Gladstone Land Announces Fourth Quarter and Year Ended 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 / February 20, 2024 / McLean, VA, February 20, 2024: Gladstone Land Corporation (Nasdaq:LAND) ("Gladstone Land" or the "Company") today reported financial results for the fourth quarter and year ended December 31, 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 Annual Report on Form 10-K (the "Form 10-K"), which is available on the Investors section of the Company's website at www.GladstoneLand.com .

Highlights for Fiscal Year 2023:

• Portfolio Activity:
  • Property Disposition: Sold a 138-acre parcel of unfarmed land in Florida for $9.6 million, which, after accounting for closing costs, resulted in a return on equity of 343% and a net gain of approximately $6.4 million. We still own and lease the remaining acreage of this farm.
  • Lease Activity: Executed 30 new or amended lease agreements on farms in six different states that are expected to result in an aggregate decrease in annual net operating income of approximately $617,000 from the prior leases. This includes new leases executed on properties to replace tenants who had previously been placed on non-accrual status. Excluding these leases, the remaining lease renewals are expected to result in an annual increase in annual net operating income of approximately $1.6 million, or 8.7%, over the prior leases.
  • Vacant, Direct-operated, and Non-accrual Properties: During a portion of 2023, we had 22 farms (7 in California, 14 in Michigan, 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 (due to credit issues with three tenants causing us to determine that the full collectibility of the remaining rental payments under the respective leases were not deemed to be probable). The year-over-year impact on our operations as a result of these properties was a decrease in net operating income of approximately $1.7 million.
  • 2023 California Floods: Due to periods of heavy rainfall and the resulting flooding experienced in California in January 2023, certain structures on one of our farms were damaged. We estimated the amount of damage on this farm to be approximately $855,000 and recognized such loss during the first quarter. None of our other farms were materially impacted as a result of the floods.
  • California Water Activity:
    • Acquired an additional 1,003 acre-feet of banked water held by a water district in Kern County, California, which was received from one of our tenants as partial consideration for a rent payment.
    • Invested approximately $1.8 million to construct groundwater recharge facilities on two of our farms to allow us to capture and store surplus water.
    • Participated in a groundwater recharge program established by a water district in Fresno County, California, whereby the water district pays for surplus surface water to be delivered to our groundwater recharge facility in exchange for allowing us to keep 50% of the net amount of groundwater credits generated under the program. Thus far, we have obtained 397 acre-feet of water credits under this program at minimal cost to us.
    • Secured a long-term water supply contract with a water district in Contra Costa County, California, that will provide an additional source of water in the future for several of our farms in the western San Joaquin Valley.
    • Entered into various other agreements with both local water districts and private individuals that are expected to result in additional water credits by allowing water to be stored in our groundwater recharge facilities.
• Debt Activity:
  • Loan Repayments: Repaid approximately $36.0 million of loans scheduled to mature or reset.
  • Interest Patronage: Recorded approximately $2.3 million of interest patronage, or refunded interest, related to our 2022 borrowings from various Farm Credit associations. Including approximately $113,000 of 2022 interest patronage that was received during the third quarter of 2022, total 2022 interest patronage resulted in a 24.1% reduction (approximately 109 basis points) to the interest rate of such borrowings.
  • Farmer Mac Facility: Amended our agreement with Federal Agricultural Mortgage Corporation ("Farmer Mac") to extend the date through which we may issue new bonds to December 31, 2026. Additionally, the final maturity date for new bonds issued under the facility will be the date that is 10 years from the applicable issuance date.
  • MetLife Facility: Extended the maturity dates of our lines of credit ($75.0 million in aggregate) with Metropolitan Life Insurance Company ("MetLife") to December 15, 2033.
• Equity Activity:
  • Series C Preferred Stock: Listed our 6.00% Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock") on Nasdaq under the ticker symbol, "LANDP." Trading of the Series C Preferred Stock commenced on June 8, 2023.
  • Series E Preferred Stock: Commenced sales of our 5.00% Series E Cumulative Redeemable Preferred Stock (the "Series E Preferred Stock"). Sold 237,441 shares of our Series E Preferred Stock for net proceeds of approximately $5.3 million.
  • Common Stock-ATM Program: Sold 788,045 shares of our common stock for net proceeds of approximately $15.1 million under our "at-the-market" program (the "ATM Program").
  • Registration Statement: Filed a new registration statement (which the SEC declared effective on April 13, 2023), permitting us to issue up to an aggregate of $1.5 billion in securities over the next three years.
• Increased and Paid Distributions: Increased the distribution run rate on our common stock (including OP Units held by non-controlling OP Unitholders, if any) by a total of 1.32% and paid monthly cash distributions totaling $0.5535 per share of common stock during the year ended December 31, 2023.

