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

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

For the quarterly period ended ~~September~~June 30, ~~2017~~2020

☐

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

☐~~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~~File Number: 001-36405

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)~~ (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
6.00% Series B Participating Preferred Stock	FPI.PRB	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 ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). ☒ Yes ☐ No

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


Large ~~Accelerated Filer~~accelerated filer	☐	Accelerated ~~Filer~~filer	☒

~~Non-Accelerated Filer~~Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☒

		Emerging growth company	☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

~~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 ~~November~~August 3, ~~2017, 32,337,305~~2020, 29,595,943 shares of the Registrant’s common stock (31,499,735 on a fully diluted basis, including 1,903,792 Common Units of limited partnership interests in the registrant’s operating partnership) held by non-affiliates of the registrant were outstanding.

Table of Contents

Farmland Partners Inc.

FORM 10-Q FOR THE QUARTER ENDED

~~September~~June 30, ~~2017~~2020

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements
	Consolidated Financial Statements
	Balance Sheets as of ~~September~~June 30, ~~2017~~2020 (unaudited) and December 31, ~~2016 (unaudited)~~2019	3
	Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	4
	Consolidated Statements of Comprehensive Income (Loss)	5
	Statements of Changes in Equity for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	5 6
	Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 (unaudited)	6 7
	Notes to Consolidated Financial Statements (unaudited)	7 8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33 29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
~~Item 4.~~	~~Controls and Procedures~~	56
		46
Item 4.	Controls and Procedures	46

PART II. OTHER INFORMATION		56 47

Item 1.	Legal Proceedings	56 47
Item 1A.	Risk Factors	56 48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57 48
Item 3.	Defaults Upon Senior Securities	57 49
Item 4.	Mine Safety Disclosures	57 49
Item 5.	Other Information	57 49
Item 6.	Exhibits	57 49

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Farmland Partners Inc.

Consolidated Balance Sheets

As of ~~September~~June 30, ~~2017~~2020 (Unaudited) and December 31, ~~2016~~2019

~~(Unaudited)~~

(in thousands except par value and share data)

September 30,

December 31,

2017

2016
ASSETS

Land, at cost

$
835,986

$
551,392
Grain facilities

10,732

6,856
Groundwater

12,072

11,933
Irrigation improvements

50,660

15,988
Drainage improvements

8,146

4,757
Permanent plantings

51,868

1,845
Other

6,615

2,901
Construction in progress

7,843

1,615
Real estate, at cost

983,922

597,287
Less accumulated depreciation

(8,309)

(3,224)
Total real estate, net

975,613

594,063
Deposits

1,161

5,721
Cash

129,298

47,166
Notes and interest receivable, net

6,951

2,843
Deferred offering costs

280

216
Deferred financing fees, net

370

—
Accounts receivable, net

3,205

4,181
Inventory

92

283
Prepaid and other assets

2,746

1,056
TOTAL ASSETS

$
1,119,716

$
655,529

LIABILITIES AND EQUITY

LIABILITIES

Mortgage notes, line of credit and bonds payable, net

$
464,494

$
308,779
Dividends and distributions payable

4,882

2,938
Accrued interest

2,886

1,538
Accrued property taxes

1,523

1,225
Deferred revenue (See Note 2)

3,876

982
Accrued expenses

3,525

4,558
Total liabilities

481,186

320,020

Series B Participating Preferred Stock

144,223

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

119,633

119,915

EQUITY

Common stock, $0.01 par value, 500,000,000 shares authorized; 32,632,150 shares issued and outstanding at September 30, 2017, and 17,351,446 shares issued and outstanding at December 31, 2016

322

172
Additional paid in capital

342,313

172,100
Retained earnings

2,665

4,103
Cumulative dividends

(26,948)

(14,473)
Non-controlling interests in operating partnership

56,322

53,692
Total equity

374,674

215,594

TOTAL LIABILITIES, SERIES B PARTICIPATING PREFERRED STOCK, REDEEMABLE NON-CONTROLLING INTERESTS IN OPERATING PARTNERSHIP AND EQUITY

$
1,119,716

$
655,529


	June 30,		December 31,
	2020		2019
ASSETS
Land, at cost	$	934,260	$	937,813
Grain facilities		12,091		12,091
Groundwater		10,214		11,473
Irrigation improvements		53,793		53,871
Drainage improvements		12,606		12,674
Permanent plantings		54,545		52,089
Other		8,013		7,827
Construction in progress		9,360		11,911
Real estate, at cost		1,094,882		1,099,749
Less accumulated depreciation		(28,813)		(25,277)
Total real estate, net		1,066,069		1,074,472
Deposits		—		1
Cash		11,598		12,561
Notes and interest receivable, net		2,448		4,767
Right of use asset		163		73
Deferred financing fees, net		131		174
Accounts receivable, net		3,144		5,515
Inventory		2,132		1,550
Prepaid and other assets		1,637		3,440
TOTAL ASSETS	$	1,087,322	$	1,102,553

LIABILITIES AND EQUITY
LIABILITIES
Mortgage notes and bonds payable, net	$	510,701	$	511,403
Lease liability		163		73
Dividends payable		1,583		1,593
Derivative liability		3,518		1,644
Accrued interest		3,554		3,111
Accrued property taxes		2,033		1,873
Deferred revenue		2,034		71
Accrued expenses		4,872		5,868
Total liabilities		528,458		525,636

Commitments and contingencies (See Note 8)

Series B Participating Preferred Stock, $0.01 par value, 6,037,500 shares authorized; 5,831,870 shares issued and outstanding at June 30, 2020, and 5,972,059 at December 31, 2019		139,766		142,861
Redeemable non-controlling interest in operating partnership, Series A preferred units		118,755		120,510

EQUITY
Common stock, $0.01 par value, 500,000,000 shares authorized; 29,595,943 shares issued and outstanding at June 30, 2020, and 29,952,608 shares issued and outstanding at December 31, 2019		287		292
Additional paid in capital		336,058		338,387
Retained earnings		604		6,251
Cumulative dividends		(51,770)		(48,784)
Other comprehensive income		(3,380)		(1,644)
Non-controlling interests in operating partnership		18,544		19,044
Total equity		300,343		313,546

TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS IN OPERATING PARTNERSHIP AND EQUITY	$	1,087,322	$	1,102,553

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of Operations

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019

(Unaudited)

(in thousands except per share amounts)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
OPERATING REVENUES:

Rental income (See Note 2)

$
11,107

$
6,164

$
28,381

$
16,462
Tenant reimbursements

474

112

1,230

276
Other revenue

465

670

1,044

931
Total operating revenues

12,046

6,946

30,655

17,669

OPERATING EXPENSES

Depreciation, depletion and amortization

2,107

419

5,651

1,102
Property operating expenses

1,400

548

4,399

1,529
Acquisition and due diligence costs

180

1,712

878

1,818
General and administrative expenses

1,707

1,587

5,840

4,770
Legal and accounting

450

330

1,151

882
Other operating expenses

88

160

363

248
Total operating expenses

5,932

4,756

18,282

10,349
OPERATING INCOME

6,114

2,190

12,373

7,320

OTHER (INCOME) EXPENSE:

Other income

(135)

(72)

(157)

(133)
(Gain) loss on disposition of assets

(44)

—

48

—
Interest expense

3,683

2,065

9,852

7,869
Total other expense

3,504

1,993

9,743

7,736

Net income (loss) before income tax expense

2,610

197

2,630

(416)

Income tax expense

—

97

—

97

NET INCOME (LOSS)

2,610

100

2,630

(513)

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

(394)

(30)

(353)

37
Net (income) loss attributable to redeemable non-controlling interests in operating partnership

—

—

—

64

Net income (loss) attributable to the Company

2,216

70

2,277

(412)

Nonforfeitable distributions allocated to unvested restricted shares

(36)

(24)

(116)

(72)
Distributions on redeemable non-controlling interests in operating partnership, Common units

—

—

—

(113)
Distributions on redeemable non-controlling interests in operating partnership, Series A preferred units and dividends on Series B Participating Preferred Stock

(1,959)

(887)

(3,714)

(2,057)

Net income (loss) available to common stockholders of Farmland Partners Inc.

$
221

$
(841)

$
(1,553)

$
(2,654)

Basic and diluted per common share data:

Basic net income (loss) available to common stockholders

$
0.01

$
(0.06)

$
(0.05)

$
(0.21)
Diluted net income (loss) available to common stockholders

$
0.01

$
(0.06)

$
(0.05)

$
(0.21)
Basic weighted average common shares outstanding

32,862

13,683

30,695

12,663
Diluted weighted average common shares outstanding

32,862

13,683

30,695

12,663
Dividends declared per common share

$
0.1275

$
0.1275

$
0.3825

$
0.3825


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
OPERATING REVENUES:
Rental income	$	9,141	$	9,698	$	19,215	$	19,369
Tenant reimbursements		883		466		1,744		934
Crop sales		362		484		697		933
Other revenue		131		300		512		600
Total operating revenues		10,517		10,948		22,168		21,836

OPERATING EXPENSES
Depreciation, depletion and amortization		2,003		2,092		4,003		4,207
Property operating expenses		1,818		2,188		3,679		4,120
Cost of goods sold		745		—		1,311		223
Acquisition and due diligence costs		11		1		11		1
General and administrative expenses		1,402		1,419		2,854		2,793
Legal and accounting		848		1,293		1,330		2,016
Other operating expenses		1		1		1		1
Total operating expenses		6,828		6,994		13,189		13,361
OPERATING INCOME		3,689		3,954		8,979		8,475

OTHER (INCOME) EXPENSE:
Other income		(33)		(111)		88		(136)
Loss (gain) on disposition of assets		(917)		(7,491)		(831)		(7,909)
Interest expense		4,467		5,031		9,130		9,987
Total other expense		3,517		(2,571)		8,387		1,942

Net income before income tax expense		172		6,525		592		6,533

Income tax expense		—		—		—		—

NET INCOME (LOSS)		172		6,525		592		6,533

Net (income) loss attributable to non-controlling interests in operating partnership		(10)		(473)		(36)		(474)

Net income (loss) attributable to the Company		162		6,052		556		6,059

Nonforfeitable distributions allocated to unvested restricted shares		(16)		(21)		(32)		(42)
Distributions on Series A Preferred Units and Series B Preferred Stock		(3,088)		(3,125)		(6,203)		(6,251)

Net loss available to common stockholders of Farmland Partners Inc.	$	(2,942)	$	2,906	$	(5,679)	$	(234)

Basic and diluted per common share data:
Basic net (loss) available to common stockholders	$	(0.10)	$	0.09	$	(0.19)	$	(0.01)
Diluted net (loss) available to common stockholders	$	(0.10)	$	0.08	$	(0.19)	$	(0.01)
Basic weighted average common shares outstanding		29,433		30,637		29,485		30,714
Diluted weighted average common shares outstanding		29,433		48,370		29,485		30,714
Dividends declared per common share	$	0.05	$	0.05	$	0.10	$	0.10

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net Income (loss)	$	172	$	6,525	$	592	$	6,533
Amortization of OCI		247				247
Net change associated with current period hedging activities		(400)		(654)		(1,983)		(870)
Comprehensive Income		19		5,871		(1,144)		5,663
Comprehensive income attributable to non-controlling interests		(10)		(473)		(36)		(474)
Net income (loss) attributable to Farmland Partners Inc.	$	9	$	5,398	$	(1,180)	$	5,189

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of Changes in Equity and Other Comprehensive Income

For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019

(Unaudited)

(in thousands)

Stockholders’ Equity

Common Stock

Non‑controlling






Additional





Interests in


Paid-in

Retained

Cumulative

Operating

Total


Shares

Par Value

Capital

Earnings

Dividends

Partnership

Equity
Balance at December 31, 2015

11,979

$
118

$
114,783

$
659

$
(7,188)

$
30,162

$
138,534

Net loss

—

—

—

(412)

—

(37)

(449)
Grant of unvested restricted stock

119

—

—

—

—

—

—
Issuance of stock under the at-the-market offering, net of costs of $81

844

10

9,224

—

—

—

9,234
Conversion of Common units to shares of common stock

1,109

11

10,450

—

—

(10,461)

—
Stock based compensation

—

—

892

—

—

—

892
Dividends and distributions accrued or paid

—

—

(2,057)

—

(5,073)

(2,232)

(9,362)
Issuance of Common units as partial consideration for asset acquisition

—

—

—

—

—

28,825

28,825
Reclassification of Common units from mezzanine equity

—

—

—

—

—

9,519

9,519
Forfeiture of unvested restricted stock

(5)

—

(3)

—

—

—

(3)
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership

—

—

4,282

—

—

(4,282)

—
Balance at September 30, 2016

14,046

$
139

$
137,571

$
247

$
(12,261)

$
51,494

$
177,190

Balance at December 31, 2016

17,351

172

172,100

4,103

(14,473)

53,692

215,594

Net income

—

—

—

2,277

—

353

2,630
Grant of unvested restricted stock

205

—

—

—

—

—

—
Costs incurred related to the at-the-market offering

—

—

(119)

—

—

—

(119)
Conversion of Common units to shares of common stock

1,108

11

10,944

—

—

(10,955)

—
Stock based compensation

—

—

1,100

—

—

—

1,100
Dividends and distributions accrued or paid

—

—

—

(3,715)

(12,475)

(2,398)

(18,588)
Issuance of common stock as partial consideration for asset acquisition and business combination

14,815

148

168,835

—

—

—

168,983
Issuance of Common units as partial consideration for business combination

—

—

—

—

—

2,494

2,494
Issuance of Common units as partial consideration for asset acquisitions

—

—

—

—

—

10,035

10,035
Repurchase and cancellation of shares

(841)

(9)

(7,437)

—

—

—

(7,446)
Forfeiture of unvested restricted stock

(6)

—

(9)

—

—

—

(9)
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership

—

—

(3,101)

—

—

3,101

—
Balance at September 30, 2017

32,632

$
322

$
342,313

$
2,665

$
(26,948)

$
56,322

$
374,674


	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, 2018	30,594	$	300	$	332,996	$	4,852	$	(42,695)	$	(865)	$	44,685	$	339,273

Net income	—		—		—		6,059		—		—		474		6,533
Grant of unvested restricted stock	224		—		—		—		—		—		—		—
Stock based compensation	—		—		778		—		—		—		—		778
Dividends accrued or paid	—		—		—		(6,251)		(3,083)		—		(239)		(9,573)
Repurchase and cancellation of shares	(3,158)		(32)		(19,435)		—		—		—		—		(19,467)
Forfeiture of unvested restricted stock	(1)		—		(2)		—		—		—		—		(2)
Net change associated with current period hedging transactions	—		—		—		—		—		(870)		—		(870)
Conversion of Common units to shares of common stock	2,185		22		21,292		—		—		—		(21,314)		—
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership	—		—		(373)		—		—		—		373		—
Balance at June 30, 2019	29,844	$	290	$	335,256	$	4,660	$	(45,778)	$	(1,735)	$	23,979	$	316,672

Balance at December 31, 2019	29,952	$	292	$	338,387	$	6,251	$	(48,784)	$	(1,644)	$	19,044	$	313,546

Net income	—		—		—		556		—		—		36		592
Grant of unvested restricted stock	139		—		—		—		—		—		—		—
Stock based compensation	—		—		517		—		—		—		—		517
Dividends accrued or paid	—		—		—		(6,203)		(2,986)		—		(191)		(9,380)
Net change associated with current period hedging transactions	—		—		—		—		—		(1,736)		—		(1,736)
Repurchase and cancellation of shares	(495)		(5)		(3,191)		—		—		—		—		(3,196)
Adjustment to non-controlling interest resulting from changes in ownership of the Operating Partnership	—		—		345		—		—		—		(345)		—
Balance at June 30, 2020	29,596	$	287	$	336,058	$	604	$	(51,770)	$	(3,380)	$	18,544	$	300,343

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of Cash Flows

For the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019

(Unaudited)

(in thousands)

For the Nine Months Ended

September 30,

2017

2016
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$
2,630

$
(513)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Depreciation, depletion and amortization

5,651

1,102
Amortization of deferred financing fees and discounts/premiums on debt

162

219
Amortization of net origination fees related to notes receivable

(11)

(3)
Amortization of below market leases

—

(63)
Stock based compensation

1,091

889
Loss on disposition of assets

48

—
Changes in operating assets and liabilities:

Decrease (increase) in accounts receivable

2,739

(1,427)
(Increase) in interest receivable

(227)

(106)
(Increase) in other assets

(433)

(303)
Decrease (increase) in inventory

289

(129)
Increase in accrued interest

1,348

945
(Decrease) increase in accrued expenses

(14,358)

1,984
(Decrease) increase in deferred revenue

(2,028)

900
(Decrease) increase in accrued property taxes

(302)

119
Net cash (used in) provided by operating activities

(3,401)

3,614
CASH FLOWS FROM INVESTING ACTIVITIES

Real estate acquisitions, net of cash acquired

(92,680)

(122,388)
Real estate and other improvements

(17,650)

(5,011)
Principal receipts on notes receivable

—

50
Issuance of notes receivable

(3,870)

—
Net cash used in investing activities

(114,200)

(127,349)
CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings from mortgage notes payable and lines of credit

101,790

200,787
Repayments on mortgage notes payable

(20,819)

(84,750)
Proceeds from ATM offering

—

9,338
Proceeds from issuance of Series B Participating Preferred Stock

144,523

—
Common stock repurchased

(7,446)

—
Payment of offering costs

(572)

(64)
Payment of debt issuance costs

(817)

(937)
Dividends on common stock

(10,535)

(4,809)
Distributions on Series A preferred units

(2,915)

—
Dividends on Series B Participating Preferred Stock

(1,082)

—
Distributions to non-controlling interests in operating partnership

(2,394)

(2,155)
Net cash provided by financing activities

199,733

117,410

NET INCREASE (DECREASE) IN CASH

82,132

(6,325)
CASH, BEGINNING OF PERIOD

47,166

23,514

CASH, END OF PERIOD

$
129,298

$
17,189
Cash paid during period for interest

$
8,491

$
6,706
Cash paid during period for taxes

$
—

$
—

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING TRANSACTIONS:

Transfer of deferred offering costs to equity

$
419

$
104
Dividend payable, common stock

$
4,152

$
1,791
Distributions payable, Common units

$
730

$
724
Distributions payable, preferred units

$
2,633

$
2,057
Additions to real estate improvements included in accrued expenses

$
1,155

$
134
Financing fees included in accrued expenses

$
25

$
—
Issuance of common stock and equity from non-controlling interests in operating partnership in conjunction with acquisitions

$
181,510

$
145,826
Below market lease acquisitions

$
—

$
29
Property tax liability assumed in acquisitions

$
—

$
79
Deferred offering costs included in accrued expenses

$
—

$
24


	For the Six Months Ended
	June 30,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	592	$	6,533
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		4,003		4,207
Amortization of deferred financing fees and discounts/premiums on debt		147		172
Stock based compensation		517		776
(Gain) loss on disposition of assets		(831)		(7,909)
Bad debt expense		46		339
Amortization of OCI		247		—
Changes in operating assets and liabilities:
Increase in accounts receivable		2,372		1,661
Increase in interest receivable		(29)		(495)
Increase in other assets		1,565		1,599
Decrease in inventory		(582)		(423)
Increase in accrued interest		347		173
Decrease in accrued expenses		(781)		58
(Decrease) Increase in deferred revenue		2,205		5,069
(Decrease) Increase in accrued property taxes		164		367
Net cash provided by operating activities		9,982		12,127
CASH FLOWS FROM INVESTING ACTIVITIES
Real estate acquisitions		(884)		—
Real estate and other improvements		(1,689)		(4,240)
Principal receipts on notes receivable		1,762		5,633
Issuance of note receivable		(8)		(1,456)
Proceeds from sale of property		7,526		34,172
Net cash provided by investing activities		6,707		34,109
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments on mortgage notes payable		(85)		(11,300)
Participating preferred stock repurchased		(3,095)		(851)
Common stock repurchased		(3,196)		(19,466)
Payment of debt issuance costs		(130)		—
Dividends on common stock		(2,996)		(3,152)
Distribution on Series A preferred units		(3,510)		(3,510)
Distribution on Series B participating preferred stock		(4,450)		(2,249)
Distributions to non-controlling interests in operating partnership, common		(190)		(240)
Net cash used in financing activities		(17,652)		(40,768)

NET INCREASE (DECREASE) IN CASH		(963)		5,468
CASH, BEGINNING OF PERIOD		12,561		16,891
CASH, END OF PERIOD	$	11,598	$	22,359
Cash paid during period for interest	$	8,334	$	9,791
Cash paid during period for taxes	$	—	$	—

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Dividend payable, common stock	$	1,488	$	1,492
Dividend payable, common units	$	95	$	120
Distributions payable, Series A preferred units	$	1,755	$	1,755
Distributions payable, Series B participating preferred stock	$	—	$	2,247
Additions to real estate improvements included in accrued expenses	$	—	$	264
Settlement of outstanding notes receivable with property acquisition	$	487	$	—
Swap fees payable included in accrued interest	$	109	$	—
Right of Use Asset	$	163	$	135
Lease Liability	$	163	$	135

See accompanying notes.

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Farmland Partners, Inc.

Notes to the Unaudited Financial Statements as of June 30, 2020

Note 1—Organization and Significant Accounting ~~Policies~~Policies

Organization

Farmland Partners Inc., collectively with its subsidiaries (the “Company”), is an internally managed real estate company that owns and seeks to acquire high-quality farmland located in agricultural markets throughout North America. The Company was incorporated in Maryland on September 27, 2013. The Company is the sole member of the general partner of Farmland Partners Operating Partnership, LP (the “Operating Partnership”), which was formed in Delaware on September 27, 2013. As of ~~September~~June 30, ~~2017,~~2020, the Company owned a portfolio of approximately ~~154,164~~156,500 acres which are consolidated in these financial statements. All of the Company’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 ~~September~~June 30, ~~2017,~~2020, the Company owned ~~an 85.1%~~a 94.0% 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”), Series A preferred units of limited partnership interest in the Operating Partnership (“Series A preferred units”)) and Series B participating preferred units of limited partnership interest in the Operating Partnership (“Series B participating preferred units”)). Unlike holders of the Company’s common stock, holders of Common units and Series A preferred units generally do not have voting rights or the power to direct our affairs. On August 17, 2017, the Company issued 6,037,500 shares of its newly designated 6.00% Series B Participating Preferred Stock, $0.01 par value per share (the “Series B Participating Preferred Stock”) in an underwritten public offering. Shares of Series B Participating Preferred Stock, which represent equity interests in the Company, generally have no voting rights and rank senior to the Company’s common stock with respect to dividend rights and rights upon liquidation (See “Note 9—Stockholders’ Equity—Series B Participating Preferred Stock” for more information on the Series B Participating Preferred Stock).

The Company 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.

On March 16, 2015, the Company formed FPI Agribusiness Inc., a wholly owned subsidiary (the “TRS” or “FPI Agribusiness”), as a taxable REIT subsidiary. The TRS was formed to provide volume purchasing services to the Company’s tenants and also to operate a ~~small scale~~small-scale custom farming business. As of ~~September~~June 30, ~~2017,~~2020, the TRS ~~performs~~performed these custom farming operations on ~~716~~3,676 acres of farmland owned by the Company ~~and~~ located in ~~Florida~~California, Michigan, South Carolina, and ~~California.~~ Florida.

~~AFCO Mergers~~

On February 2, 2017, the Company completed the previously announced merger with American Farmland Company (“AFCO”) at which time one of the Company’s wholly owned subsidiaries was merged with and into American Farmland Company L.P. (“AFCO OP”) with AFCO OP surviving as a wholly owned subsidiary of the Operating Partnership (the “Partnership Merger”), and AFCO merged with and into another one of our wholly owned subsidiaries with such wholly owned subsidiary surviving (the “Company Merger” and together with the Partnership Merger, the “AFCO Mergers”).

At the effective time of the Company Merger, each share of common stock of AFCO, par value $0.01 per share (“AFCO Common Stock”), issued and outstanding immediately prior to the effective time of the Company Merger (other than any shares of AFCO Common Stock owned by any wholly owned subsidiary of AFCO or by the Company or the Operating Partnership or any wholly owned subsidiary of the Company or the Operating Partnership), was automatically converted into the right to receive, subject to certain adjustments, 0.7417 shares of the Company’s common stock (the “Company Merger Consideration”). In addition, in connection with the Company Merger, each outstanding AFCO restricted stock unit that had become fully earned and vested in accordance with its terms was, at the effective time of the Company Merger, converted into the right to receive the Company Merger Consideration. The Company issued 14,763,604 shares of its common stock as consideration in the Company Merger, 17,373 shares of its common stock in respect of fully earned and vested AFCO restricted stock units, and 218,525 Common units in connection with the Partnership Merger at a share price of $11.41 per share on the date of the merger for a total consideration of $171.1 million, net of $75.0 million in assumed debt.

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Principles of Consolidation

The accompanying consolidated financial statements for the periods ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 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 the Company and the Operating Partnership. All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts have been reclassified in the prior year financial statements to conform to the current year presentation. Such reclassification had no effect on net income or loss.

Interim Financial Information

The information in the Company’s consolidated financial statements for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 is unaudited. The accompanying financial statements for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 include adjustments based on management’s estimates (consisting of normal and recurring accruals), which the Company considers necessary for a fair statement of the results for the periods. The financial information should be read in conjunction with the consolidated financial statements for the year ended December 31, ~~2016,~~2019, 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”)

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on ~~February 23, 2017.~~March 13, 2020. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 are not necessarily indicative of actual operating results for the entire year ending December 31, ~~2017.~~2020.

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.

During the second quarter of 2017, the Company identified and recorded an out-of-period adjustment related to tenant reimbursement revenue that should have been recorded in the first quarter of 2017. The Company concluded that this adjustment was not material to the Company’s consolidated financial statements for the periods impacted. The adjustment was reflected as a $0.2 million increase in tenant reimbursement revenue in the consolidated statements of operations for the three and six months ended June 30, 2017 with a corresponding increase to accounts receivable in the consolidated balance sheet as of June 30, 2017.

During the third quarter of 2017, the Company identified and recorded an out-of-period adjustment related to rental revenue that should have been recorded in the first and second quarters of 2017. The Company concluded that this adjustment was not material to the consolidated financial statements for the periods impacted. The adjustment is reflected as a $0.2 million increase in rental revenue in the consolidated statements of operations for the three months ended September 30, 2017 with a $0.2 million decrease in deferred revenue in the consolidated balance sheet as of September 30, 2017.

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 ~~may~~could materially differ from ~~previously estimated amounts,~~those estimates, particularly in light of the novel coronavirus (“COVID-19”) pandemic and ~~such differences~~its effects on the domestic and global economies. So far, the direct impact of the COVID-19 pandemic on our business and operations has been limited. As broader sectors of the U.S. agricultural economy are affected through supply chain and commodity price disruptions, we believe that we may ~~be material~~experience some yet largely unidentified impact in the medium term. In the long term, we do not expect that the pandemic will affect materially the global demand for food, feed, fuel and fiber, and therefore the value of its farmland portfolio. We are unable to quantify what the ultimate impact of the virus on our ~~consolidated financial statements.~~business will be.

Real Estate Acquisitions

When the Company acquires farmland where substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets it is not considered a business. As such, the Company accounts for these types of acquisitions as asset acquisitions. When substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or a group orof similar assets and contains acquired inputs and processes ~~and~~which have the ability to contribute to the creation of outputs, these acquisitions are accounted for as a business ~~combination.~~combinations.

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The Company considers single identifiable assets as tangible assets that are attached to and cannot be physically removed and used separately from another tangible asset without incurring significant cost or significant diminution in utility or fair value. The Company considers similar assets as assets that have a similar nature and risk characteristics.

Whether ~~our~~the Company’s acquisitions are treated as an asset acquisition under ASC 360 or a business combination under ASC 805, the fair value of the purchase price is allocated among the assets acquired and any liabilities assumed by valuing the property as if it was vacant. The “as-if-vacant” value is allocated to land, buildings, improvements, permanent plantings and any liabilities, based on management’s determination of the relative fair values of such assets and liabilities as of the date of acquisition.

Upon acquisition of real estate, the Company allocates the purchase price of the real estate based upon the fair value of the assets and liabilities acquired, which historically have consisted of land, drainage improvements, irrigation improvements, groundwater, permanent plantings (bushes, shrubs, vines and perennial crops), and grain facilities, and may also consist of intangible assets including in-place leases, above market and below market leases and tenant relationships. The Company allocates the purchase price to the fair value of the tangible assets by valuing the land as if it were unimproved. The Company values improvements, including permanent plantings and grain facilities, at replacement cost, adjusted for depreciation.

Management’s estimates of land value are made using a comparable sales analysis. Factors considered by management in its analysis of land value include soil types and water availability and the sales prices of comparable farms. Management’s estimates of groundwater value are made using historical information obtained regarding the applicable aquifer. Factors considered by management in its analysis of groundwater value are related to the location of the aquifer and whether or not the aquifer is a depletable resource or a replenishing resource. If the aquifer is a replenishing resource, no value is allocated to the groundwater. The Company includes an estimate of property taxes in the purchase price allocation of acquisitions to account for the expected liability that was assumed.

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When above or below market leases are acquired, the Company values the intangible assets based on the present value of the difference between prevailing market rates and the in-place rates measured over a period equal to the remaining term of the lease for above market leases and the initial term plus the term of any below market fixed rate renewal options for below market leases that are considered bargain renewal options. The above market lease values are amortized as a reduction of rental income over the remaining term of the respective leases. The fair value of acquired below market leases, included in deferred revenue on the accompanying consolidated balance sheets, is amortized as an increase to rental income on a straight-line basis over the remaining non-cancelable terms of the respective leases, plus the terms of any below market fixed rate renewal options that are considered bargain renewal options of the respective leases. As of September 30, 2016, all below market leases had been fully amortized, with amortization totaling $0.1 million recorded in the nine months ended September 30, 2016. There were no above market leases in place during the nine months ended September 30, 2017 or the year ended December 31, 2016.

