UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒

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

For the quarterly period ended June 30, ~~2022~~2023

☐

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

FARMLAND PARTNERS INC.

(Exact Name of Registrant as Specified in its Charter)


Maryland		46-3769850
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

4600 South Syracuse Street, Suite 1450 Denver, Colorado		80237-2766
(Address of Principal Executive Offices)		(Zip Code)

(720) 452-3100

(Registrant’s Telephone Number, Including Area Code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	FPI	New York Stock Exchange

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

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

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


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

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

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

As of July ~~22, 2022, 53,046,074~~21, 2023, 48,836,990 shares of the Registrant’s common stock ~~(54,283,413~~(50,074,329 on a fully diluted basis, including 1,237,339 Common Units of limited partnership interests in the registrant’s operating partnership) were outstanding.

Table of Contents

Farmland Partners Inc.

FORM 10-Q FOR THE QUARTER ENDED

June 30, ~~2022~~2023

TABLE OF CONTENTS

9



PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements
	Consolidated Financial Statements
	Balance Sheets as of June 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	3
	Statements of Operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	4
	Statements of Comprehensive Income (Loss) for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	5
	Statements of Changes in Equity for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	6
	Statements of Cash Flows for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	8
	Notes to Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3736
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5553
Item 4.	Controls and Procedures	5553

PART II. OTHER INFORMATION		5653

Item 1.	Legal Proceedings	5653
Item 1A.	Risk Factors	5654
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5654
Item 3.	Defaults Upon Senior Securities	5755
Item 4.	Mine Safety Disclosures	5755
Item 5.	Other Information	5755
Item 6.	Exhibits	5755

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Farmland Partners Inc.

Consolidated Balance Sheets

As of June 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022

(in thousands, except par value and share data)


	June 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
ASSETS
Land, at cost	$	960,593	$	945,951	$	954,522	$	980,521
Grain facilities		10,918		10,754		11,180		11,349
Groundwater		12,602		10,214		17,550		17,682
Irrigation improvements		53,431		52,693		49,861		50,097
Drainage improvements		12,528		12,606		10,665		12,543
Permanent plantings		53,698		53,698		51,054		50,394
Other		6,975		6,848		6,781		6,967
Construction in progress		12,804		10,647		12,821		14,810
Real estate, at cost		1,123,549		1,103,411		1,114,434		1,144,363
Less accumulated depreciation		(41,562)		(38,303)		(39,988)		(38,447)
Total real estate, net		1,081,987		1,065,108		1,074,446		1,105,916
Deposits		531		58		126		148
Cash		19,696		30,171
Cash and cash equivalents and restricted cash						11,228		7,654
Assets held for sale		83		530		30		33
Notes and interest receivable, net		5,855		6,112
Loans and financing receivables, net						21,978		21,921
Right of use asset		387		107		509		325
Deferred offering costs		83		40		—		63
Accounts receivable, net		2,457		4,900		1,701		7,055
Derivative asset		698		—		2,310		2,084
Inventory		2,962		3,059		2,752		2,808
Equity method investments		4,148		3,427		4,163		4,185
Intangible assets, net		1,912		1,915		2,045		2,055
Goodwill		2,706		2,706		2,706		2,706
Prepaid and other assets		1,655		3,392		1,381		3,196
TOTAL ASSETS	$	1,125,160	$	1,121,525	$	1,125,375	$	1,160,149

LIABILITIES AND EQUITY
LIABILITIES
Mortgage notes and bonds payable, net	$	424,474	$	511,323	$	471,042	$	436,875
Lease liability		387		107		509		325
Dividends payable		3,239		2,342		3,011		3,333
Derivative liability		—		785
Accrued interest		2,991		3,011		5,082		4,135
Accrued property taxes		1,851		1,762		2,014		2,008
Deferred revenue		1,317		45		1,141		44
Accrued expenses		7,826		9,564		6,877		9,215
Total liabilities		442,085		528,939		489,676		455,935

Commitments and contingencies (See Note 8)

Redeemable non-controlling interest in operating partnership, Series A preferred units		113,680		120,510		100,485		110,210

EQUITY
Common stock, $0.01 par value, 500,000,000 shares authorized; 52,742,449 shares issued and outstanding at June 30, 2022, and 45,474,145 shares issued and outstanding at December 31, 2021		515		444
Common stock, $0.01 par value, 500,000,000 shares authorized; 48,951,198 shares issued and outstanding at June 30, 2023, and 54,318,312 shares issued and outstanding at December 31, 2022						475		531
Additional paid in capital		623,748		524,183		586,736		647,346
Retained deficit		(2,456)		(4,739)
Retained earnings						11,368		3,567
Cumulative dividends		(67,446)		(61,853)		(80,078)		(73,964)
Other comprehensive income		1,857		279		3,512		3,306
Non-controlling interests in operating partnership		13,177		13,762		13,201		13,218
Total equity		569,395		472,076		535,214		594,004

TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS IN OPERATING PARTNERSHIP AND EQUITY	$	1,125,160	$	1,121,525	$	1,125,375	$	1,160,149

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of Operations

For the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022

(Unaudited)

(in thousands, except per share amounts)


	For the Three Months Ended				For the Six Months Ended				For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
OPERATING REVENUES:
Rental income	$	9,196	$	8,291	$	18,741	$	18,551	$	9,389	$	9,196	$	19,077	$	18,741
Tenant reimbursements		809		839		1,587		1,777		831		809		1,869		1,587
Crop sales		1,150		237		1,845		453		515		1,150		875		1,845
Other revenue		1,202		646		4,074		808		849		1,202		2,435		4,074
Total operating revenues		12,357		10,013		26,247		21,589		11,584		12,357		24,256		26,247

OPERATING EXPENSES
Depreciation, depletion and amortization		1,660		1,885		3,411		3,820		2,207		1,660		4,001		3,411
Property operating expenses		2,058		1,708		4,013		3,639		2,428		2,058		4,610		4,013
Cost of goods sold		1,333		667		2,772		917		980		1,333		1,926		2,772
Acquisition and due diligence costs		—		—		62		—		—		—		14		62
General and administrative expenses		3,004		1,897		6,108		3,514		2,904		3,004		5,510		6,108
Legal and accounting		816		2,901		2,072		5,643		281		816		526		2,072
Other operating expenses		31		—		36		2		27		31		76		36
Total operating expenses		8,902		9,058		18,474		17,535		8,827		8,902		16,663		18,474
OPERATING INCOME		3,455		955		7,773		4,054		2,757		3,455		7,593		7,773

OTHER (INCOME) EXPENSE:
Other income		(34)		(8)		(14)		(52)
Income from equity method investment		(8)		—		(15)		—
Gain on disposition of assets		(3,335)		(74)		(3,995)		(3,467)
Other (income) expense										75		(34)		64		(14)
(Income) loss from equity method investment										(5)		(8)		22		(15)
(Gain) on disposition of assets										(11,060)		(3,335)		(12,886)		(3,995)
Interest expense		3,743		3,902		7,570		7,961		5,844		3,743		10,768		7,570
Total other expense		366		3,820		3,546		4,442		(5,146)		366		(2,032)		3,546

Net income (loss) before income tax expense		3,089		(2,865)		4,227		(388)
Net income before income tax expense										7,903		3,089		9,625		4,227

Income tax expense		96		—		96		—		4		96		13		96

NET INCOME (LOSS)		2,993		(2,865)		4,131		(388)
NET INCOME										7,899		2,993		9,612		4,131

Net (income) loss attributable to non-controlling interests in operating partnership		(77)		130		(110)		13
Net (income) attributable to non-controlling interests in operating partnership										(188)		(77)		(226)		(110)

Net income (loss) attributable to the Company		2,916		(2,735)		4,021		(375)
Net income attributable to the Company										7,711		2,916		9,386		4,021

Nonforfeitable distributions allocated to unvested restricted shares		(16)		(14)		(31)		(28)		(27)		(16)		(43)		(31)
Distributions on Series A Preferred Units and Series B Preferred Stock		(840)		(3,055)		(1,680)		(6,120)
Distributions on Series A Preferred Units										(683)		(840)		(1,485)		(1,680)

Net income (loss) available to common stockholders of Farmland Partners Inc.	$	2,060	$	(5,804)	$	2,310	$	(6,523)
Net income available to common stockholders of Farmland Partners Inc.									$	7,001	$	2,060	$	7,858	$	2,310

Basic and diluted per common share data:
Basic net income (loss) available to common stockholders	$	0.04	$	(0.19)	$	0.05	$	(0.21)
Diluted net income (loss) available to common stockholders	$	0.04	$	(0.19)	$	0.05	$	(0.21)
Basic net income available to common stockholders									$	0.14	$	0.04	$	0.15	$	0.05
Diluted net income available to common stockholders									$	0.12	$	0.04	$	0.15	$	0.05
Basic weighted average common shares outstanding		50,362		31,072		48,084		30,747		50,860		50,362		52,425		48,084
Diluted weighted average common shares outstanding		50,362		31,072		48,084		30,747		59,112		50,362		52,425		48,084
Dividends declared per common share	$	0.06	$	0.05	$	0.11	$	0.10	$	0.06	$	0.06	$	0.12	$	0.11

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of Comprehensive Income (Loss)

For the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022

(Unaudited)

(in thousands)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,


2022

2021

2022

2021
Net income (loss)

$
2,993

$
(2,865)

$
4,131

$
(388)
Amortization of OCI

141

236

313

530
Net change associated with current period hedging activities

330

(266)

1,265

942
Comprehensive income (loss)

3,464

(2,895)

5,709

1,084
Comprehensive income (loss) attributable to non-controlling interests

(77)

130

(110)

13
Net income (loss) attributable to Farmland Partners Inc.

$
3,387

$
(2,765)

$
5,599

$
1,097


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income	$	7,899	$	2,993	$	9,612	$	4,131
Amortization of other comprehensive income		—		141		198		313
Net change associated with current period hedging activities		589		330		8		1,265
Comprehensive income		8,488		3,464		9,818		5,709
Comprehensive (loss) attributable to non-controlling interests		(188)		(77)		(226)		(110)
Net income attributable to Farmland Partners Inc.	$	8,300	$	3,387	$	9,592	$	5,599

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of Changes in Equity and Other Comprehensive Income

For the three and six months ended June 30, 2023 (Unaudited)

(in thousands)


	Stockholders’ Equity
	Common Stock											Non-controlling
				Additional						Other		Interests in
				Paid in		Retained		Cumulative		Comprehensive		Operating		Total
	Shares	Par Value		Capital		Earnings		Dividends		Income		Partnership		Equity
Balance at December 31, 2022	54,318	$	531	$	647,346	$	3,567	$	(73,964)	$	3,306	$	13,218	$	594,004
Net income	—		—		—		1,676		—		—		38		1,714
Issuance of stock	5		—		54		—		—		—		—		54
Grant of unvested restricted stock	223		—		—		—		—		—		—		—
Shares withheld for income taxes on vesting of equity-based compensation	(3)		—		(36)		—		—		—		—		(36)
Stock-based compensation	—		—		405		—		—		—		—		405
Dividends accrued and paid	—		—		—		(803)		(3,185)		—		(74)		(4,062)
Net change associated with current period hedging transactions and amortization of other comprehensive income	—		—		—		—		—		(383)		—		(383)
Repurchase and cancellation of shares	(1,458)		(15)		(14,577)		—		—		—		—		(14,592)
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership	—		—		17		—		—		—		(17)		—
Balance at March 31, 2023	53,085	$	516	$	633,209	$	4,440	$	(77,149)	$	2,923	$	13,165	$	577,104
Net income	—		—		—		7,710		—		—		188		7,898
Issuance of stock	3		—		33		—		—		—		—		33
Shares withheld for income taxes on vesting of equity-based compensation	—		—		—		—		—		—		—		—
Stock-based compensation	—		—		473		—		—		—		—		473
Dividends accrued and paid	—		—		—		(782)		(2,929)		—		(75)		(3,786)
Net change associated with current period hedging transactions and amortization of other comprehensive income	—		—		—		—		—		589		—		589
Repurchase and cancellation of shares	(4,137)		(41)		(47,056)		—		—		—		—		(47,097)
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership	—		—		77		—		—		—		(77)		—
Balance at June 30, 2023	48,951	$	475	$	586,736	$	11,368	$	(80,078)	$	3,512	$	13,201	$	535,214

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of Changes in Equity and Other Comprehensive Income

For the three and six months ended June 30, 2022 (Unaudited)

(in thousands)


	Stockholders’ Equity															Stockholders’ Equity
	Common Stock											Non-controlling				Common Stock											Non-controlling
				Additional						Other		Interests in							Additional						Other		Interests in
				Paid in		Retained		Cumulative		Comprehensive		Operating		Total					Paid in		Retained		Cumulative		Comprehensive		Operating		Total
	Shares	Par Value		Capital		Earnings (Deficit)		Dividends		Income		Partnership		Equity		Shares	Par Value		Capital		Earnings (Deficit)		Dividends		Income		Partnership		Equity
Balance at December 31, 2021	45,474	$	444	$	524,183	$	(4,739)	$	(61,853)	$	279	$	13,762	$	472,076	45,474	$	444	$	524,183	$	(4,739)	$	(61,853)	$	279	$	13,762	$	472,076
Net income	—		—		—		1,106		—		—		33		1,139	—		—		—		1,106		—		—		33		1,139
Issuance of stock	2,913		29		38,264		—		—		—		—		38,293	2,913		29		38,264		—		—		—		—		38,293
Grant of unvested restricted stock	147		—		—		—		—		—		—		—	147		—		—		—		—		—		—		—
Forfeiture of unvested restricted stock	(1)		—		—		—		—		—		—		—	(1)		—		—		—		—		—		—		—
Shares withheld for income taxes on vesting of equity-based compensation	(14)		—		(185)		—		—		—		—		(185)	(14)		—		(185)		—		—		—		—		(185)
Stock-based compensation	—		—		642		—		—		—		—		642	—		—		642		—		—		—		—		642
Dividends accrued or paid	—		—		—		(878)		(2,428)		—		(68)		(3,374)
Net change associated with current period hedging transactions	—		—		—		—		—		1,107		—		1,107
Dividends accrued and paid																—		—		—		(878)		(2,428)		—		(68)		(3,374)
Net change associated with current period hedging transactions and amortization of other comprehensive income																—		—		—		—		—		1,107		—		1,107
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership	—		—		(187)		—		—		—		187		—	—		—		(187)		—		—		—		187		—
Balance at March 31, 2022	48,519	$	473	$	562,717	$	(4,511)	$	(64,281)	$	1,386	$	13,914	$	509,698	48,519	$	473	$	562,717	$	(4,511)	$	(64,281)	$	1,386	$	13,914	$	509,698
Net income	—		—		—		2,915		—		—		77		2,992	—		—		—		2,915		—		—		77		2,992
Issuance of stock	4,121		41		60,108		—		—		—		—		60,149	4,121		41		60,108		—		—		—		—		60,149
Forfeiture of unvested restricted stock	(7)		—		—		—		—		—		—		—	(7)		—		—		—		—		—		—		—
Shares withheld for income taxes on vesting of equity-based compensation	(1)		—		(1)		—		—		—		—		(1)	(1)		—		(1)		—		—		—		—		(1)
Stock-based compensation	—		—		185		—		—		—		—		185	—		—		185		—		—		—		—		185
Dividends accrued or paid	—		—		—		(859)		(3,165)		—		(75)		(4,099)
Dividends accrued and paid																—		—		—		(859)		(3,165)		—		(75)		(4,099)
Conversion of common units to shares of common stock	110		1		1,213		—		—		—		(1,214)		—	110		1		1,213		—		—		—		(1,214)		—
Net change associated with current period hedging transactions	—		—		—		—		—		471		—		471
Net change associated with current period hedging transactions and amortization of other comprehensive income																—		—		—		—		—		471		—		471
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership	—		—		(474)		—		—		—		474		—	—		—		(474)		—		—		—		474		—
Balance at June 30, 2022	52,742	$	515	$	623,748	$	(2,455)	$	(67,446)	$	1,857	$	13,176	$	569,395	52,742	$	515	$	623,748	$	(2,455)	$	(67,446)	$	1,857	$	13,176	$	569,395

See accompanying notes.

Table of Contents

Farmland Partners Inc.

Consolidated Statements of ~~Changes in Equity and Other Comprehensive Income~~Cash Flows

For the ~~three and~~ six months ended June 30, ~~2021~~ 2023 and 2022

(Unaudited)

(in thousands)

Stockholders’ Equity

Common Stock

Non-controlling

Additional

Other

Interests in

Paid in

Retained

Cumulative

Comprehensive

Operating

Total


Shares

Par Value

Capital

Earnings (Deficit)

Dividends

Income (Loss)

Partnership

Equity
Balance at December 31, 2020

30,571

$
297

$
345,870

$
1,037

$
(54,751)

$
(2,380)

$
15,841

$
305,914
Net income

—

—

—

2,360

—

—

117

2,477
Grant of unvested restricted stock

113

—

—

—

—

—

—

—
Forfeiture of unvested restricted stock

(3)

—

—

—

—

—

—

—
Stock-based compensation

—

—

251

—

—

—

—

251
Dividends accrued or paid

—

—

—

(3,065)

(1,540)

—

(74)

(4,679)
Conversion of common units to shares of common stock

159

1

1,697

—

—

—

(1,698)

—
Net change associated with current period hedging transactions

—

—

—

—

—

1,501

—

1,501
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership

—

—

38

—

—

—

(38)

—
Balance at March 31, 2021

30,840

$
298

$
347,856

$
332

$
(56,291)

$
(879)

$
14,148

$
305,464
Net (loss)

—

—

—

(2,735)

—

—

(130)

(2,865)
Issuance of stock

1,955

19

25,281

—

—

—

—

25,300
Grant of unvested restricted stock

16

—

—

—

—

—

—

—
Stock-based compensation

—

—

334

—

—

—

—

334
Dividends accrued or paid

—

—

—

(3,054)

(1,641)

—

(74)

(4,769)
Net change associated with current period hedging transactions

—

—

—

—

—

(29)

—

(29)
Adjustments to non-controlling interests resulting from changes in ownership of operating partnership

—

—

(172)

—

—

—

172

—
Balance at June 30, 2021

32,811

$
317

$
373,299

$
(5,457)

$
(57,932)

$
(908)

$
14,116

$
323,435

~~See accompanying notes.~~


	For the Six Months Ended
	June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	9,612	$	4,131
Adjustments to reconcile net income to net cash and cash equivalents and restricted cash provided by operating activities:
Depreciation, depletion and amortization		4,001		3,411
Amortization of deferred financing fees and discounts/premiums on debt		331		176
Amortization of net origination fees related to notes receivable		(11)		(16)
Stock-based compensation		878		827
Stock-based incentive		—		417
(Gain) on disposition of assets		(12,886)		(3,995)
(Income) loss from equity method investment		22		(15)
Bad debt expense		15		24
Amortization of dedesignated interest rate swap		53		167
Loss on early extinguishment of debt		—		162
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable		5,587		2,262
(Increase) Decrease in interest receivable		(53)		1
(Increase) Decrease in other assets		1,826		1,212
(Increase) Decrease in inventory		56		96
Increase (Decrease) in accrued interest		946		239
Increase (Decrease) in accrued expenses		(2,612)		(2,086)
Increase (Decrease) in deferred revenue		1,607		1,329
Increase (Decrease) in accrued property taxes		22		96
Net cash and cash equivalents and restricted cash provided by operating activities		9,394		8,438

CASH FLOWS FROM INVESTING ACTIVITIES
Real estate acquisitions		(9,003)		(28,164)
Real estate and other improvements		(2,592)		(2,672)
Investment in equity method investees		—		(705)
Collections of principal on loans and financing receivables		7		1,577
Origination fees on notes receivable		—		60
Issuance of loans and financing receivables		—		(3,500)
Proceeds from sale of property		51,537		16,901
Net cash and cash equivalents and restricted cash provided by (used in) investing activities		39,949		(16,503)

CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from mortgage notes payable		68,001		112,000
Repayments on mortgage notes payable		(33,968)		(198,942)
Proceeds from ATM offering		—		98,403
Issuance of stock		87		39
Common stock repurchased		(61,689)		—
Payment of debt issuance costs		(197)		(244)
Payment of swap fees		(73)		(73)
Redemption of Series A preferred units		(8,100)		(5,058)
Dividends on common stock		(6,436)		(4,702)
Shares withheld for income taxes on vesting of equity-based compensation		(36)		(186)
Distributions on Series A preferred units		(3,210)		(3,510)
Distributions to non-controlling interests in operating partnership, common		(148)		(136)
Net cash and cash equivalents and restricted cash (used in) financing activities		(45,769)		(2,409)

Net increase (decrease) in cash and cash equivalents and restricted cash		3,574		(10,474)
Cash and cash equivalents and restricted cash, beginning of period		7,654		30,171
Cash and cash equivalents and restricted cash, end of period	$	11,228	$	19,697

Cash and cash equivalents and restricted cash, end of period
Cash and cash equivalents	$	9,056	$	19,697
Restricted cash		2,172		—
Total cash and cash equivalents and restricted cash, end of period	$	11,228	$	19,697

Cash paid during period for interest	$	9,955	$	7,044
Cash paid during period for taxes	$	—	$	—

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Farmland Partners Inc.

