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South Central Iowa | Here is their last annual report : http://ir.farmlandpartners.com/Cache/1001234064.PDF?O=PDF&T=&Y=&D=&...
Numbers as of 12/31/2017 dollars are in thousands, so $1,000 means one million:
-166,117 acres in many different states including Illinois, Nebraska, California, Florida, many others, most regions. They claim these assets are worth $1,061,358. That includes a purchase in 2017 of a farm in California, 5,114 acres for $110,000 (10% of the company value on 3% of the land).
-They have $514,071 in notes and bonds payable to MetLife, Rabobank, Farm Credit, Rutledge (?), and Bonds with FarmerMac. Never heard of a Rutledge.
-Annual Gross Revenue in 2017 was $46,219. Rent or variable rent reimbursements accounted for $44,865 or 97% of that.
This is where GAAP gets me. I don't remember, nor should I, how some things are accounted for on these reports that are filed. They have amortization included with depreciation and depletion, which I thought indicated they considered that the interest. I always consider the word amortization to refer to the principal and interest to refer to itself. Probably wrong, I'm not an accountant. But I can't find where they account for their principal payments if it's not part of the amortization.
So Amortization and depreciation is $7,792 and Interest Expense is $13,561. I'll give the whole to their debt servicing and say it equals $21,353. I have an issue with that though, they owe $514,071, so their loan constant is only 4.15% !?!?!?!?!?! That makes no sense as most of the maturity dates of the notes payable make them 5 and 10 year term notes; I see one that is 25 years. How are their payments not a lot higher than that? It's all legal and what not, just something that I don't know or understand about reading these reports or how things like different classes of stock or bond payments are handled.
I will put it in my terms though. They owe $514M with a 50% LTV. 30 yr, 5%, equates to an annual debt service of $33.436, $25.7M in interest year 1. Property Tax on the 166K acres is likely around $8M, overhead $2M (property maintenance, insurance, tax and legal, employees). They claim to receive $46M in rent. So:
Gross Income - $46,000
Expense- $10,000
Operating Income -$36,000
Interest - $25,700
Pre-Tax Income - $10,300
Amortization (Principal) - $7,736
So, if they were taxed as a C-Corp, that would give them approximately a $2,600 tax liability, leaving them with a net loss of $36, which is just a rounding error. They would be at exactly their payments. But they are not a C-Corp, they are a REIT, so 90% of their taxable income must be distributed. This would mean that they pay out $9,270, leaving them with $1,030 to pay for $7,736; so an annual loss of -$6,706,000.
They obviously must not care about that, I'm not even sure they make principal payments, but they really just think land will rise and overcome any of this debt. Maybe, probably, has before, IDK.
If they were a farmer, they would be in trouble. Given their structure and my lack of knowledge about how some financials are to be read, I don't have much of an opinion on their solvency. I will say they merged with another of the large publically traded REITs, noted all over that annual statement. That appears to be a merger born out of weakness, not strength. If I had to say, I don't actually believe they are very strong and likely have poor future prospects. I question some of their rents and how that is accounted for; $270 per gross acre is pretty high considering how many crappy states they are in, and I don't know how some of the fruit and specialty crop leases work in CA and FLA.
I also question some of their property values. Overall, they claim their farmland is worth $6,389 per acre. Without the California addition mentioned above, it is $5,908 per acre. The breakdown of acres by region is below. Based on the NASS data, both of their numbers are significantly above US cropland average of $4,090 in 2017, when the report was issued. Based on allocation, the average value indicated by NASS would be $4,451 per acre for a total value of $739,416,250. That is under their claimed value by $321,940,750 or 30.33% ! ! ! I sincerely doubt their land is higher quality than average; likely it is the poorer ground most everywhere they are found. $739M in assets with $514M in debt is a horse of another color. Anyway, there is their acre breakdown:
Edited by Conan the Farmer 1/20/2019 22:33
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Farmland Partners "FPI"