Fourth Quarter 2023 Results:

Net income for the quarter was approximately $1.8 million, compared to approximately $1.1 million in the prior-year quarter. Net loss to common stockholders during the quarter was approximately $4.3 million, or $0.12 per share, compared to approximately $4.8 million, or $0.14 per share, in the prior-year quarter. AFFO for the quarter was approximately $5.4 million, or $0.15 per share, compared to approximately $6.6 million, or $0.19 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 $1.1 million, or 4.7%, from the prior-year quarter, primarily due to lower participation rents. This decrease was partially offset by an increase in fixed base cash rents, which increased by approximately $255,000, or 1.3%, primarily due to additional rents earned on capital improvements completed on certain farms over the past year. Participation rents decreased by approximately $1.4 million, primarily 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 decreased by approximately $581,000 from the prior-year quarter, primarily driven by a higher incentive fee earned by our investment adviser in the prior-year quarter due to our pre-incentive fee FFO surpassing the required hurdle rate by a higher margin than in the current quarter. Excluding related-party fees, our recurring core operating expenses increased by $523,000 due to additional property operating expenses and general and administrative expenses incurred during the current quarter. The increase in property operating expenses was driven by additional property taxes and property management fees incurred as a result of certain properties being vacant or self-operated during 2023. General and administrative costs were higher primarily due to additional costs expensed in connection with amending our credit facility with MetLife.

Cash flows from operations for the current quarter decreased by approximately $3.3 million from the prior-year quarter, primarily due to a decrease in participation rents, the acquisition of additional long-term water assets, and the timing of when certain base cash rental payments were received during the respective periods. Our estimated NAV per share increased by $1.98 from the prior-year quarter to $19.06 at December 31, 2023, primarily driven by a decrease in the fair value of certain preferred securities (due to increases in market interest rates).

Fiscal Year 2023 Results:

Net income for the year was approximately $14.6 million, compared to approximately $4.7 million in the prior year. Net loss to common stockholders during the year was approximately $9.9 million, or $0.28 per share, compared to approximately $15.0 million, or $0.43 per share, in the prior year. AFFO was approximately $20.3 million, or $0.569 per share, for the current year compared to approximately $24.3 million, or $0.701 per share in the prior year. Common stock dividends declared were approximately $0.554 per share for 2023, compared to approximately $0.546 per share for 2022.

The decrease in AFFO was primarily driven by lower participation rents (for the reasons noted above) and an increase in preferred dividends (due to additional share issuances), partially offset by a decrease in interest expense (due to certain loan repayments made over the past year). Revenue from participation rents was approximately $5.9 million in 2023, compared to approximately $7.7 million in 2022. This decrease was partially offset by a $989,000 increase in revenues from fixed base cash rents during 2023. Aggregate related-party fees decreased by approximately $908,000 due to a lower incentive fee earned during the current year. Excluding related-party fees, recurring core operating expenses increased by approximately $988,000, primarily due to the same reasons as discussed above, as well as higher legal fees incurred in connection with rent collection and re-leasing efforts on certain properties. Cash flows from operations decreased by approximately $3.7 million from the prior year, primarily due to a decrease in participation rents, the acquisition of additional long-term water assets, and the timing of when certain other cash rental payments were received and interest payments made during the respective periods.

Subsequent to December 31, 2023:

• Portfolio Activity:
  • Property Disposition: Sold a 3,748-acre farm in Florida for approximately $65.7 million, which after accounting for closing costs, resulted in a return on equity of 60% and a net gain of approximately $10.4 million.
  • 2024 California Floods: In February 2024, certain parts of California, particularly the southern part of the state, again experienced heavy rains that caused widespread flooding and mudslides in multiple areas. Certain of our farms in the state suffered minor damage as a result of the storms, but no farms were materially impacted.
• Debt Activity-Loan Repayments: Repaid approximately $16.2 million of maturing loans.
• Equity Activity-Series E Preferred Stock: Sold 10,340 shares of our Series E Preferred Stock for net proceeds of approximately $233,000.
• Increased Distributions: Increased our distribution run rate by 0.22%, declaring monthly cash distributions of $0.0465 per share of common stock for each of January, February, and March. This marks our 33 ^rd distribution increase over the past 36 quarters, during which time we have increased the distribution run rate by 55.0%.

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 five properties (encompassing 15 of our 168 farms) that are vacant. We are in discussions with various groups to either buy or lease these farms, and we hope to have these situations resolved during the first half of the year. 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."

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