UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 3, 2016
FARMLAND PARTNERS INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland | | 001-36405 | | 46-3769850 |
(State of or other jurisdiction of
incorporation) | | (Commission File Number) | | (IRS Employer
Identification No.) |
4600 S Syracuse Street, Suite 1450
Denver, Colorado | | 80237 |
(Address of Principal Executive
Offices) | | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (720) 452-3100
Not Applicable
(Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
EXPLANATORY NOTE
On March 3, 2016, Farmland Partners Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original 8-K”) in connection with the Company’s acquisition of 118 farms totaling approximately 22,128 acres of row crop farmland located in Illinois (collectively, the “Forsythe Family Farms”). This amendment to the Original 8-K is being filed for the sole purpose of filing the historical financial statements of the Forsythe Family Farms for the year ended December 31, 2015 and related pro forma financial information of the Company required by Item 9.01 of Form 8-K, and should be read in conjunction with the Original 8-K.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Properties Acquired.
Forsythe Family Farms
· Independent Auditor’s Report
· Statement of Revenue and Certain Operating Expenses for the year ended December 31, 2015
· Notes to Statement of Revenue and Certain Operating Expenses
(b) Pro Forma Financial Information.
· Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2015
· Unaudited Pro Forma Consolidated Income Statement for the year ended December 31, 2015
· Notes to Unaudited Pro Forma Consolidated Financial Statements
(d) Exhibits.
Exhibit
No. | | Description |
23.1* | | Consent of Independent Registered Public Accounting Firm. |
*Filed herewith
2
Independent Auditor’s Report
To the Board of Directors and Shareholders
of Farmland Partners Inc.
We have audited the accompanying statement of revenue and certain operating expenses (the “statement”) of the Forsythe Family Farms for the year ended December 31, 2015.
Management’s Responsibility for the Statement of Revenue and Certain operating expenses
Management is responsible for the preparation and fair presentation of the statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the statement, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain operating expenses of the Forsythe Family Farms for the year ended December 31, 2015 in accordance with accounting principles generally accepted in the United States of America.
3
Emphasis of Matter
The accompanying statement of revenue and certain operating expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 2 and is not intended to be a complete presentation of the Forsythe Family Farms’ revenue and expenses. Our opinion is not modified with respect to this matter.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
May 18, 2016
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Forsythe Family Farms
Statement of Revenue and Certain operating expenses
For the Year Ended December 31, 2015
| | For the | |
| | Year Ended | |
| | December 31, 2015 | |
| | | |
OPERATING REVENUE: | | | |
Rental income | | $ | 6,795,779 | |
Total operating revenue | | 6,795,779 | |
| | | |
OPERATING EXPENSES: | | | |
Property taxes | | 432,228 | |
Insurance | | 46,651 | |
Total operating expenses | | 478,879 | |
Revenue in excess of certain operating expenses | | $ | 6,316,900 | |
The accompanying notes are an integral part of this financial statement.
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Forsythe Family Farms
Notes to Statement of Revenue and Certain operating expenses
For the Year Ended December 31, 2015
Note 1. Business
The accompanying historical summary of revenue and certain operating expenses relate to the operations of the 118 farms totaling approximately 22,128 acres (unaudited) of row crop farmland located in Illinois (collectively, the “Forsythe Family Farms” or the “Property”), which Farmland Partners Inc. (the “Company”) acquired on March 2, 2016 for total consideration of $197.0 million.
Note 2. Summary of Significant Accounting Policies
The accompanying statement of revenue and certain operating expenses has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X as promulgated by the Securities and Exchange Commission in connection with the Company’s acquisition of the Forsythe Family Farms. The historical summary is not representative of the actual operations of the Property for the period presented, nor indicative of future operations; however, the Company is not aware of any material factors relating to the Property that would cause the reported financial information to not necessarily be indicative of future operating results. In addition, certain expenses, primarily depreciation and amortization, interest expense, advertising expense, legal and accounting fees, management fees, travel and tax expense, which may not be comparable to the expenses expected to be incurred by the Company in future operations of the Property, have been excluded. Additionally, the Company’s leases with the tenants are structured in such a way that the tenant is responsible for substantially all of the Property’s operating expenses other than property taxes and insurance. Except for property taxes and insurance, the Company does not expect to incur any significant operating expenses in the future operations of the Property; as such, they have been excluded from this historical summary.