As of ~~September~~June 30, ~~2017~~2020 and ~~2016,~~December 31, 2019, the Company had ~~$0.9~~$1.3 million and $0$1.3 million ~~respectively, recorded for~~in tenant relationship intangibles, ~~net~~respectively, gross of accumulated amortization of ~~$0.5~~$1.3 million and $0$1.2 million, respectively. The purchase price is allocated to in-place lease values and tenant relationships, if they are acquired, based on the Company’s evaluation of the specific characteristics of each tenant’s lease, availability of replacement tenants, probability of lease renewal, estimated down time and its overall relationship with the tenant. The value of in-place lease intangibles and tenant relationships ~~will be~~are included as an intangible asset and ~~will be~~have been amortized over the remaining lease term (including expected renewal periods of the respective leases for tenant relationships) as amortization expense. If a tenant terminates its lease prior to its stated expiration, any unamortized amounts relating to that lease, including (i) above and below market leases, (ii) in-place lease values, and (iii) tenant relationships, would be recorded to revenue or expense as appropriate.

The Company capitalizes acquisition costs and due diligence costs if the asset is expected to qualify as an asset acquisition. If the asset acquisition is abandoned, the capitalized asset acquisition costs ~~will be~~are expensed to acquisition and due diligence costs in the period of abandonment. Costs associated with a business combination are expensed to acquisition and due diligence costs as incurred. During the three and six months ended June 30, 2020, the company incurred an immaterial amount of costs related to acquisition and due diligence during the periods.

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Total consideration for acquisitions may include a combination of cash and equity securities. When equity securities are issued, ~~we determine~~the Company determines the fair value of the equity securities issued based on the number of shares of common stock and Common units issued multiplied by the price per share of the Company’s common stock ~~price~~ on the date of closing in the case of common stock and Common units and by liquidation preference in the case of preferred stock and preferred units.

Using information available at the time of business combination, the Company allocates the total consideration to tangible assets and liabilities and identified intangible assets and liabilities. During the measurement period, which may be up to one year from the acquisition date, the Company may adjust the preliminary purchase price allocations after obtaining more information about assets acquired and liabilities assumed at the date of acquisition.

~~Inventory~~Real Estate Sales

The Company recognizes gains from the sales of real estate assets, generally at the time the title is transferred, consideration is received and the Company no longer has substantial continuing involvement with the real estate sold.

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Liquidity Policy

The Company manages its liquidity position and expected liquidity needs taking into consideration current cash balances and reasonably expected cash receipts. The business model of the Company, and of real estate investment companies in general, relies on 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. As of June 30, 2020 the Company had liquidity requirements which were not anticipated to be funded from ongoing operating cash flows in the foreseeable future which were largely impacted by debt repayments that are coming due during the remainder of 2020. When material debt repayments are due within the following 12 months, the Company works with current and new lenders and other potential sources of capital to ensure that all its obligations are timely satisfied. The Company has a history of being able to refinance its debt obligations to manage its debt maturities. Furthermore, the Company also has a deep portfolio of real estate assets which management believes could be readily liquidated if necessary to fund its immediate liquidity needs. Management’s first course of action is to work with its lenders to refinance debt which is coming due on terms acceptable to the Company. In the event the Company is unsuccessful in refinancing its debt on terms acceptable to the Company, management would look to liquidate certain assets to fund its liquidity shortfall. Management believes its plans are sufficient to overcome the liquidity pressures which existed at June 30, 2020.

Allowance for Doubtful Accounts

The Company records an allowance for doubtful accounts, reducing the receivables balance to an amount that it estimates is collectible from our customers. Estimates used in determining the allowance for doubtful accounts are based on historical collection experience, current trends, aging of accounts receivable and periodic credit evaluations of the Company’s customers’ financial condition. The Company writes off accounts receivable when it becomes apparent, based upon age or customer circumstances, such that all current expected losses are sufficiently reserved for at each reporting period. The Company considered its current expectations of future economic conditions, including the impact of COVID-19, when estimating its allowance for doubtful accounts. As of June 30, 2020 and December 31, 2019, the Company had an allowance of $0.1 million and $0.1 million, respectively.

Inventory

The costs of growing crops are accumulated until the time of harvest at the lower of cost or ~~market~~net realizable value and are included in inventory in the consolidated balance sheets. Costs are allocated to growing crops based on a percentage of the total costs of production and total operating costs that are attributable to the portion of the crops that remain in inventory at the end of the period. The costs of growing crops incurred by FPI Agribusiness consist primarily of costs related to land preparation, cultivation, irrigation and fertilization. Growing crop inventory is charged to cost of products sold when the related crop is harvested and ~~sold.~~sold and is included in other operating expenses. The cost of harvested crop was ~~$0.4~~$0.0 million and $0.1 million, and $0.0 million and $0.2 million ~~respectively, for the nine months ended September 30, 2017 and 2016 and $0.1 million and $0.2 million, respectively,~~ for the three and six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~2019, respectively.

Harvested crop inventory includes costs accumulated both during ~~both~~ the growing and harvesting ~~phases. Growing crop inventory includes costs accumulated during the current crop year for crops which have not been harvested. Both harvested~~phases and ~~growing crop~~ are stated at the lower of ~~cost~~those costs or the estimated net realizable value, which is the market price, based upon the nearest market in the geographic region, less any cost of disposition. Cost of disposition includes ~~brokers’~~broker’s commissions, freight and other marketing costs.

~~Other~~General inventory, such as fertilizer, seeds and pesticides, is valued at the lower of cost or ~~market.~~net realizable value.

As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016, respectively,~~2019, inventory consisted of the following:


(in thousands)	June 30, 2020		December 31, 2019
Harvested crop	$	—	$	171
Growing crop		2,132		1,379
General inventory		—		—
	$	2,132	$	1,550

(in thousands)

September 30, 2017

December 31, 2016
Harvested crop

$
—

$
283
Growing crop

92

—

$
92

$
283

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Hedge Accounting

ASC 815 requires the Company to recognize all of its derivative instruments as either assets or liabilities in the consolidated balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, the company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in the consolidated statements of operations during the period.

The Company uses derivative instruments to manage certain interest rate risks. More specifically, interest rate swaps are entered into to manage the risk associated with the Company’s floating-rate borrowings when such risk management is deemed appropriate by the Company’s management and a fixed interest rate is not available or not economical, or when it is contractually required by a lender. In accordance with ASC 815, the Company designates interest rate swaps as cash flow hedges of said floating-rate borrowings. The entire change in the fair value of the Company’s designated cash flow hedges is recorded to accumulated other comprehensive income, a component of shareholders’ equity in the Company’s consolidated balance sheets.

The Company terminated its old interest rate swap and entered into a new interest rate swap agreement to manage interest rate risk exposure. An interest rate swap agreement utilized by the Company effectively modifies the Company’s exposure to interest rate risk by converting the Company’s floating-rate debt to a fixed rate basis for the next six years on 50% of the currently outstanding amount to Rabobank, thus reducing the impact of interest rate changes on future interest expense. This agreement involves the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the agreement without an exchange of the underlying principal amount.

As of June 30, 2020, the total notional amount of the Company’s receive-variable/pay-fixed interest rate swap was $33.2 million. For a summary of the fair value and related disclosures in relation to hedge accounting, please refer to “Note 10 – Hedge Accounting.”

New or Revised Accounting Standards

~~Adopted~~Recent Pronouncements

In ~~July 2015,~~March 2020, the FASB issued ASU ~~No. 2015-11,~~ ~~Inventory~~2020-04, Reference Rate Reform (Topic ~~330)~~. 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. 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 ~~amendments require~~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 ~~an entity should measure inventory~~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 ~~lower of cost~~modification date or net realizable value. Net realizable value is the estimated sales price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments should be applied prospectively with earlier application permitted asreassessment of the previous 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.

The ASU was effective upon issuance on a prospective basis beginning January 1, 2020 and may be elected over time as reference rate reform activities occur. During the first quarter of ~~an interim or annual reporting period.~~2020, the Company elected to apply the hedge

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accounting practical expedient to its cash flow hedge. The Company ~~has~~will continue to evaluate its debt, derivative and lease contracts that are eligible for modification relief and may apply those elections as needed.

Recently adopted ~~this guidance as of January 1, 2017 and there has been no impact on the financial results of the Company.~~

~~Not Yet Adopted~~

In ~~May 2014,~~June 2016, the FASB issued ASU ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers:~~2016-13, Financial Instruments - Credit Losses (Topic ~~606)(“ASU 2014-09”). ASU 2014-09 amends~~326): Measurement of Credit Losses on Financial Instruments, which changes the ~~guidance for revenue recognition to replace numerous, industry-specific requirements~~method and ~~converges areas under this topic with those~~timing of the ~~International Financial Reporting Standards. ASU 2014-09 implements~~recognition of credit losses on financial assets. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities are required to use a ~~five-step process for customer contract revenue recognition~~new forward-looking "expected loss" model that ~~focuses on transfer of control, as opposed to transfer of risk and rewards. The amendment also requires enhanced disclosures regarding the nature, amount, timing and uncertainty~~

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~~of revenues and cash flows from contracts with customers. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered~~generally will result in the ~~transaction price, and allowing estimates~~earlier recognition of ~~variable consideration~~allowance for losses. This credit loss standard is required to be ~~recognized before contingencies are resolved in certain circumstances. While the Company is still completing its assessment~~applied using a modified-retrospective approach and requires a cumulative-effect adjustment to retained earnings be recorded as of the ~~impact~~date of ~~this guidance, it does~~adoption. The Company adopted the new standard on January 1, 2020. The adoption of the standard did not ~~believe that it will~~ have a material impact on ~~the~~its financial ~~statements as the majority~~position or results of the Company’s contracts with customers relate to leases that fall within the scope of ASU 2016-02 (see below). Other contract types undergoing evaluation are considered ancillary to the Company’s operations and financial statements. The amendments in this ASU are effective for annual and interim reporting periods beginning after December 15, 2017. We are currently assessing the impact of ASU 2014-09, as amended; however, the majority of our revenue is from net-lease agreements which will be in the scope of the leasing standard as described below.operations.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases: (Topic 842) (“ASU 2016-02”),~~ which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. While the Company is still completing its assessment of the impact of this guidance, the following is anticipated to reflect the primary effects of this guidance on the Company’s reporting:

~~(i)~~

For leases in which the Company is the lessee, the Company does not expect the guidance to have a material impact as there are only three operating leases for office space and for subleased property in Nebraska. Two of these leases have terms less than 12 months and the Company will elect not to apply the recognition requirements of ASU 2016-02. The Company will record a right-of-use asset and a lease liability for the third lease that has a term greater than 12 months, but the Company does not expect it to have a significant impact on the consolidated financial statements;

~~(ii)~~

For leases in which the Company is the lessor, the Company does not expect there to be a material impact as the majority of the Company’s leases do not contain a non-lease component. While the Company is expecting there to be other ancillary impacts for leases in which the Company is the lessor, they are not expected to be material to the consolidated financial statements. Under the new guidance lease procurement costs which were previously capitalized will be expensed as incurred. Lastly, under the new guidance, there are certain circumstances in which buyer-lessors in sale and leaseback transactions could potentially result in recording the transaction as a financial receivable if such transaction fails sale and leaseback criteria, which the Company is still evaluating.

The standard is effective for annual and interim reporting periods beginning after December 15, 2018, with modified retrospective restatement for each reporting period presented at the time of adoption. Early adoption is permitted. The Company has not yet determined whether this guidance will be early adopted.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (“ASU 2016-15”). ASU 2016-15 is intended to reduce diversity in practice across all industries. The amendments in this update provide guidance on the following eight specific cash flow issues: 1) Debt Prepayment or Debt Extinguishment Costs; 2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; 3) Contingent Consideration Payments Made after a Business Combination; 4) Proceeds from the Settlement of Insurance Claims; 5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; 6) Distributions Received from Equity Method Investees; 7) Beneficial Interests in Securitization Transactions; and 8) Separately Identifiable Cash Flows and Application of the Predominance Principle. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and retrospective

~~Table of Contents~~

restatement is required. Early adoption is permitted. The Company is currently evaluating the requirements of ASU 2016-15 and does not anticipate a material impact on our statement of cash flows.

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combination (Topic 805): Clarifying the definition of a business~~ (“ASU 2017-01”). ASU 2017-01 is intended to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The Company has determined that with the adoption of this guidance some acquisitions that were deemed business combinations will be deemed asset acquisitions and costs associated with these asset acquisitions will be capitalized to the acquisition rather than being expensed. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company has adopted this guidance as of January 1, 2017. The Company expects the vast majority of its acquisitions to be deemed asset acquisitions under this new guidance.

Note 2—Revenue Recognition

For the majority of its leases, the Company receives at least 50% of the annual lease payment from tenants either during the first quarter of the year or at the time of acquisition of the related farm, with the ~~remainder~~remaining 50% of the lease payment ~~generally secured by growing or harvested crops,~~ due in the second half of the year. ~~The rental~~Rental income ~~received~~ is recorded on a straight-line basis over the lease term. The lease term generally includes periods when a tenant: (1) may not terminate its lease obligation early; (2) may terminate its lease obligation early in 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.

Certain of the Company’s leases provide for a rent payment determined as a percentage of the gross farm ~~proceeds.~~proceeds (contingent rent). Revenue under leases providing for a payment equal to a percentage of the gross farm proceeds are 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.

Certain of the Company’s leases provide for minimum cash rent plus a bonus based on gross farm proceeds. Revenue under this type of lease is recognized on a straight-line basis over the lease term based on the minimum cash rent. Bonus rent is recognized upon notification from the tenant of the gross farm proceeds for the year.

Most of ~~our~~the Company’s farming leases range from two to three years for row crops and one to seven years for permanent crops. Leases in place as of ~~September~~June 30, ~~2017~~2020 have terms ranging from one to 2540 years. Payments received in advance are included in deferred revenue until they are earned. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company had ~~$3.9~~$2.0 million and $~~1.0~~$0.1 million,, respectively, in deferred revenue.

The following sets forth a summary of rental income recognized for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:

Rental income recognized

For the three months ended

For the nine months ended

September 30,

September 30,
(in thousands)

2017

2016

2017


2016
Leases in effect at the beginning of the year

$
3,187

$
3,098

$
9,348

$
9,760
Leases entered into during the year(1)

7,920

3,066

19,033

6,702

$
11,107

$
6,164

$
28,381

$
16,462

~~(1)~~

~~Includes all leases resulting from acquisitions completed during the period including those leases acquired as a result of the AFCO mergers.~~


	Rental income recognized
	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2020		2019		2020			2019
Leases in effect at the beginning of the year	$	8,338	$	9,367	$	17,679	$	18,881
Leases entered into during the year		803		331		1,536		488
	$	9,141	$	9,698	$	19,215	$	19,369

1213

Table of Contents

Future minimum lease payments from tenants under all non-cancelable leases in place as of ~~September~~June 30, ~~2017,~~2020, including lease advances when contractually due, but excluding crop share and tenant reimbursement of expenses, for the remainder of ~~2017~~2020 and each of the next four years and thereafter as of ~~September~~June 30, ~~2017~~2020 are as follows:



(in thousands)	Future rental		Future rental
Year Ending December 31,	payments		payments
2017 (remaining three months)	$	9,456
2018		26,559
2019		19,704
2020		7,548
2020 (remaining six months)			$	15,761
2021		3,263		21,244
2022				11,593
2023				5,171
2024				2,440
Thereafter		4,122		25,033
	$	70,652
			$	81,242

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.

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. Revenues from the sale of harvested crops totaling $~~0.6~~$0.4 million and $~~0.8~~$0.7 million, and $0.9 million and $0.5 million were recognized for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016, respectively, and $0.2 million~~ ~~and $0.6 million being recognized during the three months ended September 30, 2017 and 2016,~~2019, respectively. 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.

Note 3—Concentration Risk

Credit Risk

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, the Company had ~~one~~no significant ~~tenant~~tenants representing a tenant concentration ~~as presented~~of 10% or greater of period revenue. Historically, and in the ~~table below. If the Company’s~~future, 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 could be a material adverse effect on the Company’s financial performance and the Company’s ability to continue operations. Rental income received is recorded on a straight-line basis over the applicable lease term. ~~The following table presents the amount of the rental income and percentage of the Company’s total rental income received from the Company’s significant tenant.~~

Rental income recognized

Rental income recognized

For the three months ended September 30,

For the nine months ended September 30,
($ in thousands)

2017

2016


2017

2016

Tenant A(1)

$
2,091

18.8
%
$
—

—
%

$
4,071

14.3
%
$
—

—
%

~~(1)~~

~~Tenant A is a tenant who is currently leasing a number of permanent crop farms in California~~.

~~Table of Contents~~

Geographic Risk

The following table summarizes the percentage of approximate total acres owned as of ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 and the percentage of rental income recorded by the Company for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 by region:


	Approximate %				Rental Income ⁽¹⁾
	of total acres				For the three months ended				For the six months ended
	As of June 30,				June 30,				June 30,
Location of Farm ⁽²⁾	2020		2019		2020		2019		2020		2019
Corn Belt	28.1	%	27.6	%	35.4	%	33.9	%	33.7	%	35.1	%
Delta and South	17.8	%	17.8	%	11.3	%	11.2	%	10.7	%	11.3	%
High Plains	18.9	%	19.8	%	6.1	%	11.0	%	7.0	%	9.1	%
Southeast	27.8	%	27.5	%	25.9	%	25.4	%	24.6	%	25.3	%
West Coast	7.4	%	7.3	%	21.3	%	18.5	%	24.0	%	19.2	%
	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

Approximate %

Rental Income(1)

of total acres

For the three months ended

For the nine months ended

As of September 30,

September 30,

September 30,
Location of Farm(2)

2017

2016

2017

2016

2017

2016

Corn belt

30.8
%
29.3
%

33.7
%
40.2
%

35.5
%
37.5
%
Delta and South

18.8
%
21.8
%

9.3
%
11.4
%

10.0
%
11.7
%
High Plains

20.4
%
24.1
%

8.6
%
15.8
%

9.3
%
15.6
%
Southeast

25.8
%
24.8
%

18.3
%
32.6
%

21.2
%
35.2
%
West Coast

4.2
%
—
%

30.1
%
—
%

24.0
%
—
%

100.0
%
100.0
%

100.0
%
100.0
%

100.0
%
100.0
%

(1)

~~(1)~~

Due to regional disparities in the use of leases with crop share components and seasonal variations in the recognition of crop share revenue, regional comparisons by rental income are not fully representative of each ~~region's~~region’s income producing capacity until a full year is taken into account.

(2)

~~(2)~~

Corn Belt includes farms located in Illinois, Michigan and eastern Nebraska. Delta and South includes farms located in Arkansas, Louisiana and Mississippi. High Plains includes farms located in Colorado, Kansas, western Nebraska, and ~~Texas.~~South Dakota. Southeast includes farms located in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia. West Coast includes farms located in California.

Table of Contents

Note 4—Related Party Transactions

On July 21, 2015, the Company entered into a lease agreement with American Agriculture Aviation LLC (“American Ag Aviation”) for the use of a private plane. American Ag Aviation is a Colorado limited liability company that is owned 100% by Mr. Pittman. The Company ~~incurred~~paid costs of ~~$0.16 million and $0.14 million, respectively, during the nine months ended September 30, 2017 and 2016 and~~ $0.02 million and $0.05 million, ~~respectively,~~and $0.02 and $0.03 million, during the three and six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016 from~~2019, respectively, to American Ag Aviation for use of the aircraft in accordance with the lease agreement. These costs were recognized based on the nature of the associated use of the aircraft, as follows: (i) general and administrative - expensed as general and administrative expenses within the Company’s consolidated statements of operations; (ii) land acquisition (accounted for as an asset acquisition) - allocated to the acquired real estate assets within the Company’s consolidated balance sheets; and (iii) land acquisition (accounted for as a business combination) - expensed as acquisition and due diligence costs within the Company’s consolidated statements of operations.

Note 5—Real Estate

~~During~~The Company completed 2 acquisitions, consisting of 4 properties, in the ~~nine~~Corn Belt region during the six months ended ~~September~~June 30, ~~2017, the Company completed 15~~2020. Aggregate consideration for these acquisitions ~~which were accounted for as asset acquisitions in Illinois, South Carolina, South Dakota, Arkansas, Michigan, Georgia, Kansas, California, and Colorado. Consideration~~ totaled ~~$111.6~~$1.4 million and was comprised of $0.9 million in cash, ~~shares~~and $0.5 million reduction in notes receivable and related interest to the seller through the acquisition of ~~common stock and Common units. No~~collateralized property. NaN intangible assets were acquired through these acquisitions.

The ~~estimated fair values for~~Company did 0t complete any acquisitions during the assets acquired and the liabilities assumed are preliminary and are subject to change as additional information related to the fair value of the assets and liabilities becomes available. Subsequent adjustments to the preliminary purchase price allocation are not expected to have a material impact to the Company's consolidated financial statements. The following outlines the impact of the completion of the AFCO Mergers accounted for as a business combination as of Septembersix months ended June 30, ~~2017:~~2019.

~~Table of Contents~~

($ in thousands)

Land, at cost
$
181,072
Irrigation improvements

26,155
Permanent plantings

48,513
Buildings

1,499
In-place leases(1)

1,139
Lease origination costs

264
Cash

3,832
Other assets

1,831
Inventory

99
Deferred revenue

(4,434)
Other liabilities

(13,826)
Gross Total Consideration

246,144
Mortgage notes and bonds payable, net

(75,000)
Total Consideration
$
171,144

~~(1)~~

~~Weighted average amortization period of the in-place lease liability is 3 years.~~

During the ~~period~~six months ended June 30, 2020, the Company ~~recorded a measurement period adjustment in relation to property tax accruals~~completed 3 dispositions consisting of 4 properties, in the ~~amount~~Corn Belt and High Plains regions for aggregate consideration of ~~$0.6~~$7.5 million ~~recognized in other liabilities. As the amount was recovered through tenant reimbursements, the Company also increased the other assets category by $0.6 million.~~

~~The Company also recorded a measurement period adjustment in relation to deferred revenue associated with acquired leases in the amount of $1.1 million with a corresponding change in land~~and an aggregate gain on sale of $0.8 ~~million, irrigation improvements of $0.1 million and permanent plantings of $0.2~~ million. ~~The statement of operations impact of this adjustment is immaterial to the three months ended September 30, 2017.~~

The Company has included the results of operations for the acquired real estate in the consolidated statements of operations from the dates of acquisition. The real estate acquired in business combinations during the nine months ended September 30, 2017 contributed $10.1 million to total revenue and $2.4 million to net income.

The pro forma information presented below does not purport to represent what the actual results of operations of the Company would have been had the business combination outlined above occurred as of the beginning of the periods presented, nor does it purport to predict the results of operations of future periods. The pro forma information is presented below as if the real estate acquired in the business combination during the nine months ended September 30, 2017 had been acquired as of January 1, 2016.

For the three months ended

For the nine months ended
($ in thousands)

September 30,

September 30,
Proforma

2017

2016

2017

2016
Revenue

$
12,046

$
6,946

$
30,655

$
17,669
Pro forma estimate(1)

-

4,146

993

11,244
Total operating revenue

$
12,046

$
11,092

$
31,648

$
28,913

Net income (loss)

$
2,610

$
100

$
2,630

$
(513)
Pro forma estimate

-

431

(367)

2,141
Total net income

$
2,610

$
531

$
2,263

$
1,628

Net income (loss) available to common stockholders of Farmland Partners Inc.

$
221

$
(467)

$
(1,935)

$
(869)

Earnings per share basic and diluted

Income (loss) per basic share attributable to common stockholders

$
0.01

$
(0.02)

$
(0.06)

$
(0.03)
Income (loss) per diluted share attributable to common stockholders

$
0.01

$
(0.02)

$
(0.06)

$
(0.03)
Weighted-average number of common shares - basic

32,862

28,447

32,374

27,427
Weighted-average number of common shares - diluted

32,862

28,447

32,374

27,427

~~(1)~~

Represents a linear extrapolation of revenues over the three and nine months ended September 30, 2017 and 2016 and therefore does not take into account the irregularity of certain of the Company's revenue components, such as crop share lease payments.

~~Table of Contents~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, the Company completed ~~16 acquisitions which were accounted~~3 dispositions, consisting of 6 properties, in the Corn Belt and Southeast regions for ~~as asset acquisitions in Georgia, South Carolina, Texas, Illinois, and Louisiana. Consideration totaled $261.1~~aggregate proceeds of $34.2 million and ~~was comprised~~recognized an aggregate gain on sale of ~~cash, Common units, and Series A preferred units. No intangible assets were acquired through these acquisitions.~~$7.6 million.

The following outlines the fair value allocation of the assets and liabilities acquired as a result of the completion of six acquisitions in Michigan, Mississippi, Texas, Illinois, Colorado and Georgia which were accounted for as business combinations as of September 30, 2016:

($ in thousands)

Land, at cost

$
7,170
Groundwater

634
Irrigation improvements

518
Permanent plantings

763
Below market lease

(29)
Total Consideration

$
9,056

~~Prudential Termination Agreement~~

On February 18, 2017, the Company entered into a Termination Agreement (the “Termination Agreement”) with Prudential Capital Mortgage Company (the “Prudential Sub-Advisor”) pursuant to which the Company and the Prudential Sub-Advisor agreed to terminate, effective as of March 31, 2017, the Amended and Restated Sub-Advisory Agreement (the “Sub-Advisory Agreement”), dated as of October 23, 2015, by and among American Farmland Company, American Farmland Advisors, American Farmland Company L.P. and Prudential and certain related property management agreements (together with the Sub-Advisory Agreement, the “Prudential Agreements”).

The Termination Agreement provided that, as of March 31, 2017, Prudential no longer provides services to the Company under the Prudential Agreements. The Company paid the Prudential Sub-Advisor $1.6 million in cash, which is equal to the fee that would have been owed to Prudential for services through the quarter ended March 31, 2017, plus a termination fee of approximately $0.2 million. The statement of operations impact to the Company for the nine months ended September 30, 2017 totaled $0.7 million, which is included in property operating expenses, with the remaining $0.9 million being included in the accruals as a component of the purchase accounting surrounding the AFCO Mergers as this represented the costs incurred by AFCO prior to the AFCO Mergers.

Note 6—Notes Receivable

In August 2015, the Company introduced an agricultural lending product aimed at farmers as a complement to the ~~Company's~~Company’s business of acquiring and owning farmland and leasing it to farmers (the “FPI Loan Program”). Under the FPI Loan Program, the Company makes loans to third-party farmers (both tenant and non-tenant) to provide financing for working capital requirements and operational farming activities, farming infrastructure projects and for other farming and agricultural real estate related projects. The Company seeks to make loans that are collateralized by farm real estate or growing crops and in principal amounts of ~~$100,000~~$0.1 million or more at fixed interest rates with maturities of up to six years. The Company expects the borrower to repay the loans in accordance with the loan agreements based on farming operations and access to other forms of capital, as permitted.

In addition to loans made under the FPI Loan Program, the Company, on certain occasions, makes short-term loans to tenants secured by collateral other than real estate, such as growing crops, equipment or inventory, when the Company believes such loans will ensure the orderly completion of farming operations on a property owned by the Company for a given crop year and other credit is not available to the borrower.

Notes receivable are stated at their unpaid principal balance and include unamortized direct origination costs and accrued interest through the reporting date, less any allowance for losses and unearned borrower paid points.

~~Table~~The Company monitors its receivables based upon historical collection experience, collateral values and current trends. Accrued interest write-offs are recognized as credit loss expense. The Company’s estimate of ~~Contents~~

Asexpected credit losses on its notes receivable principal balance is $0.0 million as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019. The Company recorded $0.05 million and $0.10 million of credit loss expense related to interest receivables during the three and six months ended June 30, 2020 and 2019, respectively. During the three months ended June 30, 2020, the Company recovered $0.2 million of interest that was previously written off as credit loss expense.

Table of Contents

As of June 30, 2020 and December 31, 2019, the Company had the following notes receivable:


($ in thousands)		Principal Outstanding as of				Maturity
Loan	Payment Terms	June 30, 2020		December 31, 2019		Date
Mortgage Note ⁽¹⁾	Principal & interest due at maturity	$	-	$	1,804	1/15/2017
Mortgage Note ⁽²⁾	Principal & interest due at maturity		228		234	12/7/2028
Mortgage Note ⁽²⁾	Principal due at maturity & interest due monthly		2,145		2,145	3/16/2022
Mortgage Note ⁽³⁾	Principal & interest due at maturity		-		62	3/1/2020
Line of Credit	Principal & interest due at maturity		-		369	3/1/2020
Total outstanding principal			2,373		4,614
Interest receivable (net prepaid interest)			375		565
Provision for interest receivable			(300)		(412)
Total notes and interest receivable		$	2,448	$	4,767

($ in thousands)

Principal Outstanding as of

Maturity
Loan

Payment Terms

September 30, 2017

December 31, 2016

Date
Mortgage Note(1)

Principal & interest due at maturity

$
1,800

$
1,800

1/15/2017
Mortgage Note (2)

Principal & interest due at maturity

240

980

3/16/2022
Mortgage Note (2)

Principal due at maturity & interest due monthly

2,194

-

3/16/2022
Mortgage Note

Principal & interest due at maturity

1,647

-

4/27/2018
Mortgage Note

Principal & interest due at maturity

100

-

1/31/2018
Mortgage Note

Principal due at maturity & interest paid in advance

669

-

2/15/2018
Total outstanding principal

6,650

2,780

Points paid, net of direct issuance costs

(10)

(4)

Interest receivable (net prepaid interest)

311

67

Total notes and interest receivable

$
6,951

$
2,843

(1)

~~(1)~~

In January 2016 the maturity date of the note was extended from January 15, 2016 to January 15, 2017 with the year ~~one~~1 interest received at the time of the extension and principal and remaining interest due at maturity. On July 28, 2017 the Company notified the borrower of default ~~under~~on the Promissory Note. In December 2019, the Company began the process of selling the underlying collateralized property to settle the principal and accrued interest. The ~~Company currently believes that collectability is reasonably assured.~~note was settled during the three months ended June 30, 2020.

(2)

~~(2)~~

The original note was renegotiated and a second note was entered into simultaneously with the borrower during the three months ended March 31, 2017. The notes include mortgages on ~~two~~2 additional properties in Colorado that include repurchase options for the properties at a fixed price that are exercisable between the ~~second~~third and fifth anniversary of the notes by the borrower.

(3)	This note was repaid in full during the three months ended March 31, 2020.

The collateral for the mortgage notes receivable consists of real estate, personal property and improvements present on such real estate.

Fair Value

FASB ASC 820-10 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

●

Level 1—Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

●

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable or can be substantially corroborated for the asset or liability, either directly or indirectly.

