Farmland Partners Provides Rebuttal to Inaccurate, Misleading and Anonymous Internet Posting on Seeking Alpha

DENVER, July 17, 2018 /PRNewswire/ -- Farmland Partners Inc. (NYSE:FPI) ("FPI," the "Company," "we," or "us") today provided a rebuttal to a "short and distort" attack on the Company on July 11, 2018. The Company's response is below.

Introduction

On July 11, 2018, the Company was the subject of an organized, coordinated, anonymous and extremely damaging attack by the holder or holders of a short position in the Company's stock, which drove our stock price down by approximately 39% in one day. The internet posting was released on Seeking Alpha anonymously under the pseudonym Rota Fortunae ("RF"), which translates into "Wheel of Fortune" and, based on current information, was prepared with the aid and assistance of Matthew M. Mitzner, Esq. and his law firm, Mitzner PLLC (together with RF, "Wheel of Fortune").

The Wheel of Fortune internet posting is both false and materially misleading in numerous respects. While the Company's investigation into Wheel of Fortune's misconduct continues, this release updates investors with respect to the following:

The background of this anonymous and misleading "short and distort" attack on the Company;
A further response to the most significant allegations made in Wheel of Fortune's internet posting; and
The actions we are taking to pursue legal remedies from the parties responsible for the attack.

We believe Wheel of Fortune intentionally misled the market with sweeping, unfounded assumptions, misleading facts and suggestive language for the sole purpose of causing the stock price to decline dramatically in order to profit on their short position. Those false and materially misleading statements led to panic selling and very high daily volume. As a consequence, on July 11, 2018, FPI's common stock closed at $5.28, a 39% decline over the prior day's close, and FPI's Series B Participating Preferred Stock closed at $18.15, a 26% decline over the prior day's close.

Our view is that, as a publicly listed company, shareholders, analysts and others certainly have the right to and will criticize the Company from time to time. We welcome an open and honest dialogue. Nothing prevented Wheel of Fortune from participating in such a discussion with members of FPI's senior management in a manner that would afford FPI a reasonable opportunity (not the 24 hours demanded by Mitzner PLLC) to address each of Wheel of Fortune's allegations. We also understand that short selling is a legitimate investment strategy. However, posting demonstrably false and misleading information in order to profit from the panic that ensues may constitute illegal market manipulation. Accordingly, we are working with the relevant law enforcement agencies and have asked them to investigate Wheel of Fortune's conduct.

We have not undertaken in this press release to refute every single unsubstantiated claim that Wheel of Fortune made in their internet posting. Rather, we will respond to the main points and questions presented.

As a threshold matter, however, investors should rest assured that the Company does not have a material risk of insolvency. If the Company had such a risk, our financial disclosures would be required to include a going concern qualification in our financial statements. This qualification has never been placed in our financial statements.

The Set-Up Through the Mitzner Law Firm

On July 9, 2018, the Company received a letter from Matthew M. Mitzner of Mitzner PLLC on behalf of his clients, purportedly "a group of investors." The letter referred to and threatened the release of an article (which ultimately became Wheel of Fortune's anonymous posting) unless the Company responded to a lengthy list of questions within 24 hours, an unreasonable amount of time in light of the detailed questions posed by Mitzner on behalf of Wheel of Fortune. Further showing the intent to cause injury for personal gain, Mitzner "demanded" a response in writing and refused to discuss either the proposed article or the questions posed, which appear at the end of Wheel of Fortune's anonymous internet posting. In the letter, Mitzner specifically noted he would be unavailable for a phone conversation prior to the publication of what became the Wheel of Fortune posting. As a lawyer purporting to represent investors, Mitzner certainly knew, or should have known, that public companies cannot respond to such requests because doing so is likely to be an impermissible selective disclosure of non-public information. Thus, upon the advice of our outside legal counsel, we did not respond.