Revenue Recognition
All leases for the year ended December 31, 2015 had a term of one year and expired December 31, 2015, with no renewal options. Revenue is recognized on a straight-line basis in accordance with the terms of the related lease.
Use of Estimates
The preparation of the financial statements requires management of the Forsythe Family Farms to use estimates and assumptions that affect the reported amounts of revenue and certain operating expenses during the reporting period. Actual results could materially differ from these estimates in the near term.
Major Tenants
During the year ended December 31, 2015, the Forsythe Family Farms had certain tenant concentrations as presented in the table below. The following is a summary of our significant tenants:
| | 2015 | | Percentage
of Revenue | |
Tenant A | | $ | 1,659,618 | | 24 | % |
Tenant B | | 992,387 | | 15 | % |
Tenant C | | 795,355 | | 12 | % |
| | $ | 3,447,360 | | 51 | % |
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Forsythe Family Farms
Notes to Statement of Revenue and Certain operating expenses
For the Year Ended December 31, 2015
Note 3. Subsequent Events
The Company evaluated all events that have occurred from December 31, 2015 through May 18, 2016, the date the financial statements were available to be issued and noted no items requiring adjustment of the statement or additional disclosure.
7
Farmland Partners Inc.
Pro Forma Consolidated Financial Statements
(Unaudited)
The Company is an internally managed real estate company that owns and seeks to acquire high-quality farmland located in agricultural markets throughout North America. The Company was incorporated on September 27, 2013. The Company is the sole member of the general partner of Farmland Partners Operating Partnership, LP (the “Operating Partnership”), which was formed in Delaware on September 27, 2013. All of the Company’s assets are held by, and its operations are primarily conducted through, the Operating Partnership and the wholly owned subsidiaries of the Operating Partnership.
On March 2, 2016, the Company acquired the Forsythe Family Farms from unrelated third party sellers, for an aggregate purchase price of $197.0 million, which was comprised of (a) $50.0 million in cash, (b) 2,608,695 Class A common units of limited partnership interest in the Operating Partnership (“OP units”) valued at $11.50 per OP unit (the stock price on date of closing was $11.05) and (c) 117,000 Series A preferred units of limited partnership interest in the Operating Partnership (“Preferred units”). The Forsythe Family Farms comprise a total of approximately 22,128 acres of row crop farmland in Illinois.
The unaudited pro forma consolidated financial statements have been derived from our historical combined consolidated financial statements. The unaudited pro forma consolidated balance sheet as of December 31, 2015 is presented to reflect adjustments to the Company’s historical consolidated balance sheet as of December 31, 2015 as if the acquisition of the Forsythe Family Farms was completed on December 31, 2015. The unaudited pro forma consolidated income statement for the year ended December 31, 2015 is presented as if the acquisition of the Forsythe Family Farms was completed on January 1, 2015.
The following unaudited pro forma consolidated financial statements should be read in conjunction with (i) the historical combined consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which were filed with the Securities and Exchange Commission on March 15, 2016, and (ii) the statements of revenue and certain operating expenses, filed in accordance with Rule 3-14 of Regulation S-X, of the Forsythe Family Farms for the year ended December 31, 2015. The Company has based the unaudited pro forma adjustments on available information and assumptions that the Company believes are reasonable.
The following unaudited pro forma consolidated financial statements are presented for informational purposes only and are not necessarily indicative of (1) what the Company’s actual financial position would have been as of December 31, 2015 assuming the acquisition of the Forsythe Family Farms had been completed on December 31, 2015, (2) what the Company’s actual results of operations would have been for the year ended December 31, 2015 assuming the acquisition of the Forsythe Family Farms had been completed as of the beginning of the earliest period presented or (3) the Company’s future results of operations or financial condition as of any future date or for any future period, as applicable.
