Annual report pursuant to Section 13 and 15(d)

Borrowings

v3.10.0.1
Borrowings
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Borrowings
BORROWINGS
Our borrowings as of December 31, 2018 and 2017 are summarized below (dollars in thousands):
 
 
Carrying Value as of
 
As of December 31, 2018
 
 
December 31,
2018
 
December 31,
2017
 
Stated Interest
Rates(1)
(Range; Wtd Avg)
 
Maturity Dates
(Range; Wtd Avg)
Notes and bonds payable:
 
 
 
 
 
 
 
 
Fixed-rate notes payable
 
$
247,249

 
$
208,469

 
3.16%–5.70%; 3.96%
 
6/1/2020–12/1/2043; December 2031
Fixed-rate bonds payable
 
90,877

 
84,519

 
2.80%–4.57%; 3.55%
 
12/11/2019–9/13/2028; November 2022
Total notes and bonds payable
 
338,126

 
292,988

 
 
 
 
Debt issuance costs – notes and bonds payable
 
(2,338
)
 
(1,986
)
 
N/A
 
N/A
Notes and bonds payable, net
 
$
335,788

 
$
291,002

 
 
 
 
 
 
 
 
 
 
 
 
 
Variable-rate revolving lines of credit
 
$
100

 
$
10,000

 
4.66%
 
4/5/2024
 
 
 
 
 
 
 
 
 
Total borrowings, net
 
$
335,888

 
$
301,002

 
 
 
 
 
(1) 
Where applicable, stated interest rates are before interest patronage (as described below).
As of December 31, 2018, the above borrowings were collateralized by 85 farms with an aggregate net book value of approximately $541.7 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 3.70% for the year ended December 31, 2018, as compared to 3.31% for the year ended December 31, 2017. In addition, 2017 interest patronage from our Farm Credit Notes Payable (as defined below), which we received and recorded during the nine months ended September 30, 2018, resulted in an 18.0% reduction (approximately 71 basis points) to the stated interest rates on such borrowings. We are unable to estimate the amount of patronage to be received, if any, related to interest accrued during 2018 on our Farm Credit Notes Payable.
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 December 31, 2018 (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
 
$
126,658

 
3.30%, fixed through 1/4/2027
(2) 
$
63,530

(3) 
MetLife Lines of Credit
 
75,000

 
4/5/2024
 
100

 
3-month LIBOR + 2.25%
(4) 
74,900

(3) 
Total principal outstanding
 
 
 
$
126,758

 
 
 
 
  
 
(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 obligations to disburse the additional funds under the MetLife Term Notes.
(2) 
Represents the blended interest rate as of December 31, 2018. 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 notes).
(3) 
Based on the properties that were pledged as collateral under the MetLife Facility, as of December 31, 2018, the maximum additional amount we could draw under the facility was approximately $18.1 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 December 31, 2018, the interest rate on the MetLife Lines of Credit was 4.66%.
Under the MetLife Facility, we are generally allowed to borrow up to 60% of the aggregate of the lower of cost or the appraised value of the pool of agricultural real estate pledged as collateral. Our continuing ability to borrow under the MetLife Facility is subject to our ongoing compliance with various affirmative and negative covenants (as further described below), including with respect to liens, indebtedness, mergers, and asset sales.
Individual MetLife Notes
The following table summarizes, in the aggregate, the terms of two additional loan agreements entered into with MetLife (collectively, the “Individual MetLife Notes”), as of December 31, 2018 (dollars in thousands):
Date of Issuance
 