Consolidated Statements of Cash Flows (continued)

For the six months ended June 30, ~~2022~~2023 and ~~2021~~2022

(Unaudited)

(in thousands)

For the Six Months Ended

June 30,

2022

2021
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$
4,131

$
(388)
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization

3,411

3,820
Amortization of deferred financing fees and discounts/premiums on debt

176

172
Amortization of net origination fees related to notes receivable

(16)

—
Stock-based compensation

827

585
Stock-based incentive

417

—
(Gain) on disposition of assets

(3,995)

(3,467)
Income from equity method investment

(15)

—
Proceeds from litigation settlement

—

550
Bad debt expense

24

—
Amortization of dedesignated interest rate swap

167

530
Loss on early extinguishment of debt

162

—
Changes in operating assets and liabilities:

(Increase) Decrease in accounts receivable

2,262

326
(Increase) Decrease in interest receivable

1

(47)
(Increase) Decrease in other assets

1,212

1,081
(Increase) Decrease in inventory

96

375
Increase (Decrease) in accrued interest

239

(219)
Increase (Decrease) in accrued expenses

(2,086)

2,588
Increase (Decrease) in deferred revenue

1,329

2,337
Increase (Decrease) in accrued property taxes

96

(26)
Net cash provided by operating activities

8,438

8,217

CASH FLOWS FROM INVESTING ACTIVITIES

Real estate acquisitions

(28,164)

(30,003)
Real estate and other improvements

(2,672)

(1,353)
Investment in equity method investees

(705)

—
Principal receipts on notes receivable

1,577

6
Origination fees on notes receivable

60

—
Issuance of note receivable

(3,500)

—
Proceeds from sale of property

16,901

28,649
Net cash used in investing activities

(16,503)

(2,701)

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings from mortgage notes payable

112,000

14,000
Repayments on mortgage notes payable

(198,942)

(19,976)
Proceeds from ATM offering

98,403

25,301
Issuance of stock

39

—
Participating preferred stock repurchased

—

(650)
Payment of debt issuance costs

(244)
��

(73)
Payment of swap fees

(73)

(73)
Redemption of Series A preferred units

(5,058)

—
Dividends on common stock

(4,702)

(3,072)
Shares withheld for income taxes on vesting of equity-based compensation

(186)

—
Distributions on Series A preferred units

(3,510)

(3,510)
Distributions on Series B participating preferred stock

—

(4,365)
Distributions to non-controlling interests in operating partnership, common

(136)

(156)
Net cash provided by (used in) financing activities

(2,409)

7,426

NET INCREASE (DECREASE) IN CASH

(10,474)

12,942
CASH, BEGINNING OF PERIOD

30,171

27,217
CASH, END OF PERIOD

$
19,697

$
40,159

Cash paid during period for interest

$
7,044

$
7,217
Cash paid during period for taxes

$
—

$
—

~~Table of Contents~~

~~Farmland Partners Inc.~~

~~Consolidated Statements of Cash Flows (continued)~~

~~For the six months ended June 30, 2022 and 2021~~

~~(Unaudited)~~

~~(in thousands)~~


	For the Six Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2023		2022
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Dividend payable, common stock	$	3,165	$	1,641	$	2,937	$	3,165
Dividend payable, common units	$	75	$	74	$	74	$	75
Distributions payable, Series A preferred units	$	1,680	$	1,755	$	1,485	$	1,680
Convertible notes receivable	$	—	$	2,417
Additions to real estate improvements included in accrued expenses	$	92	$	238	$	437	$	92
Swap fees payable included in accrued interest	$	146	$	146	$	146	$	146
Prepaid property tax liability acquired in acquisitions	$	49	$	—	$	—	$	49
Deferred offering costs amortized through equity in the period	$	52	$	79	$	—	$	52
Right of Use Asset	$	387	$	178
Lease Liability	$	387	$	178
Right-of-use assets obtained in exchange for new operating lease liabilities					$	386	$	387
Non-cash conversion of notes receivable to real estate	$	2,135	$	—	$	—	$	2,135

See accompanying notes.

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Farmland Partners Inc.

Notes to the Unaudited Financial Statements as of June 30, ~~2022~~2023

Note 1—Organization and Significant Accounting Policies

Organization

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

FPI is the sole member of the sole general partner of Farmland Partners Operating Partnership, LP (the “Operating Partnership”), which was formed in Delaware on September 27, 2013. All of FPI’s assets are held by, and its operations are primarily conducted through, the Operating Partnership and the wholly owned subsidiaries of the Operating Partnership. As of June 30, ~~2022,~~2023, FPI owned a ~~97.4%~~97.8% interest in the Operating Partnership. See “Note 9—Stockholders’ Equity and Non-controlling Interests” for additional discussion regarding Class A Common units of limited partnership interest in the Operating Partnership (“Common units”), and Series A preferred units of limited partnership interest in the Operating Partnership (“Series A preferred units”) ~~and Series B participating preferred units of limited partnership interest in the Operating Partnership (“Series B participating preferred units”)~~. Unlike holders of FPI’s common stock, par value $0.01 per share (“~~common~~Common stock”), holders of the Operating Partnership’s Common units and Series A preferred units generally do not have voting rights or the power to direct the affairs of FPI. As of June 30, ~~2022,~~2023, the Operating Partnership ~~owns~~owned a 9.97% equity interest in an unconsolidated equity method investment that holds 1012 properties (see “Note 1—~~Convertible Notes Receivable”,~~Organization and Significant Accounting Policies—Loans and Financing Receivables,” “Note 1—Organization and Significant Accounting Policies—Equity Method ~~Investments”,~~Investments,” and “Note 4—Related Party Transactions”).

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

As of June 30, ~~2022,~~2023, the Company owned a portfolio of approximately ~~160,100~~159,200 acres of farmland, which ~~are~~is consolidated in these financial statements. In addition, as of June 30, 2023, we owned land and buildings for four agriculture equipment dealerships in Ohio leased to Ag-Pro Ohio, LLC (“Ag Pro”) under the ~~Company serves~~John Deere brand and served as property manager ~~over~~for approximately ~~25,200~~31,000 acres of farmland.

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. On October 4, 2021, the Company converted all 5,806,797 shares of the outstanding Series B Participating Preferred Stock into shares of common stock. (See “Note 9—Stockholders’ Equity—Series B Participating Preferred Stock” for more information on the Series B Participating Preferred Stock).

On March 16, 2015, the Company formed FPI Agribusiness Inc., a wholly owned subsidiary (the “TRS” or “FPI Agribusiness”), as a taxable REIT subsidiary. We engage directly in farming, provide property management, auction, and brokerage services and volume purchasing services to our tenants through the TRS. As of June 30, ~~2022,~~2023, the TRS performed direct farming operations on ~~2,973~~2,108 acres of farmland owned by the Company located in ~~California and Michigan.~~California.

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

Principles of Combination and Consolidation

The accompanying consolidated financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of FPI and the Operating Partnership. All significant intercompany balances and transactions have been eliminated in consolidation.

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Interim Financial Information

The information in the accompanying consolidated financial statements of the Company as of December 31, ~~2021~~2022 and June 30, ~~2022~~2023 and for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 is unaudited. The accompanying financial statements include adjustments based on management’s estimates (consisting of normal and recurring accruals), which the Company considers necessary for a fair presentation of the results for the periods. The financial information should be

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read in conjunction with the consolidated financial statements for the year ended December 31, ~~2021,~~2022, included in the Company’s Annual Report on Form 10-K, which the Company filed with the U.S. Securities and Exchange Commission (the “SEC”) on ~~March 1, 2022.~~February 23, 2023. Operating results for the three and six months ended June 30, ~~2022~~2023 are not necessarily indicative of actual operating results for the entire year ending December 31, ~~2022.~~2023.

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

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates for a variety of reasons, including, without limitation, the impacts of ~~the ongoing coronavirus (“COVID-19”) pandemic,~~public health crises, the war in Ukraine, substantially higher prices for oil and gas and substantially increased interest rates, and their effects on the domestic and global economies. We are unable to quantify the ultimate impact of these factors on our business.

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 a 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 of similar assets, and contains acquired inputs and processes which have the ability to contribute to the creation of outputs, these acquisitions are accounted for as business combinations.

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 the Company’s acquisitions are treated as an asset ~~acquisition~~acquisitions under ASC 360 or a business ~~combination~~combinations under ASC 805, the fair value of the aggregate purchase price paid in each such acquisition is allocated among the assets acquired and any liabilities assumed by valuing the property as if it were 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,~~(trees, 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, water availability and the sale prices of comparable farms. Management’s

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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.

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~~the Company’s overall relationship with the tenant. The value of in-place lease intangibles and tenant relationships are included as an intangible asset and 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 above and below market leases, in-place lease values, and 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 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, ~~2022~~2023 and ~~2021,~~2022, the Company incurred an immaterial amount of costs related to acquisition and due diligence.

Total consideration for acquisitions may include a combination of cash and equity securities. When equity securities are issued, the Company determines the fair value of the equity securities issued based on the number of shares or units issued multiplied by the price per share or unit.

Using information available at the time of a business combination, the Company allocates the total consideration to tangible assets and liabilities and identified intangible assets and liabilities. Any residual amount remaining after such allocations is allocated to goodwill. During the measurement period, which may be up to one year from the acquisition date when incomplete information exists as of the respective reporting 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.

Real Estate Sales

The Company recognizes gains from the sales of real estate assets generally at the time the title is transferred and consideration is received.

Liquidity Policy

The Company manages its liquidity position and expected liquidity needs taking into consideration current cash balances, undrawn availability under its lines of credit ($120.7 million as of June 30, 2023), and reasonably expected cash receipts. The business model of the Company, and of real estate investment companies in general, ~~relies on~~utilizes debt as a structural source of financing. When debt becomes due, it is generally refinanced rather than repaid using the Company’s cash flow from operations. The Company has a history of being able to refinance its debt obligations prior to maturity. Furthermore, the Company also has a ~~deep~~substantial portfolio of real estate assets ~~which~~that management believes could be readily liquidated if necessary to fund any immediate liquidity needs. As of June 30, ~~2022,~~2023, we had ~~$424.5~~$471.0 million of mortgage and other debt against a portfolio of real estate assets with a net book value of $1.1 billion. As of June 30, 2023, we had capacity to issue up to $50.5 million of our common stock under our At-the-Market Equity Offering Program (the “ATM Program”). We also have an effective shelf registration statement with approximately $100 million of capacity, in addition to availability on the ATM Program, pursuant to which we could issue additional equity or debt securities. For more information on the ATM Program please see “Item 2. Management's Discussion and Analysis of Financial Condition and

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~~$100 million~~Results of ~~capacity pursuant to which we could issue additional equity or debt securities,~~Operations—Liquidity and ~~during six months ended June 30, 2022, we raised $98.4 million of equity capital from our At-the-Market Equity Offering Program (the “ATM Program”).~~Capital Resources.”

~~Notes~~Cash and ~~Interest Receivable~~Cash Equivalents

~~Notes receivable~~The Company’s cash and cash equivalents balance at any given financial institution may at times exceed federally insurable limits. We consider highly liquid investments purchased with an original maturity of three months or less, such as money market funds, to be cash equivalents. The Company monitors balances with individual financial institutions to mitigate risks relating to balances exceeding such limits.

Restricted Cash

The Company’s restricted cash consists of escrowed funds deposited with financial institutions subject to an in-process like-kind exchange in accordance with Section 1031 of the Code. The balance of restricted cash as of June 30, 2023 and December 31, 2022 was $2.2 million and $0.0 million, respectively.

Loans and Financing Receivables

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

~~Management determines the appropriate classification of debt securities at the time of issuance and reevaluates such designation as of each balance sheet date.~~ As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company ~~had 4~~has two types of loans and ~~5 notes outstanding, respectively,~~financing receivables: loans under the Company’s loan program (the “FPI Loan Program”) and ~~have~~sale-leaseback transactions accounted for as financing receivables.

Loans under the FPI Loan Program: The Company offers an agricultural lending product focused on farmers as a complement to the Company’s business of acquiring and owning farmland and leasing it to farmers. Under the FPI Loan Program, the Company makes loans to third-party farmers (both tenant and non-tenant) to provide financing for property acquisitions, working capital requirements, operational farming activities, farming infrastructure projects and for other farming and agricultural real estate related projects. As of both June 30, 2023 and December 31, 2022, the Company had three notes outstanding under the FPI Loan Program and has designated each of the notes receivable as loans. Loans are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity computed under the straight-line method, which approximates the effective interest method. Such amortization, including interest, is included in other revenue within our Consolidated Statements of Operations. See “Note 6—Notes Receivable.”

~~Convertible Notes Receivable~~Sale-leaseback Transactions Accounted for as Financing Arrangements:

~~On January 20, 2021,~~ In November 2022, the Company ~~entered into property sale~~purchased land and ~~long-term management agreements~~buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand. In accordance with ~~Promised Land Opportunity Zone Farms I, LLC (the "OZ Fund"), a private investment fund focused on acquiring and improving farmland~~ASC 842, for transactions in ~~qualified opportunity zones in the United States, as designated under U.S. tax provisions enacted in 2017. On March 5, 2021,~~which the Company ~~sold 9 farms~~enters into a contract to acquire an asset and lease it back to the ~~OZ Fund. On March 31, 2021,~~seller, the Company ~~sold an additional property~~is required to separately assess the lease classification apart from the other assets. The Company determined that the land and building components of the lease agreement with Ag Pro meet the definition of a sales-type lease and therefore, control is not considered to have transferred to the ~~OZ Fund.~~Company under GAAP. As ~~consideration for the 10 farms sold to the OZ Fund,~~a result, the Company ~~received approximately $19.1 million in cash and approximately $2.4 million in convertible notes receivable (the “OZ Convertible Notes”), resulting in~~does not recognize the underlying asset but instead recognizes a gain on disposition of assets totaling $2.4 million. The OZ Convertible Notes had an interest rate of 1.35% and an aggregate principal balance of $2.4 million. On July 16, 2021, the Company provided notice to the OZ Fund that it was converting its OZ Convertible Notes, and accrued interest thereon, into membership interests in the OZ Fund,financial asset in accordance with ASC 310 “Receivables.” Accordingly, the ~~terms~~transactions with Ag Pro are accounted for as financing receivables and are included in loans and financing receivables, net on the accompanying consolidated balance sheets, net of ~~the OZ Convertible Notes. The value of the conversion was $2.4 million and the Company’s membership interests~~allowance for credit losses, in ~~the OZ Fund were approximately 7.6% upon conversion and increased to 9.97% as of June 30, 2022 after subsequent capital contributions. Please refer to “Note 4—Related Party Transactions.”~~accordance with ASC 310.

~~Allowance~~Current expected credit losses (“CECL”)~~for Notes and Interest Receivable~~

~~A note~~: Under ASC 326, the Company is required to estimate an expected lifetime credit loss. For loans under the FPI Loan Program, a loan is placed on non-accrual status when management determines, after considering economic and business conditions and collection efforts, that the ~~note~~loan is impaired or collection of interest is doubtful. The accrual of interest on the instrument ceases when there is concern that principal or interest due according to the note agreement will not be collected. Any payment received on such non-accrual ~~notes~~loans are recorded as interest income when the payment is received. The ~~note~~loan is reclassified as accrual-basis once interest and principal payments become current. The Company periodically reviews the value of the underlying collateral of farm real estate for the ~~note~~loan receivable and evaluates whether the value of the collateral continues to provide adequate security for the ~~note. Should the value of the underlying collateral become less than the outstanding principal and interest, the Company will determine whether an allowance is necessary.~~loan. Any uncollectible interest previously accrued is also charged off. As of June 30, ~~2022,~~2023, we ~~believe~~believed the value of the underlying collateral for each of the ~~notes~~loans to be sufficient and in excess of the respective outstanding principal and accrued interest and no ~~notes~~loans are currently on non-accrual status.

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For financing receivables, the Company monitors its receivables based upon historical collection experience, collateral values, current trends, long-term probability of default (“PD”) and estimated loss given default (“LGD”). This approach calculates impairment by multiplying the PD (probability the asset will default within a given timeframe) by the LGD (percentage of the asset not expected to be collected due to default). The PD and LGD are estimated using average historical default rates of a company with similar credit risk factors to the Company’s tenant. Accrued interest write-offs are recognized as credit loss expense. CECL are recorded as a reduction to loans and financing receivables, net on the accompanying consolidated balance sheets. The CECL allowance is updated on a quarterly basis with the resulting change being recorded in the consolidated statements of operations for the relevant period. Charge-offs are deducted from the allowance in the period in which they are deemed uncollectible. Recoveries previously written off are recorded when received. There were no charge-offs or recoveries for the three and six months ended June 30, 2023 and 2022.

Accounts Receivable

Accounts receivable are presented at face value, net of the 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 creates an allowance for accounts receivable when it becomes apparent, based upon age or customer circumstances, that an amount may not be collectible, such that all current expected losses are sufficiently

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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. The allowance for doubtful accounts was less than $0.1 million as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. An allowance for doubtful accounts is recorded on the Consolidated ~~Statement~~Statements of Operations as a reduction to rental revenue if in relation to revenues recognized in the year, or as property operating expenses if in relation to revenue recognized in the prior years.

Inventory

~~The~~Inventory consists of costs ~~of growing~~related to crops grown on farms ~~under direct operations are accumulated until~~directly operated by the ~~time of harvest~~TRS and is separated into growing crop inventory, harvested crop inventory or general inventory, as appropriate. Inventory is stated in the consolidated balance sheets at the lower of cost or net realizable value ~~and are included in~~

Growing crop inventory ~~in the consolidated balance sheets. Costs are~~consists of costs 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~~have not yet been harvested, 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 and is included in other operating expenses.~~sold. The cost of harvested ~~crop~~crops sold was $1.0 million and $1.3 million, ~~and $0.7 million,~~ respectively, ~~for~~during the three months ended June 30, ~~2022~~2023 and ~~2021. For~~2022. During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the cost of harvested ~~crop~~crops sold was ~~$2.8~~$1.9 million and ~~$0.9~~$2.8 million, respectively.

Harvested crop inventory ~~on farms under direct operations includes~~consists of costs accumulated both during the growing and harvesting phases and ~~are~~allocated to harvested crops. Harvested crop inventory is stated at the lower of ~~those~~accumulated costs or ~~the~~ estimated net realizable value, which is the market price of the harvested crops, based upon the nearest market in the geographic region, less any cost of disposition. Cost of disposition includes broker’s commissions, freight and other marketing costs.

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

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, inventory consisted of the following:


(in thousands)	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Harvested crop	$	—	$	164	$	1,403	$	—
Growing crop		2,962		2,895		1,349		2,808
	$	2,962	$	3,059	$	2,752	$	2,808

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Equity Method Investments

On January 20, 2021, the Company entered into property sale and long-term management agreements with Promised Land Opportunity Zone Farms I, LLC (the “OZ Fund”), a private investment fund focused on acquiring and improving farmland in qualified opportunity zones in the United States, as designated under U.S. tax provisions enacted in 2017. As ~~partial~~ consideration for ~~certain transactions with~~10 farms sold to the OZ Fund in March 2021, the Company received approximately $2.4 million in convertible notes receivable, which, in addition to the accrued interest thereon, was converted into membership interests in the OZ ~~Convertible Notes, which on~~Fund at the Company’s election in July ~~16, 2021, were converted into a 7.6% equity interest upon conversion and increased to 9.97% as of June 30, 2022.~~2021. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the aggregate balance of the Company’s equity method investment in the OZ Fund was approximately ~~$4.1~~$4.2 million ~~and $3.4 million, respectively,~~for each period, including aggregate capital contributions of $1.7 million ~~and $1.0 million~~from inception of the joint venture through June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. The OZ Fund will exist until an event of dissolution occurs, as defined in the limited liability company agreement of the OZ Fund (the “Fund Agreement”). Under the Fund Agreement, the ~~Manager~~manager of the OZ Fund may call for additional capital contributions from its members to fund expenses, property acquisitions and capital improvements in accordance with each members’ funding ratio. The Company’s capital contributions are capped at $20.0 million.

Under the Fund Agreement, any available cash, after the allowance for the payment of all obligations, operating expenses and capital improvements, is distributed to the members at least annually. For each fiscal year, net income or loss is allocated to the members pro rata in accordance with their percentage interest.

Business Combinations

The Company recognizes and measures the assets acquired and liabilities assumed in a business combination based on their estimated fair values as of date of acquisition, with any difference recorded as goodwill. Management engages an independent valuation specialist, as applicable, to assist with the determination of fair value of the assets acquired, liabilities assumed, and resulting goodwill, based on recognized business valuation methodologies. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, an estimate

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will be recorded. Subsequent to the acquisition, and not later than one year from the acquisition date, the Company will record any measurement period adjustments to the initial estimate based on new information obtained that would have existed as of the acquisition date. An adjustment that arises from information obtained that did not exist as of the date of the acquisition will be recorded in the period of the adjustment. Acquisition and due diligence costs that arise as a result of a business combination are expensed as incurred.

On November 15, 2021, we acquired 100% of the membership interests of Murray Wise Associates, LLC (“MWA”), an agricultural asset management, brokerage and auction company, for total transaction value of $8.1 million, comprised of $5.3 million of consideration paid at closing, net of $2.8 million of closing adjustments. The consideration paid at closing was comprised of $2.2 million in cash and $3.1 million in shares of our common stock. The primary reason for the acquisition was to increase the Company’s breadth of activities in the farmland sector, while adding additional sources of revenue and market insight. As a result of the acquisition, MWA became a wholly owned subsidiary of the TRS. The Company issued an aggregate of 248,734 shares of common stock at a price of $12.61 per share in connection with the closing of the acquisition. The Company has entered into an incentive compensation agreement providing for the issuance of up to $3.0 million in shares of common stock for the benefit of current and prospective MWA employees aside from Murray Wise, who was appointed to our Board of Directors in connection with the closing of the acquisition, the receipt of which is tied to achieving certain profitability and asset-under-management objectives within three years following the closing of the transaction. Stock-based incentive expense related to these awards will be recognized ratably over the same ~~three~~-year period to which it relates. For the three and six months ended June 30, 2022, the Company recorded $0.2 million and $0.4 million, respectively, for these awards. As of June 30, 2022, $0.4 million is included in accrued expenses on the accompanying consolidated balance sheets.

The Company recorded goodwill of $2.7 million, trade names and trademarks of $1.9 million, and customer relationships of $0.1 million, as part of the purchase of MWA. Goodwill represents the difference between the purchase consideration and the net assets acquired, including identifiable intangible assets. The factors giving rise to goodwill are primarily related to (a) entry into new lines of business which are complimentary to FPI’s existing business operations, and (b) acquired workforce-in-place, including Murray Wise, who has extensive experience in the industry, and became a member of our Board of Directors in connection with the closing of the transaction, as described above.

~~The following table presents a summary of the Company's purchase accounting entries:~~

($ in thousands)

MWA Purchase
Consideration:

Accounting
Cash consideration

$
2,161
Stock consideration

3,147
Total consideration

$
5,308

Amounts recognized for fair value of assets acquired and liabilities assumed:

Cash and cash equivalents

$
1,305
Fixed Assets

110
Goodwill

2,706
Intangible assets

1,915
Net Liabilities

(728)
Total Fair Value

$
5,308

Net cash used in the transaction:

Cash paid in transaction

$
(2,161)
Cash acquired in transaction

1,305
Net cash used in the transaction

$
(856)

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in the acquisition of a business. Goodwill is not amortized, but rather is tested for impairment annually in the fourth quarter and when events or changes in circumstances indicate that the fair value of a reporting unit with goodwill has been reduced below its carrying value. The impairment test requires allocating goodwill and other assets and liabilities to reporting units. The fair value of each reporting unit is determined and compared to the carrying value of the reporting unit. The fair value

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is calculated using the expected present value of future cash flows method. Significant assumptions used in the cash flow forecasts include future net operating margins, discount rates and future capital requirements. If the fair value of the reporting unit is less than the carrying value, including goodwill, the excess of the book value over the fair value of goodwill is charged to net income as an impairment expense. During the three and six months ended June 30, ~~2022,~~2023, the Company did not incur any impairment charges related to goodwill.