8
Farmland Partners Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 2015
(In thousands, except share and per share data)
| | Farmland
Partners Inc. | | Forsythe
Family
Farms | | Pro Forma
Adjustments | | Company
Pro Forma | |
| | A | | B | | | | | |
Assets | | | | | | | | | |
Land | | $ | 290,828 | | $ | 195,590 | | $ | — | | $ | 486,418 | |
Grain facilities | | 4,830 | | 89 | | — | | 4,919 | |
Groundwater | | 6,333 | | — | | — | | 6,333 | |
Irrigation improvements | | 11,909 | | 620 | | — | | 12,529 | |
Drainage improvements | | 1,641 | | 657 | | — | | 2,298 | |
Permanent plantings | | 1,168 | | — | | — | | 1,168 | |
Other | | 913 | | 268 | | — | | 1,181 | |
Construction in progress | | 286 | | — | | — | | 286 | |
Real estate, at cost | | 317,908 | | 197,224 | | — | | 515,132 | |
Accumulated depreciation | | (1,671 | ) | — | | — | | (1,671 | ) |
Total real estate, net | | 316,237 | | 197,224 | | — | | 513,461 | |
Deposits | | 765 | | (164 | ) | — | | 601 | |
Cash | | 23,514 | | (51,155 | ) | 49,813 | C | 22,172 | |
Notes and interest receivable, net | | 2,812 | | — | | — | | 2,812 | |
Deferred offering costs | | 267 | | — | | — | | 267 | |
Accounts receivable, net | | 703 | | — | | — | | 703 | |
Inventory | | 249 | | — | | — | | 249 | |
Other | | 407 | | — | | — | | 407 | |
Total assets | | $ | 344,954 | | $ | 145,905 | | $ | 49,813 | | $ | 540,672 | |
Liabilities | | | | | | | | | |
Mortgage notes and bonds payable | | $ | 187,074 | | $ | — | | $ | 49,813 | C | $ | 236,887 | |
Dividends payable | | 2,060 | | — | | — | | 2,060 | |
Accrued interest | | 681 | | — | | — | | 681 | |
Accrued property taxes | | 765 | | 79 | | — | | 844 | |
Deferred revenue | | 4,854 | | — | | — | | 4,854 | |
Accrued expenses | | 1,292 | | — | | — | | 1,292 | |
Total liabilities | | 196,726 | | 79 | | 49,813 | | 246,618 | |
Redeemable non- controlling interest in operating partnership | | 9,694 | | — | | — | | 9,694 | |
Redeemable preferred non-controlling interest in operating partnership | | — | | 117,000 | | — | | 117,000 | |
Equity | | | | | | | | | |
Common stock, $0.01 par value, 500,000,000 shares authorized; 11,978,675 shares issued and outstanding at December 31, 2015 | | 118 | | — | | — | | 118 | |
Additional paid-in capital | | 114,783 | | — | | (931 | )D | 113,852 | |
Retained earnings | | 659 | | — | | — | | 659 | |
Cumulative dividends | | (7,188 | ) | — | | — | | (7,188 | ) |
Non-controlling interest in operating partnership | | 30,162 | | 28,826 | | 931 | D | 59,919 | |
Total equity | | 138,534 | | 28,826 | | — | | 167,360 | |
Total Liabilities, Redeemable Non-Controlling Interests in Operating Partnership and Equity | | $ | 344,954 | | $ | 145,905 | | $ | 49,813 | | $ | 540,672 | |
9
Farmland Partners Inc.