We know that we are not the only company to be victimized by these types of attacks, including prior attacks by RF (including at least one company that ultimately was vindicated after RF sought to discredit the company and its management team), and call upon the Securities and Exchanges Commission ("SEC"), Congress and state legislatures to do more to protect the integrity and efficiency of the markets and shield shareholders and small businesses from this kind of misconduct in the marketplace. For now, we have taken the following steps:

We have reported these events to the SEC, offering our full cooperation in any investigation into the Company, but more importantly into the false allegations made and the resulting potentially illicit gains of these short sellers.
We have retained counsel and intend to commence legal proceedings.

We suggest that any FPI shareholders who sold FPI stock at a loss as a result of Wheel of Fortune's false allegations consult with their legal counsel and evaluate potential recovery of their losses from the responsible parties.

This press release attempts to address the most significant allegations made in the Wheel of Fortune internet posting. Most of the rebuttal is based on existing public disclosures; however, in certain instances in this press release, we have provided additional information, not because our earlier disclosures were deficient, but to provide further insight into the questions and issues contained in the Wheel of Fortune internet posting.

Company's Rebuttal to the Main Points of the Wheel of Fortune Internet Posting

1. The Company's Presentation of AFFO Does Not Exclude Preferred Dividends

Wheel of Fortune claims that the Company excludes dividends on the Company's Series B Participating Preferred Stock from Adjusted Funds From Operations ("AFFO"). The claim is patently false, as the inclusion of such dividends in the AFFO calculation is clearly explained in the Company's disclosures. For example, see page 41 of the Company's Quarterly Report on Form 10-Q for the first quarter of 2018.

2. The Company Did Not Make Loans to Related Parties

Neither Ryan Niebur nor Jesse Hough are "related parties" as defined by applicable rules of the SEC and the Financial Accounting Standards Board ("FASB") and were not "related parties" at the time of any loan made to them. Wheel of Fortune, unencumbered by rules or regulations and, it appears, good faith, uses their own definition of related party to suit a false narrative. As a public company, we are a regulated entity and must abide by the legal definitions of certain terms. Wheel of Fortune intentionally creates confusion by suggesting that, by conducting business with "related parties" in the common English sense of those words (i.e., parties known to us with whom we have other business relationships), the Company has not satisfied the disclosure requirements imposed by relevant regulations. We have only made loans to parties we know, which we believe is an appropriate business practice and is in the best interest of the Company and its shareholders. Borrowers under the Loan Program have always been tenants, non-tenant farmers we know, and/or parties with whom we previously have done business, and these are good, hardworking farmers who create jobs and care for families by making an honest living producing food, unlike anonymous short sellers engaging in illegal market manipulation. Our tenants and borrowers do not deserve to be disparaged so that an anonymous short seller can profit from his misdeeds.

Furthermore, Wheel of Fortune's discussion of Ryan Niebur Loans #2 and #4 asserts that, by collecting the first year of interest up front, FPI is able to "report immediate interest revenue." That is another false statement. We report the recognition of interest revenue in accordance with U.S. GAAP, which requires that this type of interest be recognized on a straight-line basis over time.

a. Background on the FPI Loan Program

In 2015, the Company announced the launch of the FPI Loan Program in a press release dated August 27, 2015, and began disclosures regarding the program in its public filings (for example, see page 21 of the Company's Quarterly Report on Form 10-Q for the third quarter of 2015). Under the FPI Loan Program, we make asset-based loans secured by agricultural real estate. These loans are underwritten primarily on the basis of the value of the underlying collateral rather than the borrower's financial health. As a non-traditional agricultural lender, we can and do originate higher loan-to-value ("LTV") loans and can close more quickly than traditional agricultural lenders. And as is customary, we receive higher than traditional fees and interest on our loans. Absent an affirmative obligation to do so, we will not, and do not believe it is appropriate to, disclose the identities of individual borrowers. We will, however, provide the following information.

Loans made by the Company generally fall under one of two different collateral structures:

Loans secured by mortgages; or
Loans secured by recorded deeds on agricultural property, with the borrower retaining the option to repurchase the collateral at a price equal to the loan's outstanding principal balance and accrued and unpaid interest rather than the collateral's market value. This structure gives the Company a stronger position than a traditional mortgage lender. In these cases, the county records will show the Company as the owner. However, these transactions are required to be reported as loans in accordance with U.S. GAAP.