Amortization of intangible assets with definite lives is calculated using the straight-line method, which is reflective of the benefit pattern in which the estimated economic benefit is expected to be received over the estimated useful life of the intangible asset. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. If the sum of the expected undiscounted future cash flows related to the asset is less than the carrying amount of the asset, an impairment loss is recognized based on the fair value of the asset. Trade names and trademarks have an indefinite life and, therefore, are not subject to amortization. Customer relationships are subject to amortization and are amortized over a period of 10 to 12

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years. During the three and six months ended June 30, 2023 and 2022, the Company recorded amortization of customer relationships of less than $0.1 million for each period.

Fair Value

The Company is required to disclose fair value as further explained in “Note 6—Notes ~~Receivable”,~~Receivable,” “Note 7—Mortgage Notes, Lines of Credit and Bonds Payable” and “Note 10—Hedge ~~Accounting”.~~Accounting.” FASB ASC 820-10 establishes a three-level hierarchy for the 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.

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 reporting period.

The Company manages economic risks, including interest rate, liquidity, and credit risk, by managing the amount, sources, duration and interest rate exposure of its funding. The Company may also use interest rate derivative financial instruments, namely interest rate swaps.

The Company may enter into marketing contracts to sell commodities. Derivatives and hedge accounting guidance requires a company to evaluate these contracts to determine whether the contracts are derivatives. Certain contracts that meet the definition of a derivative may be exempt from derivative accounting if designated as normal purchase or normal sales. The Company evaluates all contracts at inception to determine if they are derivatives and if they meet the normal purchase and normal sale designation requirements.

The Company has in place one interest rate swap agreement with Rabobank to add stability to interest expense and to manage its exposure to interest rate movements. This agreement qualifies as a cash flow hedge and is actively evaluated

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for ongoing effectiveness (see “Note 10—Hedge Accounting”). 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’~~stockholders’ equity in the Company’s consolidated balance sheets.

Additionally, the Company assesses whether the derivative used in its hedging transaction is expected to be highly effective in offsetting changes in the fair value or cash flows of the hedged item. The Company discontinues hedge accounting when it is determined that a derivative has ceased to be or is not expected to be highly effective as a hedge, and then reflects changes in fair value of the derivative as gain or loss, as applicable, in ~~earnings~~the consolidated statements of operations during reporting periods after ~~termination of the hedge relationship.~~

~~New or Revised Accounting Standards~~

such determination.

Recently ~~adopted~~Adopted Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), that provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market

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transition from the London Inter-bank Offered Rate (“LIBOR”) and other interbank offered rates (together, “IBORs”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. We refer to this transition as “reference rate reform.”

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

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

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

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

Note 2—Revenue Recognition

Fixed Rent: The majority of the Company’s leases provide for rent payments on an entirely or partially fixed basis. For the majority of its fixed farm rent leases, the Company receives at least 50% of the annual lease payment from tenants before crops are planted, generally during the first quarter of the year, with the remaining 50% of the lease payment due in the second half of the year generally after the crops are harvested. Rental income is recorded on a straight-line basis over the lease term. This means that rental income is equal in all periods of the lease, calculated by adding all expected lease payments (including increases within the lease) and dividing by the number of periods, despite the cash rents being received in lump sums at the specific times as described above. The lease term generally considers periods when a tenant: (1) may not terminate its lease obligation early; (2) may terminate its lease obligation early in exchange for a fee or penalty that the Company considers material enough such that termination would not be probable; (3) possesses renewal rights and the tenant’s failure to exercise such rights imposes a penalty on the tenant material enough such that renewal appears reasonably assured; or (4) possesses bargain renewal options for such periods. Payments received in advance are included in deferred revenue until they are earned.

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

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when the tenant has notified the Company of the total amount of gross farm proceeds, revenue is recognized for the excess of the actual gross farm proceeds and the previously recognized minimum guaranteed insurance.

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

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The Company’s leases generally have terms ranging from one to three years, with some extending up to 40 years (e.g., renewable energy leases). Payments received in advance are included in deferred revenue until they are earned. As of June 30, 2023 and December 31, 2022, the Company had $1.1 million and less than $0.1 million, respectively, in deferred revenue.

The following sets forth a summary of rental income recognized during the three and six months ended June 30, 2023 and 2022:


	Rental income recognized
		For the three months ended				For the six months ended
		June 30,				June 30,
(in thousands)		2023		2022		2023			2022
Leases in effect at the beginning of the year		$	9,024	$	7,798	$	18,445	$	15,549
Leases entered into during the year			365		1,398		632		3,192
		$	9,389	$	9,196	$	19,077	$	18,741

Future minimum fixed rent payments from tenants under all non-cancelable leases in place as of June 30, 2023, including lease advances when contractually due, but excluding crop share and tenant reimbursement of expenses, for the remainder of 2023 and each of the next four years and thereafter as of June 30, 2023 are as follows:


(in thousands)	Future rental
Year Ending December 31,	payments
2023 (remaining six months)	$	17,241
2024		25,641
2025		14,194
2026		7,332
2027		5,243
Thereafter		36,981
	$	106,632

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.

Tenant Reimbursements: Certain of the Company’s leases provide for tenants to reimburse the Company for property taxes and other expenses. Tenant reimbursements are recognized on a straight-line basis each year over the applicable term of the lease.

Crop Sales: ~~The~~For farms directly operated through the TRS, the Company records revenue from the sale of harvested crops when the harvested crop has been contracted to be delivered to a grain or packing facility and title has transferred. ~~Revenues~~During the three months ended June 30, 2023 and 2022, revenues from the sale of harvested crops recognized ~~for the three months ended June 30, 2022 and 2021~~ were ~~$1.2~~$0.5 million and ~~$0.2~~$1.2 million, respectively. Revenues from the sale of harvested crops recognized for the six months ended June 30, 2023 and 2022 ~~and 2021~~ were ~~$1.8~~$0.9 million and ~~$0.5~~$1.8 million, 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.

Other Revenue: Other revenue includes crop insurance proceeds, auction fees, brokerage fees, interest income, and property management ~~income, and proceeds from litigation settlement.~~income. Crop insurance proceeds are recognized when the amount is determinable and collectible. Crop insurance proceeds are generally received in lieu of crop sales on farms ~~under direct operations.~~directly operated through the TRS. The Company generates auction revenue by contracting with a real estate owner to market and auction farm property. Successful bidders sign a purchase agreement immediately following the auction. Auction fee revenue is recognized upon completion of the ~~Company’s performance obligations.~~transaction. The Company generates real estate brokerage commissions by acting as a broker for real estate investors or owners seeking to buy or sell farm property. Revenue from brokerage fees is recognized inupon completion of the ~~month in which the sale transaction occurs.~~transaction. Property management revenue is recognized over the term of the contract as services are being provided. The Company collects property management fees in advance of the commencement of property management activities on behalf of third ~~parties. Payments received in advance are included~~parties and includes them in deferred revenue until they are ~~earned.~~earned over the life

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of the contract. Interest income is recognized on ~~notes receivable~~loans and financing receivables on an accrual basis over the life of the ~~note.~~loans. Direct origination costs are netted against loan origination fees and are amortized over the life of the note using the straight-line method, which approximates the effective interest method, as an adjustment to interest income which is included as a component of other revenue in the Company’s Consolidated Statements of Operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~

~~Leases in place as of June 30, 2022 have terms ranging from~~ ~~one~~ ~~to 40 years, though, most of the Company’s farming leases range from~~ ~~two~~ ~~to three years for row crops and~~ ~~one~~ to seven years for permanent crops. Payments received in advance are included in deferred revenue until they are earned. As of June 30, 2022 and December 31, 2021, the Company had $1.3 million and less than $0.1 million, respectively, in deferred revenue.2022.

The following ~~sets forth a summary of rental income recognized during~~table presents other revenue that is disaggregated by revenue source for the three and six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:

Rental income recognized

For the three months ended

For the six months ended

June 30,

June 30,
(in thousands)

2022

2021

2022


2021
Leases in effect at the beginning of the year

$
7,798

$
7,263

$
15,549

$
16,734
Leases entered into during the year

1,398

1,028

3,192

1,817

$
9,196

$
8,291

$
18,741

$
18,551

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Future minimum fixed rent payments from tenants under all non-cancelable leases in place as of June 30, 2022, including lease advances when contractually due, but excluding crop share and tenant reimbursement of expenses, for the remainder of 2022 and each of the next four years and thereafter as of June 30, 2022 are as follows:

(in thousands)

Future rental
Year Ending December 31,

payments
2022 (remaining six months)

$
16,632
2023

26,802
2024

18,647
2025

9,125
2026

4,080
Thereafter

33,470

$
108,756

~~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.~~


	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2023		2022		2023			2022
Auction and brokerage fees	$	167	$	813	$	504	$	1,451
Crop insurance proceeds		29		—		624		1,925
Property management income		235		163		422		323
Other (e.g., interest income)		418		226		885		375
	$	849	$	1,202	$	2,435	$	4,074

Note 3—Concentration Risk

Credit Risk

For the three and six months ended June 30, ~~2022,~~2023, the Company had no significant tenants representing a tenant concentration of 10% or greater of period revenue. Revenue for the three and six months ended June 30, ~~2022 are~~2023 is not necessarily indicative of actual revenue for the entire year ending December 31, ~~2022.~~2023. The Company receives a significant portion of its variable rental payments in the fourth quarter of each year, typically resulting in at least one tenant concentration of 10% or greater revenue in that ~~quarter.~~quarter and for the year. If a significant tenant fails to make rental payments to the Company or elects to terminate its leases, and the land cannot be re-leased on satisfactory terms, there may be a material adverse effect on the Company’s financial ~~performance and the Company’s ability to continue operations.~~performance.

Geographic Risk

The following table summarizes the percentage of approximate total acres owned as of June 30, ~~2022~~2023 and ~~2021,~~2022, and the fixed and variable rent recorded by the Company for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 by location of the farm:


	Approximate %				Rental Income ⁽¹⁾								Approximate %				Rental Income ⁽¹⁾
	of total acres				For the three months ended				For the six months ended				of total acres				For the three months ended				For the six months ended
	As of June 30,				June 30,				June 30,				As of June 30,				June 30,				June 30,
Location of Farm ⁽²⁾	2022		2021		2022		2021		2022		2021		2023		2022		2023		2022		2023		2022
Corn Belt	28.8	%	27.3	%	40.1	%	39.5	%	39.8	%	36.8	%	28.6	%	28.8	%	43.7	%	40.1	%	43.6	%	39.8	%
Delta and South	20.5	%	20.4	%	13.3	%	9.5	%	15.5	%	10.6	%	20.9	%	20.5	%	15.0	%	13.3	%	13.9	%	15.5	%
High Plains	18.2	%	18.8	%	9.1	%	10.0	%	9.0	%	8.0	%	20.7	%	18.2	%	9.9	%	9.1	%	9.9	%	9.0	%
Southeast	25.2	%	26.1	%	24.3	%	25.7	%	23.3	%	27.3	%	22.4	%	25.2	%	23.7	%	24.3	%	24.1	%	23.3	%
West Coast	7.3	%	7.4	%	13.2	%	15.3	%	12.4	%	17.3	%	7.4	%	7.3	%	7.7	%	13.2	%	8.5	%	12.4	%
	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

⁽¹⁾

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

⁽²⁾

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

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 Paul A. Pittman, the Company’s ~~Chairman and Chief~~ Executive ~~Officer.~~Chairman. The private plane is generally utilized when commercial

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air travel is not readily available or practical to and from a particular location. The Company paid costs of ~~$0.04~~$0.02 million and ~~$0.05~~$0.04 million during the three months ended June 30, 2023 and 2022 and ~~2021, respectively,~~$0.02 million and $0.07 ~~million and $0.09~~ million during the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, to American Ag Aviation for use of

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the aircraft in accordance with the lease agreement. These costs were recognized based on the nature of the associated use of the aircraft consistently with other travel expenses, 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.

On January 20, 2021, the Company entered into property sale and long-term management agreements with the OZ Fund. The OZ Fund is a Delaware limited liability company whose manager is the brother of Thomas P. Heneghan, one of the Company's independent directors. Mr. Heneghan has an indirect investment in the OZ Fund. On March 5, 2021, the Company sold 9 farms to the OZ Fund. On March 31, 2021, the Company sold an additional property to the OZ Fund. As consideration for the 10 farms sold to the OZ Fund, the Company received approximately $19.1 million in cash and approximately $2.4 million in convertible notes receivable (the “OZ Convertible Notes”), resulting in a gain on disposition of assets totaling $2.4 million. On July 16, 2021, the OZ Convertible Notes were converted into a 7.6% equity interest in the OZ Fund. As of June 30, 2023 and December 31, 2022, the Company had a 9.97% interest for both periods in the OZ Fund. Under the terms of the long-term management agreement, the Company earns a quarterly management fee equal to (i) 0.2125% times gross book value per quarter of the gross book value under $50 million and (ii) 0.2000% times gross book value per quarter of the gross book value in excess of $50 million and under $100 million and (iii) 0.1875% times gross book value per quarter of gross book value in excess of $100 million. The Company earned management fees of ~~$0.10~~$0.1 million ~~and $0.05 million, respectively,~~for each of period during the three months ended June 30, 2023 and 2022 and ~~2021 and $0.21~~$0.2 million ~~and $0.06 million, respectively,~~for each period during the six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

Note 5—Real Estate

During the six months ended June 30, 2023, the Company completed acquisitions of two properties in the Corn Belt and Delta and South region. Aggregate consideration for these acquisitions totaled $9.0 million. No intangible assets were acquired through this acquisition.

During the six months ended June 30, 2022, the Company completed 9 acquisitions ~~consisting~~ of 9nine properties in the Corn Belt region. Aggregate consideration for these acquisitions totaled $28.2 million. ~~NaN~~No intangible assets were acquired through these acquisitions.

During the six months ended June 30, ~~2021,~~2023, the Company completed ~~4 acquisitions, consisting~~dispositions of 419 properties in the Corn Belt, ~~and~~ Delta and South and Southeast regions. ~~Aggregate~~The Company received cash consideration for these ~~acquisitions totaled $29.9~~dispositions totaling $51.5 million and recognized an aggregate gain on sale of $12.9 million. ~~NaN intangible assets were acquired through these acquisitions.~~Of the $51.5 million in cash consideration, $2.2 million is considered restricted cash as it is held in a financial institution for an in-process, like-kind exchange.

During the six months ended June 30, 2022, the Company completed 5 dispositions ~~consisting~~ of 5five properties in the Corn Belt, High Plains and Southeast regions. The Company received cash consideration for these dispositions totaling $16.9 million and recognized an aggregate gain on sale of $4.0 million.

During the six months ended June 30, 2021, the Company completed 7 dispositions consisting of 15 properties in the Corn Belt, Southeast, and Delta and South regions. The Company received cash consideration for these dispositions totaling $28.6 million and $2.4 million of convertible notes receivable (which were subsequently converted to membership interests in the OZ Fund on July 16, 2021), and recognized an aggregate gain on sale of $3.5 million.

Note 6—~~Notes Receivable~~Loans and Financing Receivables

The Company offers an agricultural lending product ~~(the “FPI Loan Program”)~~ focused on farmers as a complement to the Company’s business of acquiring and owning farmland and leasing it to farmers. Under the FPI Loan Program, the Company makes loans to third-party farmers (both tenant and non-tenant) to provide financing for property acquisitions, working capital requirements, 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 $1.0 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.

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~~Notes receivable~~On November 18, 2022, the Company acquired land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro (the seller), under the John Deere brand. In accordance with ASC Topic 842, control is not considered to have transferred to the Company under GAAP and these transactions are ~~stated at their unpaid principal balance~~accounted for as financing arrangements under ASC 310 “Receivables” rather than as investments in real estate subject to operating leases. The leases mature in November 2037 and ~~include unamortized direct origination costs and accrued interest through~~contain renewal options for periods up to 20 years from the ~~reporting date, less any allowance~~original maturity date. The discount rate used for losses and unearned borrower paid points. 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 estimated 0 expected credit losses on its notes receivable principal balances as of June 30, 2022 and December 31, 2021. The Company recorded 0 credit loss expense related to interest receivables during the ~~three and six months ended June 30, 2022 and 2021, respectively.~~transactions was 6.15%.

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company held the following ~~notes receivable:~~loans and financing receivables:


($ in thousands)		Principal Outstanding as of				Maturity			Outstanding as of				Maturity
Loan	Payment Terms	June 30, 2022		December 31, 2021		Date		Terms	June 30, 2023		December 31, 2022		Date
Mortgage Note ⁽¹⁾	Principal & interest due at maturity	$	217	$	223	12/7/2028
Loans under FPI Loan Program:
Mortgage Note ⁽¹⁾	Principal due at maturity & interest due monthly		—		2,135	3/16/2022		Principal & interest due at maturity	$	210	$	217	12/7/2028
Mortgage Note ⁽²⁾	Principal due at maturity & interest due quarterly		—		1,571	6/23/2023		Principal due at maturity & interest due semi-annually		2,100		2,100	8/18/2023
Mortgage Note ⁽³⁾	Principal due at maturity & interest due semi-annually		2,100		2,100	8/18/2023		Principal due at maturity & interest due quarterly		2,500		2,500	3/3/2025
Mortgage Note ⁽⁴⁾	Principal due at maturity & interest due quarterly		1,000		—	11/28/2022
Mortgage Note ⁽⁴⁾	Principal due at maturity & interest due quarterly		2,500		—	3/3/2025
Total outstanding principal			5,817		6,029					4,810		4,817
Sale-leaseback transactions accounted for as financing arrangements:							Sale-leaseback transactions accounted for as financing arrangements:
Financing Receivable, net ⁽⁴⁾								Monthly payments in accordance with lease agreement		5,907		5,894	11/17/2037
Financing Receivable, net ⁽⁴⁾								Monthly payments in accordance with lease agreement		4,498		4,498	11/17/2037
Financing Receivable, net ⁽⁴⁾								Monthly payments in accordance with lease agreement		3,562		3,561	11/17/2037
Financing Receivable, net ⁽⁴⁾								Monthly payments in accordance with lease agreement		3,240		3,241	11/17/2037
Total financing receivable										17,207		17,194
Interest receivable (net prepaid interest and points)			38		83					53		2
Allowance for credit losses										(92)		(92)
Provision for interest receivable			—		—					—		—
Total notes and interest receivable		$	5,855	$	6,112
Total Loans and financing receivables, net									$	21,978	$	21,921

(1)

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 included mortgages on 2two additional properties in Colorado that included repurchase options for the properties at a fixed price that were exercisable by the buyer between the third and fifth anniversary of the issuance of the notes and expired on March 16, 2022 unexercised. Upon expiration of the repurchase options, the properties are no longer accounted for as financing transactions and became owned by the Company. They are included in real estate on the accompanying consolidated balance sheets based on the net unpaid note balances.

(2)

On ~~July 27, 2021, the Company entered into a loan secured against farmland, which was repaid in full on April 13, 2022.~~

~~(3)~~

On August 18, 2021, the Company entered into a loan secured against farmland.

~~(4)~~(3)

On March 3, 2022, the Company entered into 2two loans with the same party secured against farmland.

(4)

On November 18, 2022, the Company acquired land and buildings for four agriculture equipment dealerships in Ohio, accounted for as financing transactions. The leases may be extended beyond the stated maturity date, for up to an additional 20 years, at the option of the tenant.

Loans and financing receivables 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. The Company monitors its receivables based upon historical collection experience, collateral values, current trends, long-term probability of default (“PD”) and estimated loss given default (“LGD”). Accrued interest write-offs are recognized as credit loss expense. The Company has estimated its credit losses in accordance with ASC 326 to be zero on its loan balances and approximately $0.1 million of allowance for credit losses on its financing receivables as of June 30, 2023 and December 31, 2022. The Company recorded no credit loss expense related to interest receivables during the three and six months ended June 30, 2023 and 2022, respectively.

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The following tables detail the allowance for credit losses as of June 30, 2023 and December 31, 2022:


	June 30, 2023
($ in thousands)	Amortized Cost		Allowance		Loans and financing receivables, net		Allowance as a % of Amortized Cost
Loans under FPI Loan Program	$	4,863	$	—	$	4,863		—	%
Financing Receivables		17,207		(92)		17,115		0.53	%
Totals	$	22,070	$	(92)	$	21,978		0.42	%


	December 31, 2022
($ in thousands)	Amortized Cost		Allowance		Loans and financing receivables, net		Allowance as a % of Amortized Cost
Loans under FPI Loan Program	$	4,819	$	—	$	4,819		—	%
Financing Receivables		17,194		(92)		17,102		0.54	%
Totals	$	22,013	$	(92)	$	21,921		0.42	%

The following chart reflects the roll-forward of the allowance for credit losses for our loans and financing receivables for the six months ended June 30, 2023 and 2022:


	Six months ended June 30,
($ in thousands)	2023		2022
Balance at beginning of year	$	(92)	$	—
Initial allowance for financing receivables		—		—
Current period change in credit allowance		—		—
Charge-offs		—		—
Recoveries		—		—
Balance at end of year	$	(92)	$	—

The collateral for the mortgage notes receivable consists of real estate, personal property and growing crops.

~~The~~We estimate the fair value of ~~notes receivable is valued~~loans and financing receivables using Level 3 inputs under the hierarchy established by ~~GAAP and~~GAAP. Fair value is ~~calculated based on a discounted~~estimated by discounting cash ~~flow analysis,~~flows using interest rates based on management’s estimates of market interest rates on ~~mortgage notes~~loans receivable with comparable terms and credit risk whenever the interest rates on the ~~notes~~loans receivable are deemed not to be at market rates. The fair value for financing receivables does not take into consideration any residual value upon the end of the lease term. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the fair value of the ~~notes receivable~~loans and financing receivables was ~~$6.3~~$15.7 million and ~~$6.0~~$19.6 million, respectively.

