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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to

Commission File Number: 001-36405

Graphic

FARMLAND PARTNERS INC.

(Exact Name of Registrant as Specified in its Charter)

Maryland

46-3769850

(State or Other Jurisdiction

of Incorporation or Organization)

(IRS Employer

Identification No.)

4600 South Syracuse Street, Suite 1450

Denver, Colorado

80237-2766

(Address of Principal Executive Offices)

(Zip Code)

(720) 452-3100

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

FPI

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes    No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).     Yes     No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes     No

As of April 25, 2024, 48,154,991 shares of the Registrant’s common stock (49,358,330 on a fully diluted basis, including 1,203,339 Common Units of limited partnership interests in the registrant’s operating partnership) were outstanding.

Farmland Partners Inc.

FORM 10-Q FOR THE QUARTER ENDED

March 31, 2024

TABLE OF CONTENTS

9

PART I. FINANCIAL INFORMATION

Page

Item 1.

Financial Statements

Consolidated Financial Statements

Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023

3

Statements of Operations for the three months ended March 31, 2024 and 2023 (unaudited)

4

Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023 (unaudited)

5

Statements of Changes in Equity for the three months ended March 31, 2024 and 2023 (unaudited)

6

Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)

8

Notes to Consolidated Financial Statements (unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

45

Item 4.

Controls and Procedures

45

PART II. OTHER INFORMATION

46

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

47

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Farmland Partners Inc.

Consolidated Balance Sheets

As of March 31, 2024 (Unaudited) and December 31, 2023

(in thousands, except par value and share data)

March 31,

December 31,

    

2024

    

2023

ASSETS

Land, at cost

$

885,993

$

869,848

Grain facilities

 

12,459

 

12,222

Groundwater

 

11,472

 

11,472

Irrigation improvements

 

41,345

 

41,988

Drainage improvements

 

10,315

 

10,315

Permanent plantings

42,286

39,620

Other

4,698

 

4,696

Construction in progress

 

1,795

 

4,453

Real estate, at cost

 

1,010,363

 

994,614

Less accumulated depreciation

 

(33,596)

 

(33,083)

Total real estate, net

 

976,767

 

961,531

Deposits

 

 

426

Cash and cash equivalents

 

6,228

 

5,489

Assets held for sale

26

28

Loans and financing receivables, net

 

31,170

 

31,020

Right of use asset

355

399

Accounts receivable, net

 

1,741

 

7,743

Derivative asset

1,602

1,707

Inventory

 

2,699

 

2,335

Equity method investments

4,053

 

4,136

Intangible assets, net

2,030

2,035

Goodwill

2,706

2,706

Prepaid and other assets

 

1,697

 

2,447

TOTAL ASSETS

$

1,031,074

$

1,022,002

LIABILITIES AND EQUITY

LIABILITIES

Mortgage notes and bonds payable, net

$

380,890

$

360,859

Lease liability

355

399

Dividends payable

 

2,964

 

13,286

Accrued interest

 

4,376

 

4,747

Accrued property taxes

 

2,523

 

1,898

Deferred revenue

 

9,889

 

2,149

Accrued expenses

 

3,659

 

7,854

Total liabilities

 

404,656

 

391,192

Commitments and contingencies (See Note 8)

Redeemable non-controlling interest in operating partnership, Series A preferred units

99,743

101,970

EQUITY

Common stock, $0.01 par value, 500,000,000 shares authorized; 48,154,991 shares issued and outstanding at March 31, 2024, and 48,002,716 shares issued and outstanding at December 31, 2023

 

466

 

466

Additional paid in capital

 

577,648

 

577,253

Retained earnings

 

32,041

 

31,411

Cumulative dividends

 

(98,830)

 

(95,939)

Other comprehensive income

 

2,476

 

2,691

Non-controlling interests in operating partnership

 

12,874

 

12,958

Total equity

 

526,675

 

528,840

TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS IN OPERATING PARTNERSHIP AND EQUITY

$

1,031,074

$

1,022,002

See accompanying notes.

3

Farmland Partners Inc.