The Company occasionally makes bridge loans to prospective property sellers in the context of an acquisition transaction under contract to give the property sellers effective access to a portion of the sale proceeds before the Company completes due diligence and other work on a pending acquisition. In these cases, the loan is generally secured by a mortgage on the property being acquired by the Company and, as appropriate, by additional collateral, in order to ensure an LTV consistent with the Company's lending standards.

We believe that all of our loans are made on terms that reflect the circumstances under which the loans are originated, including factors identified during our underwriting process. We believe that in most, if not all, cases we are able to charge our borrowers relatively high interest rates and up-front points as a fair compensation for our asset-based underwriting criteria and speed of execution. As an asset-based lender, we are generally not concerned about the borrower's use of proceeds. Rather, as previously stated, we primarily focus on the value of the underlying collateral.

Contrary to the author's misleading statements, all of our outstanding loans have economic substance and we fully expect them to perform well for the Company consistent with our underwriting criteria.

As of March 31, 2018, FPI's Loan Program is comprised of the notes outlined in the table on page 16 of the Company's Quarterly Report on Form 10-Q for the first quarter of 2018. Based on recent analyses derived from a combination of external appraisals and internal analysis, the weighted average LTV of the loans, including outstanding interest, on March 31, 2018 was under 75%.

b. Additional Disclosures Related to Ryan Niebur, Jesse Hough and the Loan to the Seller of North Carolina Property

Ryan Niebur was and is a tenant of the Company and he worked part-time for the Company as a farm manager from September 2015 to December 2017. Ryan Niebur was never a member of the Company's senior management team and never had corporate decision-making authority. He is not a "related party" under applicable SEC and FASB rules. We continue to believe the loans made to Ryan Niebur are good loans and will perform well for the Company.

Jesse Hough was not a "related party" under applicable SEC and FASB rules at the time loans were made. Mr. Hough is a tenant and a borrower of the Company. From April 16, 2014 through April 16, 2018, Mr. Hough was a consultant of the Company. He was a business partner of FPI's Chairman and CEO, Paul Pittman, prior to the Company's initial public offering and during the first couple of years subsequent to the initial public offering. During the period Mr. Hough and Mr. Pittman remained business partners, the Company appropriately disclosed Mr. Pittman's relationship with Mr. Hough under the related party transactions disclosures in the Company's public filings (see, for example, "Note 4–Related Party Transactions" on page F-17 of the Company's Annual Report on Form 10-K for the year ended December 31, 2015). Mr. Hough never had decision-making authority over any matters or transactions involving the Company. Mr. Hough's historic and current involvement with the Company has been properly disclosed in our filings. In accordance with the Sarbanes-Oxley Act of 2002, the Company has never made loans to any officers of the Company or entities controlled or affiliated with any officers of the Company.

Regarding the loan for the North Carolina property referred to by Wheel of Fortune, we made a short-term bridge loan in exchange for a substantial fee to the seller of a large North Carolina farm that we acquired in the first few weeks of 2018. There is nothing improper about this loan. It was made in the following context: The seller needed funds before December 31, 2017 and, due to title work and other due diligence requirements, the closing could not be completed by year end. Therefore, in exchange for a security interest in a different property, we made a short-term bridge loan that was subsequently paid off by applying the outstanding principal and interest on the loan to reduce our purchase price of the large North Carolina property.

3. The Company Did Not Fail to Properly Disclose the Financial Impact of the Loan Program

Wheel of Fortune's implication that FPI's overall financial performance was materially swayed by its Loan Program is untrue. FPI's Loan Program is a very small portion of our business. As of March 31, 2018, the total outstanding principal and interest receivable under the Loan Program was $11.6 million, or 1.0% of the Company's total assets (see page 16 of the Company's Quarterly Report on Form 10-Q for the first quarter of 2018). In the year ended December 31, 2017, the Loan Program generated $0.5 million in net revenues, or 1.1% of total revenue (see page 51 for a narrative description under "Other Revenue" and page F-3, in each case in the Company's Annual Report on Form 10-K for the year ended December 31, 2017). While we continue to believe that the loans we have made are good investments on their own merits and that the Loan Program is neither a significant portion of the Company's investment portfolio nor a significant contributor to the Company's profitability, we also believe the Loan Program provides a valuable service to our tenants and other farmers, particularly during periods of distress in their businesses.

