Gladstone Land Announces Third Quarter 2023 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 7, 2023 / Gladstone Land Corporation (Nasdaq:LAND) ("Gladstone Land" or the "Company") today reported financial results for the third quarter ended September 30, 2023. 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, appear 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.GladstoneLand.com.

Third Quarter 2023 Activity:

• Portfolio Activity:
  • Lease Activity: Executed seven new or amended lease agreements on farms in two different states that are expected to result in an aggregate increase in annual net operating income of approximately $210,000, or 9.8%, over the prior leases.
  • Self-operated and Non-accrual Properties: As of and during the quarter ended September 30, 2023, we operated one farm ourselves (via a management agreement with an unrelated third-party). In addition, during the quarter ended September 30, 2023, we recognized revenue from two different leases with one tenant at two separate farms on a cash basis (rather than on a straight-line basis) due to credit issues with the tenant. The year-over-year impact on our operations (Q3 2023 versus Q3 2022) as a result of these properties was a decrease in net operating income of approximately $201,000.
• Debt Activity:
  • Loan Repayments: Repaid approximately $4.2 million of maturing loans.
• Equity Activity:
  • Series E Preferred Stock: Issued and sold 87,672 shares of our 5.00% Series E Cumulative Redeemable Preferred Stock (the "Series E Preferred Stock") for net proceeds of approximately $2.0 million.
  • Common Stock-ATM Program: Sold 58,360 shares of our common stock for net proceeds of approximately $1.0 million under our "at-the-market" program (the "ATM Program").
• Increased and Paid Distributions: Increased the distribution run rate on our common stock by 0.43% and paid monthly cash distributions totaling $0.1386 per share of common stock during the quarter ended September 30, 2023.

Third Quarter 2023 Results:

Net income for the quarter was approximately $3.1 million, compared to approximately $1.8 million in the prior-year quarter. Net loss to common stockholders during the quarter was approximately $3.0 million, or $0.08 per share, compared to approximately $3.6 million, or $0.10 per share, in the prior-year quarter. AFFO for the quarter was approximately $5.6 million, or $0.15 per share, compared to approximately $7.2 million, or $0.21 per share, in the prior-year quarter. Common stock dividends declared were $0.139 per share for the current quarter, compared to $0.137 per share for the prior-year quarter.

Total cash lease revenues decreased by approximately $1.0 million, or 4.4%, from the prior-year quarter, due to decreases in both fixed base cash rent and participation rent amounts. Fixed base cash rents decreased by approximately $402,000, or 2.0%, from the prior-year quarter, primarily due to the execution of one lease agreement in the fourth quarter of 2022, pursuant to which we agreed to reduce the fixed base rent amount in exchange for increasing the participation rent component in the lease (the result of which will not be known until the fourth quarter of 2023), as well as a decrease in revenue from self-operated and non-accrual properties. This decrease was partially offset by additional rents earned on new farms acquired and capital improvements completed on certain farms subsequent to June 30, 2022. Participation rents decreased by approximately $618,000 from the prior-year quarter, driven by lower production (i.e. pounds per acre) on certain almond and pistachio farms (partly due to the alternate-bearing nature of such tree crops but also due to the harvest of such crops coming at the end of a multi-year drought), coupled with weaker crop prices, particularly in the almond market, which continued to be hampered with oversupply exacerbated by supply chain disruptions that occurred during the height of the COVID-19 pandemic.

Aggregate related-party fees increased by approximately $424,000 from the prior-year quarter, primarily driven by a higher incentive fee earned by our investment adviser in the current quarter due to our pre-incentive fee FFO surpassing the required hurdle rate by a higher margin than in the prior-year quarter. Excluding related-party fees, our recurring core operating expenses remained relatively flat from the prior-year quarter.

Cash flows from operations for the current quarter decreased by approximately $3.6 million from the prior-year quarter, primarily due to the timing of certain cash rental payments received. Our estimated NAV per share increased by $3.77 from the prior-year quarter to $20.33 at September 30, 2023, primarily driven by a decrease in the fair value of certain preferred securities (due to increases in market interest rates) and valuation increases in certain of our farms that were re-appraised over the past year.

Subsequent to September 30, 2023:

• Portfolio Activity:
  • Lease Activity: Executed two lease amendments that are expected to result in an aggregate increase in annual net operating income of approximately $66,000, or 1.8%, over the prior leases.
  • Water Acquisition: Entered into a water transfer agreement with a multi-county water district in California. Pursuant to the agreement, which expires on February 28, 2031, we may elect to purchase up to 15,000 acre-feet of water per water year during years in which the water district has a surplus supply of water, furthering our ability to store water for the long-term for future use on our farms. To date, we have paid approximately $1.2 million (including an initial payment of $750,000) to purchase 7,000 acre-feet of water for the 2023 water year.
• Debt Activity-Loan Repayments: Repaid approximately $2.7 million of maturing loans.
• Equity Activity-Series E Preferred Stock: Sold 2,200 shares of our Series E Preferred Stock for net proceeds of approximately $50,000.
• Increased Distributions: Increased our distribution run rate by 0.43%, declaring monthly cash distributions of $0.0464 per share of common stock for each of October, November, and December. This marks our 32 ^nd distribution increase over the past 35 quarters, during which time we have increased the distribution run rate by 54.7%.

Comments from David Gladstone, President and CEO of Gladstone Land: "Results for the quarter were largely as expected but remained slightly down from last year as we continue to work through issues with a few of our tenants. We currently have four properties (encompassing 12 total farms) that we are operating with the help of a third-party management company, and we have one property (which consists of three farms) that is vacant. We are in discussions with various groups to lease these farms, and we hope to have these situations resolved within the next few months.

"Our balance sheet remains strong, with nearly 100% of our borrowings at fixed rates, significantly limiting the impact of increased interest rates. However, the high borrowing costs continue to impact our ability to purchase new farms. As such, we continue to focus our efforts on securing additional water rights for our farms in California by taking advantage of surplus water supplies and storing water for future use on our farms.

"While high borrowing costs have resulted in reduced values for certain types of real estate, the overall value of our farmland portfolio has continued to increase. Our estimated net asset value has increased from $16.56 per share last year to $20.33 per share at September 30, 2023, an increase of 22.8% over the past year."

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