Gladstone Land Corporation (NASDAQ:LAND) ("Gladstone Land" or the
“Company”) today reported financial results for the first quarter
ended March 31, 2017.
A reconciliation of funds from operations (“FFO”), Core FFO
(“CFFO”), and Adjusted FFO (“AFFO”), all non-GAAP (generally
accepted accounting principles in the United States) financial
measures, to net income, to which the Company believes is the most
directly-comparable GAAP measure for each, and a computation of
fully-diluted net income, FFO, CFFO, and AFFO per weighted-average
share is set forth in the Quarterly Summary Information table
below, and a description of each of FFO, CFFO, and AFFO is located
at the end of this press release. In addition, a description
of net asset value (“NAV”), a non-GAAP financial measure, and a
reconciliation to total equity, to which the Company believes is
its most directly-comparable GAAP measure, is also located at the
end of this press release. All per-share references are to
fully-diluted, weighted-average shares of common stock of the
Company unless otherwise noted. For further detail, please
refer to the Company’s Quarterly Report on Form 10-Q (the “Form
10-Q”), filed today with the U.S. Securities and Exchange
Commission (the “SEC”), which can be retrieved from the SEC’s
website at www.SEC.gov or from the Company’s website at
www.GladstoneLand.com.
Please note that the limited information that follows in this
press release is not adequate for making an informed investment
judgment.
Quarterly Summary Information |
(Dollars in thousands, except per-share
amounts) |
|
|
|
|
|
|
|
For and As of the Quarters Ended |
|
Change |
|
Change |
|
3/31/2017 |
|
12/31/2016 |
|
($ / #) |
|
(%) |
Operating Data: |
|
|
|
|
|
|
|
Total operating revenues |
$ |
5,750 |
|
|
$ |
4,920 |
|
|
$ |
830 |
|
|
16.9 |
% |
Total operating expenses, net of credits |
(3,146 |
) |
|
(2,664 |
) |
|
(482 |
) |
|
18.1 |
% |
Other expenses, net |
(2,431 |
) |
|
(2,173 |
) |
|
(258 |
) |
|
11.9 |
% |
Net income available to common stockholders and OP
Unitholders |
$ |
173 |
|
|
$ |
83 |
|
|
$ |
90 |
|
|
108.4 |
% |
Plus: Real estate and intangible depreciation and
amortization |
1,472 |
|
|
1,444 |
|
|
28 |
|
|
1.9 |
% |
FFO available to common stockholders and OP
Unitholders |
$ |
1,645 |
|
|
$ |
1,527 |
|
|
$ |
118 |
|
|
7.7 |
% |
Plus: Acquisition-related expenses |
9 |
|
|
3 |
|
|
6 |
|
|
200.0 |
% |
Plus: Acquisition-related accounting fees |
11 |
|
|
37 |
|
|
(26 |
) |
|
(70.3 |
)% |
CFFO available to common stockholders and OP
Unitholders |
$ |
1,665 |
|
|
$ |
1,567 |
|
|
$ |
98 |
|
|
6.3 |
% |
Net rent adjustment(1) |
(134 |
) |
|
(123 |
) |
|
(11 |
) |
|
8.9 |
% |
Plus: Amortization of deferred financing costs |
116 |
|
|
106 |
|
|
10 |
|
|
9.4 |
% |
AFFO available to common stockholders and OP
Unitholders |
$ |
1,647 |
|
|
$ |
1,550 |
|
|
$ |
97 |
|
|
6.3 |
% |
|
|
|
|
|
|
|
|
Share and Per-Share Data: |
|
|
|
|
|
|
|
Weighted-average common shares outstanding – basic and diluted |
10,395,736 |
|
|
10,024,875 |
|
|
370,861 |
|
|
3.7 |
% |
Weighted-average OP Units outstanding(2) |
1,449,258 |
|
|
1,225,478 |
|
|
223,780 |
|
|
18.3 |
% |
Weighted-average total shares outstanding |
11,844,994 |
|
|
11,250,353 |
|
|
594,641 |
|
|
5.3 |
% |
|
|
|
|
|
|
|