●

Level 3—Inputs to the valuation methodology are unobservable, supported by little or no market activity and are significant to the fair value measurement.

The fair value of notes receivable is valued using Level 3 inputs under the hierarchy established by GAAP and is calculated based on a discounted cash flow analysis, using interest rates based on management’s estimates of market interest rates on mortgage notes receivable with comparable terms whenever the interest rates on the notes receivable are deemed not to be at market rates. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the fair value of the notes receivable was ~~$6.7~~$2.4 million and ~~$2.8~~$4.6 million, respectively.

1716

Table of Contents

Note 7—Mortgage Notes, Lines of Credit and Bonds Payable

As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company had the following indebtedness outstanding:


									Book
			Annual						Value of
($ in thousands)			Interest	Principal					Collateral
			Rate as of	Outstanding as of					as of
			June 30,	June 30,		December 31,		Maturity	June 30,
Loan	Payment Terms	Interest Rate Terms	2020	2020		2019		Date	2020
Farmer Mac Bond #6	Semi-annual interest only	3.69%	3.69%	$	13,827	$	13,827	April 2025	$	21,441
Farmer Mac Bond #7	Semi-annual interest only	3.68%	3.68%		11,160		11,160	April 2025		18,570
Farmer Mac Bond #8A	Semi-annual interest only	3.20%	3.20%		41,700		41,700	October 2020		74,412
Farmer Mac Bond #9	Semi-annual interest only	3.35%	3.35%		6,600		6,600	October 2020		7,940
MetLife Term Loan #1 (1)	Semi-annual interest only	3.30% adjusted every three years	3.30%		87,552		87,942	March 2026		194,901
MetLife Term Loan #2	Semi-annual interest only	4.27% adjusted every three years	4.27%		16,000		16,000	March 2026		32,199
MetLife Term Loan #3	Semi-annual interest only	4.27% adjusted every three years	4.27%		21,000		21,000	March 2026		27,817
MetLife Term Loan #4 (1)	Semi-annual interest only	3.30% adjusted every three years	3.30%		15,685		15,685	June 2026		31,266
MetLife Term Loan #5	Semi-annual interest only	3.50% adjusted every three years	3.50%		8,379		8,379	January 2027		14,281
MetLife Term Loan #6	Semi-annual interest only	3.45% adjusted every three years	3.45%		27,158		27,158	February 2027		58,087
MetLife Term Loan #7	Semi-annual interest only	3.20% adjusted every three years	3.20%		17,153		17,153	June 2027		39,161
MetLife Term Loan #8	Semi-annual interest only	4.12% fixed until 2027	4.12%		44,000		44,000	December 2042		110,042
MetLife Term Loan #9	Semi-annual interest only	4.19% adjusted every three years	4.19%		21,000		21,000	May 2028		41,283
Farm Credit of Central Florida	(2)	LIBOR + 2.6875% adjusted monthly	2.94%		4,804		4,890	September 2023		14,745
Rabobank	Semi-annual interest only	LIBOR + 1.70% adjustable every three years	1.88%		64,158		64,358	March 2028		135,199
Rutledge Note Payable #1	Quarterly interest only	3 month LIBOR + 1.3% adjusted quarterly	2.56%		17,000		17,000	January 2022		29,820
Rutledge Note Payable #2	Quarterly interest only	3 month LIBOR + 1.3% adjusted quarterly	2.56%		25,000		25,000	January 2022		39,468
Rutledge Note Payable #3	Quarterly interest only	3 month LIBOR + 1.3% adjusted quarterly	2.56%		25,000		25,000	January 2022		48,220
Rutledge Note Payable #4	Quarterly interest only	3 month LIBOR + 1.3% adjusted quarterly	2.56%		15,000		15,000	January 2022		29,226
Rutledge Note Payable #5	Quarterly interest only	3 month LIBOR + 1.3% adjusted quarterly	2.56%		30,000		30,000	January 2022		85,287
Total outstanding principal					512,176		512,852		$	1,053,365
Debt issuance costs					(1,475)		(1,449)
Unamortized premium					—		—
Total mortgage notes and bonds payable, net				$	510,701	$	511,403

Book

Annual

Value of
($ in thousands)

Interest

Principal

Collateral

Rate as of

Outstanding as of

as of

September 30,

September 30,

December 31,

Maturity

September 30,
Loan

Payment Terms

Interest Rate Terms

2017

2017

2016

Date

2017
Farmer Mac Bond #1 (1)

Semi-annual interest only

2.40%

2.40%

$
—

$
20,700

September 2017

$
—
Farmer Mac Bond #2 (2)

Semi-annual interest only

2.35%

2.35%

5,460

5,460

October 2017

9,557
Farmer Mac Bond #3

Semi-annual interest only

2.50%

2.50%

10,680

10,680

November 2017

11,487
Farmer Mac Bond #4

Semi-annual interest only

2.50%

2.50%

13,400

13,400

December 2017

23,588
Farmer Mac Bond #5

Semi-annual interest only

2.56%

2.56%

30,860

30,860

December 2017

61,104
Farmer Mac Bond #6

Semi-annual interest only

3.69%

3.69%

14,915

14,915

April 2025

21,609
Farmer Mac Bond #7

Semi-annual interest only

3.68%

3.68%

11,160

11,160

April 2025

18,441
Farmer Mac Bond #8A

Semi-annual interest only

3.20%

3.20%

41,700

41,700

June 2020

80,929
Farmer Mac Bond #9

Semi-annual interest only

3.35%

3.35%

6,600

6,600

July 2020

7,711

MetLife Term Loan #1(3)

Semi-annual interest only

3.48% adjusted every three years

3.48%

90,000

90,000

March 2026

198,345
MetLife Term Loan #2

Semi-annual interest only

2.66% adjusted every three years

2.66%

16,000

16,000

March 2026

31,677
MetLife Term Loan #3

Semi-annual interest only

2.66% adjusted every three years

2.66%

21,000

21,000

March 2026

27,654
MetLife Term Loan #4(3)

Semi-annual interest only

3.48% adjusted every three years

3.48%

15,685

15,685

June 2026

30,624
MetLife Term Loan #5

Semi-annual interest only

3.26% adjusted every three years

3.26%

8,379

—

January 2027

16,761
MetLife Term Loan #6

Semi-annual interest only

3.21% adjusted every three years

3.21%

27,159

—

February 2027

55,526
MetLife Term Loan #7

Semi-annual interest only

3.45% adjusted every three years

3.45%

21,253

—

June 2027

48,307
Farm Credit of Central Florida

(4)

LIBOR + 2.6875% adjusted monthly

3.92%

5,102

5,102

September 2023

9,688
Prudential

(5)

3.20%

3.20%

6,481

6,600

July 2019

11,643
Rutledge Note Payable #1

Quarterly interest only

3 month LIBOR + 1.3% adjusted quarterly

2.60%

25,000

—

January 2022

46,022
Rutledge Note Payable #2

Quarterly interest only

3 month LIBOR + 1.3% adjusted quarterly

2.60%

25,000

—

January 2022

49,700
Rutledge Note Payable #3

Quarterly interest only

3 month LIBOR + 1.3% adjusted quarterly

2.60%

25,000

—

January 2022

58,985
Rutledge Note Payable #4

Quarterly interest only

3 month LIBOR + 1.3% adjusted quarterly

2.60%

15,000

—

January 2022

28,271
Rutledge Note Payable #5

Quarterly interest only

3 month LIBOR + 1.3% adjusted quarterly

2.60%

30,000

—

January 2022

69,772
Total outstanding principal

465,834

309,862

$
917,401
Debt issuance costs

(1,360)

(1,193)

Unamortized premium

20

110

Total mortgage notes and bonds payable, net

$
464,494

$
308,779

(1)

~~(1)~~

~~Bond was repaid in full on September 5, 2017.~~

~~(2)~~

~~Bond was repaid in full on October 23, 2017.~~

~~(3)~~

During the ~~nine months~~year ended ~~September 30,~~December 31, 2017, the Company converted the interest rate on ~~MetLife~~Metlife Term Loans 1 and 4 from variable to fixed rates ~~that can~~for a term of three years. Once the term expires, the new rate will be ~~adjusted to an adjustable rate every three years over their remaining terms.~~

determined based on the loan agreements.

(2)

~~(4)~~

Loan is an amortizing loan with quarterly interest payments that commenced on January 1, 2017 and quarterly principal payments that commence on October 1, 2018, with all remaining principal and outstanding interest due at maturity.

~~(5)~~

~~Loan is an amortizing loan with semi-annual principal and interest payments that commence on July 1, 2017, with all remaining principal and outstanding interest due at maturity.~~

During the remainder of 2017, $60.4 million of the Company’s borrowings will mature. Any cash that the Company uses to satisfy its outstanding debt obligations will reduce the amounts available to acquire additional farms, which could adversely affect our growth prospects. As of September 30, 2017, the Company had $3.1 million in capacity available under the Farm Credit of Central Florida Mortgage Note (as defined below). The Company has signed a non-binding term sheet for a debt facility with a major financial institution, which the Company intends to use to refinance the debt due to mature in 2017. The Company has also signed a non-binding term sheet for a debt facility with a major financial institution to finance a portion of the California property acquisition committed to during the quarter. However, the Company can provide no assurances that the Company will be able to enter into a binding agreement to refinance or secure the debt on similar terms or at all and thus alternative sources of capital may be necessary. As of September 30, 2017, the Company

~~Table of Contents~~

had $465.8 million of debt, which may expose the Company to the risk of default under the Company’s debt obligations, restrict the Company’s operations and the Company’s ability to grow the Company’s business and revenues and restrict the Company’s ability to pay distributions to the Company’s stockholders.

Farmer Mac Facility

The Company and the Operating Partnership are parties to the Amended and Restated Bond Purchase Agreement, dated as of March 1, 2015 and amended as of June 2, 2015 and August 3, 2015 (the “Bond Purchase Agreement”), with Federal Agricultural Mortgage Corporation (“Farmer Mac”) and Farmer Mac Mortgage Securities Corporation, a wholly owned subsidiary of Farmer Mac, as bond purchaser (the “Purchaser”), regarding a secured note purchase facility (the “Farmer Mac Facility”) that has a maximum borrowing capacity of $165.0 million. Pursuant to the Bond Purchase Agreement, the Operating Partnership may, from time to time, issue one or more bonds to the Purchaser that will be secured by pools of mortgage loans, which will, in turn, be secured by first liens on agricultural real estate owned by the Company. The mortgage loans may have effective loan-to-value of up to 60%. Prepayment of each bond issuance is not permitted unless otherwise agreed upon by all parties to the Bond Purchase Agreement.

~~On September 5, 2017 the Company repaid in full a $20.7 million bond that was due and payable on that date, under the Farmer Mac facility.~~

As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Operating Partnership had approximately ~~$134.8~~$73.3 million and approximately ~~$155.5~~$73.3 million outstanding, respectively, under the Farmer Mac facility. The Farmer Mac facility is subject to the Company’s ongoing compliance with a number of customary affirmative and negative covenants, as well as financial covenants, including: a maximum leverage ratio of not more than 60%; a minimum fixed charge coverage ratio of 1.50 to 1.00; and a minimum tangible net worth requirement. The Company was in compliance with all applicable covenants at ~~September~~June 30, ~~2017. On October 23 2017,~~2020.

During the three months ended June 30, 2020, the Company ~~repaid in full~~secured an extension of the maturity of the Farmer Mac ~~#2 bond with an outstanding principal balance~~bonds due in June and July 2020, to October 31, 2020, in order to accommodate a delay in the refinancing lender's field due diligence caused by COVID-19-related travel restrictions.

MetLife Term Loans

As of ~~$5.5 million.~~

~~In connection with the Bond Purchase Agreement, on March 1, 2015,~~June 30, 2020 and December 31, 2019, the Company and the Operating Partnership ~~also entered into an amended~~had $257.9 million and restated pledge and security agreement (the “Pledge Agreement”) in favor of the Purchaser and Farmer Mac, pursuant to which the Company and the Operating Partnership agreed to pledge, as collateral for the Farmer Mac Facility, all of their respective right, title and interest in (i) mortgage loans with a value at least equal to 100% of the aggregate principal amount of the$258.3 million outstanding, bond held by the Purchaser and (ii) such additional collateral as necessary to have total collateral with a value at least equal to 110% of the outstanding notes held by the Purchaser. In addition, the Company agreed to guarantee the full performance of the Operating Partnership’s duties and obligationsrespectively, under the ~~Pledge Agreement~~.

The Bond Purchase Agreement and the Pledge Agreement include customary events of default, the occurrence of any of which, after any applicable cure period, would permit the Purchaser and Farmer Mac to, among other things, accelerate payment of all amounts outstanding under the Farmer Mac Facility and to exercise its remedies with respect to the pledged collateral, including foreclosure and sale of the agricultural real estate underlying the pledged mortgageMetLife loans.

~~Bridge Loan~~

On February 29, 2016, two wholly owned subsidiaries of the Operating Partnership (together, the “Bridge Borrower”) entered into a term loan agreement (the “Bridge Loan Agreement”) with MSD FPI Partners, LLC, an affiliate of MSD Partners, L.P. (the “Bridge Lender”), that provided for a loan of $53.0 million (the “Bridge Loan”), the proceeds of which were used primarily to fund the cash portion of the consideration for the acquisition of the Forsythe farms, which was completed on March 2, 2016. During the nine months ended September 30, 2016, the Company accrued and paid debt issuance costs on the Bridge Loan totaling $173,907, and interest totaling $2,271,867, of which $2,120,000, or 4.0%, of the Bridge Loan's principal amount, was con~~sidered additional interest paid on issuance. The Bridge Loan was paid in full, including accrued interest, and without prepayment penalty, on March 29, 2016 using proceeds from the MetLife Term Loans, as described below.~~

~~Table of Contents~~

~~MetLife Term Loans~~

On March 29, 2016, five wholly owned subsidiaries of the Operating Partnership entered into a loan agreement (the “First MetLife Loan Agreement”) and, together with the Second MetLife Loan Agreement, the “MetLife Loan Agreements”) with Metropolitan Life Insurance Company (“MetLife”), which provides for a total of $127.0 million of term loans, comprised of (i) a $90.0 million term loan (“Term Loan 1”), (ii) a $16.0 million term loan (“Term Loan 2”) and (iii) a $21.0 million term loan (“Term Loan 3” and, together with Term Loan 1 and Term Loan 2, the “Initial MetLife Term Loans” and, together with Term Loan 4, Term Loan 5, Term Loan 6 and Term Loan 7 described below, the “MetLife Term Loans”). The proceeds of the Initial MetLife Term Loans were used to repay existing debt (including amounts outstanding under the Bridge Loan), to acquire additional properties and for general corporate purposes. Each Initial MetLife Term Loan is collateralized by first lien mortgages on certain of the Company’s properties.

On June 29, 2016, five wholly owned subsidiaries of the Operating Partnership entered into a loan agreement (the “Second MetLife Loan Agreement”) with MetLife which provides for a loan of approximately $15.7 million to the Company with a maturity date of June 29, 2026 (“Term Loan 4”). Interest on Term Loan 4 is payable semi-annually and accrues at a floating rate that will be adjusted quarterly to a rate per annum equal to the greater of (a) the three-month LIBOR plus an initial floating rate spread of 1.750%, which may be adjusted by MetLife on each of September 29, December 29, March 29 and June 29 of each year to an interest rate equal to the greater of (a) the three month LIBOR plus the floating rate spread or (b) 2.00% per annum. Term Loan 4 initially bears interest at a rate of 2.39% per annum until September 29, 2016, and on September 29, 2016 the rate changed to 2.60% per annum. Effective March 29, 2017, the Company exercised its option to convert the interest rate on Term Loan 4 from a floating rate to an adjustable rate. The new adjustable rate is 3.48% which may be adjusted by MetLife on each of March 29, 2020 and March 29, 2023. Proceeds from Term Loan 4 were used to acquire additional properties and for general corporate purposes.

Interest on Term Loan 1 is payable semi-annually and accrues at a floating rate that will be adjusted quarterly to a rate per annum equal to the greater of (a) the three-month LIBOR plus an initial floating rate spread of 1.750%, which may be adjusted by MetLife on each of March 29, 2019, March 29, 2022 and March 29, 2025 to an interest rate consistent with interest rates quoted by MetLife for substantially similar loans secured by real estate substantially similar to the Company’s properties securing Term Loan 1 or (b) 2.000% per annum. Term Loan 1 bore interest at a rate of 2.40% per annum until September 29, 2016, and on September 29, 2016 the rate changed to 2.60% per annum. Effective March 29, 2017, the Company exercised its option to convert the interest rate on Term Loan 4 from a floating rate to an adjustable rate. The new adjustable rate is 3.48% which may be adjusted by MetLife on each of March 29, 2020 and March 29, 2023.Subject to certain conditions, the Company may at any time during the term of Term Loan 1 elect to have all or any portion of the unpaid balance of Term Loan 1 bear interest at a fixed rate that is initially established by the lender in its sole discretion that may be adjusted from time to time to an interest rate consistent with interest rates quoted by MetLife for substantially similar loans secured by real estate substantially similar to the Company’s properties securing Term Loan 1. On any floating rate adjustment date, the Company may prepay any portion of Term Loan 1 that is not subject to a fixed rate without penalty.

Interest on Term Loan 2 and Term Loan 3 is payable semi-annually and accrues at an initial rate of 2.66% per annum, which may be adjusted by MetLife on each of March 29, 2019, March 29, 2022 and March 29, 2025 to an interest rate consistent with interest rates quoted by MetLife for substantially similar loans secured by real estate substantially similar to the Company’s properties securing Term Loan 2 and Term Loan 3.

Subject to certain conditions, amounts outstanding under Term Loan 2 and Term Loan 3, as well as any amounts outstanding under Term Loan 1 that are subject to a fixed interest rate, may be prepaid without penalty up to 20% of the original principal amounts of such loans per year or in connection with any rate adjustments. Any other prepayments under the Initial MetLife Term Loans generally are subject to a minimum prepayment premium of 1.00%.

In connection with the Initial MetLife Term Loans, on March 29, 2016, the Company and the Operating Partnership each entered into a separate guaranty (the “Initial MetLife Guaranties”) whereby the Company and the Operating Partnership jointly and severally agreed to unconditionally guarantee all of the borrowers’ obligations under the First MetLife Loan Agreement.

~~Table of Contents~~

In connection with the Term Loan 4, on June 29, 2016, the Company and the Operating Partnership each entered into a separate guaranty (the “Term Loan 4 Guaranties”) whereby the Company and the Operating Partnership jointly and severally agreed to unconditionally guarantee all of the borrowers’ obligations under the Second MetLife Loan Agreement.

On January 12, 2017, five wholly owned subsidiaries of the Operating Partnership entered into a loan agreement (the “Fifth MetLife Loan Agreement”) with MetLife which provides for a loan of approximately $8.4 million to the Company with a maturity date of January 12, 2027 (“Term Loan 5”). Interest on Term Loan 5 is payable semi-annually and accrues at a 3.26% per annum fixed rate, and may be adjusted by MetLife on each of January 12, 2020, January 12, 2023 and January 12, 2026 at the option of the Lender to a rate that is consistent with similar loans. Proceeds from Term Loan 5 were used to acquire additional properties and for general corporate purposes.

In connection with the Term Loan 5, on January 12, 2017, the Company and the Operating Partnership each entered into a separate guaranty (the “Term Loan 5 Guaranties”) whereby the Company and the Operating Partnership jointly and severally agreed to unconditionally guarantee all of the borrowers’ obligations under the Fifth MetLife Loan Agreement.

On February 14, 2017, a wholly owned subsidiary of the Operating Partnership entered into a loan agreement (the “Sixth MetLife Loan Agreement”) with MetLife which provides for a loan of approximately $27.2 million to the Company with a maturity date of February 14, 2027 (“Term Loan 6”). Interest on Term Loan 6 is payable semi-annually and accrues at a 3.21% per annum fixed rate, and may be adjusted by MetLife on each of February 14, 2020, February 14, 2023 and February 14, 2026 at the option of the Lender to a rate that is consistent with similar loans. Proceeds from Term Loan 6 were used to acquire additional properties.

In connection with the Term Loan 6, on February 14, 2017, the Company and the Operating Partnership each entered into a separate guaranty (the “Term Loan 6 Guaranties) whereby the Company and the Operating Partnership jointly and severally agreed to unconditionally guarantee all of the borrowers’ obligations under the Sixth MetLife Loan Agreement.

On June 7, 2017, a wholly owned subsidiary of the Operating Partnership, entered into a loan agreement (the “Seventh MetLife Loan Agreement”) with MetLife which provides for a loan of approximately $21.3 million to the Company with a maturity date of June 7, 2027 (“Term Loan 7”). Interest on Term Loan 7 is payable semi-annually and accrues at a 3.45% per annum fixed rate, and may be adjusted by MetLife on each of June 7, 2020, June 7, 2023 and June 7, 2026 at the option of the Lender to a rate that is consistent with similar loans. Proceeds from Term Loan 7 were used to acquire additional properties.

In connection with the Term Loan 7, on June 7, 2017, the Company and the Operating Partnership each entered into a separate guaranty (the “Term Loan 7 Guaranties” together with the Initial MetLife Guaranties, the Term Loan 4 Guaranties, the Term Loan 5 Guaranties and the Term Loan 6 Guaranties, the “MetLife Guaranties”) whereby the Company and the Operating Partnership jointly and severally agreed to unconditionally guarantee all of the borrowers’ obligations under the Seventh MetLife Loan Agreement.

Each of the MetLife ~~Loan Agreements~~loan agreements contains a number of customary affirmative and negative covenants, including the requirement to maintain a loan to value ratio of no greater than 60%. The MetLife Guaranties also contain a number of customary affirmative and negative covenants. The Company was in compliance with all covenants under the MetLife ~~Term Loans~~loans as of ~~September~~June 30, ~~2017.~~2020.

Each of the MetLife ~~Loan Agreements~~loan agreements includes certain customary events of default, including a cross-default provision related to other outstanding indebtedness of the borrowers, the Company and the Operating Partnership, the occurrence of which, after any applicable cure period, would permit MetLife, among other things, to accelerate payment of all amounts

Table of Contents

outstanding under the MetLife ~~Term Loans~~loans and to exercise its remedies with respect to the pledged collateral, including foreclosure and sale of the Company’s properties that collateralize the MetLife ~~Term Loans.~~loans.

Farm Credit of Central Florida Mortgage Note

~~Table of Contents~~

~~$8.2 million to the Company with a maturity date of September 1, 2023.~~ As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, approximately $5.1 million had been drawn down under this facility. Interest on Farm Credit Mortgage Note is payable quarterly and accrues at a floating rate that will be adjusted monthly to a rate per annum equal to the one-month LIBOR plus 2.6875%, which is subject to adjustment on the first day of September 2016, and on the first day of each month thereafter. Principal is payable quarterly commencing on October 1, 2018, with all remaining principal and outstanding interest due at maturity. Proceeds from the Farm Credit Mortgage Note are to be used for the acquisition and development of additional properties.

The Farm Credit Mortgage Note contains a number of customary affirmative and negative covenants, as well as a covenant requiring the Company to maintain a debt service coverage ratio of 1.25 to 1.00 beginning on December 31, 2019. The Company was in compliance with all applicable covenants at June 30, 2020.

~~Prudential Note~~

On December 21, 2016, a wholly owned subsidiary of the Operating Partnership entered into a loan agreement with The Prudential Insurance Company of America (“Prudential”) which provides for a loan of approximately $6.6 million to the Company with a maturity date of July 1, 2019 (the “Prudential Note”). Interest on the Prudential Note is payable in cash semi-annually and accrues at a fixed rate of 3.20% per annum. Proceeds from the Prudential Note were used for the acquisition of additional properties.

~~Beginning on December 21, 2017, the Prudential Note requires the Company to maintain a loan to value no greater than 60%.~~

Rutledge Credit Facilities

~~Upon closing~~

As of the AFCO Mergers, by virtue of AFCO OP becoming a subsidiary of the Company, the Company assumed AFCO’s outstanding indebtedness under four loan agreements (the “Existing Rutledge Loan Agreements”) between AFCO OPJune 30, 2020 and ~~Rutledge Investment Company (“Rutledge”), which are further described below:~~

Loan Agreement, dated as of December 5, 2013, with respect to a $25,000,000 senior secured credit facility bearing interest at an annual rate of 3 month LIBOR plus 1.3%. The loan agreement requires AFCO OP to make quarterly interest payments on April 1, July 1, October 1 and January 1 of each calendar year. Additionally, the loan agreement requires AFCO OP to pay a quarterly non-usage fee equal to 0.25% per ~~annum~~ ~~of the committed loan amount minus the average outstanding principal balance of the loan amount over the prior three-month period.~~

Loan Agreement, dated as of January 14, 2015, with respect to a $25,000,000 senior secured credit facility bearing interest at an annual rate of 3 month LIBOR plus 1.3%. The loan agreement requires AFCO OP to make quarterly interest payments on April 1, July 1, October 1 and January 1 of each calendar year. Additionally, the loan agreement requires AFCO OP to pay a quarterly non-usage fee equal to 0.25% per annum of the committed loan amount minus the average outstanding principal balance of the loan amount over the prior three-month period.

Loan Agreement, dated as of August 18, 2015, with respect to a $25,000,000 senior secured credit facility bearing interest at an annual rate of 3 month LIBOR plus 1.3%. The loan agreement requires AFCO OP to make quarterly interest payments on April 1, July 1, October 1 and January 1 of each calendar year. Additionally, the loan agreement requires AFCO OP to pay a quarterly non-usage fee equal to 0.25% per annum of the committed loan amount minus the average outstanding principal balance of the loan amount over the prior three-month period.

Loan Agreement, dated as of December 22, 2015, with respect to a $15,000,000 senior secured credit facility bearing interest at an annual rate of 3 month LIBOR plus 1.3%. The loan agreement requires AFCO OP to make quarterly interest payments on April 1, July 1, October 1 and January 1 of each calendar year. Additionally, the loan agreement requires AFCO OP to pay a quarterly non-usage fee equal to 0.25% per annum of the committed loan amount minus the average outstanding principal balance over the loan amount of the prior three-month period.

~~Table of Contents~~

~~In connection with the completion of the AFCO Mergers, on February 3, 2017, AFCO OP, in its capacity as a wholly owned subsidiary of~~December 31, 2019, the Company and the Operating Partnership and Rutledge entered into the Second Amendment (the “Rutledge Amendment”) to the Existing Rutledge Loan Agreements. Pursuant to the Rutledge Amendment, among other things, the maturity dates for each of the Existing Rutledge Loan Agreements were extended to January 1, 2022 and the aggregate loan value under the Existing Rutledge Loan Agreements may not exceed 50% of the appraised value of the collateralized properties. Certain AFCO properties acquired by the Company in the Mergers serve as collateral under the Existing Rutledge Loan Agreements.

On February 3, 2017, the Company and the Operating Partnership each entered into guaranty agreements (the “Existing Loan Guarantees”) pursuant to which they unconditionally guarantee the obligations of AFCO OP under the Existing Loan Agreements.

In addition, in connection with the completion of the Mergers, on February 3, 2017, AFCO OP entered into a fifth loan agreement with Rutledge Investment Company (the “Fifth Rutledge Loan Agreement” and together with the Existing Rutledge Loan Agreements, as amended, the “Rutledge Loan Agreements”), with respect to a senior secured credit facility in the aggregate amount of $30.0had $112.0 million with a maturity date of January 1, 2022 and an annual interest rate of 3 month LIBOR plus 1.3%. The Fifth Rutledge Loan Agreement requires AFCO OP to make quarterly interest payments. Additionally, the Fifth Rutledge Loan Agreement contains certain customary affirmative and negative covenants, including (i) AFCO OP must pay a quarterly non-usage fee equal to 0.25% of the committed loan amount minus the average outstanding principal balance of the loan amount during the prior three-month period, (ii) AFCO OP must maintain a leverage ratio of 60% or less and (iii) the aggregate amounts outstanding under all of the Rutledge Loans may not exceed 50% of the aggregate appraised value of the properties serving as collateral under the Rutledge ~~Loan Agreements.~~

On February 3, 2017, the Company and the Operating Partnership each entered into separate guarantees (the “Fifth Loan Guarantees” and together with the Existing Loan Guarantees, the “Guarantees”) whereby they are required to unconditionally guarantee AFCO OP’s obligations under the Fifth Rutledge Loan Agreement.facility. As of ~~September~~June 30, ~~2017~~2020, $0 remains available under this ~~facility.~~

~~As of September 30, 2017,~~facility and the Company was in compliance with all covenants under the Rutledge ~~Loan Agreements.~~loan agreements.

Rabobank Mortgage Note

As of June 30, 2020 and December 31, 2019, the Company and the Operating Partnership had $64.2 million and $64.4 million outstanding, respectively, under the Rabobank mortgage note. The Company was in compliance with all covenants under the Rabobank mortgage note as of June 30, 2020.

LIBOR

LIBOR is expected to be discontinued after 2021. As of June 30, 2020, the Company had $181.0 million of variable- rate debt outstanding with interest rates tied to LIBOR and maturity dates beyond 2021. There can be no assurances as to what the alternative base rate will be in the event that LIBOR is discontinued, and the Company can provide no assurances whether that base rate will be more or less favorable than LIBOR. The Company intends to monitor the developments with respect to the phasing out of LIBOR after 2021 and work with its lenders to ensure that any transition away from LIBOR will have minimal impact on its financial condition, but can provide no assurances regarding the impact of LIBOR discontinuation.

