| Stockholders' Equity and Non-controlling Interests | Note 9—Stockholders’ Equity and Non-controlling Interests Non-controlling Interests in Operating Partnership The Company consolidates its Operating Partnership. As of September 30, 2020 and December 31, 2019, the Company owned 93.9% and 94.0% of the outstanding interests, respectively, in the Operating Partnership, and the remaining 6.1% and 6.0% interests, respectively, are included in non-controlling interests in Operating Partnership on the consolidated balance sheets. The non-controlling interests in the Operating Partnership are held in the form of Common units and Series A preferred units. On or after 12 months of becoming a holder of Common units, unless the terms of an agreement with such Common unitholder dictate otherwise, each limited partner, other than the Company, has the right, subject to the terms and conditions set forth in the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended (the “Partnership Agreement”), to tender for redemption all or a portion of such Common units in exchange for cash, or in the Company’s sole discretion, for shares of the Company’s common stock on a one-for-one basis. If cash is paid in satisfaction of a redemption request, the amount will be equal to the number of tendered units multiplied by the fair market value 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 nine months ended September 30, 2020 and the year ended December 31, 2019, the Company issued zero and 2,678,187, respectively, of shares of common stock upon redemption of zero and 2,678,187, respectively, Common units that had been tendered for redemption. There were 1.9 million and 1.9 million outstanding Common units eligible to be tendered for redemption as of September 30, 2020 and December 31, 2019, respectively. If the Company gives the limited partners notice of its intention to make an extraordinary distribution of cash or property to its stockholders or effect a merger, a sale of all or substantially all of its assets or any other similar extraordinary transaction, each limited partner may exercise its right to tender its Common units for redemption, regardless of the length of time such limited partner has held its Common units. Regardless of the rights described above, the Operating Partnership will not have an obligation to issue cash to a unitholder upon a redemption request if the Company elects to redeem Common units for shares of common stock. When a Common unit is redeemed, non-controlling interest in the Operating Partnership is reduced, and stockholders’ equity is increased. The Operating Partnership intends to continue to make distributions on each Common unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the Common units held by the Company being utilized to pay dividends to the Company’s common stockholders. Pursuant to the consolidation accounting standard with respect to the accounting and reporting for non-controlling interest changes and changes in ownership interest of a subsidiary, changes in parent’s ownership interest when the parent retains controlling interest in the subsidiary should be accounted for as equity transactions. The carrying amount of the non-controlling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the parent. As a result of equity issuances including and subsequent to the IPO, changes in the ownership percentages between the Company’s stockholders’ equity and non-controlling interest in the Operating Partnership occurred during the nine months ended September 30, 2020 and 2019. During the nine months ended September 30, 2020, the Company decreased the non-controlling interest in the Operating Partnership and increased additional paid in capital by $0.4 million. During the nine months ended September 30, 2019, the Company increased the non-controlling interest in the Operating Partnership and decreased additional paid in capital by $0.2 million. 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 operating partnership, preferred units on the balance sheet with the offset recorded to retained earnings. Dividends on Series A preferred units have been recorded through retained earnings in 2017 as opposed to additional paid in capital in 2016 due to the Company generating retained earnings during 2017. On March 2, 2016, 117,000 Series A preferred units were issued as partial consideration in the March 2, 2016 Illinois farm acquisition. Upon any voluntary or involuntary liquidation or dissolution, the Series A preferred units are entitled to a priority distribution ahead of Common units in an amount equal to the liquidation preference plus an amount equal to all distributions accumulated and unpaid to the date of such cash distribution. Total liquidation value of such preferred units as of September 30 2020 and December 31, 2019 was $119.6 million and $120.5 million, respectively, including accrued distributions. On or after March 2, 2026, the tenth anniversary of