Consolidated Statements of Operations

For the three months ended March 31, 2024 and 2023

(Unaudited)

(in thousands, except per share amounts)

For the Three Months Ended

March 31,

    

2024

    

2023

OPERATING REVENUES:

Rental income

$

10,207

$

10,726

Crop sales

660

360

Other revenue

 

1,123

 

1,586

Total operating revenues

 

11,990

 

12,672

OPERATING EXPENSES

Depreciation, depletion and amortization

 

1,481

 

1,794

Property operating expenses

 

1,798

 

2,182

Cost of goods sold

541

946

Acquisition and due diligence costs

 

27

 

14

General and administrative expenses

 

2,627

 

2,606

Legal and accounting

 

333

 

244

Other operating expenses

36

49

Total operating expenses

 

6,843

 

7,835

OTHER (INCOME) EXPENSE:

Other (income)

(120)

(11)

(Income) loss from equity method investment

(77)

27

(Gain) loss on disposition of assets, net

86

(1,826)

(Income) from forfeited deposits

(1,205)

Interest expense

 

5,036

4,924

Total other expense

 

3,720

 

3,114

Net income before income tax (benefit) expense

1,427

1,723

Income tax expense

19

 

9

NET INCOME

 

1,408

 

1,714

Net (income) attributable to non-controlling interests in operating partnership

 

(35)

(38)

Net income attributable to the Company

1,373

1,676

Dividend equivalent rights allocated to performance-based unvested restricted shares

(2)

Nonforfeitable distributions allocated to time-based unvested restricted shares

(22)

(16)

Distributions on Series A Preferred Units

(743)

(803)

Net income available to common stockholders of Farmland Partners Inc.

$

606

$

857

Basic and diluted per common share data:

Basic net income available to common stockholders

$

0.01

$

0.02

Diluted net income available to common stockholders

$

0.01

$

0.02

Basic weighted average common shares outstanding

 

47,704

 

54,007

Diluted weighted average common shares outstanding

 

47,704

 

54,007

Dividends declared per common share

$

0.06

$

0.06

See accompanying notes.

4

Farmland Partners Inc.

Consolidated Statements of Comprehensive Income (Loss)

For the three months ended March 31, 2024 and 2023

(Unaudited)

(in thousands)

For the Three Months Ended

March 31,

    

2024

    

2023

Net income

$

1,408

$

1,714

Amortization of other comprehensive income

198

Net change associated with current period hedging activities

(215)

(581)

Comprehensive income

1,193

1,331

Comprehensive (loss) attributable to non-controlling interests

(35)

(38)

Comprehensive income attributable to Farmland Partners Inc.

$

1,158

$

1,293

See accompanying notes.

5

Farmland Partners Inc.

Consolidated Statements of Changes in Equity and Other Comprehensive Income

For the three months ended March 31, 2024 (Unaudited)

(in thousands)

Stockholders’ Equity

Common Stock

Non-controlling

Additional

Other

Interests in

Paid in

Retained

Cumulative

Comprehensive

Operating

Total

  

Shares

  

Par Value

  

Capital

  

Earnings

  

Dividends

  

Income

  

Partnership

  

Equity

Balance at December 31, 2023

48,003

$

466

$

577,253

$

31,411

$

(95,939)

$

2,691

$

12,958

$

528,840

Net income

1,373

35

1,408

Issuance of stock

3

34

34

Grant of unvested restricted stock

165

Shares withheld for income taxes on vesting of equity-based compensation

(16)

(177)

(177)

Stock-based compensation

491

491

Dividends accrued and paid

(743)

(2,891)

(72)

(3,706)

Net change associated with current period hedging transactions

(215)

(215)

Adjustments to non-controlling interests resulting from changes in ownership of operating partnership

47

(47)

Balance at March 31, 2024

48,155

$

466

$

577,648

$

32,041

$

(98,830)

$

2,476

$

12,874

$

526,675

See accompanying notes.

6

Farmland Partners Inc.

Consolidated Statements of Changes in Equity and Other Comprehensive Income

For the three months ended March 31, 2023 (Unaudited)

(in thousands)

Stockholders’ Equity

Common Stock

Non-controlling

Additional

Other

Interests in

Paid in

Retained

Cumulative

Comprehensive

Operating

Total

  

Shares

  

Par Value

  

Capital

  

Earnings

  

Dividends

  

Income

  

Partnership

  

Equity

Balance at December 31, 2022

54,318

$

531

$

647,346

$

3,567

$

(73,964)

$

3,306

$

13,218

$

594,004

Net income

1,676

38

1,714

Issuance of stock

5

54

54

Grant of unvested restricted stock

223

Shares withheld for income taxes on vesting of equity-based compensation

(3)

(36)

(36)

Stock-based compensation

405

405

Dividends accrued and paid

(803)

(3,185)

(74)

(4,062)

Net change associated with current period hedging transactions and amortization of other comprehensive (loss)

(383)

(383)

Repurchase and cancellation of shares

(1,458)

(15)

(14,577)

(14,592)

Adjustments to non-controlling interests resulting from changes in ownership of operating partnership

17

(17)

Balance at March 31, 2023

53,085

$

516

$

633,209

$

4,440

$

(77,149)

$

2,923

$

13,165

$

577,104

See accompanying notes.