|
Diluted net income per weighted-average total share |
$ |
0.015 |
|
|
$ |
0.007 |
|
|
$ |
0.008 |
|
|
98.0 |
% |
Diluted FFO per weighted-average total share |
$ |
0.139 |
|
|
$ |
0.136 |
|
|
$ |
0.003 |
|
|
2.3 |
% |
Diluted CFFO per weighted-average total share |
$ |
0.141 |
|
|
$ |
0.139 |
|
|
$ |
0.002 |
|
|
0.9 |
% |
Diluted AFFO per weighted-average total share |
$ |
0.139 |
|
|
$ |
0.138 |
|
|
$ |
0.001 |
|
|
0.9 |
% |
Cash distributions declared per total share |
$ |
0.129 |
|
|
$ |
0.128 |
|
|
$ |
0.001 |
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
Balance Sheet Data: |
|
|
|
|
|
|
|
Net investments in real estate, at cost(3) |
$ |
378,857 |
|
|
$ |
325,747 |
|
|
$ |
53,110 |
|
|
16.3 |
% |
Total assets |
$ |
386,982 |
|
|
$ |
333,985 |
|
|
$ |
52,997 |
|
|
15.9 |
% |
Total indebtedness(4) |
$ |
271,178 |
|
|
$ |
237,509 |
|
|
$ |
33,669 |
|
|
14.2 |
% |
Total equity |
$ |
105,948 |
|
|
$ |
87,777 |
|
|
$ |
18,171 |
|
|
20.7 |
% |
Total common shares + OP Units outstanding(2) |
13,299,882 |
|
|
11,474,133 |
|
|
1,825,749 |
|
|
15.9 |
% |
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
Cash flows from operations |
$ |
2,746 |
|
|
$ |
1,191 |
|
|
$ |
1,555 |
|
|
130.6 |
% |
Farms owned |
59 |
|
|
58 |
|
|
1 |
|
|
1.7 |
% |
Acres owned |
54,340 |
|
|
50,592 |
|
|
3,748 |
|
|
7.4 |
% |
Occupancy rate |
100.0 |
% |
|
100.0 |
% |
|
— |
|
|
— |
% |
Farmland portfolio value |
$ |
460,621 |
|
|
$ |
401,122 |
|
|
$ |
59,499 |
|
|
14.8 |
% |
Net asset value per share |
$ |
14.47 |
|
|
$ |
14.21 |
|
|
$ |
0.26 |
|
|
1.8 |
% |
(1) This adjustment removes the effects of straight-lining
rental income, as well as the amortization related to above-market
lease values and accretion related to below-market lease values,
deferred revenue and tenant improvements, resulting in rental
income reflected on a modified accrual cash basis. The effect
to AFFO is that cash rents received pertaining to a lease year are
normalized 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.(2) There were 1,449,258 OP
Units held by non-controlling limited partners as of each of
March 31, 2017, and December 31, 2016.(3) 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 associated
with the properties, and adjusted for accumulated depreciation and
amortization.(4) Includes the principal balances outstanding of all
borrowings, including mortgage notes and bonds payable and lines of
credit, plus our Term Preferred Stock.
Highlights for the
Quarter:
- Property Acquisitions: Acquired a
certified organic vegetable farm in Florida, consisting of 3,748
total acres, for $54.0 million at an initial capitalization rate of
5.0% and an overall capitalization rate of 5.3%;
- Financing Activities:
Obtained an aggregate of $32.4 million of new, long-term borrowings
from an existing lender at an average interest rate of 3.33%, which
rates are fixed for next 3 to 7 years;
- Follow-on Offering: Completed a common
stock offering, issuing a total of 1,825,749 new shares for gross
proceeds of approximately $20.7 million; and
- Distributions: Increased our
distribution run rate by 1.2% and paid monthly cash distributions
of $0.043 per share of common stock (including OP Units held
outside of the Company) for each of January, February, and March
2017.