Debt Issuance Costs

Costs incurred by the Company in obtaining debt are deducted from the face amount of mortgage notes and bonds payable. During the nine months ended September 30, 2017, $0.8 million in costs were incurred in conjunction with the MetLife and Rutledge Term Loans. During the nine months ended September 30, 2016, the Company paid 4.0% of the principal amount of the MSD Bridge Loan, or $2,120,000, as additional interest on issuance. Debt issuance costs are amortized using the straight-line method, which approximates the effective interest method, over the respective terms of the related indebtedness. Any unamortized amounts upon early repayment of mortgage notes payable are written off in the period in which repayment occurs. Fully amortized deferred financing fees are removed from the balance sheet upon maturity or repayment of the underlying debt. Accumulated amortization of deferred financing fees was ~~$0.5~~$1.2 million and $~~0.7~~$1.0 million as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

Table of Contents

Aggregate Maturities

As of ~~September~~June 30, ~~2017,~~2020, aggregate maturities of long-term debt for the succeeding years are as follows:



($ in thousands)
Year Ending December 31,	Future Maturities		Future Maturities
2017 (remaining three months)	$	60,400
2018		—
2019		6,481
2020		48,300
2020 (remaining six months)			$	48,437
2021		—		274
2022				112,274
2023				4,118
2024				2,100
Thereafter		350,653		344,973
	$	465,834
			$	512,176

~~Table of Contents~~

Fair Value

The fair value of the mortgage notes payable is valued using Level 3 inputs under the hierarchy established by GAAP and is calculated based on a discounted cash flow analysis, using interest rates based on management’s estimates of market interest rates on long-term debt with comparable terms whenever the interest rates on the mortgage notes payable are deemed not to be at market rates. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the fair value of the mortgage notes payable was ~~$458.9~~$542.7 million and ~~$300.1~~$518.9 million, respectively.

Note 8—Commitments and Contingencies

On October 26, 2016, a purported class action lawsuit was filed in the Circuit Court for Baltimore County, Maryland against AFCO, seeking to represent a proposed class of all AFCO stockholders captioned Parshall v. American Farmland Company et. al., Case No. 24C16005745. The complaint names as defendants AFCO, the members of AFCO’s board of directors, AFCO OP, the Company, the Operating Partnership, Farmland Partners OP GP LLC, FPI Heartland LLC, FPI Heartland Operating Partnership, LP and FPI Heartland GP LLC. The complaint alleges that the AFCO directors breached their duties to AFCO in connection with the evaluation and approval of the AFCO Mergers. In addition, the complaint alleges, among other things, that AFCO, AFCO OP, the Company, Farmland Partners OP GP LLC, FPI Heartland LLC, FPI Heartland Operating Partnership, LP and FPI Heartland GP LLC aided and abetted those breaches of duties. On April 18, 2017, the court approved an order to dismiss the lawsuit without prejudice.

In April 2015, the Company entered into a lease agreement for office ~~space.~~space which the Company extended in March 2020 through July 31, 2021. The lease ~~expires on July 31, 2019. The lease~~ commenced on June 1, 2015 and had an initial monthly payment of $10,032, which increased to $10,200 ~~and $10,367~~ in June 2016, $10,366 in June 2017, $10,534 in June 2018, $10,701 in June 2019 and $12,373 in August 2020. Beginning in 2019, the Company recognized right of ~~2016~~use assets and ~~June of 2017, respectively, and increases annually thereafter.~~related lease liabilities in the consolidated balance sheets. The Company ~~also entered into two annual leases~~estimated the value of the lease liabilities using a discount rate equivalent to the rate we would pay on a secured borrowing with similar terms to the lease. Options to extend the lease in our minimum lease terms unless the option is reasonably certain to be exercised are excluded. Our total lease cost for ~~farmland~~the three and ~~office space on January 1, 2017~~six months ended June 30, 2020 and ~~February 2, 2017,~~2019 was $0.03 million and $0.06 million, respectively. As of ~~September~~June 30, ~~2017, future minimum~~2020, the lease has a remaining term of 14 months and a discount rate of 3.35%. Minimum annual rental payments under these operating leases, reconciled to the lease liability included in accrued liabilities and other in our consolidated balance sheets, are as ~~follows:~~follows (in thousands):

($ in thousands)

Future rental

Year Ending December 31,

payments

2017 (remaining three months)

$
44

2018

126

2019

74

2020

—

2021

—

$
244


($ in thousands)	Future rental
Year Ending December 31,	payments
2020 (remaining six months)	$	73
2021		99
2022		—
2023		—
2024		—
Thereafter		—
	$	172

~~A sale of any of the 38 properties contributed~~Litigation

The Company may become party to legal proceedings that are considered to be either ordinary, routine litigation incidental to their business or not significant to the Company’s ~~portfolio at~~consolidated financial position or liquidity. Other than as described below, the ~~time~~Company does not believe that there is any other pending litigation that could have a significant adverse impact on its consolidated financial position, liquidity or results of ~~its initial public offering~~operations.

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amended, and Rule 10b-5 promulgated thereunder. On August 17, 2018, a second purported class action, captioned Mariconda v. Farmland Partners Inc. (the “Mariconda Action”) was filed in the United States District Court for the District of Colorado, alleging substantially identical claims as the Kachmar Action. Several purported shareholders moved to consolidate the Kachmar Action and the Mariconda Action and for appointment as Lead Plaintiff. On November 13, 2018, the plaintiff in the Kachmar action voluntarily dismissed the Kachmar Action. On December 3, 2018, the court appointed two purported stockholders of the ~~formation transactions,~~Company, the Turner Insurance Agency, Inc. and Cecilia Turner (the “Turners”), as lead plaintiffs in the Mariconda Action. On March 11, 2019, the court-appointed lead plaintiffs and additional plaintiff Obelisk Capital Management filed an amended complaint in the Turner Action. On April 15, 2019, the defendants moved to dismiss the amended complaint in the Turner Action. On June 18, 2019, the court denied the defendants’ motion to dismiss the amended complaint in the Turner Action. The defendants answered the amended complaint on July 2, 2019. On December 6, 2019, plaintiffs voluntarily dismissed Obelisk Capital Management from the case. In connection with Obelisk Capital Management’s dismissal from the case, defendants filed a motion for judgment on the pleadings on December 10, 2019, which ~~occurred~~automatically stayed discovery in the action pending the court’s determination of the motion. On December 16, 2019, plaintiffs filed a motion for class certification. On December 27, 2019, plaintiffs filed a motion for leave to file a second amended complaint. Defendants filed a response opposing the motion for leave to file a second amended complaint on ~~April 16, 2014. Furthermore, if any such sale~~January 17, 2020, and filed a motion to adjourn the class certification briefing schedule in light of the discovery stay on January 29, 2020. These motions remain pending and discovery remains stayed pending decision on defendants’ motion for judgment on the pleadings. At this time, no class has been certified in the Turner Action and we do not know the amount of damages or ~~defeasance is foreseeable,~~other remedies being sought by the plaintiffs. The Company can provide no assurances as to the outcome of this litigation or provide an estimate of related expenses at this time.

On December 18, 2018, a purported stockholder of the Company, ~~is required~~Jack Winter, filed a complaint in the Circuit Court for Montgomery County, Maryland (the “Winter Action”), purporting to ~~notify Pittman Hough Farms~~assert breach of fiduciary duty claims derivatively on the Company’s behalf against the Company’s directors and ~~to cooperate with it in considering strategies to defer or mitigate the recognition of gain under the Code, by any~~certain of the ~~equity interest holders~~Company’s officers. The Winter Action alleges, among other things, that the Company’s directors and certain of the ~~recipient~~Company’s officers breached their fiduciary duties to the Company by allowing the Company to make allegedly false and misleading disclosures related to the FPI Loan Program, as alleged in the Turner Action. On April 26, 2019, Winter voluntarily dismissed his complaint in the Circuit Court for Montgomery County Maryland. On May 14, 2019, Winter re-filed his complaint in the United States District Court for the District of Colorado. The Winter Action has been stayed pending further proceedings in the Turner Action.

On November 25, 2019, another purported shareholder, Shawn Luger, filed a complaint derivatively on behalf of the ~~Common units~~Company and against certain of our officers in the Circuit Court for Baltimore City, Maryland (the “Luger Action”). The Luger Action complaint makes similar claims to those in the Turner and Winter Actions. The parties to the Luger Action stipulated to a stay of the case pending further proceedings in the Turner Action and filed a joint motion to stay on February 7, 2020. On June 26, 2020, the parties reached an agreement to lift the stay. The Company intends to move to dismiss the Luger Action. The Company’s motion to dismiss is due on September 15, 2020.

On November 26, 2019, another purported shareholder, Anna Barber, filed a complaint derivatively on behalf of the Company and against certain of our officers in the United States District Court for the District of Colorado (the “Barber Action”). The Barber Action complaint makes similar claims to those in the Turner, Winter, and Luger Actions. The Barber Action has been stayed pending further proceedings in the Turner Action.

On February 14, 2020, another purported shareholder, Brent Hustedde, filed a complaint derivatively on behalf of the Company and against certain of our officers in Maryland state court (the “Hustedde Action”). The Hustedde Action complaint makes similar claims to those in the Turner, Winter, Luger, and Barber Actions. None of the defendants have yet been served in the Hustedde Action.

The Company has entered into lease agreements in which the Company agreed to complete certain improvement projects on one Florida farm and four South Carolina farms. As of September 30, 2017, future capital commitmentsbelieves that costs associated with the ~~projects are as follows:~~

($ in thousands)

Future Capital
Year Ending December 31,

Commitments
2017 (remaining three months)

$
4,311
2018

845

$
5,156

AsTurner, Winter, Luger, Barber, and Hustedde Actions in excess of ~~September 30, 2017~~ $0.35 million will be covered by insurance; however, the Company ~~had the following properties under contract. As~~can provide no assurances that costs will not ultimately be in excess of ~~the report date, none of the farm acquisitions below have closed, but are expected to close in Q4 2017 or Q1 2018 and are expected to be accounted for as asset acquisitions.~~that amount.

2420

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($ in thousands)

Purchase
Farm State

Price
South Carolina

$
1,120
California

110,000

$
111,120

On July 24, 2018, we filed a lawsuit in the District Court, Denver County, Colorado, against “Rota Fortunae” (a pseudonym for Quinton Mathews, the individual behind Rota Fortunae) and numerous co-conspirators (collectively, “Wheel of Fortune”) in response to an article posted by Quinton Mathews on Seeking Alpha that makes numerous allegations about the Company that we believe to be false or materially misleading. We believe that as a consequence of Wheel of Fortune’s internet posting and related postings on social media, the trading price of our common stock declined by approximately 40%. We believe that Wheel of Fortune’s, including Quinton Mathews’s, internet posting was made in connection with a “short and distort” scheme to profit from a decline in our stock price based on false and misleading information. The lawsuit that we filed alleges that Wheel of Fortune, including Quinton Mathews, disseminated material false, misleading and defamatory information about us that has harmed us and our stockholders. The Company does not expect insurance proceeds to cover a substantial portion of the costs related to the lawsuit we filed against Wheel of Fortune, including Quinton Mathews. On May 15, 2020, United States District Court for the District of Colorado to which this case was removed issued orders (i) denying Rota Fortunae’s motion to dismiss our claims; and (ii) requiring him to disclose his identity. On July 28, 2020, the Court granted our motion to amend the complaint to add Rota Fortunae’s name as well as the following co-conspirators: QKM, L.L.C., Sabrepoint Capital Management, LP, Donald Marchiony and George Baxter. The case is currently in the discovery phase.

~~See~~ ~~“Note 10—Subsequent Events” for properties put under contract subsequent to September 30, 2017.~~

Note 9—Stockholders’ Equity and Non-controlling Interests

Non-controlling Interests in Operating Partnership

The Company consolidates its Operating Partnership. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company owned ~~an 85.1%~~94.0% and ~~a 75.1% interest,~~94.0% of the outstanding interests, respectively, in the Operating Partnership, and the remaining ~~14.9%~~6.0% and ~~24.9% interest,~~6.0% interests, respectively, isare included in non-controlling interests in Operating Partnership on the consolidated balance sheets. The non-controlling interests in the Operating Partnership are held in the form of Common units and Series A preferred units.

On or after 12 months of becoming a holder of Common units, unless the terms of an agreement with such Common ~~unit holder~~unitholder dictate otherwise, each limited partner, other than the Company, has the right, subject to the terms and conditions set forth in the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended (the “Partnership Agreement”), to tender for redemption all or a portion of such Common units in exchange for cash, or in the Company’s sole discretion, for shares of the Company’s common stock on a one-for-one basis. If cash is paid in satisfaction of a redemption request, the amount will be equal to the number of tendered units multiplied by the fair market value ~~of a~~per share of the Company’s common stock on the date of the redemption notice (determined in accordance with, and subject to adjustment under, the terms of the Partnership Agreement). Any redemption request must be satisfied by the Company on or before the close of business on the tenth business day after the Company receives a notice of redemption. ~~On March 27, 2017,~~During the six months ended June 30, 2020 and the year ended December 31, 2019, the Company issued ~~129,174~~0 and 2,678,187, respectively, of shares of common stock ~~in exchange for 129,174 Common units that had been tendered for redemption. On April 12, 2017, the Company issued 328,122 shares~~upon redemption of common stock in exchange for 328,122 Common units that had been tendered for redemption. On July 10, 2017, the Company issued 118,634 shares of common stock in exchange for 118,634 Common units that had been tendered for redemption. On July 19, 2017, the Company issued 531,827 shares of common stock in exchange for 531,8270 and 2,678,187, respectively, Common units that had been tendered for redemption. There were ~~4.5~~1.9 million and ~~3.0~~1.9 million outstanding Common units eligible to be tendered for redemption as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

If the Company gives the limited partners notice of its intention to make an extraordinary distribution of cash or property to its stockholders or effect a merger, a sale of all or substantially all of its assets or any other similar extraordinary transaction, each limited partner may exercise its right to tender its Common units for redemption, regardless of the length of time such limited partner has held its Common units.

Regardless of the rights described above, the Operating Partnership will not have an obligation to issue cash to a unitholder upon a redemption request if the Company elects to redeem Common units for shares of common stock. When a Common unit is redeemed, non-controlling interest in the Operating Partnership is reduced, and stockholders’ equity is increased.

The Operating Partnership intends to continue to make distributions on each Common unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the Common units held by the Company being utilized to pay dividends to the Company’s common stockholders.

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Pursuant to the consolidation accounting standard with respect to the accounting and reporting for non-controlling interest changes and changes in ownership interest of a subsidiary, changes in parent’s ownership interest when the parent retains controlling interest in the subsidiary should be accounted for as equity transactions. The carrying amount of the non-controlling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the parent. As a result of equity issuances including and subsequent to the IPO, changes in the

~~Table of Contents~~

ownership percentages between the Company’s stockholders’ equity and non-controlling interest in the Operating Partnership occurred during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016.~~2019. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, the Company decreased the non-controlling interest in the Operating Partnership and increased additional paid in capital by $0.3 million. During the six months ended June 30, 2019, the Company increased the non-controlling interest in the Operating Partnership and decreased additional paid in capital by ~~$3.1~~ ~~million. During the nine months ended September 30, 2016, the Company decreased the non-controlling interest in the Operating Partnership and increased additional paid in capital by $4.3~~$0.4 million.

~~Redeemable Non-controlling Interests in Operating Partnership, Class A Common Units~~

On June 2, 2015, the Company issued 1,993,709 Common units in conjunction with an asset acquisition. Beginning on June 2, 2016, the Common units became eligible to be tendered for redemption for cash, or at the Company’s option, for shares of common stock on a one for one basis. In connection with its annual meeting of stockholders held on May 25, 2016, the Company obtained stockholder approval to issue shares of its common stock upon the redemption of 883,724 of the Common units (the “Excess Units”). Prior to such stockholder approval, the Company would have been required to redeem the Excess Units for cash. As the tender for redemption of the Excess Units for shares of common stock was outside of the control of the Company until May 25, 2016, these units were accounted for as mezzanine equity on the consolidated balance sheets as of December 31, 2015. After the redemption became within the control of the Company these excess units formed part of the non-controlling interests in the Operating Partnership. The Company elected to accrete the change in redemption value of the Excess Units subsequent to issuance and during the respective 12-month holding period, after which point the units were marked to redemption value at each reporting period.

Redeemable Non-controlling Interests in Operating Partnership, Series A preferred units

On March 2, 2016, the sole general partner of the Operating Partnership entered into Amendment ~~No.1~~No. 1 (the “Amendment”) to the Partnership Agreement in order to provide for the issuance, and the designation of the terms and conditions, of the Series A preferred units. ~~Under~~Pursuant to the Amendment, among other things, each Series A preferred unit has a $1,000 liquidation preference and is entitled to receive cumulative preferential cash distributions at a rate of 3.00% per annum of the $1,000 liquidation preference, which is payable annually in arrears on January 15 of each year or the next succeeding business day. The cash distributions are accrued ratably over the year and credited to redeemable non-controlling interest in operating partnership, preferred units on the balance sheet with the offset recorded to retained earnings. Dividends on Series A preferred units have been recorded through retained earnings in 2017 as opposed to additional paid in capital in 2016 due to the Company generating retained earnings during 2017. On March 2, 2016, 117,000 Series A preferred units were issued as partial consideration in the March 2, 2016 Illinois farm acquisition. Upon any voluntary or involuntary liquidation or dissolution, the Series A preferred units are entitled to a priority distribution ahead of Common units in an amount equal to the liquidation preference plus an amount equal to all distributions accumulated and unpaid to the date of such cash distribution. Total liquidation value of such preferred units as of ~~September~~June 30 ~~2017~~2020 and December 31, ~~2016~~2019 was ~~$119.6~~$118.8 million and ~~$119.9~~$120.5 million, ~~respectively,~~respectively, including accrued distributions.

On or after March 2, 2026, the tenth anniversary of the closing of the Forsythe acquisition (the “Conversion Right Date”), holders of the Series A preferred units have the right to convert each Series A preferred unit into a number of Common units equal to (i) the $1,000 liquidation preference plus all accrued and unpaid distributions, divided by (ii) the volume-weighted average price per share of the Company’s common stock for the 20 trading days immediately preceding the applicable conversion date. All Common units received upon conversion may be immediately tendered for redemption for cash or, atin the Company’s ~~option,~~sole discretion, for shares of common stock on a one-for-one basis, subject to the terms and conditions set forth in the Partnership Agreement. Prior to the Conversion Right Date, the Series A preferred units may not be tendered for redemption by the Holder.

On or after March 2, 2021, the fifth anniversary of the closing of the Forsythe acquisition, but prior to the Conversion Right Date, the Operating Partnership has the right to redeem some or all of the Series A preferred units, at any time and from time to time, for cash in an amount per unit equal to the $1,000 liquidation preference plus all accrued and unpaid distributions.

~~Table of Contents~~

In the event of a Termination Transaction (as defined in the Partnership Agreement) prior to conversion, holders of the Series A preferred units generally have the right to receive the same consideration as holders of Common units and common stock, on an as-converted basis.

Holders of the Series A preferred units have no voting rights except with respect to (i) the issuance of partnership units of the Operating Partnership senior to the Series A preferred units as to the right to receive distributions and upon liquidation, dissolution or winding up of the Operating Partnership, (ii) the issuance of additional Series A preferred units and (iii) amendments to the Partnership Agreement that materially and adversely affect the rights or benefits of the holders of the Series A preferred units.

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The Series A preferred units are accounted for as mezzanine equity on the consolidated balance sheet as the units are convertible and redeemable for shares at a determinable price and date at the option of the holder ~~and~~ upon the occurrence of an event not solely within the control of the Company.

The following table summarizes the changes in the Company’s redeemable non-controlling interest in the Operating Partnership for the ~~nine~~six months ended ~~September 30, 2017~~June, 2020 and ~~2016:~~2019:

Common

Series A Preferred Units
($ in thousands)

Redeemable
Common units

Redeemable
non-controlling
interests

Redeemable
Preferred units

Redeemable
non-controlling
interests
Balance at December 31, 2015

884

$
9,695

—

$
—
Issuance of redeemable Common units as partial consideration for real estate acquisition

—

—

117

117,000
Net loss attributable to non-controlling interest

—

(64)

—

—
Accrued distributions to non-controlling interest

—

(113)

—

2,057
Redemption of Common units for Common stock

(884)

(9,518)

Balance at September 30, 2016

—

$
—

117

$
119,057

Balance at December 31, 2016

—

$
—

117

$
119,915
Distributions paid to non-controlling interest

—

—

—

(2,915)
Accrued distributions to non-controlling interest

—

—

—

2,633
Redemption of Common units for common stock

—

—

—

—
Balance at September 30, 2017

—

$
—

117

$
119,633


	Series A Preferred Units
($ in thousands)	Redeemable Preferred units	Redeemable non-controlling interests
Balance at December 31, 2018	117	$	120,510
Distribution paid to non-controlling interest	—		(3,510)
Accrued distributions to non-controlling interest	—		1,755
Balance at June 30, 2019	117	$	118,755

Balance at December 31, 2019	117	$	120,510
Distribution paid to non-controlling interest	—		(3,510)
Accrued distributions to non-controlling interest	—		1,755
Balance at June 30, 2020	117	$	118,755

Series B Participating Preferred Stock

On August 17, 2017, the Company and the Operating Partnership entered into an underwriting agreement with Raymond James & Associates, Inc. and Jefferies LLC, as representatives of the underwriters, pursuant to which the Company sold 6,037,500 shares of its newly designated Series B Participating Preferred Stock, at a public offering price of $25.00 per share, which is the Initial Liquidation Preference (as defined below) of the Series B Participating Preferred Stock.

Shares of Series B Participating Preferred Stock, which represent equity interests in the Company, generally have no voting rights and rank senior to the Company’s common stock with respect to dividend rights and rights upon liquidation. Each preferred share of Series B Participating Preferred Stock is entitled to receive cumulative preferential cash dividends at a rate of 6.00% per annum of the $25 liquidation preference, which is payable quarterly in arrears on the last day of each March, June, September and December (the “Initial Liquidation Preference”). Upon liquidation, before any payment or distribution of the assets of the Company is made to or set apart for the holders of equity securities ranking junior to the Series B Participating Preferred Stock, the holders of the Series B Participating Preferred Stock will be entitled to receive the sum of:

(i)

the Initial Liquidation Preference,

(ii)

~~adjusted by~~ an amount equal to 50% of the cumulative change in the estimated value of farmland in the states in which the Company owned farmland as of June 30, 2017 (measured by reference to a publicly available report released annually by the National Agricultural Statistics Board, the Agricultural Statistics Board and the U.S. Department of Agriculture) (the “FVA Adjustment”), and

(iii)

all accrued and unpaid dividends, subject to a 9.0% cap on total return (the “Final Liquidation Preference”).

~~Table of Contents~~

After September 30, 2021, but prior to September 30, 2024, the Company, at its option, may redeem all, but not less than all, of the then-outstanding shares of Series B Participating Preferred Stock at any time, for cash or for shares of common stock at a price equal to the Final Liquidation Preference plus an amount equal to the product of:

(i)

the Final Liquidation Preference, and

(ii)

the average change in land values in states in which the Company owned farmland as of June 30, 2017 over the immediately preceding four years and multiplied by a constant percentage of 50% and prorated for the number of days between the most recent release of the publicly available land value report used to calculate the FVA Adjustment (if such amount is positive) (the “Premium Amount”).

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At any time on or after September 30, 2024, the Company, at its option, may redeem or convert to shares of common stock all, but not less than all, of the then-outstanding shares of Series B Participating Preferred Stock at the redemption price per share equal to:

(i)

the Initial Liquidation Preference, plus

(ii)

the FVA Amount, plus

(iii)

any accrued and unpaid dividends.

The total rate of return on shares of the Series B Participating Preferred Stock is subject to a cap such that the total rate of return, when considering the Initial Liquidation Preference, the FVA Adjustment and the Premium Amount plus accrued and unpaid dividends, will not exceed 9.0%. Based on the data released by the USDA in August 2020 in their Land Values 2020 Summary, the FVA Amount as of 2020 was determined to be $0.80 per share of Series B Participating Preferred Stock.

In connection with the issuance of the Series B Participating Preferred Stock, the sole general partner of the Operating Partnership entered into Amendment No. 2 to the Partnership Agreement in order to provide for the issuance, and the designation of the terms and conditions, of newly classified 6.00% Series B participating preferred units of limited partnership interest in the Operating Partnership (“Series B participating preferred units”), the economic terms of which are identical to those of the Series B Participating Preferred Stock. The Company contributed the net proceeds from the offering of the Series B Participating Preferred Stock to the Operating Partnership in exchange for 6,037,500 Series B participating preferred units.

The shares of Series B Participating Preferred Stock are accounted for as mezzanine equity on the consolidated balance sheet as the Series B Participating Preferred Stock is convertible and redeemable for common shares at a determinable price and date at the option of the Company and upon the occurrence of an event not solely within the control of the Company.

~~During the three and nine months ended September 30, 2017 the~~The balance recorded in mezzanine equity relating to the Series B Participating Preferred Stock as of June 30, 2020 and December 31, 2019 was ~~$144.2 million. During the quarter the Company declared~~$139.8 million and ~~paid dividends relating to the Series B Participating Preferred Stock of $1.1 million.~~$142.9 million, respectively.

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Distributions

~~Distributions~~

The Company’s board of directors declared and paid the following distributions to common stockholders and holders of Common units for the ~~nine~~six months ended ~~September 30, 2017~~June, 2020 and the year ended December 31, ~~2016:~~2019:

Fiscal Year

Declaration Date

Record Date

Payment Date

Distributions
per Common
Share/OP unit
2017

July 19, 2017

October 2, 2017

October 13, 2017

0.1275

May 9, 2017

June 30, 2017

July 14, 2017

$
0.1275

February 22, 2017

April 1, 2017

April 14, 2017

0.1275

$
0.3825

2016

March 8, 2016

April 1, 2016

April 15, 2016

$
0.1275

May 9, 2016

July 1, 2016

July 15, 2016

0.1275

August 3, 2016

September 30, 2016

October 14, 2016

0.1275

November 3, 2016

January 2, 2017

January 13, 2017

0.1275

$
0.5100


Fiscal Year	Declaration Date	Record Date	Payment Date	Distributions per Common Share/OP unit
2020	March 11, 2020	April 1, 2020	April 15, 2020	$	0.0500
	May 6, 2020	July 1, 2020	July 15, 2020	$	0.0500
				$	0.0500

2019	November 11, 2019	January 1, 2020	January 15, 2020	$	0.0500
	August 6, 2019	October 1, 2019	October 15, 2019	$	0.0500
	May 8, 2019	July 1, 2019	July 15, 2019	$	0.0500
	February 7, 2019	April 1, 2019	April 15, 2019	$	0.0500
				$	0.2000

Additionally, in connection with the 3.00% cumulative preferential distribution on the Series A preferred units, the Company has accrued ~~$2.6~~$1.8 million in distributions payable as of ~~September~~June 30, ~~2017.~~2020. The distributions are payable annually in arrears on January 15 of each year.

In connection with the Series B Participating Preferred Stock, the Company paid ~~$1.1~~$2.2 million in distributions on ~~September~~June 30, ~~2017~~2020 to stockholders of record as of ~~September~~June 15, ~~2017.~~2020. As long as shares of Series B Participating Preferred Stock are outstanding, distributions on such shares are payable on the last day of March, June, September and December of each year to stockholders of record on the 15th day of such months.

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In general, common stock cash dividends declared by the Company will be considered ordinary income to stockholders for income tax purposes. From time to time, a portion of the Company’s dividends may be characterized as qualified dividends, capital gains or return of capital.

~~Stock~~Share Repurchase ~~Plan~~Program

On March 15, 2017, the Company’s board of directors approved a program to repurchase up to ~~$25,000,000~~$25 million in shares of the Company’s common stock. In November 2017, the board of directors approved repurchases of the Company’s Series B Participating Preferred Stock from time to time under the share repurchase program. Subsequently on August 1, 2018, the board of directors increased the authority under the share repurchase program by an aggregate of $30 million. On November 7, 2019, the board of directors increased the authority under the program by an additional $50 million. Repurchases under this program may be made from time to time, in amounts and prices as the Company deems appropriate. Repurchases may be made in open market or privately negotiated transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors. This ~~stock~~share repurchase ~~plan~~program does not obligate the Company to acquire any particular amount of common stock or Series B Preferred Stock and it may be modified or suspended at any time at the ~~Company's~~Company’s discretion. The Company ~~expects to continue to fund~~funds repurchases under the program using cash on ~~hand. The~~its balance sheet. During the six months ended June 30, 2020, the Company repurchased ~~841,257~~494,661 shares of its common stock for ~~$7.4~~$3.2 million at an average price of ~~$8.85~~$6.46 per share ~~during~~and 140,189 shares of its Series B preferred stock for $3.1 million at an average price of $22.08 per share. As of June 30, 2020, the ~~three and nine months ended September 30, 2017.~~Company had approximately $44.7 million in shares that it can repurchase under the stock repurchase plan.

Equity Incentive Plan

On May 3, 2017, the Company’s stockholders approved the Second Amended and Restated ~~Farmland Partners Inc.~~ 2014 Equity Incentive Plan ~~(the “Second Amended Plan”~~(as amended and restated, the “Plan”)~~. The Second Amended Plan, among other things,~~, which increased the aggregate number of shares of the Company’s common stock reserved for issuance from 615,070, which was available under the First Amended and Restated Farmland Partners Inc. Equity Incentive Plan (together with the Second Amended Plan, the “Plan”), to 1,265,851 (including the 529,195 shares of restricted common stock that have been issued under the Plan ~~and 750,000 shares reserved for future issuance).~~to approximately 1.3 million shares. As of ~~September~~June 30, ~~2017,~~2020, there were ~~0.7~~0.2 million of shares available for future ~~grant~~grants under the Plan.

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The Company may issue equity-based awards to officers, non-employee directors, employees, independent contractors and other eligible persons under the Plan. The Plan provides for the grant of stock options, share awards (including restricted stock and restricted stock units), stock appreciation rights, dividend equivalent rights, performance awards, annual incentive cash awards and other equity based awards, including LTIP units, which are convertible on a one-for-one basis into Common units. The terms of each grant are determined by the compensation committee of the board of directors.

From time to time, the Company may award restricted shares of its common stock under the Plan, as compensation to officers, employees, non-employee directors and non-employee consultants. The shares of restricted stock vest over a period of time as determined by the compensation committee of the Company’s board of directors at the date of grant. The Company recognizes compensation expense for awards issued to officers, employees and non-employee directors for restricted shares of common stock on a straight-line basis over the vesting period based upon the fair market value of the shares on the date of issuance, adjusted for forfeitures. The Company recognizes compensation expense for awards issued to non-employee consultants in the same period and in the same manner as if the Company paid cash for the underlying services.