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

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had the following indebtedness outstanding:‌


										Book												Book
				Annual						Value of				Annual								Value of
($ in thousands)	($ in thousands)			Interest	Principal					Collateral		($ in thousands)		Interest			Principal					Collateral
				Rate as of	Outstanding as of					as of				Rate as of		Next	Outstanding as of					as of
				June 30,	June 30,		December 31,		Maturity	June 30,			Interest	June 30,	Interest Rate	Adjustment	June 30,		December 31,		Maturity	June 30,
Loan		Payment Terms	Interest Rate Terms	2022	2022		2021		Date	2022			Payment Terms	2023	Terms	Date	2023		2022		Date	2023
Farmer Mac Bond #6		Semi-annual interest only	3.69%	3.69%	$	13,827	$	13,827	April 2025	$	21,438		Semi-annual	3.69%	Fixed	N/A	$	13,827	$	13,827	April 2025	$	20,938
Farmer Mac Bond #7		Semi-annual interest only	3.68%	3.68%		11,160		11,160	April 2025		18,584		Semi-annual	3.68%	Fixed	N/A		11,160		11,160	April 2025		8,258
Farmer Mac Facility													Monthly	6.66%	SOFR + 1.50%	N/A		73,500		75,000	December 2025		86,921
MetLife Term Loan #1		Semi-annual interest only	3.30% fixed until 2023	3.30%		72,622		83,206	March 2026		182,578		Semi-annual	5.55%	Fixed for 3 years	N/A		72,623		72,623	March 2026		102,346
MetLife Term Loan #2		Semi-annual interest only	3.60% fixed until 2025	3.60%		—		16,000	March 2026		—
MetLife Term Loan #3		Semi-annual interest only	3.60% fixed until 2025	3.60%		—		16,800	March 2026		—
MetLife Term Loan #4		Semi-annual interest only	3.30% fixed until 2023	3.30%		9,880		13,017	June 2026		25,694		Semi-annual	5.55%	Fixed for 3 years	March 2026		9,880		9,880	June 2026		25,651
MetLife Term Loan #5		Semi-annual interest only	3.50% fixed until 2023	3.50%		5,179		6,779	January 2027		10,096		Semi-annual	5.63%	Fixed for 3 years	January 2026		5,179		5,179	January 2027		8,542
MetLife Term Loan #6		Semi-annual interest only	3.45% fixed until 2023	3.45%		21,726		27,158	February 2027		58,087		Semi-annual	5.55%	Fixed for 3 years	February 2026		21,726		21,726	February 2027		25,711
MetLife Term Loan #7		Semi-annual interest only	3.20% fixed until 2023	3.20%		15,698		16,198	June 2027		29,629		Semi-annual	5.87%	Fixed for 3 years	June 2026		15,699		15,699	June 2027		29,679
MetLife Term Loan #8		Semi-annual interest only	4.12% fixed until 2027	4.12%		44,000		44,000	December 2042		110,042		Semi-annual	4.12%	Fixed for 10 years	December 2027		44,000		44,000	December 2042		110,042
MetLife Term Loan #9		Semi-annual interest only	3.20% fixed until 2024	3.20%		16,800		16,800	May 2028		33,652		Semi-annual	3.20%	Fixed for 3 years	May 2024		16,800		16,800	May 2028		33,617
MetLife Term Loan #10		Semi-annual interest only	3.00% fixed until 2023	3.00%		48,985		49,874	October 2030		103,867		Semi-annual	3.00%	Fixed for 3 years	October 2023		48,985		48,985	October 2030		103,858
MetLife Term Loan #11		Semi-annual interest only	2.85% fixed until 2024	2.85%		12,750		12,750	October 2031		27,102		Semi-annual	2.85%	Fixed for 3 years	October 2024		12,750		12,750	October 2031		27,215
MetLife Term Loan #12		Semi-annual interest only	3.11% fixed until 2024	3.11%		14,359		14,359	December 2031		28,884		Semi-annual	3.11%	Fixed for 3 years	December 2024		14,359		14,359	December 2031		28,941
MetLife Facility													Quarterly	6.99%	SOFR + 2.10%	N/A		—		—	October 2027		112,240
Rabobank ⁽¹⁾		Semi-annual interest only	LIBOR + 1.70% adjustable every two years	2.82%		59,500		59,500	March 2028		129,117		Semi-annual	6.93%	SOFR + 1.81%	March 2024 ⁽²⁾		48,033		59,500	March 2028		107,894
Rutledge Facility		Quarterly interest only	SOFR + 1.95%	2.60%		80,000		112,000	March 2027		231,751		Quarterly	6.69%	SOFR + 1.80%	April 2024 ⁽²⁾		65,000		18,000	March 2027		219,732
Total outstanding principal						426,486		513,428		$	1,010,521							473,521		439,488		$	1,051,585
Debt issuance costs						(2,012)		(2,105)										(2,479)		(2,613)
Unamortized premium						—		—										—		—
Total mortgage notes and bonds payable, net					$	424,474	$	511,323				Total mortgage notes and bonds payable, net					$	471,042	$	436,875

(1)

The Company has an interest rate swap agreement with Rabobank ~~to add stability to interest expense and to manage our exposure to interest~~for $33.2 million notional of fixed LIBOR at 2.114% until March 2026 for a weighted average rate ~~movements~~of approximately 4.8% (see “Note 10—Hedge Accounting”).

(2)	The adjustment date included in the table above is for the spread noted under “Interest Rate Terms.”

Farmer Mac ~~Facility~~Debt

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the ~~Company~~Operating Partnership had approximately ~~$25.0~~$98.5 million and $100.0 million in aggregate principal amount, respectively, outstanding under the bond purchase agreement entered into in October 2022 (the “Farmer Mac Facility”) with Federal Agricultural Mortgage Corporation and its wholly owned subsidiary, Farmer Mac Mortgage Securities Corporation (collectively, “Farmer Mac”), and $1.5 million and $0.0 million, respectively, in additional capacity available under the Farmer Mac ~~facility.~~Facility. The Farmer Mac ~~facility~~debt is secured by loans which are, in turn, secured by first-lien mortgages on agricultural real estate owned by the Operating Partnership. While Farmer Mac Bond #6 and Farmer Mac Bond #7 bear fixed interest rates of 3.69% and 3.68%, respectively, the Farmer Mac Facility bears interest of one-month term SOFR + 1.50% on drawn amounts and an unused commitment fee of 0.20%. In connection with the agreements, the Company entered into a guaranty agreement whereby the Company agreed to guarantee the full performance of the Operating Partnership’s duties and obligations under the Farmer Mac debt. The Farmer Mac debt 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 June 30, ~~2022.~~2023. In addition, under the Farmer Mac Facility, the Operating Partnership may request that Farmer Mac purchase additional bonds up to an additional $200.0 million, which Farmer Mac may approve at its sole discretion.

MetLife Term ~~Loans~~Debt

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had $262.0 million ~~and $316.9 million~~in aggregate principal amount outstanding ~~respectively,~~for both periods under the ~~loan~~credit agreements between certain of the Company’s subsidiaries and Metropolitan Life Insurance Company (“MetLife”~~) (together,~~ and collectively, the “MetLife ~~loan~~credit agreements”). Each of the MetLife ~~loan~~credit 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%.

In connection with each of the MetLife loan agreements, FPI and the Operating Partnership each entered into separate guarantees whereby FPI and the Operating Partnership jointly and severally agree to unconditionally guarantee the obligations under the Metlife loan agreements (the “MetLife guarantees”). The MetLife guarantees contain a number of customary affirmative and negative covenants.

The Company ~~was in compliance~~also has a $75.0 million credit facility with ~~all covenants under~~MetLife that provides the ~~MetLife loan agreements and MetLife guarantees as~~Company with access to additional liquidity on a revolving credit basis at a floating rate of interest equal to SOFR plus 210 basis points. As of June 30, ~~2022.~~

~~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, FPI~~2023, no amounts had been borrowed 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~~$75.0 million remained available under the ~~MetLife loans and to exercise its remedies with respect to the pledged collateral, including foreclosure and sale~~senior secured revolving line of ~~the Company’s properties that collateralize the MetLife loans.~~credit

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~~Rutledge Credit Facility~~

~~On February 18, 2022, the Company and~~entered into by the Operating Partnership as guarantors, and American Farmland Company L.P. (“AFCO”), a wholly owned subsidiary of the Company as the borrower, entered into an Amended, Restated and Consolidated Loan Agreement (the “Consolidated Loan Agreement”) with Rutledge Investment Company ("Rutledge"), pursuant to which the parties agreed to consolidate the Company's 5 outstanding promissory notes with Rutledge (the "Legacy Rutledge Loans") into a single revolving credit loanMetLife in an aggregate principal amount of up to $112.0 million (the "Consolidated Loan") maturing on March 1, 2027 (the "Maturity Date" and collectively, the “Refinancing”). As a condition to Rutledge providing the Refinancing, the Company and the Operating Partnership individually entered into Amended and Restated Guaranty Agreements with Rutledge, each dated as of February 18, 2022 (each, a “Guaranty Agreement”) whereby we are required to unconditionally guarantee AFCO's obligations under the Consolidated Loan, and AFCO entered into that certain Consolidation of Notes and Modification and Extension Agreement with Rutledge, dated as of February 18,October 2022 (the ~~“Modification Agreement,” and together with the Consolidated Loan Agreement and the Guaranty Agreements, the “Refinancing Agreements”~~“MetLife Facility”). As of June 30, 2022 and December 31, 2021, the Company and the Operating Partnership had $80.0 million and $112.0 million, respectively, outstanding under the Rutledge Facility. As of June 30, 2022, $32.0 remains available under this facility and2023, the Company was in compliance with all covenants under the ~~loan~~MetLife credit agreements ~~relating to the Rutledge Facility.~~and MetLife guarantees.

~~The~~On each adjustment date for MetLife Term Loans #1-10, MetLife may, at its option, adjust the rate of interest to any rate of interest determined by MetLife consistent with rates for substantially similar loans secured by real estate substantially similar to the collateral. For MetLife Term Loan #11, the interest rate will be adjusted to the greater of the three-year U.S. treasury rate plus 2.20% or 2.85%. For MetLife Term Loan #12, the interest rate will be adjusted to the greater of the three-year U.S. treasury rate plus 2.10%, or 2.75%. At the time of rate adjustment, the Company may make a prepayment equal to the unpaid principal balance for each of the ~~Consolidated Loan is based on three-month SOFR, plus an applicable margin. The applicable margin for~~MetLife loans. Otherwise, the ~~Consolidated Loan is 1.80%~~Company may make a prepayment equal to ~~2.25%, depending~~20% to 50% of the unpaid principal balance (depending on the ~~applicable pricing level in effect. The Company previously paid~~tranche of debt) during a commitment fee to Rutledge equal to 0.50% of the aggregate principal amount of the Consolidated Loan. Generally, the Consolidated Loan Agreement contains terms consistent with the Legacy Rutledge Loans, including, among others, the representations and warranties, affirmative, negative and financial covenants and events of default. The Company will owe 0 prepayment penalty if it elects to repay the Consolidated Loan in full before the Maturity Date.calendar year without penalty.

Rabobank Mortgage Note

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company and the Operating Partnership had ~~$59.5~~$48.0 million and $59.5 million in aggregate principal amount outstanding, respectively, under the Rabobank mortgage note. The Company was in compliance with all covenants under the Rabobank mortgage note as of June 30, ~~2022.~~2023.

Rutledge Facility

As of June 30, 2023 and December 31, 2022, the Company and the Operating Partnership had $65.0 million and $18.0 million in aggregate principal amount, respectively, outstanding under a credit agreement with Rutledge Investment Company (“Rutledge”) referred to herein as the Rutledge Facility. In February 2023, the total facility size was decreased from $112 million to $109 million. As of June 30, 2023, $44.2 million remained available under this facility and the Company was in compliance with all covenants under the loan agreements relating to the Rutledge Facility.

The interest rate for the credit facility is based on three-month SOFR, plus an applicable margin. The applicable margin for the credit facility is 1.80% to 2.25%, depending on the applicable pricing level in effect. As of April 1, 2023, the applicable margin changed to 1.80%. Generally, the Rutledge Facility contains terms consistent with the Company’s prior loans with Rutledge, including, among others, the representations and warranties, affirmative, negative and financial covenants and events of default.

In connection with the Rutledge agreement, the Company and the Operating Partnership each entered into separate guarantees whereby the Company and the Operating Partnership jointly and severally agreed to unconditionally guarantee the obligations under the Rutledge Facility (the “Rutledge guarantees”). The Rutledge guarantees contain a number of customary affirmative and negative covenants.

LIBOR

~~The use of LIBOR was phased out at the end of 2021, although the phase out of U.S. dollar LIBOR has been delayed until mid-2023. Currently, no official replacement rate has been identified.~~ As of June 30, ~~2022,~~2023, the Company’s only indebtedness with maturity beyond 2023 that has exposure to LIBOR was the Rabobank Mortgage ~~Note. There can be no assurances~~Note, which converted to a SOFR-based instrument 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 continued phasing out of LIBOR and will 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.July 1, 2023.

Debt Issuance Costs

Costs incurred by the Company in obtaining debt are deducted from the face amount of mortgage notes and bonds payable. 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 ~~$1.0~~$1.6 million and ~~$1.7~~$1.2 million as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

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Aggregate Maturities

As of June 30, ~~2022,~~2023, aggregate maturities of long-term debt for the succeeding years are as follows:


($ in thousands)
Year Ending December 31,	Future Maturities		Year Ending December 31,	Future Maturities
2022 (remaining six months)	$	—
2023		—
2023 (remaining six months)				$	—
2024		2,100			2,100
2025		27,087			100,587
2026		84,602			84,603
2027					109,704
Thereafter		312,697			176,527
	$	426,486		$	473,521

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 June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the fair value of the mortgage notes payable was ~~$401.3~~$448.5 million and ~~$522.7~~$405.0 million, respectively.

Note 8—Commitments and Contingencies

The Company is not currently subject to any known material contingencies arising from its business operations, nor to any material known or threatened litigation other than as discussed below.

Office Leases

The Company has 4five leases in place for office space with ~~monthly~~ payments ranging between ~~$850~~$750 and ~~$13,377~~$13,711 per month and lease terms expiring between ~~December 2022~~November 2024 and ~~October~~November 2025. Beginning in 2020, the Company recognized right of use assets and related lease liabilities in the consolidated balance sheets. The Company estimated the value of the lease liabilities using a discount ~~rate of~~rates ranging from 3.35% to 6.47%, equivalent to the ~~rate~~rates we would pay on a secured borrowing with similar terms to the lease at the inception of the lease. Options to extend the lease are excluded in our minimum lease terms unless the option is reasonably certain to be exercised. During the three months ended June 30, 2023 and 2022, our total lease cost was $0.07 million and $0.06 million, respectively. Our total lease cost for the ~~three months ended June 30, 2022 and 2021 was $0.06 million and $0.04 million, respectively. For the~~ six months ended June 30, 2023 and 2022 ~~and 2021, total lease cost~~ was ~~$0.12~~$0.13 million and ~~$0.08~~$0.12 million, respectively. Minimum annual rental payments under these operating leases, reconciled to the lease liability included in our consolidated balance sheets, are as follows (in thousands):


($ in thousands)	Future rental		Future rental
Year Ending December 31,	payments		payments
2022 (remaining six months)	$	115
2023		183
2023 (remaining six months)			$	96
2024		62		247
2025		44		205
2026		—		—
2027				—
Thereafter		—		—
Total lease payments		404		548
Less: imputed interest		(17)		(39)
Lease liability	$	387	$	509

Litigation

~~Summary of litigation matters discussed below:~~

●

The Brokop Class Action: On April 6, 2022, the Court issued an order granting the Company’s motion for summary judgment in full, and on April 7, 2022, the Court entered a final judgment dismissing Brokop’s claims with prejudice. That judgment became final on May 6, 2022, when the period for Brokop to appeal the judgment expired.

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●

The Winter Derivative Action: In light of the judgment dismissing the Brokop Class Action, the parties stipulated to the dismissal of the Winter Derivative Action, and the court entered a dismissal order on May 9, 2022.

●

~~The Luger Derivative Action: The parties filed a joint notice of voluntary dismissal of the appeal in the Luger Action on May 11, 2022, and the court ordered dismissal of the case on May 18, 2022.~~

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. was filed in the United States District Court for the District of Colorado (the “Brokop Action”). As discussed below, the current named plaintiff in that action is a purported FPI shareholder named Don Brokop. The complaint filed in the Brokop Action alleged substantially identical claims to those alleged in the Kachmar Action.

Several purported shareholders moved to consolidate the Kachmar Action and the Brokop 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 Brokop Action. On March 11, 2019, the Turners and additional plaintiff Obelisk Capital Management filed an amended complaint in the Brokop Action. On June 18, 2019, the court denied the defendants’ motion to dismiss the amended complaint in the Brokop 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, seeking to certify the case as a class action on behalf of purchasers of Farmland Partners’ common stock between November 12, 2015 and July 10, 2018 and to have the Turners and purported stockholder Don Brokop appointed as class representatives. On December 27, 2019, plaintiffs filed a motion for leave to file a second amended complaint to add Brokop as an additional plaintiff in place of Obelisk Capital Management. On December 8, 2020, the court granted the Turners’ motion to amend to add Brokop as an additional plaintiff and denied the Company’s motion for judgment on the pleadings. As a result, the automatic discovery stay was lifted and the court entered a schedule for proceedings going forward. The Company, Mr. Pittman, and Mr. Fabbri filed an opposition to plaintiffs’ motion for class certification on February 8, 2021. On February 17, 2021, plaintiffs filed a motion to withdraw the Turners as lead plaintiffs and to substitute Brokop as lead plaintiff. On June 7, 2021, the court granted the motion to withdraw the Turners and substitute Brokop as lead plaintiff. The parties completed fact discovery on June 29, 2021. On July 23, 2021, Magistrate Judge Nina Wang issued a Report and Recommendation to the district court recommending that Brokop’s motion for class certification be granted in part and denied in part. Specifically, the magistrate judge recommended that the district court deny the motion as to purchasers of Farmland Partners common stock between November 12, 2015 and December 14, 2016 and grant the motion as to purchasers between December 14, 2016 and July 11, 2018. On September 30, 2021, the district court issued an order adopting in part the magistrate judge’s recommendation and certifying a plaintiff class of purchasers of FPI stock between February 23, 2017 and July 11, 2018. Discovery concluded in the Brokop Action on October 1, 2021. On November 16, 2021, the Company, Mr. Pittman, and Mr. Fabbri moved for summary judgment dismissing Brokop’s claims and Brokop moved for partial summary judgment. On April 6, 2022, the Court issued an order granting the Company’s motion for summary judgment in full and denying Brokop’s motion for summary judgment. On April 7, 2022, the Court entered judgment dismissing Brokop’s claims with prejudice. That judgment became final on May 6, 2022, when the time for Brokop to appeal the judgment expired.

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 Brokop 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

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~~District Court for the District of Colorado. In light of the judgment dismissing the Brokop Action, Winter voluntarily dismissed the Winter Action on May 9, 2022.~~

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 made similar claims to those in the Brokop and Winter Actions. 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 made similar claims to those in the Brokop, Winter, Luger, and Barber Actions. On September 23, 2020, the Court consolidated the Luger and Hustedde action under the caption In re Farmland Partners Inc. Stockholder Litigation (the “Stockholder Litigation”). Luger and Hustedde (the “Derivative Plaintiffs”), the plaintiffs in the Stockholder Litigation, filed a consolidated amended complaint on October 30, 2020. The Company moved to dismiss the complaint in the Stockholder Litigation on December 15, 2020. On June 3, 2021, the court granted the Company’s motion to dismiss and dismissed the consolidated amended complaint in the Stockholder Litigation as to all defendants. On July 7, 2021, the Derivative Plaintiffs filed a notice of appeal, appealing the order dismissing their consolidated amended complaint to the Maryland Court of Special Appeals. In light of the dismissal of the Brokop Action, Luger agreed to voluntarily dismiss his appeal. The parties filed a joint notice of voluntary dismissal of the appeal in the Luger Action on May 11, 2022, and on May 18, 2022 the court ordered dismissal of the case.

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 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, which we alleged was published in connection with a “short and distort” scheme to profit from an artificial decline in our stock price, the trading price of our common stock declined by approximately 40%.

On June 20, 2021, Quinton Mathews (a.k.a. “Rota Fortunae”) entered into a settlement agreement with the Company in which he agreed to pay the Company a multiple of the profits he made when the Company’s common stock price fell in connection with the Wheel of Fortune article. The Company’s beliefs that Wheel of Fortune’s article was part of a short and distort attack on the Company was confirmed when Quinton Mathews issued a press release admitting he and his advisory clients shorted the Company in advance of the article and profited from the decline it caused, and further admitted that many of the key statements in that article – which he acknowledged led to the stock’s decline - were false. Following the parties’ settlement, the Court granted a joint stipulated motion to dismiss the case on June 29, 2021.

On July 2, 2021, the Company filed a complaint against First Sabrepoint Capital Management, LP, Sabrepoint Capital Partners, LP, Sabrepoint Capital Participation, LP, George Baxter, and Donald Marchiony (collectively, “Sabrepoint”) in the Civil District Courts of Dallas County, Texas seeking relief for their role, as alleged in the complaint, in the ~~short~~previously disclosed 2018 “short and ~~distort scheme.~~distort” scheme to profit from an artificial decline in our stock price. Certain Sabrepoint defendants had prevailed previously on a motion to dismiss the case against them in the Rota Fortunae action in the United

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State District Court for the District of Colorado (where the state case had been removed) solely on personal jurisdiction grounds. On December 17, 2021, the Company's claims against Sabrepoint in Texas were dismissed by the trial court, which granted (i) Sabrepoint's motion for summary judgment on collateral estoppel grounds, and (ii) motion to dismiss pursuant to the Texas Citizens Participation Act (“TCPA”). On March 21, 2022, after ~~Farmland Partners~~the Company filed a notice signaling an intent to appeal both orders, the Court of Appeals for the Fifth District of Texas (the “Court of Appeals”) entered an order declaring the trial court's TCPA order “VOID because the motion was denied by operation of law….” Accordingly, ~~Farmland Partners~~the Company narrowed its appeal to the trial court's grant of summary ~~judgment, and is confident that the order will be overturned and the litigation will be allowed to proceed.~~judgment. On January 26, 2022, Sabrepoint filed a motion for attorney's fees relating to the defense of that action. The trial court granted the motion for certain fees claimed by Sabrepoint as relating to its pursuit of its TCPA motion, but as noted above, the Court of Appeals subsequently overturned the TCPA order that formed the basis of Sabrepoint’s fee request, mooting the motion and the Court’s order on the same. ~~The parties are currently briefing~~On June 30, 2023, the ~~narrowed appeal before the Texas~~ Court of ~~Appeals.~~Appeals granted the Company’s appeal, determining that the Company’s claims against Sabrepoint are not barred, reversing the trial court and remanding the case for further proceedings on the merits. While Sabrepoint has indicated that it may seek further appellate review of the Court of Appeals’ opinion, further delaying the claims from moving forward, the Company remains confident that it will ultimately be permitted to proceed with its claims against Sabrepoint.