Unaudited Pro Forma Consolidated Income Statement
For the Year Ended December 31, 2015
(In thousands, except share and per share data)
| | Farmland
Partners Inc. | | Forsythe
Family
Farms | | Pro Forma
Adjustments | | Company Pro
Forma | |
| | AA | | BB | | | | | |
Operating Revenues | | | | | | | | | |
Rental income | | $ | 13,548 | | $ | 6,796 | | $ | — | | $ | 20,344 | |
Tenant reimbursements | | 135 | | — | | — | | 135 | |
Other revenue | | 73 | | — | | — | | 73 | |
Total operating revenues | | 13,756 | | 6,796 | | — | | 20,552 | |
Operating expenses | | | | | | | | | |
Depreciation and depletion | | 893 | | — | | 81 | CC | 974 | |
Property operating expenses | | 1,104 | | 479 | | — | | 1,583 | |
Acquisitions and due diligence costs | | 260 | | — | | — | | 260 | |
General and administrative expenses | | 4,192 | | — | | — | | 4,192 | |
Legal and accounting | | 1,090 | | — | | — | | 1,090 | |
Total operating expenses | | 7,539 | | 479 | | 81 | | 8,099 | |
Operating income | | 6,217 | | 6,317 | | (81 | ) | 12,453 | |
Other expense | | | | | | | | | |
Other income | | (98 | ) | — | | — | | (98 | ) |
Interest expense | | 4,616 | | — | | 1,209 | DD | 5,825 | |
Total other expense | | 4,518 | | — | | 1,209 | | 5,727 | |
Net income before income tax expense | | 1,699 | | 6,317 | | (1,290 | ) | 6,726 | |
State income tax expense | | 10 | | — | | — | | 10 | |
Net income | | $ | 1,689 | | $ | 6,317 | | $ | (1,290 | ) | $ | 6,716 | |
Net income attributable to non-controlling interests in operating partnership | | (360 | ) | — | | (2,025 | )EE | (2,385 | ) |
Net income attributable to redeemable non-controlling interests in operating partnership | | (102 | ) | — | | (144 | )FF | (246 | ) |
Net income attributable to the Company | | $ | 1,227 | | $ | 6,317 | | $ | (3,459 | ) | $ | 4,085 | |
Nonforfeitable dividends allocated to unvested restricted shares | | (80 | ) | — | | — | | (80 | ) |
Distributions on redeemable non-controlling interest in operating partnership | | (338 | ) | — | | — | | (338 | ) |
Dividends on redeemable preferred non-controlling interest in operating partnership | | — | | — | | (3,510 | )GG | (3,510 | ) |
Net income available to common stockholders | | $ | 809 | | $ | 6,317 | | $ | (6,969 | ) | $ | 157 | |
Pro forma per share: | | | | | | | | | |
Basic net income available to common stockholders | | $ | 0.08 | | | | | | $ | 0.02 | HH |
Diluted net income available to common stockholders | | $ | 0.08 | | | | | | $ | 0.02 | II |
Basic weighted average common shares outstanding | | 9,618,714 | | | | | | 9,618,714 | HH |
Diluted weighted average common shares outstanding | | 9,628,651 | | | | | | 9,628,651 | II |
10
Farmland Partners Inc.
Unaudited Pro Forma Consolidated Financial Statements
(In thousands, except share and per share data)
1. Adjustments to the Pro Forma Consolidated Balance Sheet
(A) Represents the historical consolidated balance sheet of the Company as of December 31, 2015.
(B) The acquisition of the Forsythe Family Farms is reflected in the unaudited pro forma consolidated balance sheet of the Company at fair market value. The preliminary allocation of purchase price for the Forsythe Family Farms acquired are shown in the table below. The allocation of the purchase price in the table below is based upon the Company’s best estimates and is subject to change based upon the final determination of the fair value of the assets acquired.
�� | | Land | | Irrigation
Improvements | | Other | | Accrued
Property
Taxes | | Total | |
Forsythe Family Farms | | $ | 195,590 | | $ | 1,277 | | $ | 357 | | $ | (79 | ) | $ | 197,145 | |
| | $ | 195,590 | | $ | 1,277 | | $ | 357 | | $ | (79 | ) | $ | 197,145 | |
The Company paid an aggregate of $51.2 million in cash, issued an aggregate of 2,608,695 OP units with an aggregate fair value of $28.8 million (calculated as the number of OP units issued multiplied by $11.05, the Company’s closing stock price on March 2, 2016, the date the acquisition of the Forsythe Family Farms was completed, and issued an aggregate of 117,000 Preferred units with a fair value of $117.0 million (calculated as the number of Preferred units issued multiplied by the liquidation preference of $1,000 per unit) for the Forsythe Family Farms.
In connection with the acquisition of the Forsythe Family Farms, the Company has incurred total acquisition-related costs of approximately $1.3 million. Of this amount, approximately $0.2 million was included in deposits at December 31, 2015 and thus is reflected in the historical column of the pro forma consolidated balance sheet. Of this amount, approximately $1.2 million of these costs were paid at closing and are reflected as an adjustment to cash.
(C) In connection with the acquisition of the Property, the Company received proceeds of approximately $53.0 million through bridge financing (in conjunction with the bridge financing a one-time additional interest of 4%, or $2.1 million, in the form of a discount on issuance), $50.0 million of which was used to pay the cash consideration for the Property. The bridge financing was subsequently refinanced with long-term debt with loan fees of $0.2 million.
