Gladstone Land Announces Third Quarter 2020 Results

Please note that the limited information that follows in this press release is a summary and is not adequate for making an informed investment decision.

MCLEAN, VA / ACCESSWIRE / November 4, 2020 / Gladstone Land Corporation (NASDAQ:LAND) ("Gladstone Land" or the "Company") today reported financial results for the third quarter ended September 30, 2020. A description of funds from operations ("FFO"), core FFO ("CFFO"), adjusted FFO ("AFFO"), and net asset value ("NAV"), all non-GAAP (generally accepted accounting principles in the United States) financial measures, appears at the end of this press release. All per-share references are to fully-diluted, weighted-average shares of the Company's common stock unless noted otherwise. For further detail, please refer to the Company's Quarterly Report on Form 10-Q (the "Form 10-Q"), which is available on the Investors section of the Company's website at www.GladstoneFarms.com.

Third Quarter 2020 Activity:

• Portfolio Activity:
  • Property Acquisitions: Acquired eight new farms, consisting of 3,473 total acres across three different states (including two new states), for approximately $39.2 million. On a weighted-average basis, these farms were acquired at an initial, minimum net capitalization rate of 5.4%. However, the leases on these farms contain certain provisions (e.g., annual rent escalations or participation rents) that are expected to drive cash rents higher in future years.
  • Leasing Activity: Executed four new lease agreements on certain of our farms in two different states (CA & FL) that are expected to result in an aggregate increase in annual net operating income of approximately $181,000, or 11.3%, over that of the prior leases.
  • Rent Collections: Collected 100% of the rent owed during each of the three and nine months ended September 30, 2020.
• Financing Activity-New Long-term Borrowing: Secured a loan of approximately $4.5 million from a new lender at an expected effective interest rate of 3.24%, which is fixed for the next 10 years.
• Equity Activity:
  • Series C Preferred Stock: Sold 289,494 shares of our 6.00% Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock") for net proceeds of approximately $6.6 million.
  • Common Stock: Sold 526,016 shares of our common stock for net proceeds of approximately $8.4 million under our "at-the-market" program (the "ATM Program").
• Increased and Paid Distributions: Increased the monthly distribution run rate on our common stock by 0.22% and paid total cash distributions of $0.13440 per share of common stock for July, August, and September 2020.

Third Quarter 2020 Results:

Net income for the quarter was approximately $1.6 million, compared to approximately $182,000 in the prior quarter. Net loss to common stockholders and non-controlling OP Unitholders during the quarter was approximately $824,000, or $0.04 per share, compared to approximately $2.1 million, or $0.10 per share, in the prior quarter.

AFFO for the quarter was approximately $3.1 million, an increase of approximately $1.0 million, or 44.2%, from the prior quarter, while AFFO per common share increased to approximately $0.14 for the current quarter, compared to $0.10 for the prior quarter. Common stock dividends declared were approximately $0.13 per share for each quarter. The increase in AFFO was primarily driven by higher lease revenues recorded in the current quarter and interest patronage received related to our Farm Credit borrowings, partially offset by an increase in certain operating expenses.

Total lease revenues increased by approximately $1.4 million, or 10.7%, primarily driven by participation rents recorded during the current quarter of approximately $1.1 million, versus approximately $44,000 in the prior quarter. Fixed base cash rents increased quarter-over-quarter by approximately $461,000, or 3.9%, primarily due to additional rental receipts from recent acquisitions. Our core operating expenses increased primarily due to higher related-party fees during the current quarter, which was driven by an incentive fee earned by our investment adviser (due to our pre-incentive fee FFO surpassing the required hurdle rate), versus no incentive fee earned in the prior quarter. Excluding related-party fees, reimbursable expenses, and certain nonrecurring or noncash items, our core operating expenses decreased quarter-over-quarter by approximately $256,000, or 28.5%. This decrease was primarily driven by lower property operating expenses, specifically, lower repairs and maintenance costs on certain properties and decreases in property-level legal fees and annual filing costs.