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Repurchase Options

For certain of the Company’s acquisitions, the seller retains the option to repurchase the property at a future date for a price, which is calculated based on an appreciation factor over the original purchase price plus the value of improvements on the property, that, at the time of the acquisition, the Company expected would be at or above the property’s fair market value at the exercise date. As of June 30, ~~2022,~~2023, the Company ~~has~~had an approximate aggregate net book value of ~~$8.3~~$5.1 million related to assets with unexercised repurchase options, and $15.8 million related to assets with exercised repurchase options. On September 4, 2020, the seller of 1one such property exercised its right to repurchase approximately 2,860 acres in South ~~Carolina. The~~Carolina, for which the Company has received a non-refundable ~~initial payment~~payments totaling $3.4 million as of ~~$2.9 million upon exercise, plus additional payments of $0.3 million in February 2021, $0.1 million in January 2022 and $0.1 million in February 2022.~~June 30, 2023. The Company is scheduled to receive a series of non-refundable payments until the closing date, which is currently scheduled to take place on or before January 15, 2025.

Employee Retirement Plan

Effective February 1, 2022, the Company amended the Murray Wise Associates 401(k) Profit Sharing Plan and Trust to make it available to all eligible employees of the Company under revised Farmland Partners Operating Partnership, LP 401(k) Plan (the “FPI 401(k) Plan”). The FPI 401(k) Plan is a defined contribution plan for substantially all employees. The Company has elected a “safe harbor” plan in which the Company plans to make contributions which are determined and authorized by the Board of Directors each plan year. As is customary, the Company retains the right to amend the FPI 401(k) Plan at its discretion. The Company ~~has~~made safe harbor contributions of less than $0.1 million for each of the six months ended June 30, 2023 and 2022.

Note 9—Stockholders’ Equity and Non-controlling Interests

Non-controlling Interest in Operating Partnership

FPI consolidates the Operating Partnership. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, FPI owned ~~97.4% and 97.0%~~97.8% of the outstanding interests, ~~respectively,~~for each period, in the Operating Partnership, and the remaining ~~2.6% and 3.0%~~2.2% interests ~~respectively,~~ are held in the form of Common units and comprise non-controlling interests in the Operating Partnership on the consolidated balance sheets. The non-controlling interests in the Operating Partnership ~~are considered to be~~consist of both the Common units and the Series A preferred ~~units.~~units held by third parties.

Common Units in Operating Partnership, OP Units

On or after 12 months of becoming a holder of Common units, unless the terms of an agreement with such Common 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

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the Company’s sole discretion, for shares of the Company’s common stock on a ~~1-for-one~~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 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. During the six months ended June 30, ~~2022~~2023 and the year ended December 31, ~~2021,~~2022, the Company issued ~~110,000~~zero and ~~281,453,~~120,000, respectively, of shares of common stock upon the redemption of ~~110,000~~zero and ~~281,453,~~120,000, respectively, of Common units that had been tendered for redemption. There were approximately 1.2 ~~million and 1.4~~ million outstanding Common units eligible to be tendered for redemption as of both June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022.

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.

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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 FPI’s common stock, with the distributions on the Common units held by FPI being utilized to pay dividends to FPI’s common stockholders.

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. Changes in the ownership percentages between the Company’s stockholders’ equity and non-controlling interest in the Operating Partnership resulted in a decrease and an ~~increase/(decrease)~~increase to the non-controlling interest in the Operating Partnership by ~~$0.7~~less than $(0.1) million and ~~less than $0.1~~$0.7 million during the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, with the corresponding offsets to additional paid-in capital.

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 (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. 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 the Operating Partnership, preferred units on the balance sheet with the offset recorded to retained earnings. On March 2, 2016, 117,000 Series A preferred units were issued as partial consideration in the acquisition of a portfolio of Illinois farms. 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. On May 19, 2022, the Company redeemed 5,000 Series A preferred units for $5.0 million plus accrued distributions for an aggregate of $5.1 million in ~~cash, resulting in 112,000~~cash. On September 1, 2022, the Company redeemed an additional 5,000 Series A preferred units for $5.0 million plus accrued distributions for an aggregate of $5.1 million in cash. On May 31, 2023, the Company redeemed 8,000 Series A preferred units for $8.0 million plus accrued distributions for an aggregate of $8.1 million in cash. 99,000 Series A preferred units were outstanding ~~following such redemption.~~as of June 30, 2023. Total liquidation value of such preferred units as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$113.7~~$100.5 million and ~~$120.5~~$110.2 million, respectively, including accrued distributions.

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On or after February 10, 2026 (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, at the Company’s option, for shares of common stock on a ~~1-for-one~~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 February 10, 2021, 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.

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

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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.

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 upon the occurrence of an event not solely within the control of the Company.

The following table summarizes the changes in our redeemable non-controlling interest in the Operating Partnership for the six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


	Series A Preferred Units			Series A Preferred Units
	Redeemable	Redeemable		Redeemable	Redeemable
	Preferred	non-controlling		Preferred	non-controlling
(in thousands)	units	interests		units	interests
Balance at December 31, 2020	117	$	120,510
Distribution paid to non-controlling interest	—		(3,510)
Accrued distributions to non-controlling interest	—		1,755
Balance at June 30, 2021	117	$	118,755

Balance at December 31, 2021	117	$	120,510	117	$	120,510
Distribution paid to non-controlling interest	—		(3,510)	—		(3,510)
Accrued distributions to non-controlling interest	—		1,680	—		1,680
Redemption of Series A preferred units	(5)		(5,000)	(5)		(5,000)
Balance at June 30, 2022	112	$	113,680	112	$	113,680

Balance at December 31, 2022				107	$	110,210
Distribution paid to non-controlling interest				—		(3,210)
Accrued distributions to non-controlling interest				—		1,485
Redemption of Series A preferred units				(8)		(8,000)
Balance at June 30, 2023				99	$	100,485

~~Series B Participating Preferred Stock~~28

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On August 17, 2017, the Company 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.

The shares of Series B Participating Preferred Stock were accounted for as mezzanine equity on the consolidated balance sheet, as the Series B Participating Preferred Stock was 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.

On October 4, 2021, the Company converted all 5,806,797 shares of the outstanding Series B Participating Preferred Stock into shares of common stock. Each share of Series B Participating Preferred Stock was converted into 2.0871798 shares of common stock, or 12,119,829 shares of common stock in total, less any fractional shares. Holders of the Series B Participating Preferred Stock received cash in lieu of fractional shares.

Distributions

The Company’s Board of Directors declared and paid the following distributions to common stockholders and holders of Common units for the six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


Fiscal Year	Declaration Date	Record Date	Payment Date	Distributions per Common Share/OP unit		Declaration Date	Record Date	Payment Date	Distributions per Common Share/OP unit
2023						October 24, 2022	January 2, 2023	January 17, 2023	$	0.0600
						February 21, 2023	April 3, 2023	April 17, 2023	$	0.0600
									$	0.1200

2022	October 26, 2021	January 3, 2022	January 18, 2022	$	0.0500	October 26, 2021	January 3, 2022	January 18, 2022	$	0.0500
	February 22, 2022	April 1, 2022	April 15, 2022	$	0.0500	February 22, 2022	April 1, 2022	April 15, 2022	$	0.0500
				$	0.1000				$	0.1000

2021	November 3, 2020	January 1, 2021	January 15, 2021	$	0.0500
	February 11, 2021	April 1, 2021	April 15, 2021	$	0.0500
				$	0.1000

Additionally, in connection with the 3.00% cumulative preferential distribution on the Series A preferred units, the

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Company ~~has~~had accrued ~~$1.7~~$1.5 million in distributions payable as of June 30, ~~2022.~~2023. The distributions are payable annually in arrears on January 15 of each year.

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.

Share Repurchase Program

On March 15, 2017, the Company’s Board of Directors approved a program to repurchase up to $25.0 million in shares of the Company’s common stock. On August 1, 2018, the Board of Directors increased the authority under the share repurchase program by an aggregate of $30.0 million. On November 7, 2019, the Board of Directors approved a $75.0 million increase in the total authorization available under the program, increasing the total availability under the share repurchase program to approximately $88.0 million as of such date. On May 3, 2023, the Company’s Board of Directors, increased the ~~authority~~availability under the share repurchase program by an additional ~~$50.0~~$75.0 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 share repurchase program does not obligate the Company to acquire any particular amount of common stock and may be modified or suspended at any time at the Company’s discretion. The Company funds repurchases under the program using cash on its balance sheet.

During the six months ended June 30, ~~2022,~~2023, the Company repurchased 05,595,332 shares of its common ~~stock.~~stock at a weighted average price of $11.01 per share. As of June 30, ~~2022,~~2023, the Company had approximately ~~$40.5~~$53.8 million of capacity remaining under the stock repurchase plan.

Equity Incentive Plan

On May 7, 2021, the Company’s stockholders approved the Third Amended and Restated 2014 Equity Incentive Plan (as amended and restated, the “Plan”), which increased the aggregate number of shares of the Company’s common stock reserved for issuance under the Plan to approximately 1.9 million shares. As of June 30, ~~2022,~~2023, there were ~~0.6~~0.4 million shares available for future grants under the Plan.

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.

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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 generally 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.

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A summary of the non-vested restricted shares as of June 30, ~~2022~~2023 and ~~2021~~2022 is as follows:


		Weighted			Weighted
	Number of	average grant		Number of	average grant
(shares in thousands)	shares	date fair value		shares	date fair value
Unvested at December 31, 2021	297	$	8.87	297	$	8.87
Granted	147		11.75	147		11.75
Vested	(171)		8.13	(171)		8.13
Forfeited	(8)		11.32	(8)		11.32
Unvested at June 30, 2022	265	$	10.86	265	$	10.86

Unvested at December 31, 2022				260	$	10.88
Granted				223		10.90
Vested				(130)		10.16
Forfeited				—		—
Unvested at June 30, 2023				353	$	11.16

The Company recognized stock-based compensation and incentive expense related to restricted stock awards of $0.5 million and $0.6 million, ~~and $0.3 million, f~~orfor the three months ended June 30, 2023 and 2022, ~~and 2021, respectively, and $1.2 million and $0.6 million, f~~orrespectively. During the six months ended June 30, 2023 and 2022, the Company recognized stock-based compensation and ~~2021,~~incentive expense related to restricted stock awards of $1.0 million and $1.2 million, respectively. As described in “Note 1—Organization and Significant Accounting Policies—Business ~~Combinations”,~~Combinations,” the Company recognized $0.0 million and $0.2 million during the three months ended June 30, 2023 and 2022 and $0.0 million and $0.4 million during the ~~three and~~ six months ended June 30, 2023 and 2022, respectively, related to stock-based incentive expense in connection with the ~~MWA~~November 2021 acquisition of Murray Wise Associates, LLC, which are included in the amounts above. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were ~~$2.4~~$3.3 million and ~~$1.6~~$1.7 million, respectively, of total unrecognized compensation costs related to nonvested stock awards, which are expected to be recognized over a weighted-average period of ~~2.1~~2.2 years.

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

On October 29, 2021, 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 $75.0 million (the "$75.0 million ATM Program”). In connection with its entry into these distribution agreements, the Company terminated the equity distribution agreements, each dated as of May 14, 2021, for its prior ATM Program. On May 6, 2022, 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 $100.0 million (the ~~"$100.0 million ATM~~“ATM Program”). During the six months ended June 30, ~~2022,~~2023, the Company sold ~~4,594,625~~no shares ~~and generated $63.1 million in gross proceeds and $62.4 million in net proceeds~~ under the ~~$75.0 million~~ ATM Program and ~~sold 2,436,463 shares and generated $36.4~~the program had a remaining capacity of $50.5 million in ~~gross proceeds and $36.1 million in net proceeds under the $100.0 million ATM Program~~shares of common stock available for ~~totals of 7,031,088 shares and $99.5 million and $98.4 million in gross and net proceeds, respectively.~~issuance.

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 less than $0.1 million ~~and $0.2 million~~ in offering costs during ~~the~~each of three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~$0.08~~$0.00 million and ~~$0.04~~$0.06 million, respectively, ~~for each period~~ in deferred offering costs, net of amortization, related to regulatory, legal, accounting and professional service costs associated with proposed or completed offerings of securities.

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Earnings (Loss) per Share

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


	For the three months ended				For the six months ended				For the three months ended				For the six months ended
	June 30,				June 30,				June 30,				June 30,
(in thousands, except per share amounts)	2022		2021		2022		2021		2023		2022		2023		2022
Numerator:
Net income (loss) attributable to Farmland Partners Inc.	$	2,916	$	(2,735)	$	4,021	$	(375)
Net income attributable to Farmland Partners Inc.									$	7,711	$	2,916	$	9,386	$	4,021
Less: Nonforfeitable distributions allocated to unvested restricted shares		(16)		(14)		(31)		(28)		(27)		(16)		(43)		(31)
Less: Distributions on redeemable non-controlling interests in Operating Partnership, preferred		(840)		(3,055)		(1,680)		(6,120)		(683)		(840)		(1,485)		(1,680)
Less: Dividends on Series B Participating Preferred Stock		—		—		—		—
Net income (loss) attributable to common stockholders	$	2,060	$	(5,804)	$	2,310	$	(6,523)
Net income attributable to common stockholders									$	7,001	$	2,060	$	7,858	$	2,310

Denominator:
Weighted-average number of common shares - basic		50,362		31,072		48,084		30,747		50,860		50,362		52,425		48,084
Conversion of preferred units⁽¹)		—		—		—		—
Unvested restricted shares⁽¹)		—		—		—		—
Redeemable non-controlling interest⁽¹)		—		—		—		—
Conversion of preferred units ⁽¹⁾										—		—		—		—
Unvested restricted shares ⁽¹⁾										—		—		—		—
Redeemable non-controlling interest ⁽¹⁾										8,252		—		—		—
Weighted-average number of common shares - diluted		50,362		31,072		48,084		30,747		59,112		50,362		52,425		48,084

Income (loss) per share attributable to common stockholders - basic	$	0.04	$	(0.19)	$	0.05	$	(0.21)
Income (loss) per share attributable to common stockholders - diluted	$	0.04	$	(0.19)	$	0.05	$	(0.21)
Income per share attributable to common stockholders - basic									$	0.14	$	0.04	$	0.15	$	0.05
Income per share attributable to common stockholders - diluted									$	0.12	$	0.04	$	0.15	$	0.05

(1)	Anti-dilutive for the three and six months ended June 30, 2022 and ~~2021~~for the six months ended June 30, 2023.

Numerator:

Unvested shares of the Company’s restricted common stock are considered participating securities, which requires the use of the two-class method for the computation of basic and diluted earnings per share. 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 subtracted, as applicable, from net income or loss attributable to common stockholders utilized in the basic and diluted earnings per share calculations.

Distributions on preferred interests in the Operating Partnership have been subtracted from net income or loss attributable to common stockholders.

Denominator:

Any anti-dilutive shares have been excluded from the diluted earnings per share calculation.

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 if they are dilutive. For the three and six months ended June 30, 2022 and ~~2021, these shares were not included in~~ the diluted earnings per share calculation as they would be anti-dilutive. 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, if they are dilutive. For the three and six months ended June 30, ~~2021,~~2023, these shares were not included in the diluted earnings per share calculation as they would be anti-dilutive.

For the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, diluted weighted average common shares do not include the impact of ~~0.3~~0.4 million and 0.3 million, respectively, unvested compensation-related shares as they would have been anti-dilutive.

The limited partners’ outstanding Common units, or the non-controlling interests, (which may be redeemed for shares of common stock) have not been included in the diluted earnings per share calculation as there would be no effect on the

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amounts since the limited partners’ share of income would also be added back to net income, therefore increasing both net income and shares. The weighted average number of Common units held by the non-controlling interest was ~~1.3~~1.2 million and ~~1.5~~1.3 million for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

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Outstanding Equity Awards and Units

The following equity awards and units were outstanding as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.


	June 30, 2022	December 31, 2021	June 30, 2023	December 31, 2022
Shares	52,477	45,177	48,598	54,058
Common Units	1,247	1,357	1,237	1,237
Redeemable Common Units	—	—
Unvested Restricted Stock Awards	265	297	353	260
	53,989	46,831	50,188	55,555

Note 10—Hedge Accounting

Cash Flow Hedging Strategy

The Company manages economic risks, including interest rate, liquidity, and credit risk, by managing the amount, sources, duration and interest rate exposure of its financing sources. The Company may also use interest rate derivative financial instruments, primarily interest rate swaps. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company was a party to 1one interest rate swap, designated as a hedging instrument, to add stability to interest expense and to manage its exposure to adverse interest rate movements.

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 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’~~stockholders’ equity in the Company’s consolidated balance sheets.

On March 26, 2020, the Company terminated its existing swap agreement and entered into a new interest rate swap agreement to obtain a more favorable interest rate and to manage interest rate risk exposure, which was effective April 1, 2020. An interest rate swap agreement utilized by the Company effectively modified 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 outstanding amount to Rabobank at the time of the agreement, 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 on the termination date. The Company ~~is amortizing~~amortized the de-designated swap over the original term utilizing a forward curve analysis of determining monthly amortization out of Other Comprehensive Income through the original termination date (March 1, 2023). ~~Amortization for~~During the three months ended June 30, 2023 and 2022, ~~and 2021~~amortization was ~~$0.1~~$0.0 million and ~~$0.2~~$0.1 million, respectively. Amortization for the six months ended June 30, 2023 and 2022 ~~and 2021~~ was ~~$0.3~~$0.2 million and ~~$0.5~~$0.3 million, respectively. The Company’s $2.6 million termination fee was rolled into the new swap and will be paid through March 1, 2026. Termination fees paid during each of the three months ended June 30, 2023 and 2022 were $0.1 million. Termination fees paid during each of the six months ended June 30, 2023 and 2022 ~~and 2021,~~ were ~~$0.1 million and~~ $0.2 ~~million, respectively.~~million.

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 assessment 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 swap contract. The qualitative assessment may indicate that the hedge relationship is not highly effective, the Company would then perform a quantitative evaluation using regression analysis. The Company concluded the hedge was highly effective at inception and ~~remains~~remained highly effective as of June 30, ~~2022.~~2023.

As of June 30, 2023, the total notional amount of the Company’s receive-variable/pay-fixed interest rate swap was $33.2 million.

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~~As of June 30, 2022, the total notional amount of the Company’s receive-variable/pay-fixed interest rate swap was $33.2 million.~~

The fair value of the Company’s derivative instrument on a recurring basis is set out below:


($ in thousands)
Instrument	Balance sheet location	Level 2 Fair Value		Balance sheet location	Level 2 Fair Value
Interest rate swap	Derivative asset	$	698	Derivative asset	$	2,310

The effect of derivative instruments on the consolidated statements of operations for the periods ended June 30, ~~2022~~2023 and ~~2021~~2022 is set out below:


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

~~For~~The amount of noncash gain recognized in net income was $0.7 million and $0.4 million during the three months ended June 30, ~~2022~~2023 and ~~2021, the amount of noncash loss recognized in net income was $0.4 million and $0.3 million,~~2022, respectively. For the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the amount of noncash ~~loss~~gain recognized in net income was ~~$0.7~~$2.3 million and ~~$2.3~~$0.7 million, respectively. The net change associated with current period hedging transactions was ~~$0.5~~$0.6 million and ~~less than $(0.1)~~$0.5 million ~~and~~ for the three months ended June 30, 2023 and 2022 and ~~2021, respectively,~~$0.2 million and $1.6 ~~million and $1.5~~ million for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The amortization of frozen Accumulated Other Comprehensive Income was ~~$0.1~~$0.0 million and ~~$0.2~~$0.1 million for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$0.3~~$0.2 million and ~~$0.5~~$0.3 million for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, 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 is considered a Level 2 measurement under the fair value hierarchy. Level 2 is defined as inputs other than quoted prices in active markets that are either directly or indirectly observable. There were no transfers between Levels 1, 2 or 3 during the six months ended June 30, ~~2022.~~2023. The variable cash receipts are based on an expectation of 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, ~~2022~~2023 and December 31, ~~2021:~~2022:


($ in thousands)	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Beginning accumulated derivative instrument gain or loss	$	279	$	(2,380)	$	3,306	$	279
Net change associated with current period hedging transactions		1,265		1,676		8		2,433
Amortization of frozen AOCI on de-designated hedge		313		983		198		594
Difference between a change in fair value of excluded components		—		—		—		—
Closing accumulated derivative instrument gain or loss	$	1,857	$	279	$	3,512	$	3,306

Note 11—Income Taxes

The TRS income/(loss) before provision for income taxes consisted of the following:


	For the Six Months Ended		For the six months ended
($ in thousands)	June 30, 2022		June 30, 2023		June 30, 2022
United States	$	1,690	$	(891)	$	1,690
International		—		—		—
Total	$	1,690	$	(891)	$	1,690

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The federal and state income tax provision (benefit) is summarized as follows:


	For the Six Months Ended		For the six months ended
($ in thousands)	June 30, 2022		June 30, 2023		June 30, 2022
Current:
Federal	$	86	$	—	$	86
State				—		—
Other				—		—
Total Current Tax Expense			$	—	$	86
Deferred:
Federal		10		13		10
Total Tax Expense	$	96	$	13	$	96

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. The tax effects of significant items comprising the TRS’s deferred taxes as of June 30, 2023 and December 31, 2022 are as follows:


	For the Six Months Ended
($ in thousands)	June 30, 2022		June 30, 2023		December 31, 2022
Deferred tax assets:
Net operating loss	$	828	$	669	$	434
Inventory reserve		16
Realized capital losses				65		76
Deferred Revenue				30		—
Total deferred tax assets		844		764		510
Deferred tax liabilities:
Net operating loss	$	(34)
Inventory reserve		(49)
Fixed assets			$	(19)	$	(18)
Intangible Assets				(80)		(32)
Total deferred tax liabilities	$	(83)	$	(99)	$	(50)
Valuation Allowance		(771)		(706)		(480)
Net deferred taxes	$	(10)	$	(41)	$	(20)

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is ~~"more~~“more likely than not."” Realization of the future tax benefits is dependent on the TRS’s ability to generate sufficient taxable income within the carryforward period. Because of the TRS’s recent history of operating losses, and ~~management not being able~~management’s inability to accurately project future taxable income, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance ~~increased/(decreased)~~increased by ~~($0.3)~~$226.0 million during the six months ended June 30, ~~2022.~~2023. The amount of the valuation allowance for deferred tax assets associated with excess tax deduction from stock-based incentive arrangements that is allocated to contributed capital if the future tax benefits are subsequently recognized is ~~$0.5~~$0.0 million. Prior year amounts are not material.