A summary of the nonvested shares as of ~~September~~June 30, ~~2017~~2020 is as follows:


		Weighted
	Number of	average grant
(shares in thousands)	shares	date fair value
Unvested at December 31, 2019	345	$	7.42
Granted	139		6.23
Vested	(166)		8.20
Forfeited	—		—
Unvested at June 30, 2020	318	$	6.46

Weighted

Number of

average grant

(shares in thousands)

shares

date fair value

Unvested at December 31, 2015

145

$
13.87

Granted

119

10.78

Vested

(70)

13.96

Forfeited

(5)

11.09

Unvested at September 30, 2016

189

11.97

Unvested at December 31, 2016

189

11.98

Granted

205

11.30

Vested

(108)

12.84

Forfeited

(7)

10.97

Unvested at September 30, 2017

279

$
11.16

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For the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, the Company recognized ~~$1.1~~$0.3 million and $~~0.9~~$0.5 million, and $0.4 million and $0.8 million, respectively, of stock-based compensation expense related to restricted stock awards. As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, there were ~~$2.4~~$1.7 million and $~~1.2~~$1.4 million,, respectively, of total unrecognized compensation costs related to nonvested stock awards, which are expected to be recognized over weighted-average periods of ~~1.3~~2.0 years. The change in fair value of the shares issued to non-employees to be issued upon vesting is remeasured at the end of each reporting period and is recorded in general and administrative expenses on the consolidated statements of operations. The remaining restricted stock awards issued to non-employees vested during the ~~nine months~~year ended ~~September 30, 2017,~~December 31, 2019, resulting in no change in fair value for the ~~three~~six months ended ~~September~~June 30, ~~2017.~~2020.

~~At-the-Market Offering Program (the “ATM Program”)~~

On September 15, 2015, the Company entered into equity distribution agreements under which the Company may issue and sell from time to time, through sales agents, shares of its common stock having an aggregate gross sales price of up to $25 million. During the nine months ended September 30, 2016, the Company had sold an aggregate of 844,207 shares of common stock for aggregate proceeds, net of fees, of approximately $9.3 million at a weighted average price per share of $11.06. During the nine months ended September 30, 2017, the Company had made no sales under the ATM Program.

~~Deferred Offering Costs~~

Deferred offering costs include incremental direct costs incurred by the Company in connection with proposed or actual offerings of securities. At the completion of a securities offering, the deferred offering costs are charged ratably as a reduction of the gross proceeds of equity as stock is issued. If an offering is abandoned, the previously deferred offering costs will be charged to operations in the period in which the offering is abandoned. The Company incurred $0.5 million and $0.1 million in offering costs during the nine months ended September 30, 2017 and 2016, respectively. As of

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~~September 30, 2017 and December 31, 2016, the Company had $0.3 million~~ ~~and~~ ~~$0.2 million respectively in deferred offering costs related to regulatory, legal, accounting and professional service costs associated with proposed or completed offerings of securities.~~

Earnings (Loss) per Share

The computation of basic and diluted loss per share is as follows:


	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands, except per share amounts)	2020		2019		2020		2019
Numerator:
Net income (loss) attributable to Farmland Partners Inc.	$	162	$	6,052	$	556	$	6,059
Less: Nonforfeitable distributions allocated to unvested restricted shares		(16)		(21)		(32)		(42)
Less: Distributions on redeemable non-controlling interests in Operating Partnership, preferred		(3,088)		(3,125)		(6,203)		(6,251)
Net loss attributable to common stockholders	$	(2,942)	$	2,906	$	(5,679)	$	(234)

Denominator:
Weighted-average number of common shares - basic		29,433		30,637		29,485		30,714
Conversion of preferred units⁽¹⁾		—		17,733		—		—
Unvested restricted shares⁽¹⁾		—		—		—		—
Redeemable non-controlling interest⁽¹⁾		—		—		—		—
Weighted-average number of common shares - diluted		29,433		48,370		29,485		30,714

Loss per share attributable to common stockholders - basic	$	(0.10)	$	0.09	$	(0.19)	$	(0.01)

For the three months ended

For the nine months ended

September 30,

September 30,
(in thousands except per share amounts)

2017

2016

2017

2016
Numerator:

Net profit (loss) attributable to Farmland Partners Inc.

$
2,216

$
70

$
2,277

$
(412)
Less:  Nonforfeitable distributions allocated to unvested restricted shares

(36)

(24)

(116)

(72)
Less:  Distributions on redeemable non-controlling interests in Operating Partnership, Common units

—

—

—

(113)
Less:  Distributions on redeemable non-controlling interests in Operating Partnership, Series A preferred units

(877)

(887)

(2,632)

(2,057)
Less:  Dividends on Series B Participating Preferred Stock

(1,082)

—

(1,082)

—
Net income (loss) attributable to common stockholders

$
221

$
(841)

$
(1,553)

$
(2,654)

Denominator:

Weighted-average number of common shares - basic

32,862

13,683

30,695

12,663
Conversion of Series A preferred units(1)

—

—

—

—
Conversion of Series B Participating Preferred Stock (1)

—

—

—

—
Unvested restricted shares(1)

—

—

—

—
Weighted-average number of common shares - diluted

32,862

13,683

30,695

12,663

Earnings (Loss) per share attributable to common stockholders - basic

$
0.01

$
(0.06)

$
(0.05)

$
(0.21)
Earnings (Loss) per share attributable to common stockholders - diluted

$
0.01

$
(0.06)

$
(0.05)

$
(0.21)

(1)

~~(1)~~

Anti-dilutive for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016.~~

for the six months ended June 30, 2019

(2)	Anti-dilutive for the three and six months ended June 30, 2020 and 2019.

Unvested shares of the Company’s restricted common stock are ~~and until May 26, 2016, the Excess Units were,~~ considered participating securities, which ~~require~~requires the use of the two-class method for the computation of basic and diluted earnings per share. On May 25, 2016, the Company obtained stockholder approval allowing the Company to issue shares of common stock upon the redemption of the Excess Units, which allowed the Company to remove the Excess Units from the mezzanine section of the consolidated balance sheets. As such, as of September 30, 2017, the Company no longer has any Common units included as redeemable non-controlling interests outstanding in the mezzanine section of the consolidated balance sheets.

The limited partners’ outstanding Common units (which may be redeemed for shares of common stock) ~~and Excess Units~~ have been excluded from the diluted earnings per share calculation as there would be no effect on the amounts since the limited partners’ share of income would also be added back to net income. Any anti-dilutive shares have been excluded from the diluted earnings per share calculation. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Accordingly, distributed and undistributed earnings attributable to unvested restricted shares (participating securities) have been excluded, as applicable, from net income or loss attributable to common stockholders utilized in the basic and diluted earnings per share calculations. Net income or loss figures are presented net of non-controlling interests in the earnings per share calculations. The weighted average number of Common units held by the non-controlling interest was ~~6.1~~1.9 million and ~~5.3~~2.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

The outstanding Series A preferred units are non-participating securities and thus are included in the computation of diluted earnings per share on an as-if converted basis. Any anti-dilutive shares are excluded from the diluted earnings per share calculation. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016,~~2019, these shares were not included in the diluted earnings per share calculation as they would be anti-dilutive.

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The outstanding shares of Series B Participating Preferred Stock are non-participating securities and thus are included in the computation of diluted earnings per share on an as-if converted basis. Any anti-dilutive shares are excluded from

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the diluted earnings per share calculation. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, these shares were not included in the diluted earnings per share calculation as they would be anti-dilutive.

For the ~~three~~six months ended ~~September~~June 30, ~~2016~~2020 and ~~nine months ended September 30, 2017 and 2016,~~2019, diluted weighted average common shares do not include the impact of 0.3 million and 0.20.4 million, respectively, unvested compensation-related shares as they would have been anti-dilutive. ~~The effect of these items on diluted earnings per share for the three months ended September 30, 2017 has been reflected in the dilutive earnings per share calculation.~~

The following equity awards and units ~~are~~were outstanding as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

September 30, 2017

December 31, 2016
Shares

32,353

17,163
Common units

5,724

5,692
Unvested restricted stock

279

188

38,356

23,043


	June 30, 2020	December 31, 2019
Shares	29,278	29,607
OP Units	1,904	1,904
Unvested Restricted Stock Awards	318	345
	31,500	31,856

~~Note 10—Subsequent Events~~

~~Subsequent~~Note 10—Hedge Accounting

Cash Flow Hedging Strategy

For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the ~~quarter end~~entire change in the fair value of the Company’s designated cash flow hedges is recorded to accumulated other comprehensive income, a component of shareholders’ equity in the Company’s consolidated balance sheets.

On March 26, 2020, the Company ~~repurchased an additional 279,210 shares at an average price of $9.15 for total consideration of $2.6 million.~~

~~On October 23, 2017~~terminated its existing swap agreement and entered into a new interest rate swap agreement to obtain a more favorable interest rate and to manage intrest rate risk exposure, which is effective April 1, 2020. An interest rate swap agreement utilized by the Company ~~fully repaid~~effectively modifies the ~~remaining $5.5~~Company’s exposure to interest rate risk by converting the Company’s floating-rate debt to a fixed rate basis for the next six years on 50% of the currently outstanding amount to Rabobank, thus reducing the impact of interest rate changes on future interest expense. This agreement involves the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the agreement without an exchange of the underlying principal amount. The fair value of the de-designated swap was $2.6 million ~~in principal~~ on ~~Farmer Mac Bond #2 which was due and payable on that~~the termination date. The Company ~~now has~~is amortizing the de-designated swap over the original term utilizing a ~~total~~forward curve analysis of ~~$129.3~~determining monthly amortization. Amortization for the three months ended June 30, 2020 was $0.2 million. The Company’s $2.6 million ~~outstanding~~termination fee was rolled into the new swap and will be paid over the next six years. The fair value is being amortized out of Other Comprehensive Income through the original termination date (March 1, 2023).

The Company determines the hedge effectiveness of its interest rate swaps at inception by applying a quantitative evaluation of effectiveness using regression analysis. On an ongoing basis the Company applies an initial qualitative assessement of on-going effectiveness and reviews hedge effectiveness through assessing the hedge relationship by comparing the current terms of the swap and the associated debt to ensure they continue to coincide through the continued ability of the Counterparty to the swap to honor its obligations under the ~~Farmer Mac Facility, $54.9~~swap contract. If the qualitative assessment indicates that the hedge relationship is ineffective, the Company performs a quantitative evaluation using regression analysis. The Company concluded the hedge was highly effective at inception.

As of June 30, 2020, the total notional amount of the Company’s receive-variable/pay-fixed interest rate swaps was $33.2 million.

The fair value of the Company’s derivative instrument is set out below:


($ in thousands)
Instrument	Balance sheet location	Fair Value
Interest rate swap	Derivative liability	$	3,518

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The effect of derivative instruments on the consolidated statements of operations for the periods ended June 30, 2020 and 2019 is set out below:


($ in thousands)
Cash flow hedging relationships		Location of Gain (Loss) reclassified from Accumulated OCI into income
Interest rate contracts		Interest expense

The amount of gain/loss recognized in net income for the three and six months ended June 30, 2020 and 2019 was $0.3 million and $0.3 million, and $0 and $0.1 million, respectively.

The fair values of the Company’s interest rate swap agreements are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts, which ~~matures prior to~~is considered a Level 2 measurement under the ~~end~~fair value hierarchy. The variable cash receipts are based on an expectation of ~~2017.~~future interest rates (forward curves) derived from observable market interest rate curves.

The following table outlines the movements in the other comprehensive income account as of June 30, 2020 and December 31, 2019:


($ in thousands)		June 30, 2020		December 31, 2019
Beginning accumulated derivative instrument gain or loss	$	(1,644)	$	(865)
Net change associated with current period hedging transactions		(1,983)		(779)
Amortization of OCI		247		—
Difference between a change in fair value of excluded components		—		—
Closing accumulated derivative instrument gain or loss	$	(3,380)	$	(1,644)

Note 11—Subsequent Events

~~On October 31, 2017, the Company completed one acquisition which is expected to be accounted for as an asset acquisition in South Carolina. Consideration totaled $2.2 million and was paid in cash.~~Dividends

On ~~October 31, 2017, the Company issued 984,365 shares of common stock in exchange for 984,365 Common units that had been tendered for redemption.~~

~~On November 8, 2017,~~August 4, 2020, the Company’s ~~board~~Board of ~~directors declared a distribution of $0.1275 per share of common stock and Common unit payable~~ ~~on January 16, 2018 to holders of record as of January 1, 2018.~~

~~On November 8, 2017, the Company’s board of directors~~Directors declared a quarterly cash dividend of $0.375 per share of 6.00% Series B Participating Preferred Stock payable on ~~January 2, 2017~~September 30, 2020 to stockholders of record as of ~~December~~September 15, ~~2017.~~2020.

On August 4, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.05 per share of common stock and Common units payable on October 15, 2020 to stockholders and unitholders of record as of October 1, 2020.

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Item 2.~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following analysis of our financial condition and results of operationsshould be read in conjunction with our consolidated financial statements and the notes included elsewhere in this Quarterly Report, as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, filed with the Securities Exchange Commission (“SEC”) on ~~February 23, 2017,~~March 13, 2020, which is accessible on the SEC’s website at www.sec.gov. References to “we,” “our,” “us” and “our company” refer to Farmland Partners Inc., a Maryland corporation, together with our consolidated subsidiaries, including Farmland Partners Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), of which we are the sole member of the sole general partner.

Special Note Regarding Forward-Looking Statements

We make statements in this Quarterly Report on Form 10-Q that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). These forward-looking statements include, without limitation, statements concerning ~~our proposed acquisition of American Farmland Company,~~pending acquisitions and dispositions, projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results, future stock repurchases, our dividend policy, future economic performance, crop yields and prices and future rental rates for our properties, ongoing litigation, as well as statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. When we use the words “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” or similar expressions or their negatives, as well as statements in future tense, we intend to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance, and our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the impact of the COVID-19 pandemic and efforts to reduce its spread on our business and on the economy and capital markets generally, general volatility of the capital markets and the market price of our common stock, changes in our business strategy, availability, terms and deployment of capital, our ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, availability of qualified personnel, changes in our industry, interest rates or the general economy, the degree and nature of our competition, the outcomes of ongoing litigation, our ability to identify new acquisitions or dispositions and close on pending acquisitions, or dispositions and the other factors described in the risk factors described in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and in other documents that we file from time to time with the SEC. Given these uncertainties, undue reliance should not be placed on such statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by law.

Overview and Background

We are an internally managed real estate company that owns and seeks to acquire high-quality farmland located in agricultural markets throughout North America. As of the date of this Quarterly Report on Form 10-Q, we own farms with an aggregate of approximately ~~154,164~~156,500 acres in Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, South Dakota ~~Texas,~~ and Virginia. As of the date of this Quarterly Report on Form 10-Q, approximately ~~75%~~70% of ~~the acres in~~ our portfolio ~~are~~(by value) is used to grow primary crops, such as corn, soybeans, wheat, rice and cotton, and approximately ~~25% of the acres in our portfolio~~30% is used to produce specialty crops, such as blueberries, vegetables, citrus, nuts and edible beans. We believe our portfolio gives investors exposure to the increasing global food demand trend in the face of growing scarcity of high quality farmland and will reflect the approximate breakdown of U.S. agricultural output between primary crops and animal protein (whose production relies principally on primary crops as feed), on one hand, and specialty crops, on the other.

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In addition, in August 2015, we announced the launch of the FPI Loan Program, an agricultural lending product aimed at farmers, as a complement to our primary business of acquiring and owning farmland and leasing it to farmers. Underunder the FPI Loan Program, we make loans to third-party farmers (both tenant and non-tenant) to provide ~~partial~~ financing for

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working capital requirements and operational farming activities, farming infrastructure projects and for other farming and agricultural real estate related purposes.

We were incorporated in Maryland on September 27, 2013, and we are the sole member of the general partner of the Operating Partnership, which is a Delaware limited partnership that was formed on September 27, 2013. All of our assets are held by, and our operations are primarily conducted through, the Operating Partnership and its wholly owned subsidiaries. As of ~~September~~June 30, ~~2017~~2020, we ~~own a 85.1% interest in~~owned 94.0% of the ~~Operating Partnership.~~Common units and none of the Series A preferred units nor the Series B Participating Preferred Stock. See “Note 9 – Stockholders’ Equity and Non-controlling Interests” within the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding the non-controlling interests.

We have 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, commencing with our short taxable year ended December 31, 2014.

The following table sets forth our ownership of acreage by ~~region:~~region as of June 30, 2020:


Region⁽¹⁾		Total Acres
Corn Belt		~~47,472~~43,988
Delta &and South		~~28,912~~27,871
High Plains		~~31,503~~29,566
Southeast		~~39,805~~43,499
West Coast		~~6,472~~11,586
		~~154,164~~156,510

(1)

~~(1)~~

Corn Belt includes farms located in Illinois, Michigan and eastern Nebraska. Delta and South includes farms located in Arkansas, Louisiana and Mississippi. High Plains includes farms located in Colorado, Kansas, western Nebraska, and ~~Texas.~~South Dakota. Southeast includes farms located in Florida, Georgia, North Carolina, South Carolina and Virginia. West Coast includes farms located in California.

WeWhen we are able to access sufficient additional capital, we intend to continue to acquire additional farmland to achieve scale and further diversify our portfolio by geography, crop type and tenants. We also may continue to selectively dispose of assets when we believe a disposition is in the Company’s best interest. We also may acquire, and make loans secured by mortgages on, properties related to farming, such as grain storage facilities, grain elevators, feedlots, processing plants and distribution centers, as well as livestock farms or ranches. In addition, we engage directly in farming through FPI Agribusiness Inc., our taxable REIT subsidiary (the “TRS” or “FPI Agribusiness”)~~, whereby we operate~~. The TRS provides volume purchasing services to our tenants, operates a ~~small number of development properties (approximately 716 acres as of September 30, 2017) relying on~~small-scale custom farming ~~contracts~~business, and occasionally provides our tenants with ~~local farm operators. Additionally,~~small operating loans. As of June 30, 2020, the TRS ~~operates a volume purchasing program for participating tenants by working with suppliers to pool tenant purchasing power~~performs these custom farming operations on 3,676 acres of farmland located in Florida, Michigan, South Carolina, and ~~create cost savings through bulk orders.~~California.

Our principal source of revenue is rent from tenants that conduct farming operations on our farmland. The majority of the leases that are in place as of the date of this Quarterly Report on Form 10-Q have fixed annual rental payments. Some of our leases have variable rents based on the revenue generated by our farm-operator tenants. We believe that this mix of fixed and variable rents will help insulate us from the variability of farming operations and reduce our credit-risk exposure to farm-operator tenants while making us an attractive landlord in certain regions where variable leases are customary. However, we may be exposed to tenant credit risk and farming operation risks, particularly with respect to leases that do not require advance payment of 100% of the annual rent, leases for which the rent is based on a percentage of a ~~tenant's~~tenant’s farming revenues and leases with terms greater than one year.

In addition, an increasing number of our leases provide for crop share lease payments, through which we only recognize revenue to the amount of the crop insurance ~~minimum, the~~minimum. The excess cannot be recognized as revenue until the tenant enters into a contract to sell their crop. Generally, we expect tenants to enter into contracts to sell their crop following the harvest of the crop.

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Impact of COVID-19 on Our Business

~~Recent Developments~~

~~Public Offering of Series B Participating Preferred Stock~~

~~On August 17, 2017, we entered into an underwriting agreement with Raymond James & Associates, Inc. and Jefferies LLC, as representatives~~As the effects of the ~~underwriters, pursuant~~coronavirus (“COVID-19”) pandemic continue to develop, we are unable to quantify what the ultimate impact of the virus on our business will be. So far, the pandemic has significantly affected only sectors of the U.S. agricultural industry to which we ~~sold 6,037,500 shares our newly designated 6.00% Series B Participating Preferred Stock, $0.01 par value per share, at a public offering price of $25.00 per share, which is~~have limited or no direct exposure, such as fresh food production marketed to the ~~initial liquidation preference~~hospitality industry, and meat packing. We expect slower-moving ripples to potentially affect the sectors of the ~~Series B Participating Preferred Stock.~~agricultural industry in which we are invested. Lower gasoline demand has affected demand for ethanol and therefore corn.

~~Shares~~Labor availability and export logistics disruptions may affect specialty crops prices and our tenants’ ability to effectively harvest and deliver product, which could adversely affect our results of ~~Series B Participating Preferred Stock, which represent equity interests~~operations to the extent that a portion of the rent we receive from tenants is earned under variable-rent leases. Disruptions in the ~~Company, generally~~meat packing industry due to worker health concerns may affect herd and flock sizes and ultimately feed demand.

Despite short- and medium-term disruptions in the U.S. agricultural industry, we do not expect global demand for food, feed, fuel and fiber to be materially affected by COVID-19 and the related economic turmoil, and therefore in the long term we expect the industry to experience some degree of transformation, but to survive relatively unscathed compared to other industries. As owners of essential long-term assets in an essential industry, we also expect our business to perform relatively well, although we are certainly prepared for a measure of yet largely unidentified medium-term pain. We expect certain farmers’ profitability to be impacted, however a combination of the high quality of our tenant base and financial support measures implemented by the U.S. federal government should prevent a material degradation in our tenants’ creditworthiness.

At this time, we are unable to estimate the ultimate impact of these effects on our tenants and their ability to pay rent in full and on time. However, the longer the economic slowdown continues, it becomes more likely that these factors will impact our results in a material way. Although a significant amount of our tenants paid 50% of their annual rent in the first quarter of the year in accordance with the respective leases, financial challenges facing our tenants could result in delays in our tenants’ ability to pay the remaining rent due under the leases, requests for rent deferral, business closures or bankruptcies.

The direct impact of COVID-19 on our operations has been so far limited. Even though we operate in an essential industry and therefore we are largely exempted from stay-at-home orders, we have ~~no voting rights~~prioritized the health and ~~rank senior~~well-being of our employees. We asked our office staff to work from home whenever possible even before the City and County of Denver and the State of Colorado implemented stay-at-home orders. Our technology infrastructure was already well suited to remote working conditions, and the layout of our offices allowed us to substantially observe social distancing guidelines when staff need to be present in the office. We asked our field personnel to limit travel to only those trips required to monitor and maintain the farms we already own, and to substantially lessen direct contact with our tenants and suppliers. As a result of these worker health measures, we have experienced a perceptible degradation in operating efficiency, but not to such an extent as to materially affect our financial results or internal controls. As of the beginning of the third quarter of 2020, both in-person office attendance and frequency of travel have increased as compared to the Company’s common stock with respect to dividend rights and rights upon liquidation. Each share of Series B Participating Preferred Stock entitled to receive cumulative preferential cash distributions at a rate of 6.00% per annumbeginning of the ~~$25 liquidation preference, which is payable quarterly in arrears~~pandemic, but remain below pre-pandemic levels.

Our interactions with critical third parties have been affected, but so far we have been able to mitigate any material impact on the last day of March, June, September and December (the “Initial Liquidation Preference”). Upon liquidation, before any payment or distribution of the assets of the Company is made to or set apart for the holders of equity securities ranking junior to the Series B Participating Preferred Stock, the holders of the Series B Participating Preferred Stock will be entitled to receive the sum of:

~~(i)~~

~~the Initial Liquidation Preference,~~

~~(ii)~~

adjusted by an amount equal to 50% of the cumulative change in the estimated value of farmland in the states in which the Company owned farmland as of June 30, 2017 (measured by reference to a publicly available report released annually by the National Agricultural Statistics Board, the Agricultural Statistics Board and the U.S. Department of Agriculture) (the “FVA Adjustment”), and

~~(iii)~~

~~all accrued and unpaid dividends, subject to a 9.0% cap on total return (the “Final Liquidation Preference”).~~

~~After September 30, 2021, but prior to September 30, 2024, we at~~ our option, may redeem all, but not less than all, of the then-outstanding shares of Series B Participating Preferred Stock at any time, for cash or convert into shares of our common stock, at a price equal to the Final Liquidation Preference plus an amount equal to ~~the product of:~~

~~(i)~~

~~the Final Liquidation Preference, and~~

~~(ii)~~

~~the average change in land values in~~ ~~states in which the Company owned farmland as of June 30, 2017~~ over the immediately preceding four years and multiplied by a constant percentage of 50% and prorated for the number of days between the most recent release of the publicly available land value report used to calculate the FVA Adjustment (if such amount is positive) (the “Premium Amount”).

~~At any time on or after September 30, 2024, the Company, at its option, may redeem all, but not less than all, of the then-outstanding shares of Series B Participating Preferred Stock at the:~~

~~(i)~~

~~redemption price per share equal to the Initial Liquidation Preference, plus~~

~~(ii)~~

~~the FVA Amount, plus~~

~~(iii)~~

~~any accrued and unpaid dividends.~~

The total rate of return on shares of the Series B Participating Preferred Stock is subject to a cap such that the rate of return, when considering the Initial Liquidation Preference, the FVA Adjustment and the Premium Amount plus accrued and unpaid dividends, will not exceed 9.0%.

~~In connection~~business. We are working with the issuance of the Series B Participating Preferred Sock, the sole general partner of the Operating Partnership entered into Amendment No. 2 to the Partnership Agreement in order to provide for the issuance, and the designation of the terms and conditions, of newly classified 6.00% Series B participating preferred units of limited partnership interest in the Operating Partnership, the economic terms of which are identical to those of the Series B Participating Preferred Stock. We contributed the net proceeds from the offering of the Series B Participating Preferred Stock to the Operating Partnership in exchange for 6,037,500 Series B participating preferred units. For more information about our Series B Participating Preferred Stock, see out Current Report on Form 8-K fied on August 16, 2017.

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~~Completed Acquisitions~~

~~AFCO Mergers~~

~~On February 2, 2017, we completed the previously announced merger with American Farmland Company (“AFCO”) at which time~~ one of our ~~wholly owned subsidiaries was merged~~existing lenders to refinance $48.3 million of debt with Farmer Mac originally due in June and ~~into American Farmland Company L.P. (“AFCO OP”) with AFCO OP surviving~~July of this year. However the lender informed us that, as a ~~wholly owned subsidiary~~result of travel restrictions implemented to contain the spread of the ~~Operating Partnership (the “Partnership Merger”),~~pandemic, they would be unable to meet the refinancing deadlines of June and ~~AFCO merged with and into another one of our wholly owned subsidiaries with such wholly owned subsidiary surviving.~~

~~At the effective time~~July 2020. In order to avoid repayment issues, we were able to secure from Farmer Mac an extension of the ~~Company Merger, each share of common stock of AFCO, par value $0.01 per share (“AFCO Common Stock”), issued and outstanding immediately prior to the effective time~~due date of the Company Merger (other than any shares of AFCO Common Stock owned by any wholly owned subsidiary of AFCO or by us or the Operating Partnership or any wholly owned subsidiary of us or the Operating Partnership), was automatically converted into the rightexpiring debt to receive, subject to certain adjustments, 0.7417 shares of our common stock (the “Company Merger Consideration”). In addition, in connection with the Company Merger, each outstanding AFCO restricted stock unit that had become fully earned and vested in accordance with its terms was, at the effective time of the Company Merger, converted into the right to receive the Company Merger Consideration. We issued 14,763,604 shares of our common stock as consideration in the Company Merger and 17,373 shares of our common stock in respect of fully earned and vested AFCO restricted stock units.

At the effective time of the Partnership Merger, each Common unit of limited partnership interest in AFCO OP issued and outstanding immediately prior to the effective time of the Partnership Merger, was converted automatically into the right to receive, subject to certain adjustments, 0.7417 Common units. We issued 218,525 Common units as consideration in the Partnership Merger.

We believe that following the AFCO Mergers, our portfolio gives investors exposure to the increasing global food demand trend in the face of growing scarcity of high quality farmland and will reflect the approximate breakdown of U.S. agricultural output between primary crops and animal protein (whose production relies principally on primary crops as feed), on one hand, and specialty crops, on the other.

~~Acquisitions under Contract~~

On September 22, 2017, we entered into a purchase agreement to acquire three tree nut ranches in California for total consideration of $110 million in cash. The purchase agreement contains certain customary representations, warranties and covenants of the parties,October 31, 2020, and the acquisition of the Properties is expected to close in December 2017, subject to the satisfaction of certain customary closing conditions. In connection with the closing pursuant to the purchase agreement, the Companyrefinancing lender expects to ~~enter into a 25-year triple-net lease agreement with the current owner on a revenue share basis with respect~~be able to the properties. During the term of the lease, the operator will be responsible for the operation, maintenance and improvements on the properties and will have a right of first refusal if we were to hold the Properties for sale. There can be no assurancesmeet that ~~the acquisition will be completed, or that the lease will be entered into, on the expected timeline, on the expected terms or at all.~~ ~~We have signed a non-binding term sheet for a debt facility with a major financial institution to finance a portion of this acquisition.~~deadline. We can provide no assurances that we will be able to ~~enter into~~obtain additional extensions of near-term maturities if travel restrictions remain in place or are put back in place after a period of time.

The global capital markets have experienced significant turmoil since the ~~anticipated~~beginning of the pandemic. However, we don’t have any immediate plans to issue equity capital. During the 2008 financial crisis, the availability and pricing of agricultural debt ~~facility on~~remained largely unaffected, reflecting the ~~expected terms, on the expected timeline or at all.~~

~~On August 1, 2017 the Company contracted to acquire~~stability of farmland ~~in South Carolina for an approximate purchase price of $1.1 million. There can be no assurances that the acquisition will be completed on the expected timeline, on the expected terms or at all.~~

~~Prudential Termination Agreement~~

~~On February 18, 2017, we entered into a Termination Agreement (the “Termination Agreement”) with Prudential Capital Mortgage Company (“the Prudential Sub-Advisor”) pursuant to which we~~values and ~~the Prudential Sub-Advisor agreed to terminate, effective as of March 31, 2017, the Amended and Restated Sub-Advisory Agreement (the “Sub-~~food demand. We believe

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Advisory Agreement”), dated as of October 23, 2015, by and among American Farmland Company, American Farmland Advisors, American Farmland Company L.P. and Prudential and certain related property management agreements (together withthat, other than the ~~Sub-Advisory Agreement, the “Prudential Agreements”).~~

~~The Termination Agreement provided that, as of March 31, 2017, Prudential no longer provides services~~short-term logistical disruptions due to ~~us under the Prudential Agreements. We paid the Prudential Sub-Advisor $1.6 million in cash, which is equal~~travel restrictions discussed above, our access to the fee that would have been owed to Prudential for services through the quarter ended March 31, 2017, plus a termination fee of $0.2 million. The statement of operations impact to the Company for the nine month period ended September 30, 2017 totaled $0.7 million, which is included in property operating expenses, with the remaining $0.9 million being includeddebt financing in the ~~accruals as a component~~ordinary course of ~~the purchase accounting surrounding the AFCO Mergers as this represented the costs incurred by AFCO prior to the AFCO Mergers.~~ business will remain largely unaffected.