4. FPI Charges Appropriate Rents For Our Properties

FPI's rents are appropriate and fair taking into consideration the actual farm, market conditions, and other unique factors related to a given property or tenant. Wheel of Fortune's claim that FPI's rents are above USDA state averages and, therefore, not consistent with market rents, is, like so many statements in the internet posting, misinformed and wrong. A responsible analyst or investor would take the time to understand the company in which it invests, and engage in dialogue with other investors and the company in the ordinary course before making statements about the company. A short seller looking to manipulate the market and profit by causing a short-term price decline, however, has a different agenda. As investors and the public know, farmland is different and rents will vary dramatically across a given state or region. To claim all farm rents in a state are or should be the same is like saying office rents in mid-town Manhattan should equal the New York state average for office rents. For example, the Washington County farm cited by Wheel of Fortune is a dryland farm with good soils and located in Eastern Colorado. As a result, it is more productive than the average dryland farm in the state.

5. FPI Has Not Intentionally Overpaid For Acquisitions

The Company does not believe it systematically overpays for acquisitions and does not enter into acquisition transactions with the belief that it is overpaying for assets.

For example, Wheel of Fortune's anonymous posting cited three properties in Telfair County, GA (the Selph, Mobley and Dorminey farms) as an example of the Company allegedly overpaying by purchasing the property for substantially more than the prior purchaser had paid. Regarding these farms, Wheel of Fortune's allegations that we overpaid are, again, false. While we do not know all of the details of transactions that pre-date our purchases, the Selph and Mobley farms were appraised at the approximate time of the purchase at a weighted average value of 12.7% above purchase price. Dorminey was not appraised since it was only a $179,000 purchase.

In the case of the American Farmland Company ("AFCO") acquisition, we of course paid more than the cover buyer, which is typically what it takes to win an auction process. The price we paid is supported by our own valuation work, the fairness opinion rendered by the investment banking firm hired by the Company's board of directors, and independent third-party appraisals. Furthermore, those farms had a higher value to us because, as an existing farmland REIT, we did not have to maintain the cost of AFCO's management structure.

As the Company's press release that went out this Monday, July 16, 2018 indicates, we recently sold four farms located in Illinois and one in Texas for a collective gain of $0.8 million, or 10% higher than the Company's book value for these assets. As we have disclosed in prior public filings, if we believe it is in the best interests of our stockholders, we may elect to sell one or more of our properties in a manner consistent with our investment objectives. Like other public REITs, we will consider the sale of assets where we believe we can recycle capital into other assets, particularly when we can realize a gain on sale.

6. No Director or Officer Has Left the Company, Nor Has Any Auditor Been Dismissed, Due to a Dispute With the Company.

Wheel of Fortune's statements about the reasons for directors or officers resigning or not standing for re-election are false. In no case has the departure of any director or officer been a result of concerns with the Loan Program, and the Company appropriately and truthfully disclosed in its public filings that the decisions were not the result of any disagreements between directors or officers and the Company.

Wheel of Fortune also misrepresented the reasons for a change in our independent auditor. As previously disclosed by the Company in a Current Report on Form 8-K filed on March 13, 2018, the appointment of EKS&H LLLP as our independent auditor was to allow the Company to maintain a high quality auditor while achieving its objective of reducing costs. This decision was not the result of any disagreement between the Company and PricewaterhouseCoopers LLP ("PwC") on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. In addition, as noted in the Current Report on Form 8-K filed March 10, 2018:

"during the fiscal years ended December 31, 2017 and December 31, 2016, as well as during the subsequent interim period preceding March 10, 2018, there were no (i) "disagreements" (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) between the Company and PwC with respect to any matter relating to accounting principles or practices, financial statement disclosure or auditing scope or procedures which, if not resolved to the satisfaction of PwC, would have caused PwC to make reference to the subject matter of the disagreement in its reports on the Company's financial statements with respect to such periods; or (ii) "reportable events" (as that term is defined in Item 304(a)(1)(v) of Regulation S-K and the related instructions)."