(D) Represents the reclassification of equity to Non-controlling Interests in the Operating Partnership. OP units not owned by the Company are classified as non-controlling interest in permanent equity in the pro forma consolidated balance sheet because holders of OP units have the right, pursuant to the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, to cause the Operating Partnership to redeem such OP units for cash, or solely at the Company’s election and within the Company’s control, for shares of the Company’s common stock on a one-for-one basis. For purposes of this pro forma consolidated balance sheet, equity of the Operating Partnership has been allocated based on the total
11
Farmland Partners Inc.
Unaudited Pro Forma Consolidated Financial Statements
(In thousands, except share and per share data)
number of OP units outstanding after the issuance of the OP units in the acquisitions of the Forsythe Family Farms that occurred on March 2, 2016, resulting in a reallocation of $931 from additional paid-in capital to non-controlling interest in operating partnership.
2. Adjustments to the Pro Forma Consolidated Income Statement
(AA) Represents the historical consolidated statement of income of the Company for the year ended December 31, 2015.
(BB) Represents the historical rental income and certain operating expenses for Forsythe Family Farms for the year ended December 31, 2015.
(CC) The pro forma adjustment for depreciation expense is based on the Company’s basis in the assets that would have been recorded assuming Forsythe Family Farms was acquired on January 1, 2015.
The value allocated to improvements is depreciated using the straight-line method over their estimated useful lives as follows:
| | Years | | Average life | | Year ended
December 31,
2015 | |
Grain facilities | | 10 years | | 10 years | | $ | 9 | |
Irrigation improvements | | 15-30 years | | 25.75 years | | 28 | |
Drainage improvements | | 20-29 years | | 25.92 years | | 26 | |
Other | | 8-15 years | | 12.5 years | | 18 | |
| | | | | | $ | 81 | |
(DD) The pro forma adjustment to interest expense is the Company’s estimate of interest expense incurred on the long-term debt used to acquire the Forsythe Family Farms, assuming the respective borrowing was issued as of January 1, 2015. The Company funded the acquisition with bridge financing which was subsequently refinanced with long-term debt. The debt is scheduled to mature March 29, 2026 and bears interest at a floating rate that is adjusted quarterly to the greater of three month Libor plus 1.75% or 2.00%; the initial rate is 2.38%.
| | Year ended
December 31,
2015 | |
Interest expense | | $ | 1,190 | |
Amortization of debt issuance costs | | 19 | |
| | $ | 1,209 | |
(EE) Reflects the allocation of pro forma net income from continuing operations attributable to non-controlling interests in the Operating Partnership.
12
Farmland Partners Inc.
Unaudited Pro Forma Consolidated Financial Statements
(In thousands, except share and per share data)
(FF) Reflects the allocation of pro forma net income from continuing operations attributable to redeemable non-controlling interests in the Operating Partnership.
(GG) Reflects the 3% stated dividend on Preferred units, as if the acquisition had occurred January 1, 2015.
(HH) Pro forma loss per share—basic is calculated by dividing pro forma consolidated net income available to the Company’s stockholders by the basic weighted average common shares outstanding.
(II) Pro forma loss per share—diluted is calculated by dividing pro forma consolidated net income available to the Company’s stockholders by the diluted weighted average common shares outstanding. The computation of diluted weighted average common shares outstanding is as follows:
| | Year ended
December 31,
2015 | |
| | | |
Weighted-average number of common shares - basic | | 9,618,714 | |
Conversion of redeemable preferred non-controlling interest (1) | | — | |
Unvested restricted shares | | 9,937 | |
| | 9,628,651 | |
(1) The outstanding Preferred units are non-participating securities and thus are included in the computation of diluted earnings per share on an as-if converted basis. Any anti-dilutive shares are excluded from the diluted earnings per share calculation. The weighted average shares outstanding (on an as-if converted to common stock basis) was 10,965,423. These shares were not included in the diluted earnings per share calculation as they would be anti-dilutive.
13
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 hereunto duly authorized.
| FARMLAND PARTNERS INC. |
| |
| |
Dated: May 18, 2016 | | By: | /s/ Luca Fabbri |
| | | |
| | | Luca Fabbri |
| | | |
| | | Chief Financial Officer, Secretary and Treasurer |
14
Exhibit Index
Exhibit
No. | | Description |
23.1* | | Consent of Independent Registered Public Accounting Firm. |
*Filed herewith
15