Amount
 
Maturity Date
 
Principal Amortization
 
Interest Rate Terms
5/31/2017
 
$14,765
 
2/14/2022 & 2/14/2025
 
28.6 years
 
3.55% & 3.85%, fixed throughout their respective terms

The Individual MetLife Notes have a loan-to-value ratio of 60% of the underlying agricultural real estate. Our agreement with MetLife for the Individual MetLife Notes contains various affirmative and negative covenants (as further described below), including with respect to liens, indebtedness, mergers, and asset sales.
Both of our agreements with MetLife (including the MetLife Facility and the Individual MetLife Notes) require that we satisfy financial covenants on a consolidated basis at the end of each calendar quarter, including staying below a maximum debt-to-asset-value ratio and maintaining a minimum net worth value and rental-revenue-to-debt ratio. Amounts owed to MetLife under each of the agreements are guaranteed by us and each subsidiary of ours that owns a property pledged as collateral pursuant to the respective loan documents. As of December 31, 2018, we were in compliance with all covenants under each of the agreements with MetLife.
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 with certain Farm Credit associations, including Farm Credit of Central Florida, FLCA (“Farm Credit CFL”), Farm Credit West, FLCA (“Farm Credit West”), Cape Fear Farm Credit, ACA (“CF Farm Credit”), Farm Credit of Florida, ACA (“Farm Credit FL”), Northwest Farm Credit Services, FLCA (“NW Farm Credit”), Southwest Georgia Farm Credit, ACA (“SWGA Farm Credit”), and Plains Land Bank, FLCA (“Plains Land Bank,” and, collectively, with the other Farm Credit associations, “Farm Credit”). During the year ended December 31, 2018, we entered into the following loan agreements with Farm Credit (dollars in thousands):
Issuer
 
Date of
Issuance
 
Amount(1)
 
Maturity
Date
 
Principal
Amortization
 
Stated Interest Rate Terms(2)
Farm Credit West
 
4/11/2018
 
$
1,473

 
5/1/2038
 
20.5 years
 
4.99%, fixed through April 30, 2023 (variable thereafter)
Farm Credit FL
 
7/12/2018
 
16,850

 
8/1/2043
 
25.0 years
 
5.38%, fixed through July 31, 2025 (variable thereafter)
Farm Credit FL
 
7/17/2018
 
5,560

 
8/1/2043
 
25.0 years
 
5.38%, fixed through July 31, 2025 (variable thereafter)
SWGA Farm Credit
 
9/6/2018
 
1,560

 
10/1/2043
 
25.0 years
 
5.06%, fixed through October 1, 2023 (variable thereafter)
Farm Credit West
 
11/1/2018
 
13,800

 
11/1/2043
 
25.0 years
 
5.61%, fixed through October 31, 2028 (variable thereafter)
Plains Land Bank
 
11/20/2018
 
5,280

 
12/1/2043
 
25.0 years
 
5.40%, fixed through November 30, 2023 (variable thereafter)
(1) 
Proceeds from these notes were used to fund new acquisitions, to repay existing indebtedness, and for other general corporate purposes.
(2) 
Stated interest rate is before interest patronage, as discussed below.
The following table summarizes, in the aggregate, the pertinent terms of the loans outstanding from Farm Credit (collectively, the “Farm Credit Notes Payable”) as of December 31, 2018 (dollars in thousands, except for footnotes):
Issuer
 
# of Loans
Outstanding
 
Dates of Issuance
 
Maturity Dates
 
Principal
Outstanding
 
Stated Interest
Rate(1)
 
Farm Credit CFL
 
7
 
9/19/2014 – 7/13/2017
 
6/1/2020 – 10/1/2040
 
$
23,884

 
4.29%
(2) 
Farm Credit West
 
6
 
4/4/2016 – 11/1/2018
 
5/1/2037 – 11/1/2043
 
38,741

 
4.62%
(3) 
CF Farm Credit
 
1
 
6/14/2017
 
7/1/2022
 
1,270

 
4.41%
(4) 
Farm Credit FL
 
3
 
8/9/2017 – 7/17/2018
 
3/1/2037 – 8/1/2043
 
28,042

 
5.24%
(5) 
NW Farm Credit
 
1
 
9/8/2017
 
9/1/2024
 
5,236

 
4.41%
(6) 
SWGA Farm Credit
 
1
 
9/6/2018
 
10/1/2043
 
1,560

 
5.06%
(7) 
Plains Land Bank
 
1
 
11/20/2018
 
12/1/2043
 
5,280

 
5.40%
(7) 
Total
 
20
 
 
 
 
 
$
104,013

 
 
 
 