Net operating losses and tax credit carryforwards as of June 30, ~~2022~~2023 are as follows:


($ in thousands)	June 30, 2022		Expiration Year		June 30, 2023		Expiration Year
Net operating losses, federal (Post-December 31, 2017)	$	3,532		Does not expire	$	3,074		Does not expire
Net operating losses, state	$	1,466		Various	$	—		N/A

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The effective tax rate of the TRS’s provision (benefit) for income taxes differs from the federal statutory rate as follows:


	~~For the Six Months Ended~~
	~~June 30, 2022~~
~~Statutory Rate~~		~~21.00~~	%
~~State Tax~~		~~0.61~~	%
~~Valuation Allowance~~		~~(17.39)~~	%
~~Total~~		~~4.22~~	%

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	June 30, 2023			December 31, 2022
Statutory Rate		21.00	%		21.00	%
State Tax		2.20	%		3.43	%
Valuation Allowance		(24.55)	%		(18.13)	%
Total		(1.35)	%		6.30	%

Note 12—Subsequent Events

We have evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the day the financial statements were issued.

Dividends

On July ~~26, 2022,~~25, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.06 per share of common stock and Common unit payable on October ~~17, 2022~~16, 2023 to stockholders and unitholders of record as of October ~~1, 2022.~~2, 2023.

~~ATM~~Share Repurchase Program

Subsequent to June 30, ~~2022,~~2023, the Company ~~sold 247,416~~repurchased an additional 116,593 shares of its common stock ~~generating $3.5 million in net proceeds under the ATM Program.~~at a weighted average price of $12.22 per share.

~~Renewable Energy Project - Notice~~Real Estate Acquisitions

The Company is under contract to purchase one farm in the Delta and South region, subject to an in-process like-kind exchange. The aggregate purchase price for this acquisition totals $11.0 million and is expected to close in the third quarter of ~~Construction~~the year.

Real Estate Dispositions

Subsequent to June 30, 2023, the Company completed two partial farm dispositions in the Corn Belt and Delta and South regions for approximately $2.7 million in aggregate consideration. The Company is under contract to sell 11 farms for aggregate consideration of approximately $22.1 million and an estimated aggregate gain on sale of $9 million to $10 million. In addition, the Company has plans to bring approximately $30 million to $33 million in additional properties to auction in Kansas, Nebraska and Colorado in the third quarter of the year. The Company also has up to $26 million of sales in advanced negotiations. Certain properties that have closed, or will close in the future, are subject to an in-process like-kind exchange. There can be no assurances that auctions will be successful and that property sales will close.

OP Unit Redemption

On July ~~28, 2022,~~24, 2023, the Company received a notice ~~from~~for redemption of 34,000 OP units. The Company will redeem the units in cash at a ~~tenant on several properties in the Corn Belt that it will begin construction~~price of ~~a solar project, resulting in future increased rent.~~$12.73 for aggregate cash of $0.4 million.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following analysis of our financial condition and results of operations should be read in conjunction with the 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, ~~2021,~~2022, filed with the Securities Exchange Commission (the “SEC”) on ~~March 1, 2022,~~February 23, 2023, which is accessible on the SEC’s website at www.sec.gov. References to “the Company,” “we,” “our,” and “us” refer to Farmland Partners Inc. (“FPI”), a Maryland corporation, together with its consolidated subsidiaries, including Farmland Partners Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), of which FPI is 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 pending acquisitions and dispositions, projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results, future stock repurchases and other transactions affecting our capitalization, 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 ongoing war in Ukraine and its impact on our tenant’s businesses and the farm economy generally, high inflation and increasing interest rates, the onset of an economic recession in the United States and other countries that impact the farm economy, extreme weather events, such as droughts, tornadoes, hurricanes or floods, the impact of ~~the COVID-19 pandemic and efforts to reduce its spread~~future public health crises 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, ~~2021,~~2022, 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

Our primary strategic objective is to beutilize our position as a leading institutional acquirer, owner and manager of high-quality farmland located in agricultural markets throughout North ~~America.~~America to deliver strong risk adjusted returns to investors through a combination of cash dividends and asset appreciation. As of ~~the~~ June 30, ~~2022,~~2023, we ~~own~~owned farms with an aggregate of approximately ~~160,100~~159,200 acres in Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Texas, and Virginia. In addition, as of June 30, 2023, we ~~serve~~owned land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand and served as property manager ~~over~~for approximately ~~25,200 acres.~~31,000 acres, including farms in Iowa. As of June 30, ~~2022,~~2023, approximately 70% of our portfolio (by value) iswas used to grow primary crops, such as corn, soybeans, wheat, rice and cotton, and approximately 30% iswas used to produce specialty crops, such as almonds, citrus, blueberries, and vegetables. We believe our portfolio gives investors the economic benefit of increasing global food demand in the face of growing scarcity of high-quality farmland and will continue to reflect the approximate allocation of

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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.

In addition, under the FPI Loan Program, we make loans to third-party farmers (both tenant and non-tenant) to provide financing for property acquisitions, working capital requirements, operational farming activities, farming infrastructure projects and for other farming and agricultural real estate related projects.

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FPI was incorporated in Maryland on September 27, 2013, and is the sole member of the sole general partner of the Operating Partnership, which is a Delaware limited partnership that was formed on September 27, 2013. All of FPI’s assets are held by, and its operations are primarily conducted through, the Operating Partnership and its wholly owned subsidiaries. As of June 30, ~~2022,~~2023, FPI owned ~~97.4%~~97.8% of the Common units and none of the Series A preferred units. 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.

FPI has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with its short taxable year ended December 31, 2014.

The following table sets forth our ownership of acreage by region as of June 30, ~~2022:~~2023:


Region ⁽¹⁾	Owned Acres	Managed Acres	Total Acres	Owned Acres	Managed Acres	Total Acres
Corn Belt(2)	45,995	17,568	63,563	45,467	22,027	67,494
Delta and South	32,878	1,489	34,367	33,242	1,489	34,731
High Plains	29,163	—	29,163	33,006	1,380	34,386
Southeast	40,354	6,107	46,461	35,737	6,107	41,844
West Coast	11,752	—	11,752	11,752	—	11,752
	160,142	25,164	185,306	159,204	31,003	190,207

(1)

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

(2)	In addition, we own land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand.

We intend to continue acquiring additional farmland ~~to achieve scale and further diversify~~that we believe provides opportunities for risk-adjusted investment returns consistent with our ~~portfolio by geography, crop type and tenant.~~primary strategic objective. We also ~~may~~intend to continue to selectively dispose of assets when we believe we can redeploy the proceeds from such sales in a ~~disposition is in the Company’s best interest.~~manner that enhances stockholder returns. 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 provide volume purchasing services to our tenants, engage directly in farming, and provide property management, auction, and brokerage services through FPI Agribusiness Inc., our taxable REIT subsidiary (the “TRS” or “FPI Agribusiness”). As of June 30, ~~2022,~~2023, the TRS directly ~~operates 2,973~~operated 2,108 acres of farmland located in ~~California and Michigan.~~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 rent 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 fixed rent, variable rent arrangements and leases with terms greater than one year.

In addition, ~~a number of our~~for leases that provide for variable rent payments, ~~through which~~ we ~~only~~may recognize revenue up to the amount of the crop insurance minimum. The excess above crop insurance minimums 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.

~~Impact of COVID-19 on Our Business~~

Demand for food, fuel, and other agricultural products has recovered relative to 2020, when stay-at-home orders led to significant declines in gasoline consumption, dining out, and other consumer spending patterns. Some experts believe the stimulus programs funded by the United States government of approximately $4 trillion in response to the COVID-19 pandemic have contributed to elevated inflation levels in the United States in recent months. Inflation in food products is generally favorable for our tenants, while inflation in fuel, nutrients, agricultural chemicals, and other products is generally unfavorable for our tenants. We are unable to quantify the ultimate impact of the COVID-19 pandemic, related government responses, and inflation on our business.

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Impact of the War in Ukraine

Food prices were near record highs even before the invasion of Ukraine. Ukraine and the Russian Federation represent large portions of global trade in a variety of agricultural products (e.g., 34% of global wheat exports, according to the International Food Policy Research Institute). The disruption in farming operations in Ukraine, and trade from the Black Sea region has stressed the food supply for many countries that depend on imports of agricultural ~~products.~~products from the region, such as Egypt (wheat for food products) and China (corn for livestock).

In addition to high food prices, the war in Ukraine has caused increases in the price of fertilizers and concerns about availability. For example, increases in the price of natural gas, used as both feedstock and an energy source in the production of ammonia (a base material for nitrogen fertilizers), have driven up the cost of fertilizer. Supply chain bottlenecks have also disrupted production and transportation of fertilizers. The Russian Federation is also a major exporter of fertilizers and trade restrictions have hampered the flow of fertilizers to countries dependent on imports from the Black Sea region. United States farmers, including our tenants, however, generally source fertilizers from the United States and Canada.

~~While prices have come down in recent weeks, we~~We anticipate that U.S. farmers will continue to be an ~~even more~~ important contributor to global food imports as Russia continues its aggression against Ukraine, and high demand for primary crops, which are the core of our business, together with high commodity prices, will ~~enhance~~sustain high levels of profitability for U.S. farmers. We can provide no assurances as to whether this anticipated increase in profitability will have an impact on rental rates in the regions in which we operate.

Inflation and Interest Rates

Most of our farming leases have lease terms of three years for row crops and up 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 will be borne by our tenants under the terms of their leases. We believe that inflationary increases in farmer profitability will impact lease renegotiations upon renewals. Furthermore, high levels of inflation have prompted the Board of Governors of the United States Federal Reserve (the “Federal Reserve”) to increase the Federal Reserve’s discount rate, which has led to a significant increase in market short- and long-term interest rates since the beginning of 2022. This increase in rates has significantly increased the cost of our floating rate debt and has also significantly increased the cost of certain of our MetLife debt with interest rates that have been reset since the beginning of 2022. The Federal Reserve may continue this policy of rate raising which would further increase interest expense for many businesses, including the Company.

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 long-term global demand for food relative to the global supply of ~~food,~~food; farmland fundamentals and economic conditions in the markets in which we own ~~farmland~~farmland; and our ability to increase or maintain rental revenues while controlling expenses. We are currently in an environment of appreciating land values, driven by, among other things, inflation, strong commodity prices (further exacerbated by the war in Ukraine) and ~~a positive~~an outlook for high levels of farmer profitability. ~~Moreover, each~~Sustained high interest rates can serve as a counter-balancing external factor to this favorable environment. Each year additional farmland in various portions of the world, including the United States, is repurposed for commercial development, thus decreasing the land acreage available for production of grains, oil seeds, permanent and specialty crops necessary to feed the world’s growing population. 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 and quality farmland becomes ~~more scarce.~~scarcer.

Demand

We expect that global demand for food, driven primarily by significant increases in the gross domestic product (“GDP”) per capita and global population, will continue to be the key driver of farmland values. We expect that global demand for most crops will continue to grow to keep pace with global population growth. 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 more fruits, vegetables and animal-based proteins, which is expected to result in increased demand for primary crops as feed for livestock. We believe that once individuals increase consumption of higher

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quality food, they will strongly resist returning to their former dietary habits, resulting in greater inelasticity in the demand for food. We anticipate these factors will lead to either higher crop 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.

According to “How to Feed the World in 2050,” a report by the United Nations’ Food and Agriculture Organization (“UN FAO”), these factors are expected to require more than one billion additional tons ofIn addition, global annual grain production by 2050 to feed a global population in excess of 9 billion. The projected growth in grain production represents a 43% increase from 2005-2007 levels and more than two times the 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. 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, could impact our rental revenues and our results of operations. ~~The success of our long-term business strategy is not dependent on growth in demand for~~

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~~biofuels, primarily because~~However, we believe that growth in ~~global population and~~ GDP per capita and global population will be more significant drivers of global demand for primary crops over the long term.

Despite advances in income, according to “The State of Food Security and Nutrition in the World 2022,” a report by the UN FAO, almost 3.1 billion people were unable to afford a healthy diet, reflecting the rising consumer food prices coming out of the pandemic. The ongoing war in Ukraine has disrupted supply chains and affected the prices of grain, fertilizer, and energy, further stressing food supplies for developing countries that are dependent on food imports.

Supply

~~Global supply of agricultural commodities is driven~~According to the World Bank Group arable land per capita has decreased by ~~two primary factors,~~approximately 50% from 1961 to 2018, further exacerbated by international conflicts, as we are seeing with the ~~number of arable acres available for crop production and the productivity of the acres being farmed. Although the amount of global cropland~~ongoing war in ~~use has gradually increased over time, growth has plateaued over the last 20 years.~~Ukraine. Typically, additions to cropland are in areas of marginal productivity, while cropland loss, driven by urban development, tends to affect primarily highly productive areas. Cropland area continues to increase in developing countries, but after accounting for expected continuing cropland loss, the UN FAO projects only 173 million acres will be added from 2005-2007 to 2050, an approximate 5% increase. In comparison, world population is expected to grow over the same period to 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 2018. While we expect growth in the global supply of arable land, we also expect that landowners will only put that land into production if 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~~arable land. Historically, productivity gains (measured by average crop yields) have been driven by advances in seed technology, farm equipment, irrigation techniques, and improvements in soil health, chemical nutrients and pest control. ~~Furthermore,~~On the other hand, we expect the shortage of water in many irrigated growing regions in the United States and around the globe, often as a result of new water restrictions imposed by laws or regulations, to lead to decreased productivity ~~growth and, in some cases, cause yields to decline~~ on those acres. ~~The supply and farmability of arable land is also impacted by international conflicts, as we are seeing with the ongoing war in Ukraine.~~

Conditions in Our Existing Markets

Our portfolio ~~spans~~is broadly diversified across numerous farmland markets and crop ~~types, which provides us broad diversification across conditions in these markets.~~types. Across all regions, farmland acquisitions continue to be dominated by buyers who are existing farm owners and operators, whereas institutional investors constitute a small fraction of the industry (less than 5% of total farmland in the United States). We generally see firm demand for high quality properties across all regions and crop types.

Farmland values are typically very stable, often showing modest increases even in years of commodity price weakness. We expect this trend to continue, with modest but consistent annual increases that compound into significant appreciation in the long term. Under certain market conditions, as in 2021 and ~~in the first half of~~ 2022, with strong commodity prices and farmer profitability, there are periods of accelerating appreciation in farmland values. Leases ~~being~~ renegotiated under the robust market conditions experienced in 2021 and ~~thus far in~~ 2022 ~~the first leasing cycle since the farm economy improved,~~ reflected significant rent increases. While the pace of appreciation and transaction volume has slowed in 2023, these metrics remain strong relative to long-term trends.

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. We believe that due to the relatively high fixed costs associated with farming operations (including equipment, labor and knowledge), many farm operators choose to rent additional acres of farmland when it becomes available in order to allocate their fixed costs over additional acres. 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. 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

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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 profits returns or even short-term losses.

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In our primary row crop farmland, we realized rent increases of over 10% in connection with 2021 lease renewals, and, as the farm economy continues to be very strong, we expect to benefit from rent growth into 2022. This is consistent with robust prices in primary crop markets and tenant demand for leasing high quality farmland. Across specialty crops, operator profitability is recovering.

Lease Expirations

Farm leases are generally one to three years in duration. As of June 30, ~~2022,~~2023, our portfolio had the following lease expirations as a percentage of approximate acres leased and annual minimum fixed rents:


($ in thousands)
Year Ending December 31,	Approximate Acres	% of Approximate Acres		Annual Fixed Rents		% of Annual Fixed Rents		Approximate Acres	% of Approximate Acres		Annual Fixed Rents		% of Annual Fixed Rents
2022 (remaining six months)	45,146	28.2	%	$	12,524	33.1	%
2023	23,768	14.8	%		7,149	18.9	%
2023 (remaining six months)								35,600	22.4	%	$	11,452	35.1	%
2024	36,130	22.6	%		9,270	24.5	%	41,292	25.9	%		11,052	33.8	%
2025	26,280	16.4	%		4,952	13.1	%	33,654	21.1	%		6,645	20.3	%
2026	7,529	4.7	%		1,411	3.7	%	11,943	7.5	%		1,670	5.1	%
2027								17,606	11.1	%		1,700	5.2	%
Thereafter	21,289	13.3	%		2,489	6.7	%	19,109	12.0	%		139	0.5	%
	160,142	100.0	%	$	37,795	100.0	%	159,204	100.0	%	$	32,658	100.0	%

Rental Revenues

Our revenues are primarily generated from renting farmland to operators of farming businesses. Our leases generally have terms ranging from one to three years, with some extending up to 40 years (e.g., renewable energy leases). Although the majority of our leases do not provide 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. As discussed above, the vacancy rate for quality U.S. farmland is near-zero and there is often competition among prospective tenants for quality farmland; accordingly, we do not believe that re-leasing farmland upon the expiration of existing leases is a significant risk for ~~FPI.~~the Company.

The leases for the majority of the row-crop properties in our portfolio provide that tenants ~~must~~ pay us, ~~at least~~typically, 50% of their fixed farm 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, which we believe 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 ~~usually requiring that~~the farming industry practice of purchasing crop insurance in almost every circumstance because it is required by lenders who provide working capital financing to our tenants ~~maintain crop insurance~~ and bydue to requirements in our ~~claim on a portion of~~leases. In certain cases, the ~~related proceeds, if any, as well as by our~~Company perfects its security interest in the crop insurance proceeds and the underlying growing ~~crop.~~crops using practices applicable in the state where the farm is located. 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. Many of our leases provide for the reimbursement by the tenant of the property’s real estate taxes that we pay in connection with the farms they rent from us.

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Expenses

Substantially all of our farm leases are structured in such a way that we are responsible for major maintenance expenses, certain liability and casualty insurance and taxes (which are sometimes reimbursed to us by our tenants), while our tenant is responsible for operating expenses, 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 leases for farmland we acquire in the future will contain similar features related to expenses. 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 incur costs associated with running a public company, ~~and managing farmland assets,~~ including, among others, costs associated with our personnel, ~~our~~ Board of Directors, compliance, legal and accounting, due diligence and acquisitions ~~including,~~(including, among others, travel expenses, and consulting fees. Over the past 12 months, we have resumed our growth strategy, and our continued growth is likely to result in increases in certain general and administrative expenses, most notably additional personnel in our accounting and finance department.fees). Inflation in personnel costs, which is impacting many United States businesses, is also likely to ~~contribute to this increase. However, we believe this cost will be offset by more farmed acres that we lease and increased management fee revenue as we continue to integrate~~impact our ~~late 2021 acquisition~~expenses.

Table of MWA. Moreover, our victory in the shareholder class action resulting from the Rota Fortunae short and distort attack resulted in a three month period-to-period reduction in legal and accounting expense of approximately $2.0 million, or over 69.1% to the comparable 2021 period.Contents

We also incur costs associated with managing ~~our farmland.~~farmland assets. The management of our farmland, generally, has significant economies of scale, as 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 operating expenses associated with the property. 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.

Crop Prices

While many people assume that short-term crop prices have a great impact on farm values, we believe that long-term farmer profitability and revenue per acre, expressed as crop prices multiplied by crop yield, is a much more significant driver of farm value. Crop ~~yields~~yield trends in corn and soybeans have been steadily increasing over the last thirty ~~years,~~years. After yields for the 2022/2023 marketing year (September 2022 to August 2023) decreased slightly for both corn and soybeans compared to the previous year, the U.S. Department of Agriculture projects ~~improved~~higher yields for the ~~2021/2022~~2023/2024 marketing year (September ~~2021~~2023 to August ~~2022) compared to the previous year.~~2024) of 2% for corn and 5% for soybeans. Short-term crop price changes have had little effect historically on farmland values. They also have a limited impact on our rental revenue, as most of our leases provide for fixed farm rents, a common approach in agricultural markets, especially with respect to row crops. Fixed farm rent significantly simplifies the administrative requirements for the landlord and the tenant, ~~significantly,~~ as farmers benefit from the fundamental revenue hedging that occurs when large crop yields mitigate the effect of lower crop prices. Similarly, lower crop yields have a tendency to trigger higher crop prices 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 variable rent component based on farm revenues. Further risk mitigation is available to tenants, and indirectly to us, via crop insurance and hedging programs implemented by tenants. Our TRS also takes advantage of these risk mitigation programs and strategies with respect to the properties it ~~owns.~~directly operates.

Crop prices are affected by many factors that can differ on a yearly basis. Weather conditions and crop diseases can create a significant risk of price volatility. Changes in government regulations and policy, fluctuations in global prosperity, fluctuations in foreign trade and export markets and eruptions of military conflicts, as we are seeing in Ukraine, or civil unrest also impact crop prices.

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~~Since late 2020, prices rebounded to or near prior highs, driven by increased demand expectations from China and modest adverse weather conditions around the world.~~

Interest Rates

The ~~Board of Governors of the United States~~ Federal Reserve ~~Bank (the “Federal Reserve”)~~ has ~~begun~~engaged in a series of significant increases in the discount rate, which is the rate the Federal Reserve charges member banks for overnight funds. These increases affect all borrowing rates, and for variable rate debt and debt with rates that reset periodically, such increases have a direct and relatively immediate impact.

As of June 30, 2023, $262.0 million of our outstanding indebtedness was subject to interest rates that reset from time to time (excluding our floating rate debt). A total of $174.1 million of such debt was subject to rate resets in 2023, and $125.1 million had been reset as of June 30, 2023.

At June 30, 2023, $186.5 million, or 39.4%, of our debt had variable interest rates, however, as stated in “Note 10—Hedge Accounting” to the accompanying consolidated financial statements, the Company has an interest rate swap with Rabobank for $33.2 million, which reduces floating rate exposure. Assuming no increase in the level of our variable rate debt spreads, if interest rates increased by 1.0%, our cash flow would decrease by approximately $1.5 million per year. If interest rates decreased by 1.0%, our cash flow would increase approximately $1.5 million per year.

We expect that future changes in interest rates will impact our overall operating performance by, among other things, affecting our borrowing costs and borrowing costs of our tenants. 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.~~rates or subject to interest rates that reset periodically. In addition, a sustained material increase in interest rates may cause farmland prices to decline if the rise in real interest rates (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

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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

InAfter an estimated 33% decrease in exports of corn for the ~~2020/2021~~2022/2023 marketing year (September ~~2020~~2022 to August ~~2021) saw a 55% increase in~~2023), the U.S. Department of Agriculture (the “USDA”) estimates corn exports ~~compared to~~will be up 27% for the ~~previous year. In soybeans, the 2020/2021~~2023/2024 marketing year (September ~~2020~~2023 to August ~~2021) saw a 35% increase~~2024). After an estimated 8% decrease in exports ~~compared~~of soybeans for the 2022/2023 marketing year, the USDA estimates soybean exports will be down 8% for the 2023/2024 marketing year, due to ~~the previous year.~~lower production.

