Gladstone Land Announces Third Quarter 2024 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 6, 2024 / Gladstone Land Corporation (Nasdaq:LAND) ("Gladstone Land" or the "Company") today reported financial results for the third quarter ended September 30, 2024. 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 common stock, unless noted otherwise. For further detail, please refer to the 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 2024 Activity:

• Portfolio Activity:

  • Lease Activity: Executed 21 amended or new lease agreements during the quarter as follows:

    • On annual row crop farms, we renewed or amended eight different leases that are expected to result in an aggregate increase in annual net operating income of approximately $309,000, or 11%, over that of the prior leases.

    • On permanent crop farms, we renewed or amended 13 different leases. With four of these leases, we changed the lease structure whereby we eliminated the base rent, and in some cases, provided the tenants with a cash allowance, in exchange for significantly increasing the participation rent component in these leases, the majority of which will be recognized in the second half of 2025. The remaining nine leases are expected to result in an aggregate decrease in annual net operating income of approximately $441,000, or 15%, from that of the prior leases.

  • Vacant, Direct-operated, and Non-accrual Properties: During all or a portion of the quarter, we had 20 farms (5 in California, 13 in Michigan, 1 in Oregon, and 1 in Washington) that were either vacant, direct-operated (via management agreements with unrelated third parties), or on which lease revenues were recognized on a cash basis. The year-over-year impact on our operations (Q3 2024 versus Q3 2023) as a result of these properties was a decrease in net operating income of approximately $638,000.

  • California Water Activity: Purchased 2,260 gross acre-feet (over 736 million gallons) of water at a cost of approximately $883,000, or approximately $391 per gross acre-foot.

• Debt Activity-Loan Repayments: Repaid approximately $13.3 million of loans that were scheduled to either mature or reprice.

• Equity Activity:

  • Series E Preferred Stock: Sold 3,595 shares of our 5.00% Series E Cumulative Redeemable Preferred Stock (the "Series E Preferred Stock") for net proceeds of approximately $81,000.

  • Repurchase Program: Repurchased a total of 176,045 shares of our 6.00% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock") and our 6.00% Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock") at an average repurchase price of $21.22 per share for a total gain on repurchase of approximately $231,000.

• Increased and Paid Distributions: Increased the distribution run rate on our common stock by 0.21% and paid monthly cash distributions totaling $0.1401 per share of common stock during the quarter ended September 30, 2024.

Third Quarter 2024 Results:

Net income for the quarter was approximately $6,000, compared to net income of approximately $3.1 million in the prior-year quarter. Net loss to common stockholders during the quarter was approximately $5.8 million, or $0.16 per share, compared to a net loss to common stockholders of approximately $3.0 million, or $0.08 per share, in the prior-year quarter. AFFO for the quarter was approximately $4.5 million, or $0.13 per share, compared to approximately $5.4 million, or $0.15 per share, in the prior-year quarter. Common stock dividends declared were $0.14 per share for both periods.

Total cash lease revenues decreased, driven by lower fixed base cash rents on certain properties, partially offset by additional participation rents recorded during the current quarter. Fixed base cash rents decreased by approximately $2.6 million, primarily due to the sale of a large farm in Florida during the first quarter of 2024, as well as a decrease in revenue from certain vacant, direct-operated and non-accrual properties. Fixed base cash rents also decreased primarily due to the execution of certain lease agreements in 2024, pursuant to which we agreed to reduce the fixed base rent amounts and, in some cases, provided certain tenants with cash lease incentives in exchange for increasing the participation rent components in the leases, the majority of which will be recognized in the second half of 2025. Participation rents increased by approximately $1.1 million due to additional information related to prior years' harvest becoming available in the current quarter to allow us to estimate certain amounts. Based on the participation rents recorded thus far, the increase was primarily driven by stronger production (i.e., pounds per acre) on certain pistachio farms, partly due to the alternate-bearing nature of such tree crops.

Aggregate related-party fees decreased by approximately $800,000 during the three months ended September 30, 2024, as compared to the prior-year period, primarily driven by an incentive fee earned by our investment adviser in the prior-year quarter. Excluding related-party fees, our recurring core operating expenses increased by approximately $666,000 due to higher property operating expenses and general and administrative expenses incurred in the current-year quarter. The increase in property operating expenses was primarily driven by higher costs incurred on properties that were either vacant, direct-operated, or on non-accrual status at some point during the quarter, including additional real estate taxes, third-party property management expenses, and legal fees associated with leasing and rent collection efforts. General and administrative costs increased primarily due to additional stockholder-related expenses incurred and higher professional fees.

Cash flows from operations for the current quarter decreased by approximately $1.4 million from the prior-year quarter, largely due to the payment of certain cash allowances provided for in three leases that were executed in the current quarter and an increase in cash payments made towards the acquisition of water assets. This decrease was partially offset by an increase in cash receipts attributable to participation rents. Our estimated NAV per share decreased by $4.76 from the prior-year quarter to $15.57 at September 30, 2024, primarily due to valuation decreases in certain of our farms that were re-appraised over the past year and an increase in the fair value of our fixed, long-term borrowings and certain preferred securities (driven by changes in market interest rates and conditions).

Subsequent to September 30, 2024:

• Portfolio Activity:

  • Disposition Activity: In October 2024, we entered into agreements to sell 11 blueberry farms located in Allegan and Van Buren, Michigan, for total consideration of approximately $5.0 million, exclusive of closing costs. We currently expect these sales to be completed during the three months ending December 31, 2024.

• Equity Activity:

  • Common Stock-ATM Program: Issued and sold 346,216 shares of our common stock for net proceeds of approximately $4.6 million under our "at-the-market" program (the "ATM Program").

• Fourth Quarter Distributions: Declared monthly cash distributions of $0.0467 per share of common stock for each of October, November, and December.

Comments from David Gladstone, President and CEO of Gladstone Land: "Our annual row crop farms, including both those in California and Florida, continue to perform, both in terms of value appreciation and rent growth. The market for many permanent crop farms in the west has been negatively impacted by lower crop prices, higher input costs, and water uncertainty. As such, we've decided to take a different approach with the leases on a few of these farms, whereby we will grant the tenants a cash allowance to cover a portion of their costs in return for receiving a larger portion of the gross crop proceeds on the farms. While we intend for this to be a temporary structure, we believe this arrangement is the most profitable structure for this specific set of farms due to the history of high yields on these farms, which allows for strong crop insurance, and we continue to see prices of these crops trending upwards. Regarding the continuing tenancy issues on certain of our farms, we currently have six properties (encompassing 7 of our 168 farms) that are either vacant or being direct-operated via agreements with third-party management groups, and we have portions of four properties (encompassing 11 farms) that are held for sale. We expect these sales to close during the fourth quarter, and we also continue to be in discussions with various groups to either lease or buy certain other farms in our portfolio. We hope to have these remaining issues resolved by the end of the year, and such solutions may include listing certain farms at auction if not leased or sold beforehand. In the meantime, we continue to acquire more water at below-market prices, providing additional water security to our farms and those growers who lease them. Our balance sheet remains strong, with nearly 100% of our borrowings at fixed rates, and we continue to maintain high levels of liquidity and overall access to capital."

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