7

Farmland Partners Inc.

Consolidated Statements of Cash Flows

For the three months ended March 31, 2024 and 2023

(Unaudited)

(in thousands)

For the Three Months Ended

March 31,

    

2024

    

2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

1,408

$

1,714

Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:

Depreciation, depletion and amortization

 

1,481

 

1,794

Amortization of deferred financing fees and discounts/premiums on debt

 

184

 

158

Amortization of net origination fees related to notes receivable

(4)

(6)

Stock-based compensation

 

491

 

405

(Gain) loss on disposition of assets, net

 

86

 

(1,826)

(Income) from forfeited deposits

(1,205)

 

(Income) loss from equity method investment

(77)

27

Bad debt expense

15

Amortization of dedesignated interest rate swap

162

Changes in operating assets and liabilities:

(Increase) Decrease in accounts receivable

 

4,389

 

3,246

(Increase) Decrease in interest receivable

(208)

(39)

(Increase) Decrease in other assets

 

1,175

 

906

(Increase) Decrease in inventory

(364)

 

96

Increase (Decrease) in accrued interest

 

(371)

 

(311)

Increase (Decrease) in accrued expenses

 

(3,453)

 

(1,794)

Increase (Decrease) in deferred revenue

 

7,739

 

10,712

Increase (Decrease) in accrued property taxes

 

626

 

580

Net cash and cash equivalents provided by operating activities

 

11,897

 

15,839

CASH FLOWS FROM INVESTING ACTIVITIES

Real estate acquisitions

 

(16,255)

(141)

Real estate and other improvements

 

(86)

(1,092)

Distributions from equity method investees

161

Collections of principal on loans

62

7

Proceeds from sale of property

1,621

7,137

Net cash and cash equivalents provided by (used in) investing activities

 

(14,497)

 

5,911

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings from mortgage notes payable

30,001

14,001

Repayments on mortgage notes payable

(10,134)

(9,850)

Issuance of stock

34

54

Common stock repurchased

(14,591)

Payment of debt issuance costs

(20)

(137)

Payment of swap fees

(109)

(73)

Dividends on common stock

(12,961)

(3,259)

Shares withheld for income taxes on vesting of equity-based compensation

(177)

(36)

Distributions on Series A preferred units

(2,970)

(3,210)

Distributions to non-controlling interests in operating partnership, common

(325)

(74)

Net cash and cash equivalents provided by (used in) financing activities

 

3,339

 

(17,175)

Net increase in cash and cash equivalents

 

739

 

4,575

Cash and cash equivalents, beginning of period

 

5,489

 

7,654

Cash and cash equivalents, end of period

$

6,228

$

12,229

Cash paid during period for interest

$

5,574

$

5,188

Cash paid during period for taxes

$

$

See accompanying notes.

8

Farmland Partners Inc.

Consolidated Statements of Cash Flows (continued)

For the three months ended March 31, 2024 and 2023

(Unaudited)

(in thousands)

For the Three Months Ended

March 31,

    

2024

    

2023

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Dividend payable, common stock

$

2,892

$

3,185

Dividend payable, common units

$

72

$

74

Distributions payable, Series A preferred units

$

743

$

803

Additions to real estate improvements included in accrued expenses

$

712

$

205

Swap fees payable included in accrued interest

$

36

$

36

Prepaid property tax liability acquired in acquisitions

$

32

$

Right-of-use assets obtained in exchange for new operating lease liabilities

$

13

$

563

See accompanying notes.

9

Farmland Partners Inc.

Notes to the Unaudited Financial Statements as of March 31, 2024

Note 1—Organization and Significant Accounting Policies

Organization

Farmland Partners Inc. (“FPI”), collectively with its subsidiaries, is an internally managed real estate company that owns and seeks to acquire high-quality farmland located in agricultural markets throughout North America. FPI was incorporated in Maryland on September 27, 2013. FPI elected to be taxed as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its short taxable year ended December 31, 2014.  