Factors That May Influence Future Results of Operations and Farmland Values

The principal factors affecting our operating results and the value of our farmland include global demand for food relative to the global supply of food, farmland fundamentals and economic conditions in the markets in which we own farmland and our ability to increase or maintain rental revenues while controlling expenses. Although farmland prices may show a decline from time to time, we believe that any reduction in U.S. farmland values overall is likely to be short-lived as global demand for food and agricultural commodities typically exceeds global supply. In addition, although prices for many crops experienced significant declines in 2014, 2015 and 2016, we do not believe that such declines represent a trend that will continue over the long term. Rather, we believe that long-term growth trends in global population, GDP per capita and farmland productivity will result in increased revenues per acre for primary crops over time.

Demand

~~Demand~~

WeNotwithstanding any impacts from the ongoing COVID-19 pandemic, we expect that global demand for food, driven primarily by significant increases in the global population and GDP per capita, will continue to be the key driver of farmland values. We further expect that global demand for most crops will continue to grow to keep pace with global population growth, which we anticipate will lead to either higher prices and/or higher yields and, therefore, higher rental rates on our farmland, as well as sustained growth in farmland values over the ~~long-term.~~long term. We also believe that growth in global GDP per capita, particularly in developing nations, will contribute significantly to increasing demand for primary crops. As global GDP per capita increases, the composition of daily caloric intake is expected to shift away from the direct consumption of primary crops toward animal-based proteins, which is expected to result in increased demand for primary crops as feed for livestock. According to the United Nations’ Food and Agriculture Organization (“UN FAO”), these factors are expected to require more than one billion additional tons of global annual grain production by 2050, a ~~45.5%~~43% increase from 2005-2007 levels and more than two times the ~~475~~446 million tons of grain produced in the United States in 2014. Furthermore, we believe that, as GDP per capita grows, a significant portion of additional household income is allocated to food and that once individuals increase consumption of, and spending on, higher quality food, they will strongly resist returning to their former dietary habits, resulting in greater inelasticity in the demand for food. As a result, we believe that, as global demand for food increases, rental rates on our farmland and the value of our farmland will increase over the ~~long-term.~~long term. Global demand for corn and soybeans as inputs in the production of biofuels such as ethanol and soy diesel also could impact the prices of corn and soybeans, which, in the ~~long-term,~~long term, could impact our rental revenues and our results of operations. As described above, the COVID-19 pandemic and efforts to reduce its spread have impacted demand for corn. However, the success of our long-term business strategy is not dependent on growth in demand for biofuels, and we do not believe that demand for corn and soybeans as inputs in the production of biofuels will materially impact our results of operations or the value of our farmland, primarily because we believe that growth in global population and GDP per capita will be more significant drivers of global demand for primary crops over the ~~long-term.~~long term.

Supply

Global supply of agricultural commodities is driven by two primary factors, the number of tillable acres available for crop production and the productivity of the acres being farmed. Although the amount of global cropland in use has gradually increased over time, growth has plateaued over the last 20 years. Cropland area continues to increase in developing countries, but after accounting for expected continuing cropland loss, the UN FAO projects only ~~171~~173 million acres will be added from 2005-2007 to 2050, ~~a 4.3%~~an approximate 5% increase. ~~Furthermore, the National Academy of Sciences of the~~

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~~United States of America estimates that farmland lost to development worldwide is on average 1.8 times more productive than the new farmland coming to production.~~ In comparison, world population is expected to grow over the same period to ~~9.7~~9.1 billion, a nearly 40% increase. According to the World Bank Group arable land per capita has decreased by approximately 50% from 1961 to 2015. While we expect growth in the global supply of arable land, we also expect that landowners will only put that land into production if increases in commodity prices and the value of farmland cause landowners to benefit economically from using the land for farming rather than alternative uses. We also believe that decreases in the amount of arable land in the United States and globally as a result of increasing urbanization will partially offset the impact of additional supply of farmland. Additionally, we believe that farmland lost to urban development disproportionately impacts higher quality farmland. According to a study published in 2017 in the Proceedings of the National Academy of Sciences, urban expansion is expected to take place on cropland that is 1.77 times more productive than the global average. The global supply of food is also impacted by the productivity per acre of tillable land. Historically, productivity gains (measured by average crop yields) have been driven by advances in seed technology, farm equipment, irrigation techniques, improvements in soil health, and chemical fertilizers and pesticides. Furthermore,

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we expect the increasing shortage of water in many irrigated growing regions in the United States and other growing regions around the globe, often as a result of new water restrictions imposed by laws or regulations, to lead to decreased productivity growth on many acres and, in some cases, cause yields to decline on those acres.

Conditions in Our Existing Markets

Our portfolio spans numerous farmland markets and crop types, which provides us broad diversification across conditions in these markets. Across all regions, farmland acquisitions continue to be dominated by buyers who are existing farm owners and operators; institutional and investor acquirors remain a small fraction of the industry. We generally see firm demand for high quality properties across all regions and crop types.

With regard to leasing dynamics, we believe quality farmland in the United States has a near-zero vacancy rate as a result of the supply and demand fundamentals discussed above. Our view is that rental rates for farmland are a function of farmland operators’ view of the long-term profitability of farmland, and that many farm operators will compete for farmland even during periods of decreased profitability due to the scarcity of farmland available to rent. In particular, we believe that due to the relatively high fixed costs associated with farming operations (including equipment, labor and knowledge), many farm operators in some circumstances will rent additional acres of farmland when it becomes available in order to allocate their fixed costs over additional acres. Furthermore, because it is generally customary in the industry to provide the existing tenant with the opportunity to re-lease the land at the end of each lease term, we believe that many farm operators will rent additional land that becomes available in order to control the ability to farm that land in future periods. As a result, in our experience, many farm operators will aggressively pursue rental opportunities in their operable geographic area, even when the farmer anticipates lower current returns or short-term losses.

In our primary ~~row~~ crop farmland, we see flat to modestly ~~lower~~higher rent rates in connection with ~~2017~~2020 lease renewals. This is consistent with, on the one hand, headwinds in primary crop markets and, on the other, tenant demand for leasing high quality farmland. In 2016, we had a higher portion than in 2015 of our fixed cash leases providing for payment of 50% of a year’s rent after harvest rather than substantially all of the lease paid prior to harvest, as compared to 2016. This structure better matches operator cash flows. Given per acre revenue on our primary crop farmland and crop insurance levels, we do not expect that this structure materially changes tenant credit risk. Due to the ~~short term~~short-term nature of most of our primary crop leases, we believe that a recovery of crop prices and farm profitability ~~will~~would be reflected relatively rapidly in our revenues via increases in rent rates. Across specialty crops, operator profitability ~~generally remains healthy.~~is under some pressure. Participating lease structures are common in many specialty crops and base lease rates are consistent with ~~2016.~~ or somewhat lower than 2019.

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Lease Expirations

Farm leases are generally short-term in nature. As of ~~September~~June 30, ~~2017,~~2020, our portfolio had the following lease expirations as a percentage of approximate acres leased and annual minimum cash rents:

($ in thousands)

Year Ending December 31,

Approximate Acres

% of Approximate Acres

Annual Cash Rents

% of Annual Cash Rents

2017 (remaining three months)

30,797

20.0
%

$
6,000

19.3
%
2018

33,978

22.1
%

6,567

21.1
%
2019

57,525

37.4
%

11,045

35.5
%
2020

11,663

7.6
%

4,272

13.7
%
2021

13,184

8.6
%

2,329

7.5
%
2022 and beyond

6,734

4.3
%

860

2.9
%

153,881

100.0
%

$
31,073

100.0
%


($ in thousands)
Year Ending December 31,	Approximate Acres	% of Approximate Acres		Annual Rents		% of Annual Cash Rents
2020 (remaining six months)	44,940	28.8	%	$	10,431	19.2	%
2021	43,889	28.1	%		9,113	16.8	%
2022	30,480	19.5	%		6,277	11.6	%
2023	14,126	9.1	%		2,671	4.9	%
2024	10,933	7.0	%		727	1.3	%
2025 and beyond	11,613	7.5	%		25,033	46.1	%
	155,981	100.0	%	$	54,252	100.0	%

As of ~~September~~June 30, ~~2017,~~2020, we had ~~72,681~~approximately 48,000 acres for which lease payments are at least partially based on a percentage of farming revenues and ~~716~~3,676 acres that are leased to our TRS. Acres leased to our TRS ~~which~~ are not included in the table above. From time to time, we may enter into recreational leases on our farms. ~~We expect market rents in the coming year to be flat.~~ Since lease renewal periods are exercisable at the option of the lessee, the preceding table presents future lease expirations during the initial lease term only.

Rental Revenues

Our revenues are primarily generated from renting farmland to operators of farming businesses. Our leases have terms ranging from one to ~~ten years.~~25 years, with three years being the most common. Although the majority of our leases do not provide

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the tenant with a contractual right to renew the lease upon its expiration, we believe it is customary to provide the existing tenant with the opportunity to renew the lease, subject to any increase in the rental rate that we may establish. If the tenant elects not to renew the lease at the end of the lease term, the land will be offered to a new tenant.

The leases for the majority of the properties in our portfolio provide that tenants must pay us at least 50% ~~(and often 100%)~~ of the annual rent in advance of each spring planting season. As a result, we collect a significant portion of total annual rents in the first calendar quarter of each year. We believe our use of leases pursuant to which at least 50% of the annual rent is payable in advance of each spring planting season mitigates the tenant credit risk associated with the variability of farming operations that could be adversely impacted by poor crop yields, weather conditions, mismanagement, undercapitalization or other factors affecting our tenants. Tenant credit risk is further mitigated by requiring that our tenants maintain crop insurance and by our claim on a portion of the related proceeds, if any, as well as by our security interest in the growing crop. Prior to acquiring farmland property, we take into consideration the competitiveness of the local farm-operator tenant environment in order to enhance our ability to quickly replace a tenant that is unwilling to renew a lease or is unable to pay a rent payment when it is due. Some of our leases provide for a reimbursement of the property taxes we pay. We

As described above, we are assessing the impact, if any, on our ability to collect rent from our tenants as a result of the COVID-19 pandemic. At this time, we expect ~~that, going forward, a progressively smaller percentage of~~to continue to be able to collect rents in full and on time. However, the situation is continuing to develop, and we are assessing the potential impact on our ~~leases will provide for such a reimbursement.~~tenants on an ongoing basis.

Expenses

Substantially all of our farm leases are structured in such a way that we are responsible for major maintenance, certain insurance and taxes (which are sometimes reimbursed to us by our tenants), while our tenant is responsible for minor maintenance, water usage and all of the additional input costs related to farming operations on the property, such as seed, fertilizer, labor and fuel. We expect that substantially all of the leases for farmland we acquire in the future will continue to be structured in a manner consistent with substantially all of our existing leases. As the owner of the land, we generally only bear costs related to major capital improvements permanently attached to the property, such as irrigation systems, drainage tile, grain storage facilities, permanent plantings or other physical structures customary for farms. In cases where capital expenditures are necessary, we typically seek to offset, over a period of multiple years, the costs of such capital expenditures by increasing rental rates. We also incur the costs associated with maintaining liability and casualty insurance.

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We incur costs associated with running a public company, including, among others, costs associated with employing our personnel and compliance costs. We incur costs associated with due diligence and acquisitions, including, among others, travel expenses, consulting fees and legal and accounting fees. We also incur costs associated with managing our farmland. The management of our farmland, generally, is not labor or capital intensive because farmland generally has minimal physical structures that require routine inspection and maintenance, and our leases, generally, are structured to require the tenant to pay many of the costs associated with the property. Furthermore, we believe that our platform is scalable, and we do not expect the expenses associated with managing our portfolio of farmland to increase significantly as the number of farm properties we own increases over time. ~~Rather, we expect that as we continue to add additional farmland to our portfolio, we will be able to achieve economies of scale, which will enable us to reduce our operating costs per acre~~.

Crop Prices

~~Our exposure to~~We believe short-term crop price ~~declines is~~changes have had little effect historically on farmland values. They also have a limited impact on our rental revenue, as most of our leases ~~do not factor in per bushel prices and instead are set on~~provide for a fixed cash rental rate, ~~per acre basis. This~~a common approach ~~is common throughout agriculture~~in agricultural markets, especially with respect to row crops, for several reasons. This approach recognizes that the value of leased land to a tenant is more closely linked to the total revenue produced on the property, which is driven by crop yield and crop price. This approach simplifies the administrative requirements for the landlord and the tenant significantly. This approach supports the tenants’ desire to maintain access to their leased farms, which are in short supply, a concept expanded upon below, by providing the landlord consistent rents. Crop price exposure is also limited because tenants also benefit from the fundamental revenue hedging that occurs when large ~~crops~~crop yields mitigate the effect of lower crop ~~prices triggered by their large crop.~~prices. Similarly, ~~smaller crops~~lower crop yields have a tendency to ~~increase the~~trigger higher crop prices ~~triggered~~ and help increase revenue even when confronted by lower crop yields. Such hedging effect also limits the impact of short-term crop price changes on revenues generated by leases with a ~~smaller crop.~~bonus component based on farm revenues. Further risk mitigation is available to tenants, and indirectly to

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us, via crop insurance and hedging programs implemented by tenants. Our TRS also takes advantage of ~~this~~these risk mitigation programs and ~~strategies also.~~strategies.

We believe quality farmland in the United States has a near-zero vacancy rate as a result of ~~the~~ supply and demand fundamentals. Our view is that rental rates for farmland are a function of farmland operators’ view of the long-term profitability of farmland and that many farm operators will compete for farmland even during periods of decreased profitability due to the scarcity of farmland available to rent. In particular, we believe that due to the relatively high fixed costs associated with farming operations (including equipment, labor and knowledge), many farm operators in some circumstances will rent additional acres of farmland when ~~it becomes~~they become available in order to allocate their fixed costs over additional acres. Furthermore, because it is generally customary in the industry to provide the existing tenant with the opportunity to re-lease the land at the end of each lease term, we believe that many farm operators will rent additional land that becomes available in order to control the ability to farm that land in future periods. As a result, in our experience, many farm operators will aggressively pursue rental opportunities in their operable geography, even when the farmer anticipates lower current returns or short-term losses.

The value of a crop is affected by many factors that can differ on a yearly basis. Weather conditions and crop ~~disease~~diseases in major crop production regions worldwide ~~creates~~create a significant risk of price volatility, which may either increase or decrease the value of the crops that our tenants produce each year. Other material factors adding to the volatility of crop prices are changes in government regulations and policy, fluctuations in global prosperity, fluctuations in foreign trade and export markets and eruptions of military conflicts or civil unrest. Prices for many primary crops, particularly corn, experienced meaningful declines in 2014 and 2015, and ~~2016.~~have still not recovered to their pre-2014 prices. Furthermore, the COVID-19 pandemic has impacted crop prices, including corn and soybeans. We do not believe such declines represent a trend over the long term. Rather, we believe those declines represented a combination of correction to historical norms (adjusted for inflation) and high yields ~~induced by farmer planting decisions and unusually~~due to favorable weather ~~patterns.~~patterns, and in the case of recent declines in crop prices, a reaction to the decline in economic activity as a result of the pandemic. We expect that continued long-term growth trends in global population and GDP per capita will result in increased ~~prices~~revenue per acre for primary crops over time. We expect pricing across specialty crops to generally remain ~~firm relative~~soft in 2020, and possibly 2021, until the economic disruptions due to ~~2016 as U.S. and global consumer demand remains strong and supply is broadly balanced to demand.~~the COVID-19 pandemic are behind us. Although annual rental payments under the majority of our leases are not based expressly on the quality or profitability of our ~~tenants'~~tenants’ harvests, any of these factors could adversely affect our ~~tenants'~~tenants’ ability to meet their obligations to us and our ability to lease or re-lease properties on favorable terms.

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Interest Rates

We expect that future changes in interest rates will impact our overall operating performance by, among other things, ~~increasing~~affecting our borrowing costs. While we may seek to manage our exposure to future changes in rates through interest rate swap agreements or interest rate caps, portions of our overall outstanding debt will likely remain at floating rates. In addition, a sustained material increase in interest rates may cause farmland prices to decline if the rise in real interest rates (which is defined as nominal interest rates minus the inflation rate) is not accompanied by rises in the general levels of inflation. However, our business model anticipates that over time the value of our farmland will increase, as it has in the past, at a rate that is equal to or greater than the rate of inflation, which may in part offset the impact of rising interest rates on the value of our farmland, but there can be no guarantee that this appreciation will occur to the extent that we anticipate or at all.

International Trade

Following the trade tensions between China and the U.S. that started developing in 2018, the two countries reached a "Phase 1" trade deal in late 2019. At this point, we believe that China and the U.S. will endeavor to largely comply with the Phase 1 trade deal, leading to increased purchases by China of many U.S. agricultural exports. However, the economic and political disruptions introduced by the COVID-19 pandemic make it difficult to predict whether the Phase 1 agreement will be maintained.

The short to medium-term impact on the Company’s financial performance due to a trade conflict may be mitigated by the multi-year term structure of many of our leases and limited to contingent rent components. However, a long-term trade conflict would likely impact our rents and thereby negatively impact our business. Additionally, a long-term trade

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conflict would likely motivate non-US. agricultural businesses to strengthen their logistics and trade infrastructure. This may also lead to the weakening of U.S. agricultural trade relationships that would be difficult for the United States to reestablish in the future.

Critical Accounting Policies and Estimates

Except as set forth in Note 1 to the consolidated financial statements included in this Quarterly Report on Form 10-Q and the de-designation of our original interest rate swap and designation of our new swap, there have been no changes to our critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

New or Revised Accounting Standards

For a summary of the new or revised accounting standards, please refer to “Note 1 – Organization and Significant Accounting Policies” within the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q.

Results of Operations

Comparison of the three months ended ~~September~~June 30, ~~2017~~2020 to the three months ended ~~September~~June 30, ~~2016~~2019


	For the three months ended September 30,

									For the three months ended June 30,
($ in thousands)	2017		2016		$ Change		% Change		2020		2019		$ Change		% Change
OPERATING REVENUES:
Rental income	$	11,107	$	6,164	$	4,943	80	%	$	9,141	$	9,698	$	(557)	(5.7)	%
Tenant reimbursements		474		112		362	323	%		883		466		417	89.5	%
Crop sales										362		484		(122)	(25.2)	%
Other revenue		465		670		(205)	(31)	%		131		300		(169)	(56.3)	%
Total operating revenues		12,046		6,946		5,100	73	%		10,517		10,948		(431)	(3.9)	%


OPERATING EXPENSES
Depreciation, depletion and amortization		2,107		419		1,688	403	%		2,003		2,092		(89)	(4.3)	%
Property operating expenses		1,400		548		852	155	%		1,818		2,188		(370)	(16.9)	%
Cost of goods sold										745		—		745	NM
Acquisition and due diligence costs		180		1,712		(1,532)	(89)	%		11		1		10	NM
General and administrative expenses		1,707		1,587		120	8	%		1,402		1,419		(17)	(1.2)	%
Legal and accounting		450		330		120	36	%		848		1,293		(445)	(34.4)	%
Other operating expenses		88		160		(72)	(45)	%		1		1		—	NM
Total operating expenses		5,932		4,756		1,176	25	%		6,828		6,994		(166)	(2.4)	%
OPERATING INCOME		6,114		2,190		3,924	179	%		3,689		3,954		(265)	(6.7)	%


OTHER (INCOME) EXPENSE:
Other income		(135)		(72)		(63)	88	%		(33)		(111)		78	(70.3)	%
(Gain) loss on disposition of assets		(44)		—		(44)	NM			(917)		(7,491)		6,574	(87.8)	%
Interest expense		3,683		2,065		1,618	78	%		4,467		5,031		(564)	(11.2)	%
Total other expense		3,504		1,993		1,511	76	%		3,517		(2,571)		6,088	NM


Net income before income tax expense		2,610		197		2,413	1,225	%		172		6,525		(6,353)	NM


Income tax expense		—		97		(97)	NM			—		—		—	NM


NET INCOME	$	2,610	$	100	$	2,510	2,510	%	$	172	$	6,525	$	(6,353)	(97.4)	%

NM=Not Meaningful

~~Table of Contents~~

Our rental income for the ~~period presented~~three months ended June 30, 2020 was impacted partially by the ~~two acquisitions completed~~three farm dispositions during the three months ended June 30, 2020. Additionally, upon renewal in ~~the last quarter~~2020, a number of ~~2016 and,~~leases transitioned to ~~a greater extent, the 15 acquisitions and the AFCO Mergers completed in the first three quarters~~higher percentages of ~~2017.~~variable rents relative to fixed rents, which variable rents have yet to be received. To highlight the effect of changes due to acquisitions and dispositions, we have separately discussed the rental income for the same-property portfolio, which includes only properties owned and operated for the entirety of both periods presented. The

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same-property portfolio for the ~~periods presented~~three months ended June 30, 2020 includes ~~110,828~~approximately 148,500 acres, ~~which represents 72%~~representing 95% of our current portfolio on an acreage basis.

~~Total~~On a same-property basis, total rental income ~~under cash leases for the same-property portfolio~~ decreased ~~to $4.9~~$0.3 million, or 3.7%, for the three months ended ~~September~~June 30, ~~2017, from $5.9 million for~~2020 as compared to the three months ended ~~September~~June 30, 2016, as a result of average annual rent for the same-property portfolio decreasing year over year to $165 per acre in the third quarter of 2017 from $199 in the comparative three-month period ended September 30, 2016. In the fourth quarter of 2016 we recognized $6.5 million in revenue in connection with the termination of certain leases. Had we recognized such revenue through the remaining life of the cancelled leases, the average annual rent for the same property portfolio would have decreased from $199 in the third quarter of 2016 to $187 in the third quarter of 2017. This decrease is primarily due to the fact that more of our leases now require the tenant to pay a portion of its rent through crop share payments rather than through fixed cash rental payments. Under GAAP, we cannot recognize crop share revenue until our tenant has a contractual agreement to sell the crop, therefore such revenue is not included in our results of operations for the three months ended September 30, 2017.2019. Management does not believe that same-property rent comparisons for periods shorter than the full year are necessarily indicative of the expected full year comparison because the majority of bonus and crop share rent payments are expected to be received in the fourth quarter.

~~Total rental~~Rental income ~~increased $4.9~~decreased $0.6 million, or ~~80%~~5.7%, for the three months ended ~~September~~June 30, ~~2017,~~2020 as compared to the three months ended ~~September~~June 30, ~~2016,~~2019, resulting from ~~the completion of 17 acquisitions~~asset dispositions and the AFCO Mergers after September 30, 2016. For the three months ended September 30, 2017, the average annual cash rent for the entire portfolio remained consistent at $202 per acre compared to the same periodtiming of crop share revenue recognition in ~~2016.~~connection with certain permanent crops.

Revenues recognized from tenant reimbursement of property taxes increased ~~323%.~~$0.4 million, or 89.5%, during the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. This increase is the result of ~~an increased number~~higher tenant reimbursement revenues on properties in the state of ~~leases requiring reimbursement of property taxes to the Company by the tenant.~~California.

~~Other revenues~~Crop sales totaled ~~$0.5~~$0.4 million during the three months ended ~~September~~June 30, ~~2017,~~2020 as compared to ~~$0.7~~$0.5 million in the comparative three-month period ended ~~September~~June 30, ~~2016.~~2019. The ~~$0.5~~slight decrease in crop sales is due to timing.

Other revenues totaled $0.1 million ~~recognized in~~during the three months ended ~~September~~June 30, ~~2017 consisted of $0.2 million realized on crop sales from our farming operation in the TRS, in addition~~2020 as compared to $0.3 million ~~earned on interest and amortization of net loan fees from notes receivable compared to $0.6 million and $0.1 million, respectively, recognized~~ in the ~~three months~~comparative three-month period ended ~~September~~June 30, ~~2016. Mortgage notes receivable under the FPI Loan Program totaled $7.0 million as of September 30, 2017 compared to $2.9 million as of September 30, 2016.~~2019.

Depreciation, depletion and amortization expense ~~increased $1.7~~decreased $0.1 million, or ~~403%~~4.3%, for the three months ended ~~September~~June 30, ~~2017,~~2020 as compared to the three months ended ~~September~~June 30, ~~2016,~~2019 as a result of ~~acquiring approximately $0.3 million~~the decrease of the amortization of in-place leases acquired as part of the AFCO acquisition that were fully amortized in depreciable assets in the last quarter of 2016 and an additional $84.6 million in depreciable assets during the first three quarters of 2017. This change was primarily driven by an increased investment in permanent crops. Additionally, approximately $0.7 million was invested in property improvements during the last quarter of 2016 along with $11.7 million in property improvements during the first three quarters of 2017.prior periods.

Property operating expenses ~~increased $0.9~~decreased $0.4 million, or ~~155%~~16.9%, for the three months ended ~~September~~June 30, ~~2017,~~2020 as compared to the three months ended ~~September~~June 30, ~~2016, primarily related~~2019. The decrease is largely due to ~~property taxes attributable to properties acquired since September~~lower travel expense and bad debt expense.

General and administrative expenses remained comparable for the three months ended June 30, ~~2016.~~2020 and June 30, 2019.

~~Acquisition and due diligence costs totaled $0.2~~Cost of goods sold increased $0.7 million for the three months ended ~~September~~June 30, 2017 as compared to $1.7 million recognized in the same period of the prior year. Prior year expenses largely related to cost associated with the acquisition of AFCO. The acquisition and due diligence costs recognized in the three months ended September 30, 2017 primarily consisted of $0.1 million of continued expense related to the AFCO Mergers as well as $0.1 million of land acquisition costs related to potential acquisitions that were not pursued further.

~~Table of Contents~~

~~General and administrative expenses increased $0.1 million, or 8%, for the three months ended September 30, 2017,~~2020 as compared to the three months ended ~~September~~June 30, ~~2016. The increase in general and administrative expenses~~2019. This was largely a result of increased costs related to our continued growth. During the three months ended September 30, 2017, employee compensation expenses increased $0.1 million which includes an increase in employee benefits expenses, as compared with the same period in 2016, due to ~~an increase in~~ the ~~number~~timing of ~~employees from 15 as of September 30, 2016 to 16 as of September 30, 2017.~~ citrus sales year over year.

Legal and accounting expenses ~~increased $0.1~~decreased $0.4 million, or ~~36%~~34.4%, for the three months ended ~~September~~June 30, ~~2017,~~2020 as compared to the three months ended ~~September~~June 30, ~~2016,~~2019, which was primarily ~~as a~~the result of lower legal fees incurred during Q2 2020 in relation to a “short and distort” attack against the ~~continued growth~~Company conducted by anonymous parties, including Quinton Mathews, under the pseudonym Rota Fortunae, as discussed below under Part II Item 1 “Legal Proceedings,” and his co-conspirators. The Company is pursuing litigation against Quinton Mathews and his co-conspirators (collectively “Wheel of ~~our portfolio~~Fortune”), and ~~general corporate matters.~~is defending stockholder class action lawsuits that are related to the claims made by Wheel of Fortune. The Company believes that a substantial portion of the costs associated with the stockholder class action litigation will be covered by insurance, but the Company can provide no assurances that costs willnot ultimately be in excess of the $0.35 million that will be covered by insurance. The Company does not expect insurance proceeds to cover a substantial portion of the costs related to the lawsuit it filed against Wheel of Fortune.

Other ~~income increased $0.1~~operating expenses were $0.0 million ~~or 88%,~~ for the three months ended ~~September~~June 30, ~~2017,~~2020 and June 30, 2019.

Other income decreased $0.1 million for the three months ended June 30, 2020 as compared to the three months ended ~~September~~June 30, ~~2016,~~2019, resulting primarily ~~due to higher interest income~~from losses in commodity futures.

Gain on ~~bank accounts.~~

~~Interest expense increased $1.6~~disposition of assets decreased $6.5 million ~~or 78%,~~ for the three months ended ~~September~~June 30, ~~2017,~~2020 as compared to the three months ended ~~September~~June 30, ~~2016.~~2019 due primarly to the gain on sale of properties during Q2 2019 as opposed to smaller dispositions occurring in Q2 2020. Additionally, during the three months ended June 30, 2020 the Company recorded disposals of storm-damaged pivots.

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Interest expense decreased $0.6 million, or 11.2%, for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019. This ~~increase~~decrease is the result of ~~an increase~~a decrease in ~~our~~interest rates on floating rate debt and the lower outstanding ~~borrowings from $303.3 million as~~balance of ~~September 30, 2016 to $465.8 million as~~debt.