the closing of the Forsythe acquisition (the “Conversion Right Date”), holders of the Series A preferred units have the right to convert each Series A preferred unit into a number of Common units equal to (i) the $1,000 liquidation preference plus all accrued and unpaid distributions, divided by (ii) the volume-weighted average price per share of the Company’s common stock for the 20 trading days immediately preceding the applicable conversion date. All Common units received upon conversion may be immediately tendered for redemption for cash or, in the Company’s sole discretion, for shares of common stock on a one-for-one basis, subject to the terms and conditions set forth in the Partnership Agreement. Prior to the Conversion Right Date, the Series A preferred units may not be tendered for redemption by the Holder. On or after 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 $1,000 liquidation preference plus all accrued and unpaid distributions. Holders of the Series A preferred units have no voting rights except with respect to (i) the issuance of partnership units of the Operating Partnership senior to the Series A preferred units as to the right to receive distributions and upon liquidation, dissolution or winding up of the Operating Partnership, (ii) the issuance of additional Series A preferred units and (iii) amendments to the Partnership Agreement that materially and adversely affect the rights or benefits of the holders of the Series A preferred units. The Series A preferred units are accounted for as mezzanine equity on the consolidated balance sheet as the units are convertible and redeemable for shares at a determinable price and date at the option of the holder upon the occurrence of an event not solely within the control of the Company. The following table summarizes the changes in the Company’s redeemable non-controlling interest in the Operating Partnership for the nine months ended September 2020 and 2019: Series A Preferred Units ($ in thousands) Redeemable Redeemable Balance at December 31, 2018 117 $ 120,510 Distribution paid to non-controlling interest — (3,510) Accrued distributions to non-controlling interest — 2,633 Balance at September 30, 2019 117 $ 119,633 Balance at December 31, 2019 117 $ 120,510 Distribution paid to non-controlling interest — (3,510) Accrued distributions to non-controlling interest — 2,633 Balance at September 30, 2020 117 $ 119,633 Series B Participating Preferred Stock On August 17, 2017, the Company and the Operating Partnership entered into an underwriting agreement with Raymond James & Associates, Inc. and Jefferies LLC, as representatives of the underwriters, pursuant to which the Company sold 6,037,500 shares of its newly designated Series B Participating Preferred Stock, at a public offering price of $25.00 per share, which is the Initial Liquidation Preference (as defined below) of the Series B Participating Preferred Stock. Shares of Series B Participating Preferred Stock, which represent equity interests in the Company, generally have no voting rights and rank senior to the Company’s common stock with respect to dividend rights and rights upon liquidation. Each preferred share of Series B Participating Preferred Stock is entitled to receive cumulative preferential cash dividends at a rate of 6.00% per annum of the $25 liquidation preference, which is payable quarterly in arrears on the last day of each March, June, September and December (the “Initial Liquidation Preference”). Upon liquidation, before any payment or distribution of the assets of the Company is made to or set apart for the holders of equity securities ranking junior to the Series B Participating Preferred Stock, the holders of the Series B Participating Preferred Stock will be entitled to receive the sum of: (i) the Initial Liquidation Preference, (ii) an amount equal to 50% of the cumulative change in the estimated value of farmland in the states in which the Company owned farmland as of June 30, 2017 (measured by reference to a publicly available report released annually by the National Agricultural Statistics Board, the Agricultural Statistics Board and the U.S. Department of Agriculture) (the “FVA Adjustment”), and (iii) all accrued and unpaid dividends, subject to a 9.0% cap on total return (the “Final Liquidation Preference”). After September 30, 2021, but prior to September 30, 2024, the Company, at its option, may redeem all, but not less than all, of the then-outstanding shares of Series B Participating Preferred Stock at any time, for cash or for shares of common stock at a price equal to the Final Liquidation Preference plus an amount equal to the product of: (i) the Final Liquidation Preference, and (ii) the average change in land values in states in which the Company owned farmland as of June 30, 2017 over the immediately preceding four years and multiplied by a constant percentage of 50% and prorated for the number of days between the most