According to the USDA Outlook for Agricultural Trade, ~~exports~~the top three export countries from the United States are China, Canada, and Mexico. Exports to China for fiscal year 2022 (October 2021 to September 2022) ~~are estimated to be~~were a record of ~~$36~~$36.4 billion, up ~~nearly 8%~~9% from 2021. ~~The export~~Exports to Canada were $28.4 billion, up 17% from 2021. Exports to Mexico were $28.0 billion, up 17% from 2021. Exports to China for fiscal year 2023 are forecast ~~for~~to decrease to $34 billion, exports to Mexico are expected to be flat at $28.0 billion, and exports to Canada ~~is $28.5 billion, largely driven by the strong performance of corn and ethanol. The export forecast for Mexico is $29.5 billion, reflecting robust exports of corn, soybeans, dairy, and wheat~~are expected to ~~date. Mexico is forecast as the second largest U.S. agricultural market.~~decrease to $27.8 billion.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. ~~Actual amounts may differ significantly from these estimates and assumptions. We have provided a summary of our significant accounting policies~~Except as set forth in ~~the notes~~Note 1 to the ~~historical~~ consolidated financial statements included ~~elsewhere~~ in this Quarterly Report on Form 10-Q. We have set forth below those accounting policies that we believe require material subjective or complex judgments and have the most significant impact on our financial condition and results of operations. We evaluate our estimates, assumptions and judgments on an ongoing basis, based on information that is then available to us, our experience and various matters that we believe are reasonable and appropriate for consideration under the circumstances.

~~Real Estate Acquisitions~~

When we acquire 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, we account for these types of acquisitions as asset acquisitions. We allocate the purchase price of properties that meet the definition of an asset acquisition to net tangible and identified intangible assets acquired based on their relative fair values using assumptions primarily based upon property-specific characteristics.

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In making estimates of relative fair values for purposes of allocating purchase price, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired or developed and existing comparable properties in our portfolio and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible and intangible assets/liabilities acquired. The allocations of purchase price are sensitive due to a number of inputs and judgements made by management including market data and property specific characteristics such as soil types and water availability.

Net tangible assets, historically, have consisted of land, drainage improvements, irrigation improvements, groundwater, permanent plantings (bushes, shrubs, vines, and perennial crops), and grain facilities, while intangible assets, historically, consisted of in-place leases, above-market and below-market leases, and tenant relationships.

We allocate the purchase price to the fair value of the tangible assets by valuing the land as if it were unimproved. We value improvements, including permanent plantings and grain facilities, at replacement cost, adjusted for depreciation. Our estimates of land value are made using a comparable sales analysis. Factors considered by us in our analysis of land value include soil types, water availability and the sales prices of comparable farms. Our estimates of groundwater value are made using historical information obtained regarding the applicable aquifer. Factors considered by us in our analysis of groundwater value are related to the location of the aquifer and whether or not the aquifer is a depletable or a replenishing resource. If the aquifer is a replenishing resource, no value is allocated to the groundwater. We include an estimate of property taxes in the purchase price allocation of acquisitions to account for the expected liability that was assumed.

When above- or below-market leases are acquired, we value 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 will be 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.

The purchase price is allocated to in-place lease values and tenant relationships, if they are acquired, based on our evaluation of the specific characteristics of each tenant’s lease, the availability of replacement tenants, the probability of lease renewal, estimated down time, and our overall relationship with the tenant. The value of in-place lease intangibles and tenant relationships will be included as an intangible asset and will be 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.

~~Impairment of Real Estate Assets~~

We evaluate our tangible and identifiable intangible real estate assets for impairment indicators whenever events such as declines in a property’s operating performance, deteriorating market conditions, or environmental or legal concerns bring recoverability of the carrying value of one or more assets into question. If such events are present, we project the total undiscounted cash flows of the asset, including proceeds from disposition, and compare it to the net book value of the asset. If this evaluation indicates that the carrying value may not be recoverable, an impairment loss is recorded in earnings equal to the amount by which the carrying value exceeds the fair value of the asset. Assessing impairment can be complex and involves a high degree of subjectivity in determining if indicators are present and in estimating the future undiscounted cash flows or the fair value of an asset. In particular, these estimates are sensitive to significant assumptions, including the estimation of future rental revenues, operating expenses, discount and capitalization rates and our intent and ability to hold the related asset, all of which could be affected by our expectations about future market or economic conditions. Assumptions are primarily subject to property-specific characteristics, especially with respect to our intent and ability to hold the related asset. While these property-specific assumptions can have a significant impact on the undiscounted cash flows or estimated fair value of a particular asset, our evaluation of the reported carrying values of long-

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~~lived assets during the current year were not particularly sensitive to external or market assumptions. There~~10-Q, there have been no ~~impairments recognized~~changes to our critical accounting policies disclosed in our Annual Report on ~~real estate assets in~~Form 10-K for the ~~accompanying financial statements.~~year ended December 31, 2022.

New or Revised Accounting Standards

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

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Results of Operations

Comparison of the three months ended June 30, ~~2022~~2023 to the three months ended June 30, ~~2021~~2022


	For the three months ended June 30,								For the three months ended June 30,
($ in thousands)	2022		2021		$ Change		% Change		2023		2022		$ Change		% Change
OPERATING REVENUES:
Rental income	$	9,196	$	8,291	$	905	10.9	%	$	9,389	$	9,196	$	193	2.1	%
Tenant reimbursements		809		839		(30)	(3.6)	%		831		809		22	2.7	%
Crop sales		1,150		237		913	385.2	%		515		1,150		(635)	(55.2)	%
Other revenue		1,202		646		556	86.1	%		849		1,202		(353)	(29.4)	%
Total operating revenues		12,357		10,013		2,344	23.4	%		11,584		12,357		(773)	(6.3)	%

OPERATING EXPENSES
Depreciation, depletion and amortization		1,660		1,885		(225)	(11.9)	%		2,207		1,660		547	33.0	%
Property operating expenses		2,058		1,708		350	20.5	%		2,428		2,058		370	18.0	%
Cost of goods sold	��	1,333		667		666	99.9	%		980		1,333		(353)	(26.5)	%
General and administrative expenses		3,004		1,897		1,107	58.4	%		2,904		3,004		(100)	(3.3)	%
Legal and accounting		816		2,901		(2,085)	(71.9)	%		281		816		(535)	(65.6)	%
Other operating expenses		31		—		31	NM			27		31		(4)	(12.9)	%
Total operating expenses		8,902		9,058		(156)	(1.7)	%		8,827		8,902		(75)	(0.8)	%
OPERATING INCOME		3,455		955		2,500	261.8	%		2,757		3,455		(698)	(20.2)	%

OTHER (INCOME) EXPENSE:
Other (income)		(34)		(8)		(26)	325.0	%
(Income) loss from equity method investment		(8)		—		(8)	NM
Gain on disposition of assets		(3,335)		(74)		(3,261)	NM
Other (income) expense										75		(34)		109	NM
(Income) from equity method investment										(5)		(8)		3	(37.5)	%
(Gain) on disposition of assets										(11,060)		(3,335)		(7,725)	231.6	%
Interest expense		3,743		3,902		(159)	(4.1)	%		5,844		3,743		2,101	56.1	%
Total other expense		366		3,820		(3,454)	(90.4)	%		(5,146)		366		(5,512)	NM

Net income (loss) before income tax expense		3,089		(2,865)		5,954	NM
Net income before income tax expense										7,903		3,089		4,814	155.8	%

Income tax expense		96		—		96	NM			4		96		(92)	(95.8)	%

NET INCOME (LOSS)	$	2,993	$	(2,865)	$	5,858	NM
NET INCOME									$	7,899	$	2,993	$	4,906	163.9	%

NM=Not Meaningful

Our net income for the three months ended June 30, ~~2022~~2023 was affected partially by ~~five~~ acquisitions and ~~three~~ dispositions ~~during~~that occurred since the ~~three months~~quarter ended June 30, 2022, as well as ~~substantially~~ lower crop sales, auction and brokerage revenue, legal and accounting expense, and ~~additional revenue from auction and brokerage activities.~~cost of goods sold.

Rental income increased ~~$0.9~~$0.2 million, or ~~10.9%~~2.1%, for the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021,~~2022 resulting primarily from increased ~~variable rent, solar~~fixed farm rent and ~~fixed farm~~solar rent, partially offset by ~~certain farms converting to direct operations in the second half of 2021.~~lower variable rent on citrus farms.

Revenues recognized from tenant reimbursement of property taxes remained relatively flat at $0.8 million for the three months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

Crop sales totaled $0.5 million for the three months ended June 30, 2023 compared to $1.2 million for the three months ended June 30, 2022. This decrease was the result of a lower volume of crop sold on citrus farms in the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

Other revenue decreased $0.4 million, or 29.4%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This decrease was primarily due to a decrease of $0.6 million in auction and brokerage income partially offset by an increase of $0.3 million in management fees and interest income.

Depreciation, depletion and amortization increased $0.5 million, or 33.0%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This increase was driven by non-recurring adjustments in the second

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~~Crop sales totaled $1.2 million for the three months ended June 30, 2022 compared to $0.2 for the three months ended June 30, 2021. This increase is the result~~quarter of ~~four properties being directly operated by the Company~~2023 and ~~a higher volume of crop sold in the three months ended June 30, 2022 compared to the three months ended June 30, 2021.~~

Other revenue increased $0.6 million, or 86.1%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. This increase was primarily due to increased auction and brokerage income, management fees, and interest income on loans,more depreciable assets placed into service partially offset by ~~lower revenue from litigation-related proceeds.~~

~~Depreciation, depletion and amortization decreased $0.2 million, or 11.9%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. This decrease is a result of~~ asset dispositions and more assets becoming fully ~~depreciated partially offset by depreciable assets being placed into service.~~ depreciated.

Property operating expenses increased $0.4 million, or ~~20.5%~~18.0%, for the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021,~~2022, resulting from higher tax, ~~expenses due to an accrual write off in 2021~~insurance, and ~~increased insurance expenses.~~cost sharing on a West Coast farm partially offset by lower utilities expense.

Cost of goods sold totaled ~~$1.3~~$1.0 million for the three months ended June 30, ~~2022~~2023 compared to ~~$0.7~~$1.3 for the three months ended June 30, ~~2021.~~2022. This ~~increase is~~decrease was the result of a ~~higher volume~~lower costs of ~~crop sold as the Company directly operated more farms~~citrus and blueberries partially offset by an increase in walnuts in the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021.~~2022.

General and administrative expenses ~~increased $1.1~~decreased $0.1 million, or ~~58.4%~~3.3%, for the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021. $0.8 million of this increase~~2022. This decrease was ~~related to the November 2021 acquisition of MWA. The remaining increase was largely~~primarily driven by ~~higher personnel costs,~~lower stock-based and incentive compensation as well as lower travel and consulting expenses and partially attributable to the resumption of our growth strategy. As the farm economy has strengthened, the Company has focused on growth by adding people, increasing travel and pursuit cost to rebuild its acquisition pipeline.expense.

Legal and accounting expenses decreased ~~$2.1~~$0.5 million, or ~~71.9%~~65.6%, for the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021, which~~2022, due primarily to the successful defense and termination of the stockholder class action litigation that was ~~primarily~~pending against the ~~result~~Company from July 2018 until dismissal of ~~lower legal fees incurred in relation to~~the litigation ~~as discussed under Part I, Item 1 “Note 8—Commitments and Contingencies—Litigation”.~~by a federal judge on April 6, 2022.

Other operating expenses were negligible during the three months ended June 30, ~~2022~~2023 and remained relatively consistent compared to the three months ended June 30, ~~2021.~~2022.

Other (income) expense changed from other income ~~and~~of less than $0.1 million for the three months ended June 30, 2022 compared to other expense ~~were~~of less than $0.1 million for the three months ended June 30, 2023.

Income from equity method investment was negligible during the three months ended June 30, ~~2022~~2023 and remained relatively consistent compared to the three months ended June 30, ~~2021.~~

~~Income (loss) from equity method investment were negligible during the three months ended June 30, 2022 and remained relatively consistent compared to the three months ended June 30, 2021.~~2022.

Gain on disposition of assets increased ~~$3.3~~$7.7 million for the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021.~~2022 primarily due to greater property dispositions in 2023 as compared to 2022.

Interest expense ~~decreased $0.2~~increased $2.1 million, or ~~4.1%~~56.1%, for the three months ended June 30, ~~2022~~2023 compared to the three months ended June 30, ~~2021.~~2022. This ~~decrease is~~increase was the result of ~~lower~~an increase in interest rates and a higher outstanding balance of debt.

Income tax expense decreased $0.1 million, or 95.8%, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

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Comparison of the six months ended June 30, ~~2022~~2023 to the six months ended June 30, ~~2021~~2022


	For the six months ended June 30,								For the six months ended June 30,
($ in thousands)	2022		2021		$ Change		% Change		2023		2022		$ Change		% Change
OPERATING REVENUES:
Rental income	$	18,741	$	18,551	$	190	1.0	%	$	19,077	$	18,741	$	336	1.8	%
Tenant reimbursements		1,587		1,777		(190)	(10.7)	%		1,869		1,587		282	17.8	%
Crop sales		1,845		453		1,392	307.3	%		875		1,845		(970)	(52.6)	%
Other revenue		4,074		808		3,266	404.2	%		2,435		4,074		(1,639)	(40.2)	%
Total operating revenues		26,247		21,589		4,658	21.6	%		24,256		26,247		(1,991)	(7.6)	%

OPERATING EXPENSES
Depreciation, depletion and amortization		3,411		3,820		(409)	(10.7)	%		4,001		3,411		590	17.3	%
Property operating expenses		4,013		3,639		374	10.3	%		4,610		4,013		597	14.9	%
Cost of goods sold		2,772		917		1,855	202.3	%		1,926		2,772		(846)	(30.5)	%
Acquisition and due diligence costs		62		—		62	NM			14		62		(48)	(77.4)	%
General and administrative expenses		6,108		3,514		2,594	73.8	%		5,510		6,108		(598)	(9.8)	%
Legal and accounting		2,072		5,643		(3,571)	(63.3)	%		526		2,072		(1,546)	(74.6)	%
Other operating expenses		36		2		34	NM			76		36		40	111.1	%
Total operating expenses		18,474		17,535		939	5.4	%		16,663		18,474		(1,811)	(9.8)	%
OPERATING INCOME		7,773		4,054		3,719	91.7	%		7,593		7,773		(180)	(2.3)	%

OTHER (INCOME) EXPENSE:
Other (income)		(14)		(52)		38	(73.1)	%
Other (income) expense										64		(14)		78	NM
(Income) loss from equity method investment		(15)		—		(15)	NM			22		(15)		37	NM
(Gain) on disposition of assets		(3,995)		(3,467)		(528)	15.2	%		(12,886)		(3,995)		(8,891)	222.6	%
Interest expense		7,570		7,961		(391)	(4.9)	%		10,768		7,570		3,198	42.2	%
Total other expense		3,546		4,442		(896)	(20.2)	%		(2,032)		3,546		(5,578)	NM

Net income (loss) before income tax expense		4,227		(388)		4,615	NM
Net income before income tax expense										9,625		4,227		5,398	127.7	%

Income tax expense		96		—		96	NM			13		96		(83)	(86.5)	%

NET INCOME (LOSS)	$	4,131	$	(388)	$	4,519	NM
NET INCOME									$	9,612	$	4,131	$	5,481	132.7	%

NM=Not Meaningful

Our net income for the six months ended June 30, ~~2022~~2023 was affected partially by acquisitions ~~consisting of nine farms~~ and dispositions ~~consisting~~that occurred since the quarter ended June 30, 2022, as well as lower crop sales, auction and brokerage revenue, legal and accounting expense, and cost of ~~five farms during~~goods sold.

Rental income increased $0.3 million, or 1.8%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 ~~as well as substantially lower legal and accounting expense and additional revenue~~resulting primarily from ~~crop insurance, auction and brokerage activities.~~

~~Rental income remained relatively flat at $18.7 million and $18.6 million for the six months ended June 30, 2022 and 2021, respectively, resulting from~~ increased ~~solar rent,~~ fixed farm rent and ~~recreation~~solar rent, partially offset by lower variable rent on citrus, grapes and ~~certain farms converting to direct operations in the second half of 2021.~~row crops.

Revenues recognized from tenant reimbursement of property taxes ~~decreased $0.2~~increased $0.3 million, or ~~10.7%~~17.8%, for the six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021.~~2022. This ~~decrease is~~increase in tenant reimbursements was primarily the result of ~~asset dispositions and~~an increase in the ~~conversion~~number of ~~certain farms to direct operations.~~leases in place with reimbursements of property taxes, as well as a general increase in property tax expense.

Crop sales ~~increased $1.4~~decreased $1.0 million, or ~~307.3%~~52.6%, for the six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021.~~2022. This ~~increase is~~decrease was the result of ~~four properties being directly operated by the Company and~~ a ~~higher~~lower volume of crop sold on citrus farms.

Other revenue ~~increased $3.3~~decreased $1.6 million, or ~~404.2%~~40.2%, for the six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021.~~2022. This ~~increase~~decrease was primarily due to ~~increased~~a decrease of $1.3 million in crop insurance proceeds, $0.9 million in auction and brokerage income ~~crop insurance proceeds from farms under direct operations,~~partially offset by an increase of $0.6 million in management fees and interest ~~income on loans, partially offset by lower revenue from litigation-related proceeds.~~income.

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Depreciation, depletion and amortization ~~decreased $0.4~~increased $0.6 million, or ~~10.7%~~17.3%, for the six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021.~~2022. This ~~decrease is a result~~increase was driven by non-recurring adjustments in the second quarter of 2023 and more depreciable assets placed into service partially offset by asset dispositions and more assets becoming fully ~~depreciated partially offset by depreciable assets being placed into service.~~ depreciated.

Property operating expenses increased ~~$0.4~~$0.6 million, or ~~10.3%~~14.9%, for the six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021,~~2022 resulting from higher tax, ~~expenses due to an accrual write off in 2021, increased utilities~~insurance, and ~~insurance expenses,~~cost sharing on a West Coast farm partially offset by lower ~~repairs.~~utilities expense.

Cost of goods sold ~~totaled $2.8~~decreased $0.8 million, or 30.5%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This decrease was the result of a lower costs of citrus and blueberries partially offset by an increase in walnuts. in the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Acquisition and due diligence costs remained relatively flat at less than $0.1 million for the six months ended June 30, 2023 and 2022, respectively.

General and administrative expenses decreased $0.6 million, or 9.8%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This decrease was primarily driven by lower stock-based and incentive compensation as well as lower travel expense.

Legal and accounting expenses decreased $1.5 million, or 74.6%, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, due primarily to the successful defense and termination of the stockholder class action litigation that was pending against the Company from July 2018 until dismissal of the litigation by a federal judge on April 6, 2022.

Other operating expenses remained relatively flat at less than $0.1 million for the six months ended June 30, 2023 and 2022, respectively.

Other (income) expense changed from other income of less than $0.1 million for the six months ended June 30, 2022 compared to ~~$0.9~~other expense of less than $0.1 million for the six months ended June 30, ~~2021. This increase is the result of a higher volume of crop sold as the Company directly operated more farms in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.~~2022.

~~General and administrative expenses increased $2.6 million, or 73.8%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. $1.6 million of this increase~~(Income) loss from equity method investment was related to the November 2021 acquisition of MWA. The remaining increase was largely driven by higher personnel costs, travel and consulting expenses and partially attributable to the resumption of our growth strategy. As the farm economy has strengthened, the Company has focused on growth by adding people, increasing travel and pursuit cost to rebuild its acquisition pipeline.

Legal and accounting expenses decreased $3.6 million, or 63.3%, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, which was primarily the result of lower legal fees incurred in relation to litigation, as discussed under Part I, Item 1 “Note 8—Commitments and Contingencies—Litigation”.

~~Other operating expenses were~~ negligible during the six months ended June 30, ~~2022~~2023 and remained relatively consistent compared to the six months ended June 30, ~~2021.~~

~~Other income and expense remained relatively flat at $0.0 million and $0.1 million for the six months ended June 30, 2022 and 2021, respectively.~~

~~Income (loss) from equity method investment were negligible during the six months ended June 30, 2022 and remained relatively consistent compared to the six months ended June 30, 2021.~~2022.

Gain on disposition of assets increased ~~$0.5~~$8.9 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to greater property dispositions in 2023 as compared to 2022.

Interest expense increased $3.2 million, or ~~15.2%~~42.2%, for the six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021.~~2022. This increase was the result of an increase in interest rates.

~~Interest~~Income tax expense decreased ~~$0.4~~$0.1 million, or ~~4.9%~~86.5%, for the six months ended June 30, ~~2022~~2023 compared to the six months ended June 30, ~~2021. This decrease is the result of lower outstanding debt.~~2022.

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, acquire new properties, make distributions to our stockholders and unitholders, and fund other general business needs.

~~Our short-~~High levels of inflation have prompted the Federal Reserve to increase interest rates which has resulted in, and ~~long-term liquidity requirements consist primarily of funds necessary~~may continue to ~~make principal and~~result in, increased interest payments on outstanding borrowings, make distributions on our Series A preferred units, make distributions necessary to qualify for taxation as a REIT, and fund our operations. In addition, we require liquidity to acquire additional farmland, extend loans under the FPI Loan Program, and make other investments and capital expenditures.expense. We expect to meet our liquidity needs through cash on hand, undrawn availability under our lines of credit ($120.7 million in availability as of June 30, 2023), operating cash flows, borrowings, ~~equity issuances and asset dispositions, if necessary.~~

We entered into equity distribution agreements on October 29, 2021 in connection with the "at-the-market" equity offering program (the "ATM Program"), under which we may issue and sell from time to time, through the sales agents,

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~~shares~~proceeds from equity issuances and selective asset dispositions where such dispositions are deemed to be in the best interests of ~~our common stock having an aggregate gross sales price of up to $75.0 million (the "$75.0 million ATM Program"). In connection with our entry into~~ the ~~distribution agreements, we terminated the equity distribution agreements, each dated as of May 14, 2021, for our prior $50.0 million ATM Program.~~ Company.