(1) 
Where applicable, represents the weighted-average, blended rate (before interest patronage, as discussed below) on the respective borrowings as of December 31, 2018.
(2) 
During the year ended December 31, 2018, we received interest patronage of approximately $142,000 related to interest accrued on loans from Farm Credit CFL during the year ended December 31, 2017, which resulted in a 15.1% reduction (approximately 58 basis points) to the stated interest rates on such borrowings. During the year ended December 31, 2017, we received interest patronage related to loans from Farm Credit CFL of approximately $124,000.
(3) 
During the year ended December 31, 2018, we received interest patronage of approximately $126,000 related to interest accrued on loans from Farm Credit West during the year ended December 31, 2017, which resulted in a 19.7% reduction (approximately 75 basis points) to the stated interest rates on such borrowings. During the year ended December 31, 2017, we received interest patronage related to loans from Farm Credit West of approximately $59,000.
(4) 
During the year ended December 31, 2018, we received interest patronage of approximately $11,000 related to interest accrued on loans from CF Farm Credit during the year ended December 31, 2017, which resulted in a 36.6% reduction (approximately 161 basis points) to the stated interest rates on such borrowings. In addition, during the year ended December 31, 2018, we received interest patronage of approximately $14,000 from CF Farm Credit, which was an early payment of a portion of the estimated patronage to be paid out during 2019 related to interest accrued on loans from CF Farm Credit during the year ended December 31, 2018. We did not receive any interest patronage related to loans from CF Farm Credit prior to 2018.
(5) 
During the year ended December 31, 2018, we received interest patronage of approximately $27,000 related to interest accrued on loans from Farm Credit FL during the year ended December 31, 2017, which resulted in a 24.6% reduction (approximately 115 basis points) to the stated interest rates on such borrowings. We did not receive any interest patronage related to loans from Farm Credit FL prior to 2018.
(6) 
In February 2018, we received interest patronage of approximately $17,000 related to interest accrued on loans from NW Farm Credit during the year ended December 31, 2017, which resulted in a 22.7% reduction (approximately 100 basis points) to the stated interest rates on such borrowings. We did not receive any patronage related to loans from NW Farm Credit prior to 2018.
(7) 
To date, no interest patronage has been received or recorded for these loans, as they were not outstanding during 2017.
Interest patronage, or refunded interest, on our borrowings from the various Farm Credit associations is generally recorded upon receipt and is included in Other income on our Consolidated Statements of Operations. Receipt of interest patronage typically occurs in the first half of the calendar year following the year in which the respective interest payments are made.
Loans from Farm Credit will generally have a loan-to-value ratio of 60% of the underlying agricultural real estate. Our agreements with Farm Credit contain various affirmative and negative covenants, including with respect to liens, indebtedness, mergers, and asset sales. The Farm Credit Notes Payable also require us to satisfy certain financial covenants at the end of each calendar year, including maintaining a minimum current ratio and net worth value and staying below a maximum leverage ratio. In addition, certain amounts owed under the Farm Credit Notes Payable, limited to 12 months of principal and interest due under certain of the loans, are guaranteed by us pursuant to the loan documents. As of December 31, 2018, we were in compliance with all covenants applicable to the Farm Credit Notes Payable.
Farmer Mac Facility
On December 5, 2014, we, through certain subsidiaries of our Operating Partnership, entered into a bond purchase agreement (the “Bond Purchase Agreement”) with Federal Agricultural Mortgage Corporation (“Farmer Mac”) and Farmer Mac Mortgage Securities Corporation (the “Bond Purchaser”), for a secured note purchase facility. As subsequently amended, the Bond Purchase Agreement provided for bond issuances up to an aggregate amount of $125.0 million (the “Farmer Mac Facility”) through December 11, 2018.
During the year ended December 31, 2018, we issued four bonds under the Farmer Mac Facility, the pertinent terms of which are summarized in the table below (dollars in thousands):
Dates of Issuance
 
Gross
Proceeds
 
Maturity Dates
 
Principal Amortization
 
Interest Rate Terms
3/13/2018
 
$
1,260

(1) 
3/13/2028
 
None
 
4.47%, fixed throughout its term
7/30/2018
 
10,356

(2) 
7/24/2025
 
None
 
4.45%, fixed throughout its term
8/17/2018
 
7,050

(2) 
8/17/2021
 
None
 
4.06%, fixed throughout its term
9/13/2018
 
4,110

 
9/13/2028
 
96.9 years
 
4.57%, fixed throughout its term
(1) 
Except as noted, proceeds from these bonds were used to repay existing indebtedness and for the acquisitions of new farms.
(2) 
Proceeds from the issuance of these bonds were used to repay three bonds totaling approximately $16.0 million that matured during the year ended December 31, 2018. The additional proceeds received of approximately $1.4 million were a result of appreciation in the value of the underlying collateral since the time of the original bond issuances and were used for general corporate purposes.
The following table summarizes, in the aggregate, the terms of the 16 bonds outstanding under the Farmer Mac Facility as of December 31, 2018 (dollars in thousands):
Dates of Issuance
 
Initial
Commitment
 
Maturity Dates
 
Principal
Outstanding
 
Stated
Interest Rate(1)
 
