Annual report pursuant to Section 13 and 15(d)

Borrowings

v3.19.3.a.u2
Borrowings
 12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Borrowings
BORROWINGS
We generally borrow at a rate of 60% of the value of the underlying agricultural real estate, and, except as noted below, the amounts borrowed are not generally guaranteed by the Company. Our borrowings as of December 31, 2019 and 2018 are summarized below (dollars in thousands):
 
 
Carrying Value as of
 
As of December 31, 2019
 
 
December 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
 
$
394,569

 
$
247,249

 
3.16%–5.70%; 4.05%
 
6/1/2020–8/1/2044; March 2032
Fixed-rate bonds payable
 
90,380

 
90,877

 
2.61%–4.57%; 3.45%
 
1/10/2020–9/13/2028; January 2023
Total notes and bonds payable
 
484,949

 
338,126

 
 
 
 
Debt issuance costs – notes and bonds payable
 
(3,120
)
 
(2,338
)
 
N/A
 
N/A
Notes and bonds payable, net
 
$
481,829

 
$
335,788

 
 
 
 
 
 
 
 
 
 
 
 
 
Variable-rate revolving lines of credit
 
$
100

 
$
100

 
4.03%
 
4/5/2024
 
 
 
 
 
 
 
 
 
Total borrowings, net
 
$
481,929

 
$
335,888

 
 
 
 
 
(1) 
Where applicable, stated interest rates are before interest patronage (as described below).
As of December 31, 2019, the above borrowings were collateralized by certain farms with an aggregate net book value of approximately $794.8 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 3.95% for the year ended December 31, 2019, as compared to 3.70% for the year ended December 31, 2018. In addition, 2018 interest patronage from our Farm Credit Notes Payable (as defined below), which we received and recorded during the three months ended March 31, 2019, resulted in an 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.
Our loan agreements generally contain various affirmative and negative covenants, including with respect to liens, indebtedness, mergers, and asset sales, and customary events of default. These agreements may also require that we satisfy certain financial covenants at the end of each calendar quarter or year. Some of these financial covenants include, but are not limited to, staying below a maximum leverage ratio and maintaining a minimum net worth value, rental-revenue-to-debt ratio, current ratio, and fixed charge coverage ratio. As of December 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, as of December 31, 2019, the MetLife Facility consisted 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”).
During the year ended December 31, 2019, we drew the following amounts on the MetLife Term Notes (dollars in thousands):
Date of
Issuance
 
Amount
 
Maturity
Date
 
Principal
Amortization
 
Interest Rate Terms(1)
8/16/2019
 
$
16,500

 
1/5/2029
 
28.6 years
 
3.70%, fixed through January 4, 2027 (variable thereafter)
11/1/2019
 
25,500

 
1/5/2029
 
28.6 years
 
3.81%, fixed through January 4, 2027 (variable thereafter)
(1) 
The interest rates on these new disbursements were blended with the existing interest rate on the previously-outstanding balance under the MetLife Term Notes.
The following table summarizes the pertinent terms of the MetLife Facility as of December 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

 
1/5/2029
 
$
163,908

 
3.42%, fixed through 1/4/2027
(1) 
$
21,530

(2) 
MetLife Lines of Credit
 
75,000

 
4/5/2024
 
100

 
3-month LIBOR + 2.00%
(4) 
74,900

(3) 
Total principal outstanding
 
 
 
$
164,008

 
 
 
 
  
 
(1) 
Represents the blended interest rate as of December 31, 2019. Interest rates for subsequent disbursements, if any, 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 were also subject to an unused fee ranging from 0.10% to 0.20% on undrawn amounts (based on the balance drawn under the notes).
(2) 
As the aggregate commitment under this facility was not fully utilized by December 31, 2019, MetLife had the option to be relieved of its obligations to disburse the additional funds under the MetLife Term Notes.
(3) 
Based on the properties that were pledged as collateral under the MetLife Facility, as of December 31, 2019, the maximum additional amount we could draw under the facility was approximately $22.9 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).
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. Amounts owed to MetLife under the agreement are guaranteed by us and each subsidiary of ours that owns a property pledged as collateral pursuant to the loan documents.
Farm Credit Notes Payable
From time to time since September 2014 through December 31, 2019, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements (collectively, the “Farm Credit Notes Payable”) with 10 different Farm Credit associations (collectively, “Farm Credit”). During the year ended December 31, 2019, we entered into the following loan agreements 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)
GreenStone Farm Credit Services
 