Results of September 30, 2017 and increased interest rates. The increase in our total borrowings was primarily driven by the use of debt financing to acquire new properties as well as the debt assumed in the AFCO Mergers.Operations

Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 to the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2019


	For the Nine Months Ended September 30,

									For the Six Months Ended June 30,
($ in thousands)	2017		2016		$ Change		% Change		2020		2019		$ Change		% Change
OPERATING REVENUES:
Rental income	$	28,381	$	16,462	$	11,919	72	%	$	19,215	$	19,369	$	(154)	(0.8)	%
Tenant reimbursements		1,230		276		954	346	%		1,744		934		810	86.7	%
Crop sales										697		933		(236)	(25.3)	%
Other revenue		1,044		931		113	12	%		512		600		(88)	(14.7)	%
Total operating revenues		30,655		17,669		12,986	73	%		22,168		21,836		332	1.5	%


OPERATING EXPENSES
Depreciation, depletion and amortization		5,651		1,102		4,549	413	%		4,003		4,207		(204)	(4.8)	%
Property operating expenses		4,399		1,529		2,870	188	%		3,679		4,120		(441)	(10.7)	%
Cost of goods sold										1,311		223		1,088	487.9	%
Acquisition and due diligence costs		878		1,818		(940)	(52)	%		11		1		10	NM
General and administrative expenses		5,840		4,770		1,070	22	%		2,854		2,793		61	2.2	%
Legal and accounting		1,151		882		269	30	%		1,330		2,016		(686)	(34.0)	%
Other operating expenses		363		248		115	46	%		1		1		—	NM	%
Total operating expenses		18,282		10,349		7,933	77	%		13,189		13,361		(172)	(1.3)	%
OPERATING INCOME		12,373		7,320		5,053	69	%		8,979		8,475		504	5.9	%

OTHER (INCOME) EXPENSE:

OTHER EXPENSE:
Other income		(157)		(133)		(24)	18	%		88		(136)		224	NM
(Gain) loss on disposition of assets		48		—		48	NM			(831)		(7,909)		7,078	NM
Interest expense		9,852		7,869		1,983	25	%		9,130		9,987		(857)	(8.6)	%
Total other expense		9,743		7,736		2,007	26	%		8,387		1,942		6,445	NM


Net income (loss) before income tax expense		2,630		(416)		3,046	(732)	%		592		6,533		(5,941)	(90.9)	%


Income tax expense		—		97		(97)	NM			—		—		—	NM

NET INCOME (LOSS)	$	2,630	$	(513)	$	3,143	(613)	%

NET INCOME									$	592	$	6,533	$	(5,941)	(90.9)	%

NM=Not Meaningful

Our rental income for the ~~period presented~~six months ended June 30, 2020 was impacted partially by the ~~two acquisitions completed~~three farm dispositions during the three months ended June 30, 2020. Additionally, upon renewal in ~~the last quarter~~2020, a number of ~~2016 and,~~leases transitioned to higher percentages of variable rents relative to fixed rents, which variable rents have yet to be received. This decrease was partially offset by a ~~greater extent, the 15 acquisitions and the AFCO Mergers completed~~higher volume of crop share revenue received in ~~the first three quarters of 2017.~~Q1 2020 as compared to Q1 2019. To highlight the effect of changes due to acquisitions and dispositions, we have separately discussed the rental income for the same-property portfolio, which includes only properties owned and operated for the entirety of both periods presented. The same-property portfolio for the ~~periods presented~~six months ended June 30, 2020 includes ~~74,420~~approximately 148,500 acres, ~~which represents 48%~~representing 95% of our current portfolio on an acreage basis.

~~Table of Contents~~

~~Total~~On a same-property basis, total rental income ~~under cash leases~~increased $0.6 million, or 3.2%, for the ~~same-property portfolio decreased to $8.0 million for the nine~~six months ended ~~September~~June 30, ~~2017, from $12.0 million for~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, 2016, as a result of average annual rent for the same-property portfolio decreasing year over year to $145 per acre in the first three quarters of 2017 from $215 in the comparative nine-month period ended September 30, 2016. In the fourth quarter of 2016 we recognized $6.5 million in revenue in connection with the termination of certain leases. Had we recognized such revenue through the remaining life of the cancelled leases, the average annual rent for the same property portfolio would have decreased from $215 in the first three quarters of 2016 to $179 in the first three quarters of 2017. This decrease is primarily due to the fact that more of our leases now require the tenant to pay a portion of its rent through crop share payments rather than through fixed cash rental payments. Under GAAP, we cannot recognize crop share revenue until our tenant has a contractual agreement to sell the crop, therefore such revenue is not included in our results of operations for the nine months ended September 30, 2017.2019. Management does not believe that same-property rent comparisons for periods shorter than the full year are necessarily indicative of the expected full year comparison because the majority of bonus and crop share rent payments are expected to be received in the fourth quarter.

~~Total rental~~38

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Rental income ~~increased $11.9~~decreased $0.2 million, or ~~72%~~0.8%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, resulting ~~entirely~~ from ~~the completion of 17 acquisitions~~asset dispositions and the AFCO Mergers after September 30, 2016. For the nine months ended September 30, 2017, the average annual cash rent for the entire portfolio remained consistent at $202 per acre compared to the same periodtiming of crop share revenue recognition in ~~2016.~~connection with certain permanent crops.

Revenues recognized from tenant reimbursement of property taxes increased ~~346%.~~$0.8 million, or 86.7%, during the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. This increase is the result of ~~an increased number~~higher tenant reimbursement revenues on properties in the state of ~~leases requiring reimbursement of property taxes~~California.

Crop sales decreased $0.2 million, or 25.3%, during the six months ended June 30, 2020 compared to the ~~Company by~~six-months ended June 30, 2019 due to timing of crop sales revenue recognition throughout the ~~tenant~~.year.

Other revenues totaled ~~$1.0~~$0.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to ~~$0.9~~$0.6 million in the comparative ~~nine-month~~six-month period ended ~~September~~June 30, 2016. The $1.0 million recognized in the nine months ended September 30, 2017 consisted of $0.6 million realized on crop sales from our farming operation in the TRS, in addition to $0.4 million earned on interest and amortization of net loan fees from notes receivable compared to $0.8 million and $0.1 million, respectively, recognized in the nine months ended September 30, 2016. Mortgage notes receivable under the FPI Loan Program totaled $7.0 million as of September 30, 2017 compared to $2.9 million as of September 30, 2016.2019.

Depreciation, depletion and amortization expense ~~increased $4.5~~decreased $0.2 million, or ~~413%~~4.8%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019 as a result of ~~acquiring approximately $0.3 million~~the decrease of the amortization of in-place leases acquired as part of the AFCO acquisition that were fully amortized in depreciable assets in the last quarter of 2016 and an additional $84.6 million in depreciable assets during the first three quarters of 2017. This change was primarily driven by an increased investment in permanent crops.Additionally, approximately $0.7 million was invested in property improvements during the last quarter of 2016 along with $11.7 million in property improvements during the first three quarters of 2017. prior periods.

Property operating expenses ~~increased $2.9~~decreased $0.4 million, or ~~188%~~10.7%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016, primarily related~~2019. The decrease is largely due to ~~property taxes attributable to properties acquired since September 30, 2016. The increase~~higher travel expense and bad debt expense in property operating expenses also includes an increase in expense relating to the Prudential Agreements assumed in the AFCO Mergers and subsequently terminated as of March 31, 2017, totaling $0.7 million2019 compared to ~~no such costs in the same period in 2016.~~2020.

Acquisition and due diligence costs totaled $0.9 million for the nine months ended September 30, 2017 as compared to $1.8 million recognized in the same period of the prior year. Prior year costs largely related to the acquisition of AFCO. The acquisition and due diligence costs recognized in the nine months ended September 30, 2017 primarily consisted of $0.5 million of costs related to the AFCO Mergers, $0.2 million of land acquisition costs related to potential acquisitions that were not pursued further, and $0.2 million of miscellaneous acquisition and due diligence expenses.

General and administrative expenses remained comparable for the six months ended June 30, 2020 and June 30, 2019.

Cost of goods sold increased $1.1 million, or ~~22%~~487.9%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016. The increase in general and administrative expenses~~2019. This was largely a result of increased costs related to our continued growth. During the nine months ended September 30, 2017, employee compensation expenses increased $0.9 million which includes an increase in employee benefits expenses, as compared with the same period in 2016, due to ~~an increase in~~ the ~~number~~timing of employees from 15 as of September 30, 2016 to 16 as of September 30, 2017. During the nine months ended September 30, 2017, our public company costs increased due to increased investor relations, regulatory, compliance activity~~and general and administrative activity. This activity~~

~~Table of Contents~~

~~amounted to an increase of $0.2 million during the nine months ended September 30, 2017 compared to the same period in 2016.~~citrus sales year over year.

Legal and accounting expenses ~~increased $0.3~~decreased $0.7 million, or ~~30%~~34.0%, for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, which was primarily ~~as a~~the result of ~~increased~~lower legal fees incurred during 2020 in relation to a “short and distort” attack against the Company conducted by anonymous parties, including Quinton Mathews, under the pseudonym Rota Fortunae, as discussed below under Part II Item 1 “Legal Proceedings.” The Company is pursuing litigation against Quinton Mathews’s co-conspirators, and is defending stockholder class action lawsuits that are related to the claims made by Wheel of Fortune. The Company believes that a substantial portion of the costs associated with the stockholder class action litigation will be covered by insurance, but the Company can provide no assurances that costs will not ultimately be in excess of the $0.35 million that will be covered by insurance. The Company does not expect insurance proceeds to cover a substantial portion of the costs related to ~~transactions, including~~ the ~~AFCO Mergers, the continued growth~~lawsuit it filed against Wheel of ~~our portfolio and general corporate matters.~~Fortune.

Other operating expenses ~~totaling $0.4~~were $0.0 million ~~during~~for the ~~nine~~six months ended ~~September~~June 30, 2017 is related to cost of crop sales on the $0.6 million of revenue recognized on crop sales from our TRS’s farming operations, compared to other operating expenses totaling $0.2 million during the nine months ended September2020 and June 30, ~~2016 related to cost of crop sales on the $0.8 million of revenue recognized on crop sales in that period.~~2019.

Other income ~~increased $0.02~~decreased $0.2 million ~~or 18%,~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, resulting primarily ~~due to higher interest~~from losses in commodity futures.

Gain on ~~bank accounts.~~

~~Interest expense increased $2.0~~disposition of assets decreased $7.1 million ~~or 25%,~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2019 due primarly to the gain on sale of properties during 2019 as opposed to smaller dispositions occurring in 2020. Additionally, during the six months ended June 30, 2020, the Company recorded disposals of storm-damaged pivots.

Interest expense decreased $0.9 million, or 8.6%, for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. This ~~increase resulted from an increase~~decrease is the result of a decrease in ~~our outstanding borrowings from $303.3 million as of September 30, 2016 to $465.8 million as of September 30, 2017 and increased~~ interest rates ~~which was offset by~~on floating rate debt and the ~~absence~~lower outstanding balance of ~~additional interest expense during the nine months ended September 30, 2017 related to interest and amortization~~debt.

Table of deferred loan fees associated with the $53.0 million Bridge Loan compared to $2.4 million during the nine months ended September 30, 2016. The increase in our total borrowings was primarily driven by the use of debt financing to acquire new properties as well as the debt assumed in the AFCO Mergers. Contents

Liquidity and Capital Resources

Overview

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay any outstanding borrowings, fund and maintain our assets and operations, make distributions to our stockholders and ~~to Common~~ unitholders and other general business needs.

Our short-term liquidity requirements consist primarily of funds necessary to acquire additional farmland, to pay legal fees in relation to the stockholder class action litigation and the Rota Fortunae litigation in excess of the Company’s insurance coverage and make other investments consistent with our investment ~~strategy,~~ make principal and interest payments on outstanding borrowings, make distributions on our Series A preferred units and Series B Participating Preferred Stock and make distributions necessary to qualify for taxation as a REIT and fund our operations. Our sources of funds primarily will be cash on hand, operating cash flows, proceeds from asset disposals and borrowings from prospective lenders. ~~As at September 30, 2017 the Company had $129.3 million in cash on hand.~~

~~During the remainder~~Our long-term liquidity needs consist primarily of ~~2017, $54.9 million of our borrowings will mature. Any cash that we use to satisfy our outstanding debt obligations will reduce the amounts available~~funds necessary to acquire additional ~~farms,~~farmland, make other investments and certain long-term capital expenditures, make principal and interest payments on outstanding borrowings and make distributions necessary to qualify for taxation as a REIT. We expect to meet our long-term liquidity requirements through various sources of capital, including future equity issuances (including issuances of Common units), net cash provided by operations, long-term mortgage indebtedness and other secured and unsecured borrowings.

We manage our liquidity position and expected liquidity needs taking into consideration current cash balances and reasonably expected cash receipts. When material debt repayments are due within the following 12 months, we work with current and new lenders and other potential sources of capital to ensure that all our obligations are timely satisfied. Our ability to incur additional debt will depend on a number of factors, including our degree of leverage, the value of our unencumbered assets, compliance with the covenants under our existing debt agreements, borrowing restrictions that may be imposed by lenders and the conditions of debt markets. Our ability to access the equity capital markets will depend on a number of factors as well, including general market conditions for REITs and market perceptions about us.

On April 30, 2020, the Company entered into amendments to bonds 8A and 9 with Farmer Mac to extend the maturities of such bonds, under which ~~could adversely affect~~there is a total of $48.3 million outstanding, from June and July 2020 to October 31, 2020. We are working with one of our ~~growth prospects. As~~existing lenders to refinance Farmer Mac bonds 8A and 9, and we anticipated having the refinancing finalized during the second quarter of 2020. However the lender informed us that, as a result of travel restrictions implemented to contain the spread of the pandemic, they would be unable to meet the refinancing deadlines of June and July 2020. In order to avoid repayment issues, we were able to secure from Farmer Mac an extension of the due date of ~~this report, we have $3.1 million in capacity available under~~ the ~~Farm Credit of Central Florida Mortgage Note (as defined below). To date, we have repayed all 2017 maturities under~~expiring debt to October 31, 2020, and the ~~Famer Mac Facility using cash from the Series B Participating Preferred Stock offering.~~ ~~We have signed a non-binding term sheet with a major financial institution for a debt facility, which we intend~~refinancing lender expects to ~~use~~be able to refinance the debt due to mature in 2017. The Company has also signed a non-binding term sheet for a debt facility with a major financial institution to finance a portion of the California property acquisition committed to during the quarter.meet that deadline. However, we can provide no assurances that we will be able to ~~enter into a binding agreement~~obtain additional extensions of these near-term maturities if travel restrictions are put back in place. If we are unable to refinance ~~or secure the~~this debt, ~~on similar terms or at all and thus alternative sources of capital~~we may be ~~necessary.~~ Asrequired to dispose of ~~September~~ farms to repay it at maturity.

During the six months ended June 30, ~~2017,~~2020, we ~~had $465.8~~used $3.2 million to repurchase an aggregate of ~~debt, which may expose us~~494,661 shares of common stock and $3.1 million to ~~the risk~~repurchase an aggregate of ~~default under our debt obligations, restrict our operations and our ability to grow our business and revenues and restrict our ability to pay distributions to our stockholders.~~

~~On August 17, 2017, we completed an underwritten public offering of 6,037,500~~140,189 shares of Series B Participating ~~Preferred Stock which generated net proceeds~~preferred stock.We currently have authority to repurchase up to an aggregate of $144.5 million. We intend to use the proceeds from the offering to partially fund our acquisition of the California properties discussed under “—Recent Developments—Acquisitions under Contract” and for future farmland acquistions$44.7 million in ~~accordance with our investment strategy and for general corporate~~

~~Table of Contents~~

~~purposes. The Company has also used part of the proceeds to make initial debt repayments for maturing bonds under the Farmer Mac Facility,~~ we have signed a non-binding term sheet with a major financial institution for a debt facility, which we intend to use to refinance the remaining debt due to mature in 2017 and to replace cash used from the Series B Participating Preferred Stock offering initially used to make bond repayments.

In addition to utilizing current and any future available borrowings, we entered into equity distribution agreements on September 15, 2015 in connection with the ATM Program, under which the Company has issued and sold from time to time, through the sales agents,additional shares of our common stock ~~having an aggregate gross sales price~~or shares of upour Series B participating preferred Stock.

Consolidated Indebtedness

For further details relating to ~~$25 million. Through September 30, 2017, the Company has generated $11.1 million in net cash proceeds under the ATM Program which is intended~~our consolidated indebtness, refer to ~~provide cost-effective financing alternatives~~“Note 7 – Mortgage Notes, Line of Credit and Bonds Payable” in the ~~capital markets. We intend to use the net proceeds from the ATM Program, if any, for future farmland acquisitions~~financial statements included elsewhere in accordance with our investment strategy and for general corporate purposes, which may also include originating loans to farmers under our loan program. We only intend to utilize the ATM Program if the market price of our common stock reaches levels which are deemed appropriate by our board of directors.

~~Consolidated Indebtedness~~

~~Farmer Mac Facility~~

We are party to the Amended and Restated Bond Purchase Agreement, dated as of March 1, 2015 and amended as of June 2, 2015 and August 3, 2015 (the “Bond Purchase Agreement”), with Federal Agricultural Mortgage Corporation (“Farmer Mac”) and Farmer Mac Mortgage Securities Corporation, a wholly owned subsidiary of Farmer Mac, as bond purchaser (the “Purchaser”), regarding a secured note purchase facility (the “Farmer Mac Facility”) that has a maximum borrowing capacity of $165.0 million. Pursuant to the Bond Purchase Agreement, the Operating Partnership may, from time to time, issue one or more bonds to the Purchaser that will be secured by pools of mortgage loans, which will, in turn, be secured by first liens on agricultural real estate owned by us. The mortgage loans may have effective loan-to-value of up to 60%. Prepayment of each bond issuance is not permitted unless otherwise agreed upon by all parties to the Bond Purchase Agreement.

~~On September 5, 2017 the Company repaid $20.7 million in principal which was due and payable on that date, as a result this facility has been fully repaid.~~

As of September 30, 2017 and December 31, 2016, we had approximately $134.8 million and approximately $155.5 million outstanding, respectively, under the Farmer Mac Facility. The Farmer Mac Facility is subject to our ongoing compliance with a number of customary affirmative and negative covenants, as well as financial covenants, including: a maximum leverage ratio of not more than 60%; a minimum fixed charge coverage ratio of 1.50 to 1.00; and a minimum tangible net worth requirement. We were in compliance with all applicable covenants at September 30, 2017. On October 23 2017, the Company repaid in full an additional bond with an outstanding principal amount of $5.5 million bringing the total amount of outstanding indebtedness under the Farmer Mac Facility to $129.3 million.

In connection with the Bond Purchase Agreement, on March 1, 2015, we and the Operating Partnership also entered into an amended and restated pledge and security agreement (the “Pledge Agreement”) in favor of the Purchaser and Farmer Mac, pursuant to which we and the Operating Partnership agreed to pledge, as collateral for the Farmer Mac Facility, all of their respective right, title and interest in (i) mortgage loans with a value at least equal to 100% of the aggregate principal amount of the outstanding bond held by the Purchaser and (ii) such additional collateral as necessary to have total collateral with a value at least equal to 110% of the outstanding notes held by the Purchaser. In addition, we agreed to guarantee the full performance of the Operating Partnership’s duties and obligations under the Pledge Agreement.

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~~Bridge Loan~~

On February 29, 2016, two wholly owned subsidiaries of the Operating Partnership (together, the “Bridge Borrower”) entered into a term loan agreement (the “Bridge Loan Agreement”) with MSD FPI Partners, LLC, an affiliate of MSD Partners, L.P. (the “Bridge Lender”), that provided for a loan of $53.0 million (the “Bridge Loan”), the proceeds of which were used primarily to fund the cash portion of the consideration for the acquisition of the Forsythe farms, which was completed on March 2, 2016. During the nine months ended September 30, 2016, we accrued and paid debt issuance costs on the Bridge Loan totaling $173,907, and interest totaling $2,271,867, of which $2,120,000, or 4.0%, of the Bridge Loan’s principal amount was considered additional interest paid on issuance. The Bridge Loan was paid in full, including accrued interest, and without prepayment penalty, on March 29, 2016 using proceeds from the MetLife Term Loans, as described below.

~~MetLife Term Loans~~

On March 29, 2016, five wholly owned subsidiaries of the Operating Partnership entered into a loan agreement (the “First MetLife Loan Agreement” and together with the Second MetLife Loan Agreement, the “MetLife Loan Agreements”) with Metropolitan Life Insurance Company (“MetLife”), which provides for a total of $127.0 million of term loans, comprised of (i) a $90.0 million term loan (“Term Loan 1”), (ii) a $16.0 million term loan (“Term Loan 2”) and (iii) a $21.0 million term loan (“Term Loan 3” and, together with Term Loan 1 and Term Loan 2, the “Initial MetLife Term Loans” and, together with Term Loan 4, Term Loan 5, Term Loan 6 and Term Loan 7 (described below), the “MetLife Term Loans”). The proceeds of the Initial MetLife Term Loans were used to repay existing debt (including amounts outstanding under the Bridge Loan), to acquire additional properties and for general corporate purposes. Each Initial MetLife Term Loan is collateralized by first lien mortgages on certain of our properties.

On June 29, 2016, five wholly owned subsidiaries of the Operating Partnership entered into a loan agreement (the “Second MetLife Loan Agreement”) with MetLife, which provides for a loan of approximately $15.7 million to the Company with a maturity date of June 29, 2026 (“Term Loan 4”). Interest on Term Loan 4 is payable semi-annually and accrues at a floating rate that will be adjusted quarterly to a rate per annum equal to the greater of (a) the three-month LIBOR plus an initial floating rate spread of 1.750%, which may be adjusted by MetLife on each of September 29, December 29, March 29 and June 29 of each year to an interest rate equal to the greater of (a) the three month LIBOR plus the floating rate spread or (b) 2.00% per annum. Term Loan 4 initially bears interest at a rate of 2.39% per annum until September 29, 2016, and on September 29, 2016 the rate changed to 2.60% per annum. Effective March 29, 2017, the Company exercised its option to convert the interest rate on Term Loan 4 from a floating rate to an adjustable rate. The new adjustable rate is 3.48% which may be adjusted by MetLife on each of March 29, 2020 and March 29, 2023. Proceeds from Term Loan 4 were used to acquire additional properties and for general corporate purposes.

Interest on Term Loan 1 is payable semi-annually and accrues at a floating rate that will be adjusted quarterly to a rate per annum equal to the greater of (a) the three-month LIBOR plus an initial floating rate spread of 1.750%, which may be adjusted by MetLife on each of March 29, 2019, March 29, 2022 and March 29, 2025 to an interest rate consistent with interest rates quoted by MetLife for substantially similar loans secured by real estate substantially similar to the Company’s properties securing Term Loan 1 or (b) 2.000% per annum. Term Loan 1 bore interest at a rate of 2.40% per annum until September 29, 2016 and on September 29, 2016 the rate changed to 2.60% per annum. Effective March 29, 2017, the Company exercised its option to convert the interest rate on Term Loan 4 from a floating rate to an adjustable rate. The new adjustable rate is 3.48% which may be adjusted by MetLife on each of March 29, 2020 and March 29, 2023. Subject to certain conditions, we may at any time during the term of Term Loan 1 elect to have all or any portion of the unpaid balance of Term Loan 1 bear interest at a fixed rate that is initially established by the lender in its sole discretion that may be adjusted from time to time to an interest rate consistent with interest rates quoted by MetLife for substantially similar loans secured by real estate substantially similar to the Company’s properties securing Term Loan 1. On any floating rate adjustment date, we may prepay any portion of Term Loan 1 that is not subject to a fixed rate without penalty.

Interest on Term Loan 2 and Term Loan 3 is payable semi-annually and accrues at an initial rate of 2.66% per annum, which may be adjusted by MetLife on each of March 29, 2019, March 29, 2022 and March 29, 2025 to an interest rate consistent with interest rates quoted by MetLife for substantially similar loans secured by real estate substantially similar to our properties securing Term Loan 2 and Term Loan 3.

~~Table of Contents~~

On January 12, 2017, five wholly owned subsidiaries of the Operating Partnership, entered into a loan agreement (the “Fifth MetLife Loan Agreement”) with MetLife which provides for a loan of approximately $8.4 million to the Company with a maturity date of January 12, 2027 (“Term Loan 5”). Interest on Term Loan 5 is payable semi-annually and accrues at a 3.26% per annum fixed rate, and may be adjusted by MetLife on each of January 12, 2020, January 12, 2023 and January 12, 2026 at the option of the Lender to a rate that is consistent with similar loans. Proceeds from Term Loan 5 were used to acquire additional properties and for general corporate purposes.

On February 14, 2017, a wholly owned subsidiary of the Operating Partnership, entered into a loan agreement (the “Sixth MetLife Loan Agreement”) with MetLife which provides for a loan of approximately $27.2 million to the Company with a maturity date of February 14, 2027 (“Term Loan 6”). Interest on Term Loan 6 is payable semi-annually and accrues at a 3.21% per annum fixed rate, and may be adjusted by MetLife on each of February 14, 2020, February 14, 2023 and February 14, 2026 at the option of the Lender to a rate that is consistent with similar loans. Proceeds from Term Loan 6 were used to acquire additional properties.

In connection with the Term Loan 6, on February 14, 2017, the Company and the Operating Partnership each entered into a separate guaranty (the “Term Loan 6 Guaranties”) whereby the Company and the Operating Partnership jointly and severally agreed to unconditionally guarantee all of the borrowers’ obligations under the Sixth MetLife Loan Agreement.

On June 7, 2017, a wholly owned subsidiary of the Operating Partnership entered into a loan agreement (the “Seventh MetLife Loan Agreement”) with MetLife which provides for a loan of approximately $21.3 million to the Company with a maturity date of June 7, 2027 (“Term Loan 7”). Interest on Term Loan 7 is payable semi-annually and accrues at a 3.45% per annum fixed rate, and may be adjusted by MetLife on each of June 7, 2020, June 7, 2023 and June 7, 2026 at the option of the Lender to a rate that is consistent with similar loans. Proceeds from Term Loan 7 were used to acquire additional properties.

In connection with the Term Loan 7, on June 7, 2017, the Company and the Operating Partnership each entered into a separate guaranty (the “Term Loan 7 Guaranties” and, together with the Initial MetLife Guaranties, the Term Loan 4 Guaranties, the Term Loan 5 Guaranties and the Term Loan 6 Guaranties, the “MetLife Guaranties”) whereby the Company and the Operating Partnership jointly and severally agreed to unconditionally guarantee all of the borrowers’ obligations under the Seventh MetLife Loan Agreement.

Each of the MetLife Loan Agreements contains a number of customary affirmative and negative covenants, including the requirement to maintain a loan to value ratio of no greater than 60%. The MetLife Guaranties also contain a number of customary affirmative and negative covenants.

~~Table of Contents~~

Each of the MetLife Loan Agreements includes certain customary events of default, including a cross-default provision related to other outstanding indebtedness of the borrowers, the Company and the Operating Partnership, the occurrence of which, after any applicable cure period, would permit MetLife, among other things, to accelerate payment of all amounts outstanding under the MetLife Term Loans and to exercise its remedies with respect to the pledged collateral, including foreclosure and sale of the Company’s properties that secure the MetLife Term Loans. As of September 30, 2017 there was $199.5 million outstanding under the MetLife Term Loans and we were in compliance with all covenants under the MetLife Loan Agreements.

~~Farm Credit of Central Florida Mortgage Note~~

On August 31, 2016, a wholly owned subsidiary of the Operating Partnership entered into a loan agreement (the “Farm Credit Mortgage Note”) with Farm Credit of Central Florida (“Farm Credit”) which provides for a loan of approximately $8.2 million to the Company with a maturity date of September 1, 2023. As of September 30, 2017 and December 31, 2016, approximately $5.1 million had been drawn down under this facility. Interest on the Farm Credit Mortgage Note is payable quarterly and accrues at a floating rate that will be adjusted monthly to a rate per annum equal to the one-month LIBOR plus 2.6875% which is subject to adjustment on the first day of September 2016, and on the first day of each month thereafter. Principal is payable quarterly commencing on October 1, 2018, with all remaining principal and outstanding interest due at maturity. Proceeds from Farm Credit Mortgage Note are to be used for the acquisition and development of additional land.

The Farm Credit Mortgage Note contains a number of customary affirmative and negative covenants, as well as a covenant requiring us to maintain a debt service coverage ratio of 1.25 to 1.00 beginning on December 31, 2019.

~~Prudential Note~~

~~Beginning on December 21, 2017, the Prudential Note requires the Company to maintain a loan to value no greater than 60%.~~

~~Rutledge Credit Facilities~~

Upon closing of the AFCO Mergers, by virtue of AFCO OP becoming a subsidiary of the Company, the Company assumed AFCO’s outstanding indebtedness under four loan agreements (the “Existing Rutledge Loan Agreements”) between AFCO OP and Rutledge Investment Company (“Rutledge”), which are further described below:

Loan Agreement, dated as of December 5, 2013, with respect to a $25,000,000 senior secured credit facility bearing interest at an annual rate of 3 month LIBOR plus 1.3%. The loan agreement requires AFCO OP to make quarterly interest payments on April 1, July 1, October 1 and January 1 of each calendar year. Additionally, the loan agreement requires AFCO OP to pay a quarterly non-usage fee equal to 0.25% per annum of the committed loan amount minus the average outstanding principal balance of the loan amount over the prior three-month period.

~~Table of Contents~~

In connection with the completion of the AFCO Mergers, on February 3, 2017, AFCO OP, in its capacity as a wholly owned subsidiary of the Company and the Operating Partnership, and Rutledge entered into the Second Amendment and the “Rutledge Amendment”) to the Existing Rutledge Loan Agreements. Pursuant to the Rutledge Amendment, among other things, the maturity dates for each of the Existing Rutledge Loan Agreements were extended to January 1, 2022 and the aggregate loan value under the Existing Rutledge Loan Agreements may not exceed 50% of the appraised value of the collateralized properties. Certain AFCO properties acquired by the Company in the AFCO Mergers serve as collateral under the Existing Rutledge Loan Agreements.

On February 3, 2017, the Company and the Operating Partnership each entered into guaranty agreements (the “Existing Loan Guarantees”) pursuant to which they will unconditionally guarantee the obligations of AFCO OP under the Existing Loan Agreements.

In addition, in connection with the Completion of the Mergers, on February 3, 2017, AFCO OP entered into a fifth loan agreement with Rutledge Investment Company (the “Fifth Rutledge Loan Agreement” and together with the Existing Rutledge Loan Agreements, as amended, the “Rutledge Loan Agreements”), with respect to a senior secured credit facility in the aggregate amount of $30 million, with a maturity date of January 1, 2022 and an annual interest rate of 3 month LIBOR plus 1.3%. The Fifth Rutledge Loan Agreement requires AFCO OP to make quarterly interest payments. Additionally, the Fifth Rutledge Loan Agreement contains certain customary affirmative and negative covenants, including (i) AFCO OP must pay a quarterly non-usage fee equal to 0.25% of the committed loan amount minus the average outstanding principal balance of the loan amount during the prior three-month period, (ii) AFCO OP must maintain a leverage ratio of 60% or less and (iii) the aggregate amounts outstanding under all of the Rutledge Loans may not exceed 50% of the aggregate appraised value of the properties serving as collateral under the Rutledge Loan Agreements.

On February 3, 2017, the Company and the Operating Partnership each entered into separate guarantees (the “Fifth Loan Guarantees” and together with the Existing Loan Guarantees, the “Guarantees”) whereby they are required to unconditionally guarantee AFCO OP’s obligations under the Fifth Rutledge Loan Agreement. As of September 30, 2017 $0 remains available under this facility.

~~As of the date of~~ this Quarterly Report ~~there is an aggregate~~on Form 10-Q.

