Gladstone Land Corporation (NASDAQ:LAND) ("Gladstone Land" or the
“Company”) today reported financial results for the second quarter
ended June 30, 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.
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Quarterly Summary
Information(Dollars in thousands, except per-share
amounts) |
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For and As of the Quarters Ended |
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Change |
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Change |
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6/30/2017 |
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3/31/2017 |
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($ / #) |
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(%) |
Operating Data: |
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Total operating revenues |
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$ |
5,996 |
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$ |
5,750 |
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$ |
246 |
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4.3 |
% |
Total operating expenses, net of credits |
|
(3,090 |
) |
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|
(3,146 |
) |
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56 |
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(1.8 |
)% |
Other expenses, net |
|
(2,651 |
) |
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(2,431 |
) |
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(220 |
) |
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9.0 |
% |
Net income available to common stockholders and OP
Unitholders |
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$ |
255 |
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$ |
173 |
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$ |
82 |
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47.4 |
% |
Plus: Real estate and intangible depreciation and
amortization |
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1,599 |
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1,472 |
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127 |
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8.6 |
% |
FFO available to common stockholders and OP
Unitholders |
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$ |
1,854 |
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$ |
1,645 |
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$ |
209 |
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12.7 |
% |
Plus: Acquisition-related expenses |
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37 |
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9 |
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28 |
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311.1 |
% |
Plus: Acquisition-related accounting fees |
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25 |
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11 |
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14 |
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127.3 |
% |
CFFO available to common stockholders and OP
Unitholders |
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$ |
1,916 |
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$ |
1,665 |
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$ |
251 |
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15.1 |
% |
Net rent adjustment(1) |
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(156 |
) |
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(134 |
) |
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(22 |
) |
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16.4 |
% |
Plus: Amortization of deferred financing costs |
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120 |
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116 |
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4 |
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3.4 |
% |
AFFO available to common stockholders and OP
Unitholders |
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$ |
1,880 |
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$ |
1,647 |
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$ |
233 |
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14.1 |
% |
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Share and Per-Share Data: |
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Weighted-average common shares outstanding – basic and diluted |
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11,850,624 |
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10,395,736 |
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1,454,888 |
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14.0 |
% |
Weighted-average OP Units outstanding(2) |
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1,449,258 |
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1,449,258 |
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— |
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— |
% |
Weighted-average total shares outstanding |
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13,299,882 |
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11,844,994 |
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1,454,888 |
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12.3 |
% |
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Diluted net income per weighted-average total share |
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$ |
0.019 |
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$ |
0.015 |
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$ |
0.004 |
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31.3 |
% |
Diluted FFO per weighted-average total share |
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$ |
0.139 |
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$ |
0.139 |
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$ |
— |
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0.4 |
% |
Diluted CFFO per weighted-average total share |
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$ |
0.144 |
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$ |
0.141 |
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$ |
0.003 |
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2.5 |
% |
Diluted AFFO per weighted-average total share |
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$ |
0.141 |
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$ |
0.139 |
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$ |
0.002 |
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1.7 |
% |
Cash distributions declared per total share |
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$ |
0.131 |
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$ |
0.129 |
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$ |
0.002 |
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1.2 |
% |
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Balance Sheet Data: |
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Net investments in real estate, at cost(3) |
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$ |
408,660 |
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$ |
378,857 |
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$ |
29,803 |
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7.9 |
% |
Total assets |
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$ |
417,020 |
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$ |
386,982 |
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$ |
30,038 |
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7.8 |
% |
Total indebtedness(4) |
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$ |
302,442 |
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$ |
271,178 |
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$ |
31,264 |
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11.5 |
% |
Total equity |
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$ |
104,476 |
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$ |
105,947 |
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$ |
(1,471 |
) |
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(1.4 |
)% |
Total common shares + OP Units outstanding(2) |
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13,299,882 |
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13,299,882 |
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— |
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— |
% |
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Other Data: |
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Cash flows from operations |
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$ |
1,933 |
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$ |
2,746 |
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$ |
(813 |
) |
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(29.6 |
)% |
Farms owned |
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65 |
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59 |
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6 |
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10.2 |
% |
Acres owned |
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57,930 |
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54,340 |
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3,590 |
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6.6 |
% |
Occupancy rate |
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100.0 |
% |
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100.0 |
% |
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— |
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— |
% |
Farmland portfolio value |
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$ |
492,972 |
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$ |
460,621 |
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$ |
32,351 |
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7.0 |
% |
Net asset value per share |
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$ |
14.46 |
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$ |
14.47 |
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$ |
(0.01 |
) |
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(0.1 |
)% |
(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 June 30, 2017, and March 31, 2017.(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 indebtedness, including our
lines of credit, mortgage notes and bonds payable, and our Term
Preferred Stock.