7/11/2019
 
1,609

 
8/1/2044
 
25.0 years
 
5.00%, fixed through June 30, 2029 (variable thereafter)
GreenStone Farm Credit Services
 
7/11/2019
 
3,060

 
8/1/2044
 
25.0 years
 
5.00%, fixed through June 30, 2029 (variable thereafter)
Farm Credit West, FLCA
 
7/11/2019
 
5,400

 
5/1/2044
 
24.5 years
 
4.24%, fixed through July 31, 2026 (variable thereafter)
Farm Credit of Central Florida, ACA
 
7/22/2019
 
31,850

 
7/1/2027
 
25.2 years
 
5.05%, fixed throughout term
Farm Credit of Central Florida, ACA
 
7/22/2019
 
5,850

 
7/1/2027
 
None
(interest only)
 
5.05%, fixed throughout term
Farm Credit West, FLCA
 
8/28/2019
 
12,792

 
5/1/2044
 
24.5 years
 
3.84%, fixed through August 31, 2026 (variable thereafter)(2)
American AgCredit, ACA
 
8/29/2019
 
19,254

 
10/1/2039
 
20.0 years
 
3.84%, fixed through August 31, 2029 (variable thereafter)
 
(1) 
Stated rate is before interest patronage, as described below.
(2) 
Loan originally issued as a variable-rate loan and was converted to a fixed-rate loan effective September 1, 2019.
Interest patronage, or refunded interest, on our borrowings from Farm Credit is generally recorded upon receipt and is included within Other income on our Consolidated Statements of Operations and Comprehensive Income. 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.
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 respective loan documents.
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, after which date the Bond Purchaser had the option to continue buying new bonds issued under the Farmer Mac Facility.
During the year ended December 31, 2019, we amended and restated two bonds totaling approximately $13.9 million that were previously issued under the Farmer Mac Facility and were originally scheduled to mature on December 11, 2019, and January 6, 2020, respectively. The pertinent terms of the two amended and restated bonds are summarized in the table below (dollars in thousands):
Date of Issuance
 
Amount
 
Maturity Dates
 
Principal Amortization
 
Interest Rate Terms
12/11/2019
 
$
3,285

 
12/11/2020
 
None
(interest only)
 
2.61%; fixed throughout term
12/11/2019
 
10,568

 
12/11/2020
 
None
(interest only)
 
2.61%; fixed throughout term
No prepayment penalties were incurred in connection with these amendments, and all other material items of the amended and restated bonds remained unchanged.
Pursuant to the Bond Purchase Agreement, bonds issued by us to the Bond Purchaser will be secured by a security interest in loans originated by us (pursuant to a pledge and security agreement), which, in turn, will be collateralized by first liens on agricultural real estate owned by subsidiaries of ours. The bonds issued generally have a maximum aggregate, effective loan-to-value ratio of 60% of the underlying agricultural real estate, after giving effect to certain overcollateralization obligations.
Prudential Note Payable
During the year ended December 31, 2019, we entered into a loan agreement with PGMI Real Estate Finance, LLC (“Prudential”), the terms of which are summarized in the following table (dollars in thousands):
Date of Issuance
 
Amount
 
Maturity Date
 
Principal Amortization
 
Interest Rate Terms
6/17/2019
 
$
17,130

(1) 
7/1/2029
 
25.0 years
 
4.00%, fixed throughout term
(1) 
Approximately $498,000 of this funding was held back by the lender until certain irrigation improvements on the property were completed and is included within Other assets on the accompanying Consolidated Balance Sheet as of December 31, 2019. We currently expect these irrigation improvements to be completed during the three months ending March 31, 2020, at which point these funds will be released to us pursuant to an escrow holdback agreement.
Rabo Notes Payable
During the year ended December 31, 2019, we, through certain subsidiaries of our Operating Partnership, entered into the following loan agreements with Rabo AgriFinance, LLC (“Rabo”):
Date of Issuance
 