Cash flows from operations for the current quarter decreased, primarily due to the timing of when certain rental payments are scheduled to be paid, as well as increases in the amounts of fees paid to our Adviser and interest payments made. Our NAV per share increased by $0.91 from the prior quarter to $11.97 at September 30, 2020, primarily driven by valuation increases in certain of our farms that were re-appraised during the current quarter.

Subsequent to September 30, 2020:

• Portfolio Activity:
  • Acquisitions: Acquired four new farms, consisting of 1,398 total acres across two different states (including one new state), for approximately $35.6 million. On a weighted-average basis, these farms were acquired at an initial, minimum net capitalization rate of 4.9%. However, the leases on these farms contain certain provisions (e.g., annual rent escalations or participation rents) that are expected to drive cash rents higher in future years.
  • Rent Collections: Collected 99% of the rent owed during October 2020 (all except for approximately $43,000 owed from one tenant).

• Equity Activity:
  • Stock Listing: Listed the 6.00% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock") on Nasdaq under the ticker symbol, "LANDO."
  • Series C Preferred Stock: Sold 203,861 shares of the Series C Preferred Stock for net proceeds of approximately $4.6 million.
  • Common Stock Offering: Completed a public offering of our common stock, whereby we sold a total of 1,897,500 shares for total net proceeds of approximately $26.1 million.
• Financing Activity-New Long-term Borrowing: Secured a total of approximately $40.4 million of new, long-term borrowings from two different lenders (including one new lender). On a weighted-average basis, these loans will bear interest at 2.52% and are fixed for 7.7 years.
• $1 Billion Portfolio Milestone: With the valuation increases experienced during the quarter ended September 30, 2020, coupled with acquisitions subsequent to September 30, 2020, the value of Company's farmland holdings has surpassed $1.0 billion in fair value.
• Increased Distributions: Increased our distribution run rate by 0.22%, declaring monthly cash distributions of $0.0449 per share of common stock (including OP Units held by non-controlling OP Unitholders) for each of October, November, and December 2020. This marks our 20th distribution increase over the past 23 quarters, during which time we have increased the distribution run rate by 49.7%.

Comments from David Gladstone, President and CEO of Gladstone Land: "The Company has acquired approximately $75 million of new farms over the past two months, and the team has a robust list of farms they are seeking to acquire over the next several months. We recently surpassed $1 billion in total farmland value, which is a testament to the hard work of this team. The team also continued to have success with lease renewals, and we believe the increased net rental rates on these renewals indicate the strong demand for, and continued appreciation in value of, the Company's farms. The impact on the Company's farms and farmers as a result of COVID-19 continues to be minimal, as most tenants on the Company's farms sell their products to grocery stores, with very little of their sales going to restaurants and other segments of the food service industry. Based on current pricing and sales volumes at most grocery stores, the tenants on the Company's farms seem to be in a good position right now. With the exception of one farmer who owes us about $43,000, all of our tenants are current in their rental payments to us, and we do not currently foresee any reason for that to change in the future. Finally, I'd just like to note that none of our farms suffered any significant damage as a result of the recent wildfires in California or hurricanes in the Southeastern U.S., though our thoughts are always with those farmers and families who were negatively impacted by such events."

Quarterly Summary Information
(Dollars in thousands, except per-share amounts)

1. Includes (i) cash dividends paid on our Series B and Series C Preferred Stock, (ii) the pro-rata write-off of offering costs related to shares of Series B Preferred Stock that were redeemed, and (iii) the value of additional shares of Series C Preferred Stock issued pursuant to the dividend reinvestment program.
2. Represents our pro-rata share of depreciation expense recorded in unconsolidated entities during the period.
3. Consists primarily of property and casualty recoveries recorded, net of the cost of related repairs expensed, as a result of the damage caused to certain irrigation improvements by natural disasters on certain of our properties.
4. 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, 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.
5. Consists of (i) the pro-rata write-off of offering costs related to shares of the Series B Preferred Stock that were redeemed, which was a noncash expense, (ii) the amount of dividends on the Series C Preferred Stock paid via issuing new shares (pursuant to the DRIP), and (iii) our pro-rata share of income (loss) recorded from investments in unconsolidated entities during the period.
6. 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.
7. Consists of the principal balances outstanding of all indebtedness, including our lines of credit, notes and bonds payable, and our Series A Term Preferred Stock.
8. Based on gross acreage.