On May 6, 2022, we entered into equity distribution agreements under which we may issue and sell from time to time, through sales agents, shares of our common stock having an aggregate gross sales price of up to $100.0 million (the ~~"$100.0 million ATM~~“ATM Program”). ~~Through June 30, 2022, the Company generated $63.1 million in gross proceeds and $62.4 million in net proceeds under the $75.0 million ATM Program and~~ ~~$36.4 million in gross proceeds and $36.1 million in net proceeds under the $100.0 million ATM Program~~ ~~for a total of $99.5 million and $98.4 million in gross and net proceeds, respectively. As of June 30, 2022, we had $10.1 million in availability under the $75.0 million ATM Program and $63.6 million in availability under the $100.0 million ATM Program.~~ The ATM Program is intended to provide cost-effective financing alternatives in the capital markets. We intend to use the net proceeds for future farmland acquisitions in accordance with our investment strategy, for loans under the FPI Loan Program, to reduce leverage and for general corporate purposes. We intend to continue to utilize the ATM Program when the market price of our common stock remains at levels which are deemed appropriate by our Board of Directors. ~~In addition, the~~The Company may increase the size of the ATM Program in the future. During the three and six months ended June 30, ~~2022, we raised $98.4 million of equity capital from our~~2023, the Company sold no shares under the ATM Programs as mentioned above. Furthermore, we have a large portfolio of high-quality real estate assets which we believe could be selectively and readily liquidated if necessary to fund our immediate liquidity needs.Program. As of June 30, ~~2022, the Company has no material debt maturities due before 2025.~~

~~During the six months ended June 30, 2022,~~2023, we ~~reduced our overall indebtedness by $86.9~~had $50.5 million ~~largely with proceeds from the sale of~~in shares of common stock available for issuance under the ATM Program. We have reduced our leverage level from approximately 48% of total real estate (net of depreciation) at December 31, 2021 to approximately 39% as of June 30, 2022. We believe that the use of proceeds from the ATM Program in the manner discussed above has substantially strengthened our balance sheet, positioned us to take advantage of growth opportunities that we believe will arise over the coming several quarters and will be significantly accretive to cash flow and to shareholder value.

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.~~

We manage our capital position and liquidity needs by continuously forecasting our expected cash receipts, expenses and capital needs, managing our cash position and monitoring all the sources of capital available to us. Our business model, and the business model of real estate investment companies in general, utilizes a combination of debt and equity capital in financing the business. When debt becomes due, it is generally refinanced or repaid with proceeds from the issuance of equity securities or the sale of farms rather than repaid using our cash flow from operations. When material debt repayments are due within the following 12 months, we work with current and new lenders and other potential sources of capital sufficiently in advance of the debt maturity to ensure that all of our obligations are satisfied in a timely manner. We have a history of being able to refinance or extend our debt obligations to manage our debt maturities. Our ability to access the equity capital markets will depend on a number of factors as well, including general market conditions. We have an effective shelf registration statement with approximately $100 million of capacity whereby we could issue additional equity or debt securities, which we have done successfully in the past as mentioned above. The Company has no material debt maturities due before 2025.

During the six months ended June 30, ~~2022,~~2023, the Company repurchased no5,595,332 shares of its common ~~stock.~~stock at a weighted average price of $11.01. We currently have authority to repurchase up to an aggregate of ~~$40.5~~$53.8 million in additional shares of our common ~~stock or shares.~~stock.

Consolidated Indebtedness

For further details relating to our consolidated indebtedness as of June 30, 2023, refer to “Note 7—Mortgage Notes, Line of Credit and Bonds Payable” in the financial statements included elsewhere in this Quarterly Report on Form 10-Q.

~~Table of Contents~~

Sources and Uses of Cash and Cash Equivalents and Restricted Cash

The following table summarizes our cash flows for the six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:


	For the six months ended June 30,				For the six months ended June 30,
(in thousands)	2022		2021		2023		2022
Net cash provided by operating activities	$	8,438	$	8,217
Net cash used in investing activities	$	(16,503)	$	(2,701)
Net cash provided by (used in) financing activities	$	(2,409)	$	7,426
Net cash and cash equivalents and restricted cash provided by operating activities					$	9,394	$	8,438
Net cash and cash equivalents and restricted cash provided by (used in) investing activities					$	39,949	$	(16,503)
Net cash and cash equivalents and restricted cash (used in) financing activities					$	(45,769)	$	(2,409)

Comparison of the six months ended June 30, ~~2022~~2023 to the six months ended June 30, ~~2021~~2022

As of June 30, ~~2022,~~2023, we had ~~$19.7~~$11.2 million of cash and cash equivalents and restricted cash compared to ~~$30.2~~$19.7 million at June 30, ~~2021.~~2022.

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Cash Flows from Operating Activities

Net cash and cash equivalents and restricted cash provided by operating activities increased by ~~$0.2~~$1.0 million primarily as a result of the following:

●

Receipt of ~~$21.4~~$23.4 million in fixed rents, ~~$1.6~~$1.9 million in variable rent and ~~$0.5~~$2.0 million in tenant reimbursements for the six months ended June 30, ~~2022~~2023 as compared to the receipt of ~~$18.2~~$21.4 million in fixed rents, ~~$1.3~~$1.6 million in variable rents, and ~~$1.1~~$0.5 million in tenant reimbursements in the six months ended June 30, ~~2021;~~2022;

●

Stock-based compensation and incentive during the six months ended June 30, ~~2022~~2023 of ~~$1.2~~$0.9 million as compared to ~~$0.6~~$1.2 million during the six months ended June 30, ~~2021;~~2022;

●

Gain on disposition of assets during the six months ended June 30, ~~2022~~2023 of ~~$4.0~~$12.9 million as compared to ~~$3.5~~$4.0 million during the six months ended June 30, ~~2021;~~2022;

●

A change in accounts receivable of $5.6 million for the six months ended June 30, 2023 compared to $2.3 million for the six months ended June 30, ~~2022 compared to $0.3 million for the six months ended June 30, 2021;~~2022;

●

A change in ~~inventory~~other assets of ~~$0.1~~$1.8 million for the six months ended June 30, ~~2022~~2023 compared to ~~$0.4~~$1.2 million for the six months ended June 30, ~~2021;~~2022;

●

A change in accrued interest of $0.9 million for the six months ended June 30, 2023 compared to $0.2 million for the six months ended June 30, ~~2022 compared to $(0.2) million for the six months ended June 30, 2021;~~2022;

●

A change in accrued expenses of $(2.6) million for the six months ended June 30, 2023 compared to $(2.1) million for the six months ended June 30, ~~2022 compared to $2.6 million for the six months ended June 30, 2021;~~2022; and

●

A change in deferred revenue of $1.6 million for the six months ended June 30, 2023 compared to $1.3 million for the six months ended June 30, ~~2022 compared to $2.3 million for the six months ended June 30, 2021.~~2022.

Cash Flows from Investing Activities

Net cash and cash equivalents and restricted cash provided by (used in) investing activities increased by ~~$13.8~~$56.5 million primarily as a result of the following:

●

Property acquisitions during the six months ended June 30, ~~2022~~2023 of ~~$28.2~~$9.0 million as compared to ~~$30.0~~$28.2 million during the six months ended June 30, ~~2021;~~2022;

●

Property dispositions during the six months ended June 30, ~~2022~~2023 for cash consideration of ~~$16.9~~$51.5 million as compared to ~~$28.6~~$16.9 million during the six months ended June 30, ~~2021;~~2022;

●

~~An increase~~Collections on notes receivable under the FPI Loan Program and financing receivables of ~~$1.3 million in real estate improvements as compared to the six months ended June 30, 2021;~~

●

~~Investment in equity method investees during the six months ended June 30, 2022 of $0.7 million as compared to~~ $0.0 million during the six months ended June 30, ~~2021;~~

●

~~Principal repayments on notes receivable under the FPI Loan Program of~~2023 as compared to $1.6 million during the six months ended June 30, ~~2022 as compared less than $0.1 million during the six months ended June 30, 2021;~~2022; and

●

Issuances of ~~note~~notes receivable under the FPI Loan Program and financing receivables of $0.0 million during the six months ended June 30, 2023 as compared to $3.5 million during the six months ended June 30, ~~2022 as compared to $0.0 million during the six months ended June 30, 2021.~~2022.

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Cash Flows from Financing Activities

Net cash and cash equivalents and restricted cash used in financing activities increased by ~~$9.8~~$43.4 million primarily as a result of the following:

●

Borrowings from mortgage notes payable during the six months ended June 30, ~~2022~~2023 of ~~$112.0~~$68.0 million as compared to ~~$14.0~~$112.0 million during the six months ended June 30, ~~2021;~~2022;

●

Repayments on mortgage notes payable during the six months ended June 30, ~~2022~~2023 of ~~$198.9~~$34.0 million as compared to ~~$20.0~~$198.9 million during the six months ended June 30, ~~2021;~~2022;

●

Net proceeds from the ATM ~~Programs~~Program during the six months ended June 30, ~~2022~~2023 of ~~$98.4~~$0.0 million as compared to ~~$25.3~~$98.4 million during the six months ended June 30, ~~2021;~~2022;

●

Common stock repurchases during the six months ended June 30, 2023 of $61.7 million as compared to $0.0 million during the six months ended June 30, 2022;

●

Dividends on common stock during the six months ended June 30, 2023 of $6.4 million as compared to $4.7 million during the six months ended June 30, 2022;

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●

Redemption of Series A preferred units during the six months ended June 30, ~~2022~~2023 of ~~$5.1~~$8.1 million as compared to ~~$0.0~~$5.1 million during the six months ended June 30, ~~2021;~~2022; and

●

Dividends on common stock during the six months ended June 30, ~~2022~~2023 of ~~$4.7~~$6.4 million as compared to ~~$3.1~~$4.7 million during the six months ended June 30, ~~2021;~~2022.

●

~~Distributions on Series A preferred units during the six months ended June 30, 2022 of $3.5 million as compared to $3.5 million during the six months ended June 30, 2021; and~~

●

~~Distributions on Series B participating preferred stock during the six months ended June 30, 2022 of $0.0 million as compared to $4.4 million during the six months ended June 30, 2021.~~

~~Off-Balance Sheet Arrangements~~

~~As of June 30, 2022, 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 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 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 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

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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 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. The Company incurred an immaterial amount of acquisition and due diligence costs during the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022. 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 improve the comparability of our results over each reporting period and of the Company with other real estate operators.

●

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

●

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 are amortized over what would have been the 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 pay under the new swap agreement, and results in improved comparability of our results across reporting periods.

●

Distributions on Series A preferred units. Dividends on Series A preferred units, which are convertible into Common units on or after February 10, 2026, have a fixed and certain impact on our cash flow, and therefore are excluded from AFFO. We believe this improves the comparability of the Company with other real estate operators.

●

~~Dividends on Series B Participating Preferred Stock~~. Dividends on the previously outstanding shares of Series B Participating Preferred Stock, which were converted into shares of common stock on October 4, 2021, had a fixed and certain impact on our cash flow, and therefore are excluded from AFFO. We believe this improves the comparability of the 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, and unvested shares of restricted stock outstanding at the end of the period on a share equivalent

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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, and therefore do not 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 income (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 (unaudited):


	For the three months ended June 30,				For the six months ended June 30,				For the three months ended June 30,				For the six months ended June 30,
(in thousands except per share amounts)	2022		2021		2022		2021		2023		2022		2023		2022
Net income (loss)	$	2,993	$	(2,865)	$	4,131	$	(388)
Gain on disposition of assets		(3,335)		(74)		(3,995)		(3,467)
Net income									$	7,899	$	2,993	$	9,612	$	4,131
(Gain) on disposition of assets										(11,060)		(3,335)		(12,886)		(3,995)
Depreciation, depletion and amortization		1,660		1,885		3,411		3,820		2,207		1,660		4,001		3,411
FFO		1,318		(1,054)		3,547		(35)	$	(954)	$	1,318	$	727	$	3,547

Stock-based compensation and incentive		601		334		1,243		585		506		601		965		1,243
Deferred impact of interest rate swap terminations		32		127		94		311		—		32		198		94
Real estate related acquisition and due diligence costs		—		—		62		—		—		—		14		62
Distributions on Preferred units and stock		(840)		(3,055)		(1,680)		(6,120)		(683)		(840)		(1,485)		(1,680)
AFFO	$	1,111	$	(3,648)	$	3,266	$	(5,259)	$	(1,131)	$	1,111	$	419	$	3,266

AFFO per diluted weighted average share data:

AFFO weighted average common shares		51,985		32,836		49,739		32,527		52,454		51,985		54,002		49,739

Net loss per share available to common stockholders	$	0.04	$	(0.19)	$	0.05	$	(0.21)
Net income available to common stockholders of Farmland Partners Inc.									$	0.14	$	0.04	$	0.15	$	0.05
Income available to redeemable non-controlling interest and non-controlling interest in operating partnership		0.02		0.10		0.04		0.21		0.01		0.02		0.04		0.04
Depreciation and depletion		0.03		0.06		0.07		0.12
Depreciation, depletion and amortization										0.04		0.03		0.07		0.07
Stock-based compensation and incentive		0.01		0.01		0.02		0.02		0.01		0.01		0.02		0.02
(Gain) loss on disposition of assets		(0.06)		—		(0.08)		(0.11)
(Gain) on disposition of assets										(0.21)		(0.06)		(0.24)		(0.08)
Distributions on Preferred units and stock		(0.02)		(0.09)		(0.03)		(0.19)		(0.01)		(0.02)		(0.03)		(0.03)
AFFO per diluted weighted average share	$	0.02	$	(0.11)	$	0.07	$	(0.16)	$	(0.02)	$	0.02	$	0.01	$	0.07

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 June 30,		For the six months ended June 30,		For the three months ended June 30,		For the six months ended June 30,
(in thousands)	2022	2021	2022	2021	2023	2022	2023	2022
Basic weighted average shares outstanding	50,362	31,072	48,084	30,747	50,860	50,362	52,425	48,084
Weighted average OP units on an as-if converted basis	1,337	1,479	1,347	1,495	1,237	1,337	1,237	1,347
Weighted average unvested restricted stock	286	285	308	285	357	286	340	308
AFFO weighted average common shares	51,985	32,836	49,739	32,527	52,454	51,985	54,002	49,739

EBITDAre

The Company calculates Earnings Before Interest Taxes Depreciation and 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 expense, income tax, depreciation and amortization, 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 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. The Company believes that EBITDAre is a useful performance measure commonly reported and will be widely used by analysts and investors in the Company’s industry. However, while EBITDAre is a performance measure widely used across the Company’s industry, the Company does not believe that it

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correctly captures the Company’s business operating performance because it includes non-cash expenses and recurring adjustments that are necessary to better understand the Company’s business operating performance. Therefore, in addition to EBITDAre, management uses Adjusted EBITDAre, a non-GAAP measure.

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We further adjust EBITDAre for certain additional items such as stock-based compensation and incentive, 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. We believe that Adjusted EBITDAre provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and EBITDAre, is beneficial to an investor’s understanding of our operating performance.

EBITDAre and Adjusted 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:

●

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

●

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

●

EBITDAre and Adjusted 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 EBITDAre and Adjusted EBITDAre do not reflect any cash requirements for these replacements; and

●

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

Because of these limitations, EBITDAre and Adjusted 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 EBITDAre and Adjusted EBITDAre only as a supplemental measure of our performance.

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

For the three months ended

For the six months ended

June 30,

June 30,
(in thousands)

2022

2021

2022

2021
Net income (loss)

$
2,993

$
(2,865)

$
4,131

$
(388)
Interest expense

3,743

3,902

7,570

7,961
Income tax expense

96

—

96

—
Depreciation, depletion and amortization

1,660

1,885

3,411

3,820
Gain on disposition of assets

(3,335)

(74)

(3,995)

(3,467)
EBITDAre

$
5,157

$
2,848

$
11,213

$
7,926

Stock-based compensation and incentive

601

334

1,243

585
Real estate related acquisition and due diligence costs

—

—

62

—
Adjusted EBITDAre

$
5,758

$
3,182

$
12,518

$
8,511

~~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 many of 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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	For the three months ended				For the six months ended
	June 30,				June 30,
(in thousands)	2023		2022		2023		2022
Net income	$	7,899	$	2,993	$	9,612	$	4,131
Interest expense		5,844		3,743		10,768		7,570
Income tax expense		4		96		13		96
Depreciation, depletion and amortization		2,207		1,660		4,001		3,411
(Gain) on disposition of assets		(11,060)		(3,335)		(12,886)		(3,995)
EBITDAre	$	4,894	$	5,157	$	11,508	$	11,213

Stock-based compensation and incentive		506		601		965		1,243
Real estate related acquisition and due diligence costs		—		—		14		62
Adjusted EBITDAre	$	5,400	$	5,758	$	12,487	$	12,518

Seasonality

We recognize rental revenue from fixed-rate farmland leases on a pro rata basis over the non-cancellable term of the lease in accordance with accounting principles generally accepted in the United States (“GAAP”). Notwithstanding GAAP accounting requirements to spread rental revenue over the lease term, a significant portion of fixed rent is received in a lump sum before planting season, in the first quarter, and after harvest, in the fourth quarter. We receive a significant portion of our variable rental payments in the fourth calendar quarter of each year, following harvest, with only a portion of such payments being recognized ratably through the year in accordance with GAAP, in relation to crop insurance contracts entered into by our tenants. The highly seasonal nature of the agriculture industry causes seasonality in our business to some extent. Our financial performance should be evaluated on an annual basis, which eliminates impacts of seasonality and other similar factors that may cause our quarterly results to vary during the course of the year.

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Item 3.Quantitative and Qualitative Disclosures 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 LIBOR and SOFR. We may use fixed interest rate financing to manage our exposure to fluctuations in interest rates. On a limited basis, we also use derivative financial instruments to manage interest rate risk. We do not use such derivatives for trading or other speculative purposes.

At June 30, ~~2022, $139.5~~2023, $186.5 million, or ~~32.7%~~39.4%, of our debt had variable interest ~~rates.~~rates however, as stated in “Note 10—Hedge Accounting” to the accompanying consolidated financial statements, the Company has an interest rate swap with Rabobank for $33.2 million, which reduces floating rate exposure. Assuming no increase in the level of our variable rate debt spreads, if interest rates increased by 1.0%, our cash flow would decrease by approximately ~~$1.1~~$1.5 million per year. ~~At June 30, 2022, 1 month LIBOR was approximately 112 basis points.~~ Assuming no increase in the level of our variable rate debt, if LIBOR and SOFR were reduced ~~to 0 basis points,~~by 1.0%, our cash flow would increase approximately ~~$0.8~~$1.5 million per year.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

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 their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosures and procedures were effective at a reasonable level of assurance as of the end of the period covered by this report.

Limitations on the Effectiveness of Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

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Changes in Internal Controls over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the six months ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings.

For information regarding legal proceedings as of June 30, ~~2022,~~2023, see Note 8 to our Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Item 1A.Risk Factors.

As of June 30, ~~2022,~~2023, there ~~have been~~were no material changes from the risk factors previously disclosed in response to “Part I – Item 1A. ‘Risk Factors’” in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the SEC on ~~March 1, 2022.~~February 23, 2023.

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

Issuer Purchases of Equity Securities

Unregistered Sales of Equity Securities

~~On May 24, 2022, we issued an aggregate of 110,000 shares of common stock in exchange for an equivalent number of Common units pursuant to the terms of the Partnership Agreement.~~

~~These shares were issued in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933.~~None.

Share Repurchase Program

On March 15, 2017, our Board of Directors approved a program to repurchase up to $25.0 million 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. This share repurchase program does not obligate us to acquire any particular amount of common 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 our balance sheet. On August 1, 2018, our Board of Directors increased the authority under the share repurchase to $38.5 million. On November 7, 2019, the Board of Directors approved an additional $50 million under the share repurchase program. On May 3, 2023, the Company’s Board of Directors approved a $75.0 million increase in the total authorization available under the program, increasing the total availability under the share repurchase program to approximately $88.0 million as of such date. As of June 30, 2023, we had $53.8 million of capacity remaining under the program.

Issuer Purchases of Equity Securities

Our ~~repurchase activity for~~purchases of equity securities during the three months ended June 30, ~~2022~~2023, including repurchases under the share repurchase program isare presented in the following table. As


(in thousands except per share amounts)	Total Number of Common Shares Purchased ⁽¹⁾	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, 2023 - April 30, 2023	1,180	$	10.75	—	$	—	1,180	$	13,169
May 1, 2023 - May 31, 2023	1,120		10.94	—		—	1,120		75,901
June 1, 2023 - June 30, 2023	1,837		12.03	—		—	1,837		53,767
Total	4,137	$	11.37	—	$	—	4,137

⁽¹⁾ There were no shares of our common stock transferred to us in order to satisfy tax withholding obligations incurred upon the ~~date~~vesting of ~~this report, we had $40.5 million~~restricted stock awards held by our employees during the three months ended June 30, 2023.

Subsequent to June 30, 2023, the Company repurchased an additional 116,593 shares of ~~availability under the program.~~common stock at a weighted average price of $12.22.

(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, 2022 - April 30, 2022

—

$
—

—

$
—

—

$
40,456
May 1, 2022 - May 31, 2022

—

—

—

—

—

40,456
June 1, 2022 - June 30, 2022

—

—

—

—

—

40,456
Total

—

$
—

—

$
—

—

$
40,456

5654

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~~Subsequent to June 30, 2022, the Company has repurchased no shares of common stock.~~

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other 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.

Exhibit Index


Exhibit Number		Description of Exhibit
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*		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2022,~~2023, were formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104*		Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL.

* Filed herewith

5755

Table of Contents

SIGNATURES

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


		Farmland Partners Inc.

Date: July ~~28, 2022~~27, 2023		/s/ ~~Paul A. Pittman~~Luca Fabbri
		~~Paul A. Pittman~~Luca Fabbri
		~~Executive Chairman~~President and Chief Executive Officer
		(Principal Executive Officer)

Date: July ~~28, 2022~~27, 2023		/s/ James Gilligan
		James Gilligan
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

5856



($ in thousands)		MWA Purchase
Consideration:		Accounting
Cash consideration	$	2,161
Stock consideration		3,147
Total consideration	$	5,308

Amounts recognized for fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	1,305
Fixed Assets		110
Goodwill		2,706
Intangible assets		1,915
Net Liabilities		(728)
Total Fair Value	$	5,308

Net cash used in the transaction:
Cash paid in transaction	$	(2,161)
Cash acquired in transaction		1,305
Net cash used in the transaction	$	(856)


(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, 2022 - April 30, 2022	—	$	—	—	$	—	—	$	40,456
May 1, 2022 - May 31, 2022	—		—	—		—	—		40,456
June 1, 2022 - June 30, 2022	—		—	—		—	—		40,456
Total	—	$	—	—	$	—	—	$	40,456