Subsequent to March 31,
2017:
- Increased Distributions: Increased our
distribution run rate by 1.2%, declaring monthly cash distributions
of $0.0435 per share of common stock (including OP Units held
outside of the Company) for each of April, May, and June
2017. This marks our sixth distribution increase over the
past 28 months, during which time we’ve increased the distribution
run rate by a total of 45.0%.
Comments from David Gladstone, President and CEO of the
Gladstone Land: “We had a nice start to 2017 and
believe we can continue this strong growth throughout the rest of
the year, as we have several farms in our backlog that we hope to
acquire over the next few months. Our AFFO has fully covered
our dividend for six consecutive quarters now, and we plan to
continue adding high-quality farms that are expected to produce
income that will be used to pay distributions to our
stockholders. We have already increased our distributions
twice this year, and we hope to continue this trend. Please
dial in and listen to our quarterly conference call tomorrow
morning."
Q1 2017 Results: Net income for the
quarter was approximately $173,000, or $0.01 per share, compared to
approximately $83,000, or $0.01 per share, in the prior
quarter. AFFO for the quarter was approximately $1.6 million,
or $0.14 per share, and increased by 6.3% from the prior quarter
due to additional rental income recorded as a result of our recent
acquisitions, partially offset by increases in certain operating
expenses. We declared and paid distributions during the
quarter of $0.129 per share. Our core operating expenses
(which we define as our total operating expenses, less depreciation
and amortization expense, acquisition-related expenses, any fee
credits, and certain other one-time expenses) increased by
approximately $449,000, driven primarily by increases in
inter-company fees and certain non-recurring or annually-recurring
expenses. The aggregate amount of fees paid to our adviser
and administrator increased by approximately $223,000, the majority
of which was due to a higher performance-based incentive fee earned
by our adviser due to our pre-incentive fee FFO (as defined in the
agreement with our adviser) surpassing a required hurdle
rate. Excluding fees paid to our adviser and administrator,
our core operating expenses increased by approximately
$227,000. However, approximately $127,000 of this increase
consists of items we expect to be either non-recurring or
annually-recurring expenses, including: (i) writing off
certain unallocated costs related to a registration statement we
filed in 2014 that expired during the current quarter, (ii)
incurring annually-recurring costs related to the upcoming annual
shareholders' meeting and certain state filing and franchise fees,
and (iii) additional costs incurred to obtain certain permits on
one of our California farms. Other increases in operating
expenses related to increased advertising and marketing efforts,
incurring additional professional fees, and increased property tax
expenses due to certain of our recent acquisitions. Our NAV
per share increased by $0.26 from the prior quarter to $14.47 at
March 31, 2017, primarily due to the net appreciation in value
of our farmland portfolio (the majority of which was the result of
updated valuations as determined by third-party appraisals) and a
further decrease in the fair value of our long-term, fixed-rate
borrowings (certain of which borrowings were held at cost at
December 31, 2016, in accordance with our valuation policy),
partially offset by the dilutive effect of a follow-on offering of
our common stock completed during the quarter.
Conference Call for
Stockholders: The Company will hold a conference
call on Wednesday, May 10, 2017, at 8:30 a.m. ET to discuss
its earnings results. Please call (855) 363-1762 to enter the
conference. An operator will monitor the call and set a queue
for any questions. A conference call replay will be available
beginning one hour after the call and will be accessible through
June 10, 2017. To hear the replay, please dial (855)
859-2056, and use playback conference number 56276478. The
live audio broadcast of the Company’s conference call will also be
available online at the Company’s website,
www.GladstoneLand.com. The event will be archived and
available for replay on the Company’s website through July 10,
2017.