PwC confirmed the foregoing with a letter addressed to the SEC dated March 12, 2018, which was filed as an exhibit to the Form 8-K.

7. Our Same-Property Rent Disclosures Are Appropriately Calculated and Materially Accurate

Wheel of Fortune claims that the Company stopped disclosing same-property rents per acre and omits certain farms from the calculation, thereby presenting a misleading picture to investors. This is not true. The Company stopped disclosing same-property rent increases or decreases on a per acre basis when the expansion of the portfolio into multiple regions and crop types made the average per acre rent on a nationwide basis not meaningful to investors. With a portfolio that includes properties that have some rents per acre measured in the thousands of dollars and other rents per acre under fifty dollars, the nationwide average provides investors less useful information upon which to assess the Company's performance, not more.

Wheel of Fortune also suggests that we are arbitrarily excluding properties to make the same-property rent numbers look better. This is simply not true. Unlike other real estate asset classes, vacancy rates in quality U.S. farmland are virtually zero. In addition, annual rents are typically determined and paid for the entire crop year rather than the specific months or days during which a lease was in place. As a result, including in our calculation properties that did not contribute to revenues calculated in accordance with U.S. GAAP for the entirety of the periods presented in the same-property comparison would skew the comparison - positively or negatively - even though such properties are expected to generate cash rents for the entirety of those periods and historically have done so. This issue is particularly significant in the first quarter of the year, when row crop properties whose leases have expired, especially in the northern part of the U.S., might not have yet a new lease in place.

The Company believes that same-property portfolio rent comparisons on less than a full year basis are not indicative of the portfolio's true performance. This is due to the multiple types of lease structures we use that have significant variance in the annual timing of revenue recognition. However, we are required to make this disclosure in accordance with U.S. GAAP rules.

Wheel of Fortune also refers to substantial increases and decreases in reported same-property rents between Q4 2016 and Q1 2017 and then between Q1 2018 and Q1 2017. As fully disclosed in our filings and public comments, a major cause of this was the termination payments made by a tenant in the fourth quarter of 2016, which materially increased U.S. GAAP recognized revenue in that quarter and the subsequent relative decline into Q1 2017 that did not include those termination payments. When comparing Q1 2018 to Q1 2017, the increase in same-property rents looks quite large due to Q1 2017 being so low.

8. Paul Pittman Has Never Pledged Any Shares

Despite the misleading statements in the Wheel of Fortune internet posting, FPI's Chairman and CEO, Paul Pittman, has never pledged any of his shares to date. More importantly, as indicated in the Company's most recent proxy statement, as of March 16, 2018, he held a 6.7% interest in the Company on a fully diluted basis and has been a significant and repetitive buyer of additional shares as indicated in his Form 4's. If it weren't for the Company's insider trading policy and its current black-out period, the Company, Mr. Pittman and other members of management would buy additional shares right now.

Conclusion

These malicious, self-interested and misleading "short and distort" attacks against the Company are very unfortunate and have caused serious financial and reputational harm to the Company, its management and its common and preferred shareholders. We intend to pursue all legal avenues to redress these wrongs, but more importantly, we are firmly committed to seeing that over time, the Company's stock price more accurately reflects the actual underlying value of our portfolio. We are committed to increasing revenue from our farms through the active management of our farms, including rental increases and property improvements.

About Farmland Partners Inc.

Farmland Partners Inc. is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of the date of this release, the Company owns or has under contract over 165,000 acres in 17 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, South Dakota, Texas and Virginia. We have approximately 30 crop types and over 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" or similar expressions or their negatives, as well as statements in future tense. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: general volatility of the capital markets and the market price of the Company's common stock or Series B participating preferred stock, changes in the Company's business strategy, availability, terms and deployment of capital, the Company's ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, availability of qualified personnel, changes in the Company's industry, interest rates or the general economy, adverse developments related to crop yields or crop prices, the degree and nature of the Company's competition, the timing, price or amount of repurchases, if any, under the Company's share repurchase program, the ability to consummate acquisitions under contract and the other factors described in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017, and our other filings with the Securities and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

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