Highlights for the
Quarter:
- Property Acquisitions: Acquired 6 new
farms, consisting of 3,590 total acres across 2 states, for
approximately $29.7 million (including 2 farms consisting of 1,368
total acres acquired through a leasehold interest, with the State
of Arizona as the lessor). On a weighted-average basis, these
farms were acquired at an initial, net capitalization rate of 5.3%,
with provisions within certain of the leases (e.g., revenue-sharing
payments and annual rent escalations) expected to drive rents
higher in future years.
- Leasing Activities: Extended or renewed
leases on seven different farms that were expiring in either 2017
or 2018. In total, these leases were renewed for additional
terms ranging between one and five years and for total annualized
rents of approximately $1.1 million, representing a slight decrease
of approximately $4,000 (approximately 0.3%) from that of the prior
leases. No downtime, leasing commissions, or tenant
improvements, were incurred in connection with any of these
renewals.
- Financing Activities:
Obtained an aggregate of $16.6 million of new, long-term borrowings
from new and existing lenders at an expected weighted-average
effective interest rate of 3.80%. On a weighted-average
basis, these rates are fixed for the next 7-plus years.
- Increased and Paid Distributions:
Increased our distribution run rate by 1.2% and paid 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.
Q2 2017 Results: Net income for the
quarter was approximately $255,000, or $0.02 per share, compared to
approximately $173,000, or $0.01 per share, in the prior
quarter. AFFO for the quarter was approximately $1.9 million,
or $0.14 per share, and increased by 14.1% from the prior quarter,
primarily due to additional rental income recorded as a result of
our recent acquisitions. AFFO per share increased by 1.7%
from the prior quarter but was impacted by the three-month lag
between the completion of an equity offering in March 2017 (the
"March 2017 Offering") and the reinvestment of those proceeds into
new acquisitions in June 2017. 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) decreased by
approximately $211,000, driven primarily by decreases in
inter-company fees. The aggregate amount of fees paid to our
adviser and administrator decreased by approximately $146,000, the
majority of which was due to a lower performance-based incentive
fee earned by our adviser during the current quarter (caused by a
higher hurdle during the current quarter due to the March 2017
Offering), partially offset by a higher management fee incurred in
the current quarter (primarily due to an amendment to the agreement
with our adviser that brought the non-controlling interests in our
operating partnership into the base on which the management fee is
calculated). Excluding fees paid to our adviser and
administrator, our core operating expenses decreased by
approximately $59,000, primarily due to the write-off during the
prior quarter of certain unallocated costs related to a
registration statement we filed in 2014 that expired during the
prior quarter. Our NAV per share remained relatively flat,
decreasing by $0.01 from the prior quarter to $14.46 at
June 30, 2017, as the increase caused by the net appreciation
in value of our farmland portfolio was offset by capital
improvements made on certain existing properties during the quarter
(the full costs of which have not yet been considered in the
determination of the respective properties' estimated fair values)
and by an increase in the fair value of our long-term, fixed rate
borrowings.
Subsequent to June 30,
2017:
- Property Acquisition: Acquired four
contiguous farms totaling 847 gross acres in Fresno County,
California, for approximately $13.6 million. The farms were
acquired at an initial net capitalization rate of 5.0% but is
expected to yield between 7.0% and 11.0% when including the
revenue-sharing component of the lease.
- Leasing Activities: Renewed the lease on
one of our farms that was originally subject to a lease scheduled
to expire during the second half of 2017. The new lease is
for an additional period of three years and provides for annualized
cash rents of approximately $0.8 million, representing an increase
of approximately $25,000 (approximately 3.4%) from that of the
prior lease. No downtime, leasing commissions, or tenant
improvements, were incurred in connection with this renewal.