About Gladstone Land Corporation:Gladstone Land
is a publicly-traded real estate investment trust that invests in
farmland and farm-related properties located in major agricultural
markets in the U.S., which it leases to farmers, and pays monthly
distributions to its stockholders. The Company reports the
current fair value of its farmland on a quarterly basis; as of
March 31, 2017, the estimated net asset value of the Company
was $14.47 per share. Gladstone Land currently owns 59 farms,
comprised of 54,340 acres in 7 different states across the U.S.,
valued at approximately $461 million. Its acreage is
predominantly concentrated in locations where its tenants are able
to grow fresh produce annual row crops, such as berries and
vegetables, which are planted and harvested annually or more
frequently, as well as permanent crops, such as almonds,
blueberries, and pistachios, which are planted every 10 to 20-plus
years. The Company also may acquire property related to
farming, such as cooling facilities, processing buildings,
packaging facilities, and distribution centers. Gladstone
Land has paid 51 consecutive monthly cash distributions on its
common stock since its initial public offering in January
2013. The current per-share distribution is $0.0435 per
month, or $0.522 per year. Additional information can be
found at www.GladstoneLand.com and www.GladstoneFarms.com.
Owners or brokers who have farmland for sale in the U.S. should
contact:
- Bill Frisbie at (703) 287-5839 or Bill.F@GladstoneLand.com –
Eastern U.S.
- Bill Reiman at (805) 263-4778 or Bill.R@GladstoneLand.com –
Western U.S.
- Bill Hughes at (618) 606-2887 or Bill.H@GladstoneLand.com –
Midwest U.S.
For stockholder information on Gladstone Land, call (703)
287-5893. Information on the business activities of all of
the Gladstone funds can be found at
www.GladstoneCompanies.com. For Investor Relations inquiries
related to any of the monthly dividend paying Gladstone funds,
please visit www.Gladstone.com.
Non-GAAP Financial Measures:
FFO: The National
Association of Real Estate Investment Trusts (“NAREIT”) developed
FFO as a relative non-GAAP supplemental measure of operating
performance of an equity REIT in order to recognize that
income-producing real estate historically has not depreciated on
the basis 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. The Company believes that FFO per share provides
investors with an additional context for evaluating its financial
performance and as a supplemental measure to compare it to other
REITs; however, comparisons of its FFO to the FFO of other REITs
may not necessarily be meaningful due to potential differences in
the application of the NAREIT definition used by such other
REITs.
CFFO: CFFO is FFO,
adjusted for items that are not indicative of the results provided
by the Company’s operating portfolio and affect the comparability
of the Company’s period-over-period performance. These items
include certain non-recurring items, such as acquisition-related
expenses, income tax provisions and property and casualty losses or
recoveries. Although the Company’s calculation of CFFO
differs from NAREIT’s definition of FFO and may not be comparable
to that of other REITs, the Company believes it is a meaningful
supplemental measure of its sustainable operating
performance. Accordingly, CFFO should be considered a
supplement to net income computed in accordance with GAAP as a
measure of our performance. For a full explanation of the
adjustments made to arrive at CFFO, please read the Company’s Form
10-Q, filed today with the SEC.
AFFO: AFFO is CFFO,
adjusted for certain non-cash items, such as the straight-lining of
rents and amortizations into rental income (resulting in cash rent
being recognized ratably over the period in which the cash rent is
earned). Although the Company’s calculation of AFFO differs
from NAREIT’s definition of FFO and may not be comparable to that
of other REITs, the Company believes it is a meaningful
supplemental measure of its sustainable operating performance on a
cash basis. Accordingly, AFFO should be considered a
supplement to net income computed in accordance with GAAP as a
measure of our performance. For a full explanation of the
adjustments made to arrive at AFFO, please read the Company’s Form
10-Q, filed today with the SEC.
The Company’s presentation of FFO, as defined by NAREIT, or CFFO
or AFFO, as defined above, does not represent cash flows from
operating activities determined in accordance with GAAP and should
not be considered an alternative to net income as an indication of
its performance or to cash flow from operations as a measure of
liquidity or ability to make distributions.