Table of ~~$120.0 million outstanding under Rutledge Loan Agreements. As of September 30, 2017, we were in compliance with all covenants under the Rutledge Loan Agreements.~~Contents

Sources and Uses of Cash

The following table summarizes our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:

For the nine months ended September 30,
(in thousands)

2017

2016
Net cash (used in) provided by operating activities

$
(3,401)

$
3,614
Net cash used in investing activities

$
(114,200)

$
(127,349)
Net cash provided by financing activities

$
199,733

$
117,410


	For the six months ended June 30,
(in thousands)	2020		2019
Net cash provided by operating activities	$	9,982	$	12,127
Net cash provided by investing activities	$	6,707	$	34,109
Net cash (used in) provided by financing activities	$	(17,652)	$	(40,768)

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Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 to the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2019

As of ~~September~~June 30, ~~2017,~~2020, we had ~~$129.3~~$11.6 million of cash compared to ~~$17.2~~$22.4 million at ~~September~~June 30, ~~2016.~~2019.

Cash Flows from Operating Activities

Net cash provided by operating activities decreased ~~$7.0~~by $2.1 million primarily as a result of the following:

●

Receipt of ~~$28.2~~$22.1 million in cash rents for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 as compared to receiving ~~$16.3~~$23.9 million in cash rents in the ~~nine~~six months ended ~~September~~June 30, ~~2016;~~

2019;

●

~~An increase~~A decrease of ~~$1.8~~$1.5 million in cash ~~paid for~~ interest payments as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016;~~

2019;

●

~~An increase~~Decrease in accrued expenses of ~~approximately $4.6~~$1.3 million ~~in cash paid for other operating expenses~~ as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016;~~2019; and

●

~~Cash payments totaling $12.5~~A decrease in deferred revenue of $3.2 million ~~made in relation~~as compared to ~~settling assumed obligations as part of~~ the ~~AFCO Mergers.~~

six months ended June 30, 2019.

Cash Flows from Investing Activities

Net cash ~~used for~~provided by investing activities decreased ~~$13.1~~$27.4 million primarily as a result of the following:

●

~~Completing 15 acquisitions and the AFCO Mergers~~Property dispositions during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 for aggregate consideration of $7.5 million as opposed to completing property dispositions during the six months ended June 30, 2019 for aggregate cash consideration of ~~$92.7 million, as compared to $122.4 million in aggregate cash consideration for 22 acquisitions during the nine months ended September 30, 2016;~~

$34.2 million;

●

~~An increase~~A decrease of ~~$12.6~~$2.6 million in investments in real estate improvements as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016;~~

2019;

●

Property acquisition during the six months ended June 30, 2020 for $0.9 million as compared to no property acquisitions during the six months ended June 30, 2019;

●

A ~~$0.1~~$3.8 million decrease in principal repayments on notes receivable received by the Company as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016;~~

2019; and

●

A ~~$3.9~~$1.4 million ~~increase~~decrease in notes receivable issued by the Company as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~

2019.

Cash Flows from Financing Activities

Net cash ~~provided by~~used in financing activities ~~increased $82.3~~decreased $23.1 million primarily as a result of the following:

●

~~Borrowings from mortgage notes payable~~Debt payments decreased ~~$99.0~~$11.2 million as compared to the ~~borrowings during the nine~~six months ended ~~September~~June 30, ~~2016;~~

2019;

●

~~Debt payments decreased $63.9 million as compared to the nine months ended September 30, 2016 which includes the pay-off~~A decrease of ~~the $53.0 million Bridge Loan;~~

~~A $9.3 million decrease in proceeds from the At the Market offering as compared to the nine months ended September 30, 2016;~~

~~A $7.4 million increase in common stock repurchased as compared to the nine months ended September 30, 2016;~~

~~A $2.9 million increase in dividends paid on Series A preferred units as compared to the nine months ended September 30, 2016;~~

~~Increase of $5.7~~$0.2 million in dividends paid on common stock as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016;~~

2019;

●

~~Increase of $144.5~~Common stock repurchases decreased $16.3 million ~~in proceeds from issuance of the Series B Participating Preferred Stock~~ as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016;~~

2019;

●

~~Increase~~An increase of ~~$1.1~~$2.2 million in dividends paid on ~~Series B, Participating Preferred Stock~~participating preferred shares as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016;~~

2019;

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●

An increase of $0.1 million in ~~distributions of $0.2 million to non-controlling interests as compared to the nine months ended September 30, 2016;~~

~~A $0.5 million increase in the payments associated with offering~~debt issuance costs as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~

2019 as the Company is currently refinancing debt; and

●

An increase of $2.2 million in participating preferred stock repurchased as compared to the six months ended June 30, 2019.

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Off-Balance Sheet Arrangements

As of ~~September~~June 30, ~~2017,~~2020, we did not have any off-balance sheet arrangements.

Non-GAAP Financial Measures

Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”)

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or ~~NAREIT. NAREIT~~Nareit. Nareit defines FFO as net income (loss) (calculated in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, plus real estate related depreciation, depletion and amortization (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures. FFO is a supplemental non-GAAP financial measure. Management presents FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from sales of depreciable operating properties, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures necessary to maintain the operating performance of improvements on our properties, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the ~~NAREIT~~Nareit definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Accordingly, FFO should be considered only as a supplement to net income as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or service indebtedness. FFO also should not be used as a supplement to or substitute for cash flow from operating activities computed in accordance with GAAP.

We do not, however, believe that FFO is the only measure of the sustainability of our operating performance. Changes in GAAP accounting and reporting rules that were put in effect after the establishment of ~~NAREIT’s~~Nareit’s definition of FFO in 1999 result in the inclusion of a number of items in FFO that do not correlate with the sustainability of our operating performance. Therefore, in addition to FFO, we present AFFO and AFFO per share, fully diluted, both of which are non-GAAP measures. Management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO. AFFO is not intended to represent cash flow or liquidity for the period and is only intended to provide an additional measure of our operating performance. Even AFFO, however, does not properly capture the timing of cash receipts, especially in connection with full-year rent payments under lease agreements entered into in connection with newly acquired farms. Management considers AFFO per share, fully diluted to be a supplemental metric to GAAP earnings per share. AFFO per share, fully diluted provides additional insight into how our operating performance could be allocated to potential shares outstanding at a specific point in time. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO will enable investors to assess our performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and AFFO per share, fully diluted, and, accordingly, our AFFO and AFFO per share, fully diluted may not always be comparable to AFFO and AFFO per share amounts calculated by other REITs. AFFO and AFFO per share, fully diluted should not be considered as an alternative to net income (loss) or earnings per share (determined in accordance with GAAP) as an indication of financial performance or as an alternative to net income (loss) earnings per share (determined in accordance with GAAP) as a measure of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to make distributions.

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AFFO is calculated by adjusting FFO to exclude or include the income and expenses that we believe are not reflective of the sustainability of our ongoing operating performance, as further explained below:

●

Real estate related acquisition and due diligence costs. Acquisition (including audit fees associated with these acquisitions) and due diligence costs are incurred for investment purposes and, therefore, do not correlate with the ongoing operations of our portfolio. We believe that excluding these costs from AFFO provides useful supplemental information reflective of the realized economic impact of our leases, which is useful in assessing the sustainability of our operating performance. Acquisition and due diligence costs totaled ~~$0.9~~$0.0 million and ~~$1.8~~$0.0 million ~~for the periods ended September 30, 2017,~~ and ~~2016, respectively. Real estate related acquisition and due diligence costs~~for the period ended September 30, 2016 included $2.3 million in interest and loan fees associated with the short-term Bridge Loan and the Forsythe acquisition and as the interest and fees are a non-recurring item they have been excluded from the AFFO calculation. Included in the $2.3 million of interest and loan fees is only a portion of the interest, approximately $2.1 million, or 4% of the Bridge Loan's principal amount, which was considered additional interest paid on issuance. A portion of the audit fees we incur are directly related to acquisitions, which varies with the number and complexity of the acquisitions we evaluate and complete in a given period. As such, these costs do not correlate with the ongoing operations of our portfolio. Total acquisition related audit fees excluded from AFFO totaled $0.2$0.0 million and $0.1 million for the ~~period~~three and nine months ended September 30, ~~2017,~~2019 and ~~2016,~~2018, respectively. Also included in real estate related acquisition and due diligence costs for the period ended September 30, 2017 is $0.7 million in fees paid to the Prudential Sub-Advisor following the completion of the AFCO Mergers, including a $160,000 termination fee. We believe that excluding these costs from AFFO provides useful supplemental information reflective of the realized economic impact of our current acquisition strategy, which is useful in assessing the sustainability of our operating performance. These exclusions also ~~improves~~improve comparability of our results over each reporting period and of our Company with other real estate operators.

●

Stock based compensation. Stock based compensation is a non-cash expense and, therefore, does not correlate with the ongoing operations. We believe that excluding these costs from AFFO improves comparability of our results over each reporting period and of our Company with other real estate operators.

●

~~Indirect offering costs.~~ ~~Indirect offering costs~~Deferred impact of interest rate swap terminations. When an interest rate swap is terminated and the related termination fees are rolled into a new swap, the terminated swap's termination fees ~~for services incurred by~~are amortized over what would have been the ~~Company~~remaining life of the terminated swap, while the related contractual and financial obligations extend over the life of the new swap. As a result, the net impact on interest expense is uneven throughout the life of the swap, which is inconsistent with the purpose of an interest rate swap. We believe that, with this adjustment, AFFO better reflects the actual cash cost of the fixed interest rate we are obligated to ~~grow~~pay under the new swap agreement, and maintain an active institutional investor presence. As we continue to acquire more farms, our ability to access capital through the equity markets will remain a critical component of our growth strategy. As of September 30, 2015, we began excluding indirect offering costs from AFFO as we believe it improvesresults in improved comparability of our results ~~over each~~across reporting ~~period and of our Company with other real estate operators. Prior to this date the company did not incur indirect offering costs.~~

periods.

●

Distributions on Series A preferred units. ~~Dividends~~Distributions on Series A preferred units, which are convertible into Common units on or after March 2, 2026, have a fixed and certain impact on our cash flow, and thus they are subtracted from FFO. We believe this improves comparability of our Company with other real estate operators.

●

Dividends on Series B Participating Preferred Stock. Dividends on Series B Participating Preferred Stock, which may be redeemed for cash or converted into shares of common stock on or after September 30, 2021,, have a fixed and certain impact on our cash flow, and thus they are subtracted from FFO. We believe this improves comparability of our Company with other real estate operators.

●

Common shares fully diluted. In accordance with GAAP, common shares used to calculate earnings per share are presented on a weighted average basis. Common shares on a fully diluted basis includes shares of common stock, Common units, redeemable Common units and unvested restricted stock outstanding at the end of the period on a share equivalent basis because all shares are participating securities and thus share in the performance of the Company. The conversion of Series A preferred units is excluded from the calculation of common shares fully diluted as they are not participating ~~securities,~~securities; thus, they don’t share in the performance of the Company, and their impact on shares outstanding is uncertain.

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The following table sets forth a reconciliation of net income (loss) to FFO, AFFO and net (loss) income available to common stockholders per share to AFFO per share, fully diluted, the most directly comparable GAAP equivalents, respectively, for the periods indicated below as previously reported (unaudited):


	For the three months ended September 30,				For the nine months ended September 30,

									For the three months ended June 30,				For the six months ended June 30,
(in thousands except per share amounts)	2017		2016		2017		2016		2020		2019		2020		2019
Net income (loss)	$	2,610	$	100	$	2,630	$	(513)	$	172	$	6,525	$	592	$	6,533
(Gain) loss on disposition of assets										(917)		(7,491)		(831)		(7,909)
Depreciation, depletion and amortization		2,107		419		5,651		1,102		2,003		2,092		4,003		4,207
FFO		4,717		519		8,281		589		1,258		1,126		3,764		2,831


Stock based compensation		309		333		1,091		889		276		382		517		778
Indirect equity offering costs		—		24		—		72
Deferred impact of interest rate swap terminations										137		—		137		—
Real estate related acquisition and due diligence costs		250		1,735		1,760		4,172		11		1		11		1
Dividends on Series B Participating Preferred Stock and distributions on Series A preferred units		(1,959)		(887)		(3,714)		(2,057)
Distributions on Preferred units										(3,088)		(3,125)		(6,203)		(6,250)
AFFO	$	3,317	$	1,724	$	7,418	$	3,665	$	(1,406)	$	(1,616)	$	(1,774)	$	(2,640)


AFFO per diluted weighted average share data:


AFFO weighted average common shares		38,997		19,711		37,118		18,576		31,656		33,456		31,708		33,907

Net income (loss) per share available to common stockholders	$	0.01	$	(0.06)	$	(0.05)	$	(0.21)

Net loss per share available to common stockholders									$	(0.10)	$	0.09	$	(0.19)	$	(0.01)
Income available to redeemable non-controlling interest and non-controlling interest in operating partnership		0.06		0.07		0.12		0.19		0.11		0.10		0.21		0.20
Depreciation, depletion and amortization		0.05		0.02		0.15		0.06
Depreciation and depletion										0.06		0.06		0.13		0.12
Stock based compensation		0.01		0.02		0.03		0.05		0.01		0.01		0.02		0.02
Real estate related acquisition and due diligence costs		0.01		0.09		0.05		0.22
Dividends on Series B Participating Preferred Stock and distributions on Series A preferred units		(0.05)		(0.05)		(0.10)		(0.11)
(Gain) loss on disposition of assets										(0.03)		(0.22)		(0.03)		(0.23)
Distributions on Preferred units										(0.10)		(0.09)		(0.20)		(0.18)
AFFO per diluted weighted average share	$	0.09	$	0.09	$	0.20	$	0.20	$	(0.04)	$	(0.05)	$	(0.06)	$	(0.08)

The following table sets forth a reconciliation of AFFO share information to basic weighted average common shares outstanding, the most directly comparable GAAP equivalent, for the periods indicated below (unaudited):


	For the three months ended September 30,		For the nine months ended September 30,

					For the three months ended June 30,		For the six months ended June 30,
(in thousands)	2017	2016	2017	2016	2020	2019	2020	2019
Basic weighted average shares outstanding	32,862	13,683	30,695	12,663	29,433	30,637	29,485	30,714
Weighted average Common units on an as-if converted basis	5,846	5,840	6,139	5,265
Weighted average OP units on an as-if converted basis					1,904	2,397	1,904	2,817
Weighted average unvested restricted stock	289	188	284	177	319	422	319	376
Weighted average redeemable non-controlling interest in operating partnership	—	—	—	471
AFFO weighted average common shares	38,997	19,711	37,118	18,576	31,656	33,456	31,708	33,907

~~EBITDA~~

EBITDAre

The Company calculates Earnings Before Interest Taxes Depreciation and ~~Adjusted EBITDA~~

~~Earnings before~~Amortization for real estate (“EBITDAre”) in accordance with the standards established by NAREIT in its September 2017 White Paper. NAREIT defines EBITDAre as net income (calculated in accordance with GAAP) excluding interest ~~taxes,~~expense, income tax, depreciation and amortization, ~~(“EBITDA”)~~gains or losses on disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s pro rata share of EBITDAre of unconsolidated affiliates. EBITDAre is a key financial measure used to evaluate ~~our~~the Company’s operating performance but should not be construed as an alternative to operating income, cash flows from operating activities or net income, in each case as determined in accordance with GAAP. ~~EBITDA is not a measure defined in accordance with GAAP. We believe~~The Company believes that ~~EBITDA~~EBITDAre is a ~~standard~~useful performance measure commonly reported and will be widely used by analysts and investors in ~~our~~the Company’s industry. However, while ~~EBITDA~~EBITDAre is a performance measure widely used across ~~several industries, we do~~the Company’s industry, the Company does not believe that it correctly captures ~~our~~the Company’s business operating performance because it includes non-cash expenses and recurring adjustments that are necessary to better understand ~~our~~the Company’s business operating performance. Therefore, in addition to ~~EBITDA, our~~EBITDAre, management uses ~~adjusted EBITDA (“~~Adjusted ~~EBITDA”),~~EBITDAre, a non-GAAP measure.

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We further adjust ~~EBITDA~~EBITDAre for certain additional items such as stock based compensation, indirect offering costs, real estate acquisition related audit fees and real estate related acquisition and due diligence costs (for a full discussion of these adjustments, see AFFO adjustments discussed above) that we consider necessary to understand our operating performance. As of September 30, 2015, we began excluding indirect offering costs from EBITDA as we believe it improves comparability of our results over each reporting period and of our Company with other real estate operators. Prior to this date the Company had not incurred any indirect offering costs. We believe that Adjusted ~~EBITDA~~EBITDAre provides useful

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supplemental information to investors regarding our ongoing operating performance that, when considered with net income and ~~EBITDA,~~EBITDAre, is beneficial to an investor’s understanding of our operating performance.

~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

●

~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

●

~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre do not reflect changes in, or cash requirements for, our working capital needs;

●

~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

●

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and ~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre do not reflect any cash requirements for these replacements; and

●

Other companies in our industry may calculate ~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre differently than we do, limiting the usefulness as a comparative measure.

Because of these limitations, ~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results of operations and using ~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre only as a supplemental measure of our performance.

The following table sets forth a reconciliation of our net income to our ~~EBITDA~~EBITDAre and Adjusted ~~EBITDA~~EBITDAre for the periods indicated below (unaudited):


	For the three months ended				For the nine months ended
	September 30,				September 30,

									For the three months ended				For the six months ended
									June 30,				June 30,
(in thousands)	2017		2016		2017		2016		2020		2019		2020		2019
Net income (loss)	$	2,610	$	100	$	2,630	$	(513)
Net Income (loss)									$	172	$	6,525	$	592	$	6,533
Interest expense		3,683		2,065		9,852		7,869		4,467		5,031		9,130		9,987
Income tax expense		—		97		—		97		—		—		—		—
Depreciation, depletion and amortization		2,107		419		5,651		1,102		2,003		2,092		4,003		4,207
EBITDA	$	8,400	$	2,681	$	18,133	$	8,555

Stock-based compensation		309		333		1,091		889
Indirect equity offering costs		—		24		—		72
(Gain) loss on disposition of assets										(917)		(7,491)		(831)		(7,909)
EBITDAre									$	5,725	$	6,157	$	12,894	$	12,818

Stock based compensation										276		382		517		778
Real estate related acquisition and due diligence costs		250		1,735		1,760		1,901		11		1		11		1
Adjusted EBITDA	$	8,959	$	4,773	$	20,984	$	11,417
Adjusted EBITDAre									$	6,012	$	6,540	$	13,422	$	13,597

Inflation

Most of our farming leases are two to three years for row crops and one to seven years for permanent crops, pursuant to which each tenant is responsible for substantially all of the operating expenses related to the property, including maintenance, water usage and insurance. As a result, we believe that the effect on us of inflationary increases in operating expenses may be offset in part by the operating expenses that are passed through to our tenants and by contractual rent increases because our leases will be renegotiated every one to five years. We do not believe that inflation has had a material impact on our historical financial position or results of operations.

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Seasonality

~~Seasonality~~

Because the leases for ~~a majority~~many of the properties in our portfolio require ~~payment of at least 50% of the annual rent~~significant payments in advance of ~~each~~the spring planting season (for row crops), we receive a significant portion of our cash rental payments in the first calendar quarter of each year, although we recognize rental revenue from these leases on a pro rata basis over the non-cancellable term of the lease in accordance with GAAP.

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Item 3.Quantitative and Qualitative Disclosures ~~About~~about Market Risk.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market-sensitive instruments. In pursuing our business strategies, the primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure will be the daily LIBOR. We may use fixed interest rate financing to manage our exposure to fluctuations in interest rates. On a limited basis, we also may use derivative financial instruments to manage interest rate risk. We will not use such derivatives for trading or other speculative purposes.

At ~~September~~June 30, ~~2017, $125.1~~2020, $181.0 million, or ~~27%~~35.3%, of our debt had variable interest rates. Assuming no increase in the level of our variable rate debt, if interest rates increased by 1.0%, or 100 basis points, our cash flow would decrease by approximately ~~$1.3~~$0.9 million per year. At ~~September 29, 2017,~~June 30, 2020, 1 year LIBOR was approximately ~~123~~17 basis points. Assuming no increase in the level of our variable rate debt, if LIBOR were reduced to 0 basis points, our cash flow would increase approximately ~~$1.6~~$2.1 million per year.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We previously reported a material weakness that was identified as of December 31, 2019 related to the design and implementation of compensating controls relating to information technology general controls.

As required by Rule 13a-15(b) under the Exchange Act, ~~management has~~we have evaluated, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures. Based upon this evaluation, due to the existence of the material weakness in the Company’s internal control over financial reporting described above, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

Remediation of the Material Weakness in Internal Control over Financial Reporting

During the six months ended June 30, 2020, we implemented additional quarterly review controls over logical access, user administration and security changes for information technology systems that support the Company’s financial reporting process. Management believes the additional quarterly review controls that have been implemented will remediate the identified deficiencies.

Changes in Internal Control over Financial Reporting

~~There~~Except as described above, there were no changes in the Company’s internal control over financial reporting during the ~~quarter~~six months ended ~~September~~June 30, ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings.

On July 11, 2018, a purported class action lawsuit, captioned Kachmar v. Farmland Partners Inc. (the “Kachmar Action”), was filed in the United States District Court for the District of Colorado against the Company and certain of our officers by a purported Company stockholder. The complaint alleges, among other things, that our disclosure related to the FPI Loan Program was materially false and misleading in violation of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. On August 17, 2018, a second purported class action, captioned Mariconda v. Farmland Partners Inc. (the “Mariconda Action”) was filed in the United States District Court for the District of Colorado, alleging substantially identical claims as the Kachmar Action. Several purported shareholders moved to consolidate the Kachmar Action and the Mariconda Action and for appointment as Lead Plaintiff. On November 13, 2018, the plaintiff in the Kachmar action voluntarily dismissed the Kachmar Action. On December 3, 2018, the court appointed two purported stockholders of the Company, the Turner Insurance Agency, Inc. and Cecilia Turner (the “Turners”), as lead plaintiffs in the Mariconda Action. On March 11, 2019, the court-appointed lead plaintiffs and additional plaintiff Obelisk Capital Management filed an amended complaint in the Turner Action. On April 15, 2019, the defendants moved to dismiss the amended complaint in the Turner Action. On June 18, 2019, the court denied the defendants’ motion to dismiss the amended complaint in the Turner Action. The defendants answered the amended complaint on July 2, 2019. On December 6, 2019, plaintiffs voluntarily dismissed Obelisk Capital Management from the case. In connection with Obelisk Capital Management’s dismissal from the case, defendants filed a motion for judgment on the pleadings on December 10, 2019, which automatically stayed discovery in the action pending the court’s determination of the motion. On December 16, 2019, plaintiffs filed a motion for class certification. On December 27, 2019, plaintiffs filed a motion for leave to file a second amended complaint. Defendants filed a response opposing the motion for leave to file a second amended complaint on January 17, 2020, and filed a motion to adjourn the class certification briefing schedule in light of the discovery stay on January 29, 2020. These motions remain pending and discovery remains stayed pending decision on defendants’ motion for judgment on the pleadings. At this time, no class has been certified in the Turner Action and we do not know the amount of damages or other remedies being sought by the plaintiffs. The Company can provide no assurances as to the outcome of this litigation or provide an estimate of related expenses at this time.

On December 18, 2018, a purported stockholder of the Company, Jack Winter, filed a complaint in the Circuit Court for Montgomery County, Maryland (the “Winter Action”), purporting to assert breach of fiduciary duty claims derivatively on the Company’s behalf against the Company’s directors and certain of the Company’s officers. The Winter Action alleges, among other things, that the Company’s directors and certain of the Company’s officers breached their fiduciary duties to the Company by allowing the Company to make allegedly false and misleading disclosures related to the FPI Loan Program, as alleged in the Turner Action. On April 26, 2019, Winter voluntarily dismissed his complaint in the Circuit Court for Montgomery County Maryland. On May 14, 2019, Winter re-filed his complaint in the United States District Court for the District of Colorado. The Winter Action has been stayed pending further proceedings in the Turner Action.

On November 25, 2019, another purported shareholder, Shawn Luger, filed a complaint derivatively on behalf of the Company and against certain of our officers in the Circuit Court for Baltimore City, Maryland (the “Luger Action”). The Luger Action complaint makes similar claims to those in the Turner and Winter Actions. The parties to the Luger Action stipulated to a stay of the case pending further proceedings in the Turner Action and filed a joint motion to stay on February 7, 2020. On June 26, 2020, the parties reached an agreement to lift the stay. The Company intends to move to dismiss the Luger Action. The Company’s motion to dismiss is due on September 15, 2020.

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complaint makes similar claims to those in the Turner, Winter, Luger, and Barber Actions. None of the defendants have yet been served in the Hustedde Action.

The ~~nature~~Company believes that costs associated with the Turner, Winter, Luger, Barber, and Hustedde Actions in excess of $0.35 million will be covered by insurance; however, the Company can provide no assurances that costs will not ultimately be in excess of that amount.

On July 24, 2018, we filed a lawsuit in the District Court, Denver County, Colorado, against “Rota Fortunae” (a pseudonym for Quinton Mathews, the individual behind Rota Fortunae) and numerous co-conspirators (collectively, “Wheel of Fortune”) in response to an article posted by Quinton Mathews on Seeking Alpha that makes numerous allegations about the Company that we believe to be false or materially misleading. We believe that as a consequence of Wheel of Fortune’s internet posting and related postings on social media, the trading price of our ~~business exposes~~common stock declined by approximately 40%. We believe that Wheel of Fortune’s, including Quinton Mathews’s, internet posting was made in connection with a “short and distort” scheme to profit from a decline in our ~~properties,~~stock price based on false and misleading information. The lawsuit that we filed alleges that Wheel of Fortune, including Quinton Mathews disseminated material false, misleading and defamatory information about us that has harmed us and our stockholders. The Company does not expect insurance proceeds to cover a substantial portion of the ~~Operating Partnership~~costs related to the ~~risk~~lawsuit we filed against Wheel of ~~claims~~Fortune, including Quinton Mathews. On May 15, 2020, United States District Court for the District of Colorado to which this case was removed issued orders (i) denying Rota Fortunae’s motion to dismiss our claims; and ~~litigation~~(ii) requiring him to disclose his identity. On July 28, 2020, the Court granted our motion to amend the complaint to add Rota Fortunae’s name as well as the following co-conspirators: QKM, L.L.C., Sabrepoint Capital Mangement, LP, Donald Marchiony and George Baxter. The case is currently in the ~~normal course~~discovery phase.

For information regarding legal proceedings as of ~~business.~~June 30, 2020, refer to Note 8 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A.Risk Factors.

As of ~~September~~June 30, ~~2017, There~~2020, there have been no material changes from the risk factors previously disclosed in response to “Part I -– Item 1A. ~~“Risk Factors”~~‘Risk Factors’” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019, filed with the SEC on ~~February 23, 2017.~~March 13, 2020, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 8, 2020.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

Unregistered Sales of Equity Securities

None.

Share Repurchase Program

On March 15, 2017, our board of directors approved a program to repurchase up to $25,000,000 in shares of our common stock. Repurchases under this program may be made from time to time, in amounts and prices as we deem appropriate. Repurchases may be made in open market or privately negotiated transactions in compliance with Rule 10b-18 under the Exchange Act, subject to market conditions, applicable legal requirements, trading restrictions under our insider trading policy and other relevant factors. In November 2017, our Board of Directors approved repurchases of our Series B participating preferred stock from time to time under the share repurchase program. This share repurchase program does not obligate us to acquire any particular amount of common stock or Series B participating preferred stock, and it may be modified or suspended at any time at our discretion. We expect to fund repurchases under the program using cash on ~~its~~our balance sheet. Our repurchase activity for the three months ended ~~September~~June 30, ~~2017~~2020 under the share repurchase program is presented in the following table. On August 1, 2018, our Board of Directors increased the authority under the

($ in thousands)

Total Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly announced Plans or Programs

Approximate Dollar Value of Shares that May Yet be Purchased Under the Share Repurchase Program
July 1, 2017 - July 31, 2017

—

$
—

—

$
25,000
August 1, 2017 - August 31, 2017

274

8.54

274

22,660
September 1, 2017 - September 30, 2017

567

9.00

567

17,555
Total

841

$
8.85

841

$
17,555

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share repurchase to $38.5 million. On November 7, 2019, the Board of Directors approved an additional $50 million under the share repurchase program. As of the date of this report, we had $44.7 million of availability under the program.



(in thousands except per share amounts)	Total Number of Common Shares Purchased		Average Price Paid per Share	Total Number of Preferred Shares Purchased		Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet be Purchased Under the Share Repurchase Program
April 1, 2020 - April 30, 2020	—	$	—	29	$	21.90	29	$	48,010
May 1, 2020 - May 31, 2020	245		6.63	6		23.22	251		46,251
June 1, 2020 - June 30, 2020	25		6.96	57		23.50	82		44,729
Total	270	$	6.66	92	$	22.98	362	$	44,729

From July 1, 2020, through the date of this report, the Company has repuchased ~~1,120,467~~no shares ~~for $9,999,998 at an average price~~ of ~~$8.92.~~common stock or Series B participating preferred stock.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other ~~information.~~Information.

None.

Item 6.Exhibits.

The exhibits on the accompanying Exhibit Index are filed, furnished or incorporated by reference (as stated therein) as part of this Quarterly Report on Form 10-Q.

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Exhibit Index


Exhibit Number		Description of Exhibit
10.1*			~~Purchase Agreement, dated as of September 22, 2017, by and between Farmland Partners Inc., Farmland Partners Operating Partnership, LP and Olam International~~
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document*Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema*Schema
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase*Linkbase
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase*Document
101.LAB	~~101.PRE~~		Inline XBRL Taxonomy Extension Label Linkbase*Linkbase
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase*Linkbase
104		Cover page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL.*

* Filed herewith

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SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, ~~as amended,~~ the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Farmland Partners Inc.
	~~Farmland Partners Inc.~~

~~Dated: November 9, 2017~~Date: August 10, 2020	/s/ Paul A. Pittman
	Paul A. Pittman
	Executive Chairman and Chief Executive Officer
	(Principal Executive Officer)

~~Dated: November 9, 2017~~Date: August 10, 2020	/s/ Luca Fabbri
	Luca Fabbri
	Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)

5950