FPI is the sole member of the sole general partner of Farmland Partners Operating Partnership, LP (the “Operating Partnership”), which was formed in Delaware on September 27, 2013. All of FPI’s assets are held by, and its operations are primarily conducted through, the Operating Partnership and the wholly owned subsidiaries of the Operating Partnership. As of March 31, 2024, FPI owned a 97.5% interest in the Operating Partnership. See “Note 9—Stockholders’ Equity and Non-controlling Interests” for additional discussion regarding Class A Common units of limited partnership interest in the Operating Partnership (“Common units”) and Series A preferred units of limited partnership interest in the Operating Partnership (“Series A preferred units”). Unlike holders of FPI’s common stock, par value $0.01 per share (“common stock”), holders of the Operating Partnership’s Common units and Series A preferred units generally do not have voting rights or the power to direct the affairs of FPI. As of March 31, 2024, the Operating Partnership owned a 9.97% equity interest in an unconsolidated equity method investment that holds 11 properties (see “Note 4—Related Party Transactions”).

 

References to the “Company,” “we,” “us,” or “our” mean collectively FPI and its consolidated subsidiaries, including the Operating Partnership.

As of March 31, 2024, the Company owned a portfolio of approximately 134,700 acres of farmland, which is consolidated in these financial statements. In addition, as of March 31, 2024, we owned land and buildings for four agriculture equipment dealerships in Ohio leased to Ag-Pro Ohio, LLC (“Ag Pro”) under the John Deere brand and served as property manager for approximately 42,700 acres of farmland (see “Note 6—Loans and Financing Receivables”).

On March 16, 2015, the Company formed FPI Agribusiness Inc., a wholly owned subsidiary (the “TRS” or “FPI Agribusiness”), as a taxable REIT subsidiary. We engage directly in farming, provide property management, auction, and brokerage services and volume purchasing services to our tenants through the TRS. As of March 31, 2024, the TRS performed direct farming operations on 2,103 acres of farmland owned by the Company located in California.

All references to numbers and percent of acres within this report are unaudited.

Principles of Consolidation

The accompanying consolidated financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of FPI and the Operating Partnership. All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the presentation used in the current year. Such reclassifications had no effect on net income or total equity.

Interim Financial Information

The information in the accompanying consolidated financial statements of the Company as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 is unaudited. The accompanying financial statements include adjustments based on management’s estimates (consisting of normal and recurring accruals), which the Company considers necessary for a fair presentation of the results for the periods. The financial information should be read in

10

conjunction with the consolidated financial statements for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K, which the Company filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 29, 2024. Operating results for the three months ended March 31, 2024 are not necessarily indicative of actual operating results for the entire year ending December 31, 2024.

The consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates for a variety of reasons, including, without limitation, the impacts of public health crises, the war in Ukraine and the ongoing conflict in the Middle East, substantially higher prices for oil and gas and substantially increased interest rates, and their effects on the domestic and global economies. We are unable to quantify the ultimate impact of these factors on our business.

Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Liquidity Policy

The Company manages its liquidity position and expected liquidity needs taking into consideration current cash balances, undrawn availability under its lines of credit ($178.9 million as of March 31, 2024), and reasonably expected cash receipts. The business model of the Company, and of real estate investment companies in general, utilizes debt as a structural source of financing. When debt becomes due, it is generally refinanced rather than repaid using the Company’s cash flow from operations. The Company has a history of being able to refinance its debt obligations prior to maturity. Furthermore, the Company also has a substantial portfolio of real estate assets that management believes could be readily liquidated if necessary to fund any immediate liquidity needs. As of March 31, 2024, the Company had $380.9 million of mortgage and other debt against a portfolio of real estate assets with a net book value of $976.8 million.

Accounts Receivable

Accounts receivable are presented at face value, net of the allowance for doubtful accounts. The allowance for doubtful accounts was less than $0.1 million as of March 31, 2024 and December 31, 2023. An allowance for doubtful accounts is recorded on the Consolidated Statements of Operations as a reduction to rental revenue if in relation to revenues recognized in the year, or as property operating expenses if in relation to revenue recognized in the prior years.

Inventory

Inventory consists of costs related to crops grown on farms directly operated by the TRS and is separated into growing crop inventory, harvested crop inventory or general inventory, as appropriate.