recent release of the publicly available land value report used to calculate the FVA Adjustment (if such amount is positive) (the “Premium Amount”) . At any time on or after September 30, 2024, the Company, at its option, may redeem or convert to shares of common stock all, but not less than all, of the then-outstanding shares of Series B Participating Preferred Stock at the redemption price per share equal to: (i) the Initial Liquidation Preference, plus (ii) the FVA Amount, plus (iii) any accrued and unpaid dividends. The total rate of return on shares of the Series B Participating Preferred Stock is subject to a cap such that the total rate of return, when considering the Initial Liquidation Preference, the FVA Adjustment and the Premium Amount plus accrued and unpaid dividends, will not exceed 9.0%. Based on the data released by the USDA in August 2020 in their Land Values 2020 Summary, the FVA Amount as of 2020 was determined to be $0.80 per share of Series B Participating Preferred Stock. In connection with the issuance of the Series B Participating Preferred Stock, the sole general partner of the Operating Partnership entered into Amendment No. 2 to the Partnership Agreement in order to provide for the issuance, and the designation of the terms and conditions, of newly classified 6.00% Series B participating preferred units of limited partnership interest in the Operating Partnership (“Series B participating preferred units”), the economic terms of which are identical to those of the Series B Participating Preferred Stock. The Company contributed the net proceeds from the offering of the Series B Participating Preferred Stock to the Operating Partnership in exchange for 6,037,500 Series B participating preferred units. The shares of Series B Participating Preferred Stock are accounted for as mezzanine equity on the consolidated balance sheet as the Series B Participating Preferred Stock is convertible and redeemable for common shares at a determinable price and date at the option of the Company and upon the occurrence of an event not solely within the control of the Company. The balance recorded in mezzanine equity relating to the Series B Participating Preferred Stock as of September 30, 2020 and December 31, 2019 was $139.8 million and $142.9 million, respectively. Distributions The Company’s board of directors declared and paid the following distributions to common stockholders and holders of Common units for the nine months ended September, 2020 and the year ended December 31, 2019: Fiscal Year Declaration Date Record Date Payment Date Distributions 2020 August 4, 2020 October 1, 2020 October 15, 2020 $ 0.0500 May 6, 2020 July 1, 2020 July 15, 2020 $ 0.0500 March 11, 2020 April 1, 2020 April 15, 2020 $ 0.0500 $ 0.1500 2019 November 11, 2019 January 1, 2020 January 15, 2020 $ 0.0500 August 6, 2019 October 1, 2019 October 15, 2019 $ 0.0500 May 8, 2019 July 1, 2019 July 15, 2019 $ 0.0500 February 7, 2019 April 1, 2019 April 15, 2019 $ 0.0500 $ 0.2000 Additionally, in connection with the 3.00% cumulative preferential distribution on the Series A preferred units, the Company has accrued $2.6 million in distributions payable as of September 30, 2020. The distributions are payable annually in arrears on January 15 of each year. In connection with the Series B Participating Preferred Stock, the Company paid $2.2 million in distributions on September 25, 2020 to stockholders of record as of September 16, 2020. As long as shares of Series B Participating Preferred Stock are outstanding, distributions on such shares are payable on the last day of March, June, September and December of each year to stockholders of record on the 15th day of such months. 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 million in shares of the Company’s common stock. In November 2017, the board of directors approved repurchases of the Company’s Series B Participating Preferred Stock from time to time under the share repurchase program. Subsequently on August 1, 2018, the board of directors increased the authority under the share repurchase program by an aggregate of $30 million. On November 7, 2019, the board of directors increased the authority under the program by an additional $50 million. Repurchases under this program may be made from time to time, in amounts and prices as the Company deems appropriate. Repurchases may be made in open market or privately negotiated transactions in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors. This share repurchase program does not obligate the Company to acquire any particular amount of common stock or Series B Preferred Stock and it may be modified or suspended at any time at the Company’s discretion. The Company funds repurchases under the program using cash on its balance sheet. During the nine months ended September 30, 2020, the Company repurchased 1,004,167 shares of its common stock for $6.6 million at an average price of $6.54 per share and 