other property-level information, and (iii) reviewed information from a variety of sources about regional market conditions applicable to each of our properties, including, but not limited to, recent sale prices of comparable farmland, market rents for similar farmland, estimated marketing and exposure time, market capitalization rates, and the current economic environment, among others. In performing our internal valuations, we will consider the most recent appraisal available and use similar methodologies in determining an updated fair value. We will also obtain updated market data related to the property, such as updated sales and market rent comparisons and market capitalization rates, and perform an updated assessment of the tenants' credit risk profiles, among others. Sources of this data may come from market inputs from recent acquisitions of our own portfolio of real estate, recent appraisals of properties we own that are similar in nature and in the same region (as applicable) as the property being valued, market conditions and trends we observe in our due diligence process, and conversations with appraisers, brokers, and farmers. A breakdown of the methodologies used to value our properties and the aggregate value as ofJune 30, 2020 , determined by each method is shown in the table below (dollars in thousands, except in footnotes): Valuation Number of Total Farm Net Cost Current % of Total Method Farms Acres Acres Basis(1) Fair Value Fair Value Purchase 17 13,242 12,221$ 234,543 $ 233,412 25.6% Price Third-party 98 75,886 60,069 587,980 678,358 74.4% Appraisal(2) Total 115 89,128 72,290$ 822,523 $ 911,770 100.0% 49
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(1) Consists of the initial acquisition price (including the costs allocated to
both tangible and intangible assets acquired and liabilities assumed), plus
subsequent improvements and other capitalized costs paid for by us that were
associated with the properties, and adjusted for accumulated depreciation
and amortization.
(2) Appraisals performed between
Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as ofJune 30, 2020 , include land values per farmable acre, market rental rates per farmable acre and the resulting net operating income ("NOI") at the property level, and capitalization rates, among others. These assumptions were applied on a farm-by-farm basis and were selected based on several factors, including comparable land sales, surveys of both existing and current market rates, discussions with other brokers and farmers, soil quality, size, location, and other factors deemed appropriate. A summary of these significant assumptions is provided in the following table: Range Weighted (Low - High) Average
Land Value (per farmable acre)
Note: Figures in the table above apply only to the farmland portion of our portfolio and exclude assumptions made relating to farm-related facilities (e.g., cooling facilities), and other structures on our properties (e.g., residential housing), as their aggregate value was considered to be insignificant in relation to that of the farmland. Our Valuation Team reviews the appraisals, including the significant assumptions and inputs used in determining the appraised values, and considers any developments that may have occurred since the time the appraisals were performed. Developments considered that may have an impact on the fair value of our real estate include, but are not limited to, changes in tenant credit profiles, changes in lease terms (such as expirations and notices of non-renewals or to vacate), and potential asset sales (particularly those at prices different from the appraised values of our properties). Management believes that the purchase prices of the farms acquired during the previous 12 months and the most recent appraisals available for the farms acquired prior to the previous 12 months fairly represent the current market values of the properties as ofJune 30, 2020 , and, accordingly, did not make any adjustment to these values. A quarterly roll-forward of the change in our portfolio value for the three months endedJune 30, 2020 , from the prior value basis as ofJune 30, 2019 , is provided in the table below (dollars in thousands): Total portfolio fair value as ofMarch 31, 2020 $
891,555
Plus: Acquisition of two new farms during the three months
ended
20,902
Plus net value depreciation during the three months ended
$ (687 )
Total net depreciation for the three months ended
(687 )
Total portfolio fair value as of June 30, 2020 $ 911,770
(1) Includes a
Management also determined fair values of all long-term borrowings and preferred stock. Using a discounted cash flow analysis, management determined that the fair value of all long-term encumbrances on our properties as ofJune 30, 2020 , was approximately$496.5 million , as compared to a carrying value (excluding unamortized related debt issuance costs) of approximately$494.7 million . In addition, using the closing stock price as ofJune 30, 2020 , the fair value of the Series A Term Preferred Stock was determined to be approximately$30.2 million , as compared to a carrying value (excluding unamortized related issuance costs) of approximately$28.8 million . Finally, pursuant to Financial Industry Regulatory Authority Rule 2310(b)(5), with the assistance of a third-party valuation expert, we determined the estimated value of our Series B Preferred Stock and Series C Preferred Stock to each be$25.00 per share as ofJune 30, 2020 (see Exhibit 99.1 to this Form 10-Q). Calculation of Estimated Net Asset Value To provide our stockholders with an estimate of the fair value of our real estate assets, we intend to estimate the fair value of our farms and farm-related properties and provide an estimated net asset value ("NAV") on a quarterly basis. NAV is a non-GAAP, supplemental measure of financial position of an equity REIT and is calculated as total equity, adjusted for the increase or decrease in fair value of our real estate assets and long-term borrowings (including any preferred stock required to be treated as debt for GAAP purposes) relative to their respective costs bases. Further, we calculate NAV per common share by dividing NAV by our total common shares outstanding (consisting of our common stock and OP Units held by non-controlling limited partners). 50