NAV: Pursuant to a valuation policy
approved by our board of directors, our valuation team, with
oversight from the chief valuation officer, provides
recommendations of value for our properties to our board of
directors, who then review and approve the fair values of our
properties. Per our valuation policy, our valuations are
derived based on either the purchase price of the property; values
as determined by an independent, third-party appraiser; or through
an internal valuation process, which process is, in turn, based on
values as determined by independent, third-party appraisers.
In any case, we intend to have each property valued by an
independent, third-party appraiser at least once every three years,
or more frequently in some instances. Various methodologies
are used, both by the appraisers and in our internal valuations, to
determine the fair value of our real estate on a fee simple, “As
Is” basis, including the sales comparison, income capitalization
(or a discounted cash flow analysis), and cost approaches of
valuation. 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 encumbrances relative to their respective
costs bases. Further, we calculate NAV per share by dividing
NAV by our total shares outstanding (inclusive of both our common
stock and OP Units held outside of the Company). A
reconciliation of NAV to total equity, to which the Company
believes is the most directly-comparable GAAP measure, is provided
below:
|
|
|
|
|
|
Total equity
per balance sheet |
|
|
$ |
105,948 |
|
Fair value adjustment
for long-term assets: |
|
|
|
Less: net cost basis of tangible and intangible real estate
holdings(1) |
$ |
(378,857 |
) |
|
|
Plus: estimated fair value of real estate holdings(2) |
460,621 |
|
|
|
Net fair
value adjustment for real estate holdings |
|
|
81,764 |
|
Fair value adjustment
for long-term liabilities: |
|
|
|
Plus: book value of aggregate long-term indebtedness(3) |
251,128 |
|
|
|
Less: fair value of aggregate long-term
indebtedness(3)(4) |
(246,429 |
) |
|
|
Net fair
value adjustment for long-term indebtedness |
|
|
4,699 |
|
Estimated
NAV |
|
|
$ |
192,411 |
|
|
|
|
|
Total
shares outstanding(5) |
|
|
13,299,882 |
|
|
|
|
|
Estimated NAV
per share |
|
|
$ |
14.47 |
|
|
|
|
|
|
|
(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 associated with the properties, and adjusted for
accumulated depreciation and amortization.(2) As determined by the
Company's valuation policy and approved by its board of
directors.(3) Includes the principal balances outstanding of all
long-term borrowings (consisting of mortgage notes and bonds
payable) and the Term Preferred Stock.(4) Long-term mortgage notes
and bonds payable were valued using a discounted cash flow model.
The Term Preferred Stock was valued based on its closing stock
price as of March 31, 2017.(5) Includes 11,850,624 shares of
common stock and 1,449,258 OP Units held by non-controlling limited
partners (representing 10.9% of all OP Units issued and
outstanding).
Comparison of estimated NAV and estimated NAV per share 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 share
calculation. The Company’s independent auditors have neither
audited nor reviewed our calculation of NAV or NAV per share.
For a full explanation of our valuation policy, please read the
Company’s Form 10-Q, filed today with the SEC.
Certain statements in this press release, including, but not
limited to, the Company’s ability to maintain or grow its portfolio
and FFO, expected increases in capitalization rates, benefits from
increases in farmland values, increases in operating revenues, and
the increase in net asset value per share are “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. These forward-looking statements
inherently involve certain risks and uncertainties, although they
are based on the Company’s current plans that are believed to be
reasonable as of the date of this press release. Factors that
may cause actual results to differ materially from these
forward-looking statements include, but are not limited to, the
Company’s ability to procure financing for investments; downturns
in the current economic environment; the performance of its
tenants; the impact of competition on its efforts to renew existing
leases or re-lease real property; and significant changes in
interest rates. Additional factors that could cause actual results
to differ materially from those stated or implied by its
forward-looking statements are disclosed under the caption "Risk
Factors" of its Form 10-K for the fiscal year ended
December 31, 2016, as filed with the SEC on February 21, 2017,
and its Form 10-Q for the three months ended March 31, 2017,
as filed with the SEC on May 9, 2017. The Company
cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law.
Gladstone Land Corporation, +1-703-287-5893
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