Amount
 
Maturity Date
 
Principal Amortization
 
Interest Rate Terms
7/10/2019
 
$
5,514

 
6/1/2029
 
25.0 years
 
1-Month LIBOR + 1.75% (1)
10/16/2019
 
5,739

 
10/1/2029
 
25.0 years
 
1-Month LIBOR + 1.75% (2)
10/16/2019
 
3,045

 
10/1/2029
 
25.0 years
 
1-Month LIBOR + 1.75% (2)

(1) 
In connection with securing this loan and to hedge our exposure to the above variable interest rate, we entered into an interest rate swap agreement in which we agreed to pay a fixed interest rate to our counterparty of 4.04% through June 1, 2029. See “—Interest Rate Swap Agreements” below for additional information on this swap agreement.
(2) 
In connection with securing these loans, we entered into two interest rate swap agreements in which we agreed to pay a fixed interest rate to our counterparty of 3.67% through October 1, 2029. See “—Interest Rate Swap Agreements” below for additional information on these swap agreements.
Diversified Financial Note Payable
During the year ended December 31, 2019, we entered into a loan agreement with Diversified Financial Services, LLC (“Diversified Financial”) to finance approximately $1.1 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 term loan from Diversified Financial (dollars in thousands):
Date of Issuance
 
Amount
 
Maturity Date
 
Principal Amortization
 
Interest Rate Terms
10/17/2019
 
$
976

 
10/17/2026
 
7.0 years
 
4.75%, fixed throughout term
Debt Service – Aggregate Maturities
Scheduled principal payments of our aggregate notes and bonds payable as of December 31, 2019, for the succeeding years are as follows (dollars in thousands):
For the Fiscal Years Ending December 31,
 
Scheduled
Principal Payments
2020
 
$
34,052

2021
 
18,834

2022
 
41,707

2023
 
35,974

2024
 
27,163

Thereafter
 
327,219

 
 
$
484,949


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, 2019, the aggregate fair value of our long-term, fixed-rate notes and bonds payable was approximately $484.7 million, as compared to an aggregate carrying value (excluding unamortized related debt issuance costs) of approximately $484.9 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, 2019, is deemed to approximate their aggregate carrying value of $100,000.
Interest Rate Swap Agreements
To hedge our exposure to variable interest rates, during the year ended December 31, 2019, we entered into various interest rate swap agreements in connection with certain of our mortgage financings. In accordance with these swap agreements, we will pay our counterparty a fixed rate interest rate on a quarterly basis and receive payments from our counterparty equivalent to the respective stipulated floating rates. We have adopted the fair value measurement provision for these financial instruments, and the aggregate fair value of our interest rate swap agreements is recorded in Other assets, net or Other liabilities, net, as appropriate, on our accompanying Consolidated Balance Sheets. Generally, in the absence of observable market data, we will estimate the fair values of our interest rate swaps using estimates of certain data points, including estimated remaining life, counterparty credit risk, current market yield, and interest rate spreads of similar securities as of the measurement date. As of December 31, 2019, our interest rate swaps were valued using Level 2 inputs.
In addition, we have designated our interest rate swaps as cash flow hedges, and we record changes in the fair values of the interest rate swap agreements to accumulated other comprehensive income on the Consolidated Balance Sheets. We record changes in fair value on a quarterly basis, using current market valuations at quarter end. We had not entered into any interest rate swap agreements prior to the year ended December 31, 2019. The following table summarizes our interest rate swaps as of December 31, 2019 (dollars in thousands):
Aggregate Notional Amount
 
Aggregate Fair Value Asset
 
Aggregate Fair Value Liability
$
14,298

 
$
—

 
$
390


The following table presents the amount of loss recognized in comprehensive income within our consolidated financial statements for the year ended December 31, 2019 (dollars in thousands):
 
 
Year Ended December 31, 2019
Derivative in cash flow hedging relationship:
 
 
Interest rate swaps
 
$
390

Total
 
$
390


The following table summarizes certain information regarding our derivative instruments as of December 31, 2019 (dollars in thousands):
Derivative Type
 
Balance Sheet Location
 
Derivative Liability Fair Value
Derivatives Designated as Hedging Instruments:
 
 
 
 
Interest rate swaps
 
Other liabilities, net
 
$
390

Total
 
 
 
$
390