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The fair values presented above and their usage in the calculation of net asset value per share presented below have been prepared by and is the responsibility of management.PricewaterhouseCoopers LLP has neither examined, compiled, nor performed any procedures with respect to the fair values or the calculation of net asset value per common share, which utilizes information that is not disclosed within the financial statements, and, accordingly, does not express an opinion or any other form of assurance with respect thereto. As ofJune 30, 2020 , we estimate the NAV per common share to be$11.06 . A reconciliation of NAV to total equity, which we believe is the most directly-comparable GAAP measure, is provided below (dollars in thousands, except per-share data): Total equity per balance sheet $
306,383
Fair value adjustment for long-term assets: Less: net cost basis of tangible and intangible real$ (822,523 ) estate holdings(1) Plus: estimated fair value of real estate holdings(2) 911,770 Net fair value adjustment for real estate holdings
89,247
Fair value adjustment for long-term liabilities: Plus: book value of aggregate long-term indebtedness(3) 523,412 Less: fair value of aggregate long-term indebtedness(3)(4) (526,718 ) Net fair value adjustment for long-term indebtedness
(3,306 )
Estimated NAV 392,324
Less: aggregate fair value of Series B Preferred Stock and (152,580 ) Series C Preferred Stock(5) Estimated NAV available to common stockholders and $
239,744
non-controlling OP Unitholders Total common shares and OP Units outstanding(6)
21,678,890
Estimated NAV per common share and OP Unit$ 11.06 (1) Per Net Cost Basis as presented in the table above. (2) Per Current Fair Value as presented in the table above.
(3) Includes the principal balances outstanding of all long-term borrowings
(consisting of notes and bonds payable) and the Series A Term Preferred
Stock.
(4) Long-term notes and bonds payable were valued using a discounted cash flow
model. The Series A Term Preferred Stock was valued based on its closing
stock price as of
(5) Valued at the securities' respective liquidation values, as discussed above.
(6) Includes 21,534,739 shares of common stock and 144,151 OP Units held by
non-controlling OP Unitholders.
A quarterly roll-forward in the estimated NAV per common share for the three
months ended June 30, 2020 , is provided below:
Estimated NAV per common share and non-controlling OP Unit $ 11.46
as of March 31, 2020
Less net loss available to common stockholders and (0.10 )
non-controlling OP Unitholders
Plus net change in valuations:
Net change in unrealized fair value of farmland $ (0.04 ) portfolio(1)
Net change in unrealized fair value of long-term (0.12 )
indebtedness
Net change in valuations (0.16 ) Less distributions on common stock and non-controlling OP (0.13 ) Units Less net dilutive effect of equity issuances (0.01 ) Estimated NAV per common share and non-controlling OP Unit$ 11.06 as of June 30, 2020
(1) The net change in unrealized fair value of our farmland portfolio consists
of three components: (i) a decrease of
depreciation in value of the farms that were valued during the three months
ended
aggregate depreciation and amortization expense recorded during the three
months ended
capital improvements made on certain farms that have not yet been considered
in the determination of the respective farms' estimated fair values.
Comparison of estimated NAV and estimated NAV per common share, using the definitions above, to similarly-titled measures for other REITs may not necessarily be meaningful due to possible differences in the calculation or application of the definition of NAV used by such REITs. In addition, the trading price of our common shares may differ significantly from our most recent estimated NAV per common share calculation. For example, while we estimated our NAV per common share to be$11.06 as ofJune 30, 2020 , based on the calculation above, the closing price of our common stock onJune 30, 2020 , was$15.86 per share. The determination of estimated NAV is subjective and involves a number of assumptions, judgments, and estimates, and minor adjustments to these assumptions, judgments, or estimates may have a material impact on our overall portfolio valuation. In addition, many of the assumptions used are sensitive to market conditions and can change frequently. Changes in the market 51
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environment and other events that may occur during our ownership of these
properties may cause the values reported above to vary from the actual fair
value that may be obtained in the open market. Further, while management
believes the values presented reflect current market conditions, the ultimate
amount realized on any asset will be based on the timing of such dispositions
and the then-current market conditions. There can be no assurance that the
ultimate realized value upon disposition of an asset will approximate the
estimated fair value above.
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