- Financing Activities:
Obtained an aggregate of approximately $13.6 million of new,
long-term borrowings from existing lenders at an expected
weighted-average effective interest rate of 3.64%. On a
weighted-average basis, these rates are fixed for the next 6-plus
years.
- Equity Activity: Issued 161,133 shares
of common stock at an average sales price of $11.90 per share under
our ATM Program for gross and net proceeds of approximately 1.9
million.
- Increased Distributions: Increased our
distribution run rate by 1.1%, declaring monthly cash distributions
of $0.044 per share of common stock (including OP Units held
outside of the Company) for each of July, August, and September
2017, payable per the table below. This marks our seventh
distribution increase over the past 31 months, during which time
we’ve increased the distribution run rate by a total of 46.7%.
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Record Date |
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Payment Date |
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Distribution perCommon
Share |
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Dividend per share ofTerm
Preferred Stock |
July 21, 2017 |
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July
31, 2017 |
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$ |
0.044 |
|
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$ |
0.1328125 |
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August 21, 2017 |
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August
31, 2017 |
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0.044 |
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|
0.1328125 |
|
September 20, 2017(1) |
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September 29, 2017 |
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|
0.044 |
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|
0.1328125 |
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Total for the Quarter: |
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$ |
0.132 |
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$ |
0.3984375 |
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(1) |
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Previously,
on July 11, 2017, the Company announced an ex-dividend date of
September 18,2017 for the September 2017 distribution and
dividend. As an update to the Company'sprevious announcement,
the Company notes that the ex-dividend date for the September
2017distribution and dividend is September 19, 2017. |
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Comments from David Gladstone, President and CEO of the
Gladstone Land: “2017 is shaping up to be a strong
year for us, as we've already added $97 million of new farms to our
holdings, and we have several more farms in our backlog that we
hope to acquire over the next few months. Our team continues
to be successful at finding high-quality farms that are expected to
produce steady income that will be used to pay distributions to our
shareholders. We recently increased our distributions for the
third time this year, and we hope to be able to continue this
trend. And our AFFO has fully covered our distributions for
seven consecutive quarters now. Please dial in and listen to
our quarterly conference call tomorrow morning for more information
on the quarter."
Conference Call for
Stockholders: The Company will hold a conference
call on Wednesday, August 9, 2017, at 8:30 a.m. EDT 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
September 9, 2017. To hear the replay, please dial (855)
859-2056, and use playback conference number 54433981. 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 October 9,
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
June 30, 2017, the estimated net asset value of the Company
was $14.46 per share. Gladstone Land currently owns 69 farms,
comprised of 58,777 acres in 8 different states across the U.S.,
valued at approximately $507 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 54 consecutive monthly cash distributions on its
common stock since its initial public offering in January
2013. The current per-share distribution is $0.044 per month,
or $0.528 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 (dollars in thousands, except per-share amount):
|
|
|
|
|
|
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|
|
Total equity
per balance sheet |
|
|
|
|
|
$ |
104,476 |
|
Fair value adjustment
for long-term assets: |
|
|
|
|
|
|
Less: net cost basis of tangible and intangible real estate
holdings(1) |
|
|
$ |
(408,660 |
) |
|
|
|
Plus: estimated fair value of real estate holdings(2) |
|
|
492,972 |
|
|
|
|
Net fair
value adjustment for real estate holdings |
|
|
|
|
|
84,312 |
|
Fair value adjustment
for long-term liabilities: |
|
|
|
|
|
|
Plus: book value of aggregate long-term indebtedness(3) |
|
|
267,392 |
|
|
|
|
Less: fair value of aggregate long-term
indebtedness(3)(4) |
|
|
(263,870 |
) |
|
|
|
Net fair
value adjustment for long-term indebtedness |
|
|
|
|
|
3,522 |
|
Estimated
NAV |
|
|
|
|
|
$ |
192,310 |
|
|
|
|
|
|
|
|
Total
shares outstanding(5) |
|
|
|
|
|
13,299,882 |
|
|
|
|
|
|
|
|
Estimated NAV
per share |
|
|
|
|
|
$ |
14.46 |
|
(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 June 30, 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 as of June 30, 2017).
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 June 30, 2017, as
filed with the SEC on August 8, 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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