140,189 shares of its Series B preferred stock for $3.1 million at an average price of $22.08 per share. As of September 30, 2020, the Company had approximately $41.4 million in shares that it can repurchase under the stock repurchase plan. Equity Incentive Plan On May 3, 2017, the Company’s stockholders approved the Second Amended and Restated 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 1.3 million shares. As of September 30, 2020, there were 0.2 million of 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. From time to time, the Company may award restricted shares of its common stock under the Plan, as compensation to officers, employees, non-employee directors and non-employee consultants. The shares of restricted stock vest over a period of time as determined by the compensation committee of the Company’s board of directors at the date of grant. The Company recognizes compensation expense for awards issued to officers, employees and non-employee directors for restricted shares of common stock on a straight-line basis over the vesting period based upon the fair market value of the shares on the date of issuance, adjusted for forfeitures. The Company recognizes compensation expense for awards issued to non-employee consultants in the same period and in the same manner as if the Company paid cash for the underlying services. A summary of the nonvested shares as of September 30, 2020 is as follows: Weighted Number of average grant (shares in thousands) shares date fair value Unvested at December 31, 2019 345 $ 7.42 Granted 139 6.23 Vested (167) 8.20 Forfeited — — Unvested at September 30, 2020 317 $ 6.46 For no Earnings (Loss) per Share The computation of basic and diluted loss per share is as follows: For the three months ended For the nine months ended September 30, September 30, (in thousands, except per share amounts) 2020 2019 2020 2019 Numerator: Net income (loss) attributable to Farmland Partners Inc. $ 527 $ (1,364) $ 1,083 $ 4,695 Less: Nonforfeitable distributions allocated to unvested restricted shares (16) (18) (48) (60) Less: Distributions on redeemable non-controlling interests in Operating Partnership, preferred (3,064) (3,117) (9,269) (9,368) Net loss attributable to common stockholders $ (2,553) $ (4,499) $ (8,234) $ (4,733) Denominator: Weighted-average number of common shares - basic 29,206 29,497 29,392 30,319 Conversion of preferred units (1) — — — — Unvested restricted shares (1) — — — — Redeemable non-controlling interest (1) — — — — Weighted-average number of common shares - diluted 29,206 29,497 29,392 30,319 Loss per share attributable to common stockholders - basic $ (0.09) $ (0.15) $ (0.28) $ (0.16) (1) Anti-dilutive for the three and nine months ended September 30, 2020 and 2019 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. The limited partners’ outstanding Common units (which may be redeemed for shares of common stock) have been excluded from the diluted earnings per share calculation as there would be no effect on the amounts since the limited partners’ share of income would also be added back to net income. Any anti-dilutive shares have been excluded from the diluted earnings per share calculation. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Accordingly, distributed and undistributed earnings attributable to unvested restricted shares (participating securities) have been excluded, as applicable, from net income or loss attributable to common stockholders utilized in the basic and diluted earnings per share calculations. Net income or loss figures are presented net of non-controlling interests in the earnings per share calculations. The weighted average number of Common units held by the non-controlling interest was 1.9 million and 1.9 million for the nine months ended September 30, 2020 and 2019, respectively. The outstanding Series A preferred units are non-participating securities and thus are included in the computation of diluted earnings per share on an as-if converted basis. Any anti-dilutive shares are excluded from the diluted earnings per share calculation. For the three and nine months ended September 30, 2020 and 2019, 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. Any anti-dilutive shares are excluded from the diluted earnings per share calculation. For the three and nine months ended September 30, 2020, these shares were not included in the diluted earnings per share calculation as they would be anti-dilutive. For the nine months ended September 30, 2020 and 2019, diluted weighted average common shares do not include the impact of 0.3 million and 0.4 million, respectively, unvested compensation-related shares as they would have been anti-dilutive. The following equity awards and units were outstanding as of September 30, 2020 and December 31, 2019, respectively. September 30, 2020 December 31, 2019 Shares 29,086 29,607 Common Units 1,904 1,904 Unvested Restricted Stock Awards 318 345 31,308 31,856 |