As of March 31, 2024 and December 31, 2023, inventory consisted of the following:

(in thousands)

    

March 31, 2024

    

December 31, 2023

Harvested crop

$

$

246

Growing crop

2,699

2,089

$

2,699

$

2,335

11

Goodwill and Intangible Assets

During the three months ended March 31, 2024, the Company did not incur any impairment charges related to goodwill.

The Company recorded amortization of customer relationships of less than $0.1 million during each of the three months ended March 31, 2024 and 2023.

Recently Adopted Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), that provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market transition from the London Inter-bank Offered Rate (“LIBOR”) and other interbank offered rates (together, “IBORs”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. We refer to this transition as “reference rate reform.”

The first practical expedient allows companies to elect to not apply certain modification accounting requirements to debt, derivative and lease contracts affected by reference rate reform if certain criteria are met. These criteria include the following: (i) the contract referenced an IBOR rate that is expected to be discontinued; (ii) the modified terms directly replace or have the potential to replace the IBOR rate that is expected to be discontinued; and (iii) any contemporaneous changes to other terms that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the IBOR rate. If the contract meets all three criteria, there is no requirement for remeasurement of the contract at the modification date or reassessment of the previous hedging relationship accounting determination.

The second practical expedient allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to de-designate the hedging relationship. This allows for companies to continue applying hedge accounting to existing cash flow and net investment hedges.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time preparers can utilize the reference rate reform relief guidance in Topic 848. The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published. In 2021, the UK Financial Conduct Authority (FCA) delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023. To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The Company will continue to evaluate its debt, derivative and lease contracts that are eligible for modification relief and expects to apply those elections as needed.

Note 2—Revenue Recognition

Fixed Rent: The majority of the Company’s leases provide for rent payments on an entirely or partially fixed basis. For the majority of its fixed farm rent leases, the Company receives at least 50% of the annual lease payment from tenants before crops are planted, generally during the first quarter of the year, with the remaining 50% of the lease payment due in the second half of the year generally after the crops are harvested. Rental income is recorded on a straight-line basis over the lease term. Certain of the Company’s leases provide for tenants to reimburse the Company for property taxes and other expenses. These tenant reimbursements and rent payments are treated as a single lease component because the timing and pattern of revenue recognition is the same. This means that rental income is equal in all periods of the lease, calculated by adding all expected lease payments (including increases within the lease) and dividing by the number of periods, despite the cash rents being received in lump sums at the specific times as described above. The lease term generally considers periods when a tenant: (1) may not terminate its lease obligation early; (2) may terminate its lease obligation early in

12

exchange for a fee or penalty that the Company considers material enough such that termination would not be probable; (3) possesses renewal rights and the tenant’s failure to exercise such rights imposes a penalty on the tenant material enough such that renewal appears reasonably assured; or (4) possesses bargain renewal options for such periods. Payments received in advance are included in deferred revenue until they are earned.

Variable Rent: Certain of the Company’s leases provide for a rent payment determined as a percentage of the gross farm proceeds in their entirety or above a certain threshold. Revenue under leases providing for variable rent may be recorded at the guaranteed crop insurance minimums and recognized ratably over the lease term during the crop year. Upon notification from the grain or packing facility that a future contract for delivery of the harvest has been finalized or when the tenant has notified the Company of the total amount of gross farm proceeds, revenue is recognized for the excess of the actual gross farm proceeds and the previously recognized minimum guaranteed insurance.

Fixed Rent and Variable Rent: Certain of the Company’s leases provide for a minimum fixed rent plus variable rent based on gross farm revenue.

The following table presents rental income that is disaggregated by revenue source for the three months ended March 31, 2024 and 2023:

For the three months ended

March 31,

(in thousands)

    

2024

    

2023

Fixed Farm Rent

$

8,624

$

8,794

Solar, Wind and Recreation Rent

653

770

Tenant Reimbursements

 

721

 

1,038

Variable Rent

 

209

 

124

$

10,207

$

10,726

The Company’s leases generally have terms ranging from one to three years, with some extending up to 40 years (e.g., renewable energy leases). Payments received in advance are included in deferred revenue until they are earned. As of March 31, 2024 and December 31, 2023, the Company had $9.9 million and $2.1 million, respectively, in deferred revenue. Both periods included a deferred gain of approximately $2.1 million in connection with the sale of two properties that occurred during the three months ended December 31, 2023, whereby the Company provided approximately $9.5 million of seller financing. The deferred gain will be recognized at such time as we consider collection of the seller financing to be probable under applicable accounting standards.