Conference Call for Stockholders: The Company will hold a conference call on Thursday, November 5, 2020, at 8:30 a.m. (EST) to discuss its earnings results. Please call (877) 407-9046 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 November 12, 2020. To hear the replay, please dial (877) 660-6853, and use playback conference number 13711040. The live audio broadcast of the Company's conference call will also be available online at the Company's website, www.GladstoneFarms.com. The event will be archived and available for replay on the Company's website.

About Gladstone Land Corporation:

Founded in 1997, Gladstone Land is a publicly traded real estate investment trust that acquires and owns farmland and farm-related properties located in major agricultural markets in the U.S. and leases its properties to unrelated third-party farmers. The Company, which reports the aggregate fair value of its farmland holdings on a quarterly basis, currently owns 127 farms, comprised of approximately 94,000 acres in 13 different states, valued at approximately $1.0 billion. Gladstone Land's farms are predominantly located in regions where its tenants are able to grow fresh produce annual row crops, such as berries and vegetables, which are generally planted and harvested annually. The Company also owns farms growing permanent crops, such as almonds, apples, figs, olives, pistachios, and other orchards, as well as blueberry groves and vineyards, which are generally planted every 10 to 20-plus years and harvested annually. The Company may also acquire property related to farming, such as cooling facilities, processing buildings, packaging facilities, and distribution centers. The Company pays monthly distributions to its stockholders and has paid 93 consecutive monthly cash distributions on its common stock since its initial public offering in January 2013. The Company has increased its common distributions 20 times over the prior 23 quarters, and the current per-share distribution on its common stock is $0.0449 per month, or $0.5388 per year. Additional information, including detailed information about each of the Company's farms, can be found at www.GladstoneFarms.com.

Owners or brokers who have farmland for sale in the U.S. should contact:

• Western U.S. - Bill Reiman at (805) 263-4778 or [email protected], or Tony Marci at (831) 225-0883 or [email protected];
• Midwestern U.S. - Bill Hughes at (618) 606-2887 or [email protected];
• Mid-Atlantic U.S. - Joey Van Wingerden at (703) 287-5914 or [email protected]; or
• Southeastern U.S. - Bill Frisbie at (703) 287-5839 or [email protected];

Lenders who are interested in providing us with long-term financing on farmland should contact Jay Beckhorn at (703) 587-5823 or [email protected].

For stockholder information on Gladstone Land, call (703) 287-5893. For Investor Relations inquiries related to any of the monthly dividend-paying Gladstone funds, please visit www.GladstoneCompanies.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- and disposition-related expenses, the net incremental impact of operations conducted through our taxable REIT subsidiary, 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.

A reconciliation of FFO (as defined by NAREIT), CFFO, and AFFO (each as defined above) to net income (loss), which the Company believes is the most directly-comparable GAAP measure for each, and a computation of fully-diluted net income (loss), FFO, CFFO, and AFFO per weighted-average share is set forth in the Quarterly Summary Information table above. The Company's presentation of FFO, CFFO, or AFFO, 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 independent, third-party appraisers; 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, 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 available to common stockholders and non-controlling OP Unitholders, 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 by non-controlling third parties). 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):

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 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 September 30, 2020.
5. Valued at the security's liquidation value.
6. Includes 22,204,906 shares of common stock and zero OP Units held by non-controlling OP Unitholders.

Comparison of our 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-K, filed today with the SEC.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS:

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 NAV 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" within the Company's Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on February 19, 2020, and certain other documents filed with the SEC from time to time. 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.

CONTACT:

Gladstone Land Corporation, +1-703-287-5893

SOURCE: Gladstone Land Corporation