Gladstone Land Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Borrowings

Borrowings

3 Months Ended

Mar. 31, 2019

Our borrowings as of March 31, 2019, and December 31, 2018, are summarized below (dollars in thousands):



	Carrying Value as of						As of March 31, 2019
	March 31, 2019			December 31, 2018			Stated Interest Rates⁽¹⁾ (Range; Wtd Avg)	Maturity Dates (Range; Wtd Avg)
Notes and bonds payable:
Fixed-rate notes payable	$	245,488		$	247,249		3.16%–5.70%; 3.97%	6/1/2020–12/1/2043; January 2032
Fixed-rate bonds payable	90,629			90,877			2.80%–4.57%; 3.55%	12/11/2019–9/13/2028; November 2022
Total notes and bonds payable	336,117			338,126
Debt issuance costs – notes and bonds payable	(2,282		)	(2,338		)	N/A	N/A
Notes and bonds payable, net	$	333,835		$	335,788

Variable-rate revolving lines of credit	$	100		$	100		5.05%	4/5/2024

Total borrowings, net	$	333,935		$	335,888


⁽¹⁾	Where applicable, stated interest rates are before interest patronage (as described below).

As of March 31, 2019, the above borrowings were collateralized by 86 farms with an aggregate net book value of approximately $544.0 million. The weighted-average interest rate charged on the above borrowings (excluding the impact of debt issuance costs and before any interest patronage, or refunded interest) was 3.93% and 3.52% for the three months ended March 31, 2019, and 2018, respectively. In addition, 2018 interest patronage from our Farm Credit Notes Payable (as defined below), which we recorded during the three months ended March 31, 2019, resulted in a 21.2% reduction (approximately 95 basis points) to the stated interest rates on such borrowings. We are unable to estimate the amount of interest patronage to be received, if any, related to interest accrued during 2019 on our Farm Credit Notes Payable.

As of March 31, 2019, we were in compliance with all covenants applicable to the above borrowings.

MetLife Borrowings

MetLife Facility

On May 9, 2014, we closed on a credit facility (the “MetLife Facility”) with Metropolitan Life Insurance Company (“MetLife”). As a result of subsequent amendments, the MetLife Facility currently consists of an aggregate of $200.0 million of term notes (the “MetLife Term Notes”) and $75.0 million of revolving equity lines of credit (the “MetLife Lines of Credit”). The following table summarizes the pertinent terms of the MetLife Facility as of March 31, 2019 (dollars in thousands, except for footnotes):

Issuance

Aggregate

Commitment

Maturity

Dates

Principal

Outstanding

Interest Rate Terms

Undrawn

Commitment

MetLife Term Notes

200,000

⁽¹⁾

1/5/2029

124,283

3.30%, fixed through 1/4/2027

⁽²⁾

64,374

⁽³⁾

MetLife Lines of Credit

75,000

4/5/2024

100

3-month LIBOR + 2.25%

⁽⁴⁾

74,900

⁽³⁾

Total principal outstanding

124,383


⁽¹⁾	If the aggregate commitment under this facility is not fully utilized by December 31, 2019, MetLife has the option to be relieved of its obligation to disburse the additional funds under the MetLife Term Notes.

⁽²⁾

Represents the blended interest rate as of March 31, 2019. Interest rates for subsequent disbursements will be based on then-prevailing market rates. The interest rate on all then-outstanding disbursements will be subject to adjustment on January 5, 2027. Through December 31, 2019, the MetLife Term Notes are also subject to an unused fee ranging from 0.10% to 0.20% on undrawn amounts (based on the balance drawn under the MetLife Term Notes).


⁽³⁾	Based on the properties that were pledged as collateral under the MetLife Facility, as of March 31, 2019, the maximum additional amount we could draw under the facility was approximately $20.4 million.


⁽⁴⁾	The interest rate on the MetLife Lines of Credit is subject to a minimum annualized rate of 2.50%, plus an unused fee ranging from 0.10% to 0.20% on undrawn amounts (based on the balance drawn under each line of credit). The interest rate spread will be subject to adjustment on October 5, 2019. As of March 31, 2019, the interest rate on the MetLife Lines of Credit was 5.05%.

Farm Credit Notes Payable

From time to time since September 2014, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements (collectively, the “Farm Credit Notes Payable”) with eight different Farm Credit associations (collectively, “Farm Credit”). During the three months ended March 31, 2019, we entered into the following loan agreement with Farm Credit (dollars in thousands):

Issuer

Date of

Issuance

Amount

Maturity

Date

Principal

Amortization

Interest Rate Terms⁽¹⁾

Premier Farm Credit, FLCA

2/7/2019

1,440

11/1/2043

25.0 years

5.45%, fixed through October 31, 2023 (variable thereafter)


⁽¹⁾	Stated rate is before interest patronage, as described below.

Interest patronage, or refunded interest, on our borrowings from the various Farm Credit associations is generally recorded upon receipt and is included within Other income on our Condensed Consolidated Statements of Operations. Receipt of interest patronage typically occurs in the first half of the calendar year following the calendar year in which the respective interest payments are made. During the three months ended March 31, 2019, we recorded interest patronage of approximately $700,000 related to interest accrued on loans from Farm Credit during the year ended December 31, 2018, which resulted in a 21.2% reduction (approximately 95 basis points) to the stated interest rates on such borrowings.

Debt Service – Aggregate Maturities

Scheduled principal payments of our aggregate notes and bonds payable as of March 31, 2019, for the succeeding years are as follows (dollars in thousands):



Period		Scheduled Principal Payments
For the remaining nine months ending December 31:	2019	$	8,953
For the fiscal years ending December 31:	2020	28,181
	2021	16,205
	2022	38,645
	2023	32,420
	2024	23,508
	Thereafter	188,205
		$	336,117

Fair Value

ASC 820 provides a definition of fair value that focuses on the exchange (exit) price of an asset or liability in the principal, or most advantageous, market and prioritizes the use of market-based inputs to the valuation. ASC 820-10, “Fair Value Measurements and Disclosures,” establishes a three-level hierarchy for fair value measurements 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 that are based upon quoted prices (unadjusted) for identical assets or liabilities in active markets;


•	Level 2 — inputs are based upon quoted prices for similar assets or liabilities in active or inactive markets or model-based valuation techniques, for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and


•	Level 3 — inputs are generally unobservable and significant to the fair value measurement. These unobservable inputs are generally supported by little or no market activity and are based upon management’s estimates of assumptions that market participants would use in pricing the asset or liability.

As of March 31, 2019, the aggregate fair value of our long-term, fixed-rate notes and bonds payable was approximately $332.1 million, as compared to an aggregate carrying value (excluding unamortized related debt issuance costs) of approximately $336.1 million. The fair value of our long-term, fixed-rate notes and bonds payable is valued using Level 3 inputs under the hierarchy established by ASC 820-10 and is calculated based on a discounted cash flow analysis, using discount rates based on management’s estimates of market interest rates on long-term debt with comparable terms. Further, due to the revolving nature of the MetLife Lines of Credit and the lack of changes in market credit spreads, their aggregate fair value as of March 31, 2019, is deemed to approximate their aggregate carrying value of $100,000.