Undrawn
Commitment
 
12/11/2014–9/13/2018
 
$
125,000

(2) 
12/11/2019 – 9/13/2028
 
$
90,877

 
3.55%
 
$
16,342

(2) 
 
(1) 
Represents the weighted-average interest rate as of December 31, 2018.
(2) 
As of December 31, 2018, the period during which we were able to issue bonds under the facility had expired, and Farmer Mac had no obligation to purchase additional bonds under the facility.
Pursuant to the Bond Purchase Agreement, we may, from time to time, issue one or more bonds to the Bond Purchaser that will be secured by a security interest in one or more loans originated by us (pursuant to the Pledge and Security Agreement described below), which, in turn, will be collateralized by first liens on agricultural real estate owned by subsidiaries of ours. The interest rate for each bond issuance will be based on prevailing market rates at the time of such issuance, and prepayment of each bond issuance will not be permitted unless otherwise agreed upon by all parties to the Bond Purchase Agreement. The bonds issued will generally have a maximum aggregate, effective loan-to-value ratio of 60% of the underlying agricultural real estate, after giving effect to the overcollateralization obligations described below.
In connection with the Bond Purchase Agreement, on December 5, 2014, we also entered into a pledge and security agreement (the “Pledge and Security Agreement”) in favor of the Bond Purchaser and Farmer Mac, which provides for us to pledge, as collateral for bonds issued pursuant to the Farmer Mac Facility, all of our respective right, title, and interest in mortgage loans made by us, which, among other things, must have at all times a value of not less than 110% of the aggregate principal amount of the outstanding bonds held by the Bond Purchaser.
The Bond Purchase Agreement and the Pledge and Security Agreement include customary events of default, the occurrence of any of which, after any applicable cure period, would permit the Bond Purchaser and Farmer Mac to, among other things, accelerate payment of all amounts outstanding under the Farmer Mac Facility and to exercise its remedies with respect to the pledged collateral, including foreclosure and sale of the agricultural real estate underlying the pledged mortgage loans.
Our ability to borrow under the Farmer Mac Facility is subject to our ongoing compliance with a number of customary affirmative and negative covenants, as well as financial covenants, including staying below a maximum leverage ratio and maintaining a minimum fixed charge coverage ratio and a tangible net worth. As of December 31, 2018, we were in compliance with all covenants under the Farmer Mac Facility.
Rabo Note Payable
On October 13, 2017, we closed on a term loan from Rabo AgriFinance, LLC (“Rabo”). The following table summarizes the pertinent terms of our loan agreement with Rabo as of December 31, 2018 (dollars in thousands):
Date of Issuance
 
Maturity Date
 
Principal Outstanding
 
Principal Amortization
 
Stated Interest Rate
 
Interest Rate Terms
10/13/2017
 
10/1/2022
 
$518
 
25.0 years
 
4.59%
 
Fixed throughout its term

Diversified Financial Note Payable
On December 3, 2018, we closed on a term loan from Diversified Financial for approximately $1.3 million to finance approximately $1.4 million of irrigation improvements we funded on one of our properties in Colorado (See Note 3, “Real Estate and Lease Intangibles—Significant Existing Real Estate Activity—Project Completions”). The following table summarizes the pertinent terms of our loan agreement with Diversified Financial as of December 31, 2018 (dollars in thousands):
Date of Issuance
 
Maturity Date
 
Principal Outstanding
 
Principal Amortization
 
Stated Interest Rate
 
Interest Rate Terms
12/3/2018(1)
 
11/27/2025
 
$1,295
 
7.0 years
 
5.70%
 
Fixed throughout its term
(1) 
This loan was issued in two separate disbursements: approximately $688,000 was disbursed on December 3, 2018, and approximately $607,000 was disbursed on December 20, 2018.
Debt Service – Aggregate Maturities
Scheduled principal payments of our aggregate notes and bonds payable as of December 31, 2018, for the succeeding years are as follows (dollars in thousands):
For the Fiscal Years Ending December 31,
 
Scheduled
Principal Payments
2019
 
$
12,374

2020
 
28,151

2021
 
16,174

2022
 
38,612

2023
 
32,385

Thereafter
 
210,429

 
 
$
338,126


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 December 31, 2018, the aggregate fair value of our long-term, fixed-rate notes and bonds payable was approximately $328.5 million, as compared to an aggregate carrying value (excluding unamortized related debt issuance costs) of approximately $338.1 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 determined by 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 December 31, 2018, is deemed to approximate their aggregate carrying value of $100,000.