The majority of the Company’s revenue is derived from rental income. The Company elected an accounting policy to account for both its lease and non-lease components (specifically, tenant reimbursements) as a single lease component under Accounting Standards Codification (“ASC”) 842, Lease Accounting.

The following sets forth a summary of rental income recognized during the three months ended March 31, 2024 and 2023:

Rental income recognized

For the three months ended

March 31,

(in thousands)

    

2024

    

2023

Leases in effect at the beginning of the year

$

9,136

$

10,446

Leases entered into during the year

 

1,071

 

280

$

10,207

$

10,726

13

Future minimum fixed rent payments from tenants under all non-cancelable leases in place as of March 31, 2024, including lease advances when contractually due, but excluding crop share and tenant reimbursement of expenses, for the remainder of 2024 and each of the next four years and thereafter as of March 31, 2024 are as follows:

(in thousands)

    

Future rental

Year Ending December 31,

payments

2024 (remaining nine months)

$

16,351

2025

24,114

2026

18,020

2027

 

8,229

2028

3,885

Thereafter

49,377

$

119,976

Since lease renewal periods are exercisable at the option of the lessee, the preceding table presents future minimum lease payments due during the initial lease term only.

Crop Sales: For farms directly operated through the TRS, the Company records revenue from the sale of harvested crops when the harvested crop has been contracted to be delivered to a grain or packing facility and title has transferred. During the three months ended March 31, 2024 and 2023, revenues from the sale of harvested crops recognized were $0.7 million and $0.4 million, respectively. The cost of harvested crops sold was $0.5 million and $0.9 million, respectively, during the three months ended March 31, 2024 and 2023. Harvested crops delivered under marketing contracts are recorded using the fixed price of the marketing contract at the time of delivery to a grain or packing facility. Harvested crops delivered without a marketing contract are recorded using the market price at the date the harvested crop is delivered to the grain or packing facility and title has transferred.

Other Revenue: Other revenue includes crop insurance proceeds, auction fees, brokerage fees, interest income, and property management income. Crop insurance proceeds are recognized when the amount is determinable and collectible. Crop insurance proceeds are generally received in lieu of crop sales on farms directly operated through the TRS. The Company generates auction revenue by contracting with a real estate owner to market and auction farm property. Successful bidders sign a purchase agreement immediately following the auction. Auction fee revenue is recognized upon completion of the auction. The Company generates real estate brokerage commissions by acting as a broker for real estate investors or owners seeking to buy or sell farm property. Revenue from brokerage fees is recognized upon completion of the transaction. Property management revenue is recognized over the term of the contract as services are being provided. The Company collects property management fees in advance of the commencement of property management activities on behalf of third parties and includes them in deferred revenue until they are earned over the life of the contract. Interest income is recognized on loans and financing receivables on an accrual basis over the life of the loans. Direct origination costs are netted against loan origination fees and are amortized over the life of the note using the straight-line method, which approximates the effective interest method, as an adjustment to interest income which is included as a component of other revenue in the Company’s Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023.

The following table presents other revenue that is disaggregated by revenue source for the three months ended March 31, 2024 and 2023:

For the three months ended

March 31,

(in thousands)

    

2024

    

2023

Auction and brokerage fees

$

282

$

336

Crop insurance proceeds

595

Property management income

 

229

 

186

Other (e.g., interest income)

 

612

 

469

$

1,123

$

1,586

14

Note 3—Concentration Risk

Credit Risk

For the three months ended March 31, 2024, the Company had no significant tenants representing a tenant concentration of 10% or greater of period revenue. Revenue for the three months ended March 31, 2024 is not necessarily indicative of actual revenue for the entire year ending December 31, 2024. The Company receives a significant portion of its variable rental payments in the fourth quarter of each year, typically resulting in at least one tenant concentration of 10% or greater revenue in that quarter and for the year. If a significant tenant fails to make rental payments to the Company or elects to terminate its leases, and the land cannot be re-leased on satisfactory terms, there may be a material adverse effect on the Company’s financial performance.

Geographic Risk

The following table summarizes the percentage of approximate total acres owned as of March 31, 2024 and 2023, and the fixed and variable rent recorded by the Company for the three months ended March 31, 2024 and 2023 by location of the farm:

Approximate %