| Stockholders' Equity and Non-controlling Interests | Note 9—Stockholders’ Equity and Non-controlling Interests Non-controlling Interest in Operating Partnership FPI consolidates the Operating Partnership. As of March 31, 2024 and December 31, 2023, FPI owned 97.5% and 97.6% of the outstanding interests, respectively, in the Operating Partnership, and the remaining 2.5% and 2.4% interests, respectively, were held in the form of Common units and comprised non-controlling interests in the Operating Partnership on the consolidated balance sheets. The non-controlling interests in the Operating Partnership consist of both the Common units and the Series A preferred units held by third parties. Common Units in Operating Partnership, OP Units On or after the 12-month anniversary 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 three months ended March 31, 2024, there were no redemptions of Common units. During the year ended December 31, 2023, the Company redeemed 34,000 Common units in exchange for cash of approximately $0.4 million. There were approximately 1.2 million outstanding Common units eligible to be tendered for redemption as of each of March 31, 2024 and December 31, 2023. 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 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 the 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 to the non-controlling interest in the Operating Partnership by less than $0.1 million during each of the three months ended March 31, 2024 and 2023 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. 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. As of March 31, 2024, 99,000 Series A preferred units were outstanding. The total liquidation value of such preferred units as of March 31, 2024 and December 31, 2023 was $99.7 million and $102.0 million, respectively, including accrued distributions. 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 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 our redeemable non-controlling interest in the Operating Partnership for the three months ended March 31, 2024 and 2023: Series A Preferred Units Redeemable Redeemable Preferred non-controlling (in thousands) units interests Balance at December 31, 2022 107 $ 110,210 Distribution paid to non-controlling interest — (3,210) Accrued distributions to non-controlling interest — 803 Redemption of Series A preferred units — — Balance at March 31, 2023 107 $ 107,803 Balance at December 31, 2023 99 $ 101,970 Distribution paid to non-controlling interest — (2,970) Accrued distributions to non-controlling interest — 743 Redemption of Series A preferred units — — Balance at March 31, 2024 99 $ 99,743 Distributions The Board of Directors declared and paid the following distributions to common stockholders and holders of Common units for the three months ended March 31, 2024 and 2023: Fiscal Year Declaration Date Record Date Payment Date Distributions per Common Share/OP unit 2024 January 2, 2024 January 2, 2024 January 16, 2024 $ 0.0600 2023 January 2, 2023 January 2, 2023 January 17, 2023 $ 0.0600 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. In connection with the 3.00% cumulative preferential distribution on the Series A preferred units, the Company had accrued $0.7 million in distributions payable as of March 31, 2024. The distributions are payable annually in arrears on January 15 of each year. Share Repurchase Program On March 15, 2017, the 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 increased the authority under the program by an additional $50.0 million. On May 3, 2023, the Board of Directors approved a $75.0 million increase. On November 1, 2023, the Board of Directors approved a $40.0 million increase in the total authorization available under the program, increasing the total availability under the share repurchase program to approximately $85.0 million as of such date. 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 three months ended March 31, 2024, the Company repurchased no shares of its common stock, and as of March 31, 2024, the Company had approximately $83.3 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 March 31, 2024, there were 0.2 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. From time to time, the Company may award time-based and performance-based 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 and/or upon the achievement of certain performance conditions, as applicable, as determined by the compensation committee of the Board of Directors at the date of grant. Performance-based restricted shares are based upon the Company’s total shareholder return measured on an absolute basis, and relative to an index, and are subject to continued employment. The number of shares of common stock that may be ultimately earned following the end of the cumulative performance period ranges from 0% to 150% of the target number of performance-based restricted shares granted. 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 non-vested restricted shares as of March 31, 2024 and 2023 is as follows: Time-based Performance-based 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, 2022 260 $ 10.88 Granted 223 10.90 Vested (124) 10.05 Forfeited — — Unvested at March 31, 2023 359 $ 11.19 Unvested at December 31, 2023 347 $ 11.15 — $ — Granted 165 11.29 39 7.36 Vested (152) 11.23 — — Forfeited — — — — Unvested at March 31, 2024 360 $ 11.18 39 $ 7.36 The grant-date fair values of performance-based restricted shares were based on specified absolute and relative total stockholder return goals measured over a three-year performance period. The Company used Monte Carlo simulations, which use a probabilistic approach for estimating the fair values of the awards. Expected volatilities were derived from the volatility of the historical prices of the Company and the comparative index. The risk-free interest rate was determined using the yield available for zero-coupon U.S. government securities with remaining terms corresponding to the service periods of the performance-based restricted shares. A dividend yield was based on historical dividend yields for the Company and the comparative index. The Company recognized stock-based compensation and incentive expense related to restricted stock awards of $0.5 million and $0.5 million, for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, there were $4.0 million and $2.3 million, respectively, of total unrecognized compensation costs related to nonvested stock awards, which are expected to be recognized over a weighted-average period of 2.4 years. At-the-Market Offering Program (the “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 “ATM Program”). The ATM Program expired on April 9, 2024 in connection with the expiration of the Company’s shelf registration statement as described elsewhere in this Quarterly Report on Form 10-Q. Deferred Offering Costs Deferred offering costs include incremental direct costs incurred by the Company in connection with proposed or actual offerings of securities. At the completion of a securities offering, the deferred offering costs are charged ratably as a reduction of the gross proceeds of equity as stock is issued. If an offering is abandoned, the previously deferred offering costs will be charged to operations in the period in which the offering is abandoned. The Company incurred $0.0 million and less than $0.1 million in offering costs during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the Company had $0.0 million in deferred offering costs, net of amortization, related to regulatory, legal, accounting and professional service costs associated with proposed or completed offerings of securities. Earnings (Loss) per Share The computation of basic and diluted earnings (loss) per share is shown below. Diluted earnings (loss) per share includes the impact of unvested restricted shares and Series A preferred units, if dilutive. For the three months ended March 31, (in thousands, except per share amounts) 2024 2023 Numerator for net income per share - basic: Net income available to common stockholders of Farmland Partners Inc. $ 606 $ 857 Numerator for net income per share - diluted: Net income available to common stockholders of Farmland Partners Inc. $ 606 $ 857 Dividend equivalent rights allocated to performance-based unvested restricted shares — — Nonforfeitable distributions allocated to time-based unvested restricted shares — — Distributions on Series A preferred units — — Numerator for net income per share - diluted: $ 606 $ 857 Denominator: Weighted-average number of common shares - basic 47,704 54,007 Unvested time-based restricted shares — — Unvested performance-based restricted shares — — Redeemable non-controlling interest — — Weighted-average number of common shares - diluted (1) 47,704 54,007 Income per share attributable to common stockholders - basic $ 0.01 $ 0.02 Income per share attributable to common stockholders - diluted $ 0.01 $ 0.02 (1) 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 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 1.2 million during each of the three months ended March 31, 2024 and 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. Denominator 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 months ended March 31, 2024, these shares were not included in the diluted earnings per share calculation as they would have been anti-dilutive. For the three months ended March 31, 2024 and 2023, diluted weighted average common shares do not include the impact of unvested compensation-related shares as they would have been anti-dilutive. Outstanding Equity Awards and Units The following equity awards and units were outstanding as of March 31, 2024 and December 31, 2023, respectively. March 31, 2024 December 31, 2023 Shares 47,795 47,656 Common Units 1,203 1,203 Unvested Restricted Stock Awards 360 347 49,358 49,206 |
