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, 2017

Our borrowings as of March 31, 2017, and December 31, 2016 are summarized below (dollars in thousands):



	Carrying Value as of						As of March 31, 2017
	March 31, 2017			December 31, 2016			Stated Interest Rates⁽¹⁾ (Range; Wtd Avg)	Maturity Dates (Range; Wtd Avg)
Mortgage notes and bonds payable:
Fixed-rate mortgage notes payable	$	140,857		$	142,861		2.90%–3.94%; 3.26%	5/1/2020–11/1/2041; Jun 2030
Fixed-rate bonds payable	81,521			49,348			2.38%–3.63%; 3.10%	7/30/2018–1/12/2024; May 2021
Total mortgage notes and bonds payable	222,378			192,209
Deferred financing costs – mortgage notes and bonds payable	(1,658		)	(1,412		)	N/A	N/A
Mortgage notes and bonds payable, net	$	220,720		$	190,797

Variable-rate revolving lines of credit	$	20,050		$	16,550		3.26%	4/5/2024

Total borrowings, net	$	240,770		$	207,347


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

The weighted-average interest rate charged on the above borrowings, excluding the impact of deferred financing costs and before any interest patronage, or refunded interest, was 3.25% for the three months ended March 31, 2017, as compared to 3.29% for the prior-year period. In addition, 2016 interest patronage from our Farm Credit Notes Payable (including the Farm Credit CFL Notes Payable and the Farm Credit West Notes Payable, each as defined below), which was received during 2017, resulted in a 17.2% reduction (approximately 61 basis points) to the stated interest rates on such borrowings.

MetLife Facility

On May 9, 2014, we closed on a facility with Metropolitan Life Insurance Company (“MetLife”) that consisted of a $100.0 million long-term note payable (the “2015 MetLife Term Note”) and a $25.0 million revolving equity line of credit (the “2015 MetLife Line of Credit” and, together with the 2015 MetLife Term Note, the “MetLife Facility”). As amended on October 5, 2016, the overall size of the facility was increased from $125.0 million to $200.0 million (the "2016 Amendment"). Pursuant to the 2016 Amendment, the MetLife Facility now consists of the 2015 MetLife Term Note, the 2015 MetLife Line of Credit, a $50.0 million long-term note payable (the "2016 MetLife Term Note" and, together with the 2015 MetLife Term Note, the "MetLife Term Notes"), the terms of which are pari passu with those of the 2015 MetLife Term Note, and a $25.0 million revolving equity line of credit (the "2016 MetLife Line of Credit" and, together with the 2015 MetLife Line of Credit, the "MetLife Lines of Credit"), the terms of which are pari passu to those of the 2015 MetLife Line of Credit.

The following table summarizes the pertinent terms of the MetLife Facility as of March 31, 2017 (dollars in thousands):

Issuance

Aggregate

Commitment

Maturity

Dates

Principal

Outstanding

Interest Rate Terms

Undrawn

Commitment

MetLife Term Notes

150,000

⁽¹⁾

1/5/2029

105,608

3.16%, fixed for 10 years

⁽²⁾

40,980

⁽³⁾

MetLife Lines of Credit

50,000

4/5/2024

20,050

3-month LIBOR + 2.25%

⁽⁴⁾

29,950

⁽³⁾

Total principal outstanding

125,658


⁽¹⁾	If the aggregate commitment under this facility is not fully utilized by December 31, 2018, 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 March 31, 2017. 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, 2018, the MetLife Term Notes are also subject to an unused fee of 0.20% on undrawn amounts.


⁽³⁾	Based on the properties that were pledged as collateral under the MetLife Facility, as of March 31, 2017, the maximum additional amount we could draw under the facility was approximately $21.8 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 of 0.20% on undrawn amounts. The interest rate spread will be subject to adjustment on October 5, 2019. As of March 31, 2017, the interest rate on the MetLife Lines of Credit was 3.26%.

As of March 31, 2017, we were in compliance with all covenants under the MetLife Facility.

Farm Credit Notes Payable

Farm Credit CFL Notes Payable

From time to time since September 19, 2014, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements with Farm Credit of Central Florida, FLCA ("Farm Credit CFL"). We did not enter into any new loan agreements with Farm Credit CFL during the three months ended March 31, 2017.

The following table summarizes, in the aggregate, the pertinent terms of the eight loans outstanding from Farm Credit CFL (collectively, the "Farm Credit CFL Notes Payable") as of March 31, 2017 (dollars in thousands):



Dates of Issuance	Maturity Dates	Principal Outstanding		Stated Interest Rate⁽¹⁾
9/19/2014 – 7/1/2016	5/1/2020–10/1/2040	$	22,187	3.47%	⁽²⁾


⁽¹⁾	Represents the weighted-average, blended rate on the respective borrowings as of March 31, 2017.


⁽²⁾	Rate is before interest patronage, as discussed below.

Subsequent to March 31, 2017, we received interest patronage of approximately $124,000 related to interest accrued on the Farm Credit CFL Notes Payable during the year ended December 31, 2016, which resulted in a 15.8% reduction (approximately 55 basis points) to the stated interest rates on such borrowings. This interest patronage was recorded as a receivable as of March 31, 2017, and is included in Other income on the accompanying Condensed Consolidated Statement of Operations for the three months ended March 31, 2017. During the three months ended March 31, 2016, we received interest patronage related to the Farm Credit CFL Notes Payable of approximately $94,000.

As of March 31, 2017, we were in compliance with all covenants applicable to the Farm Credit CFL Notes Payable.

Farm Credit West Note Payable

From time to time since April 4, 2016, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements with Farm Credit West, FLCA ("Farm Credit West"). We did not enter into any new loan agreements with Farm Credit West during the three months ended March 31, 2017.

The following table summarizes, in the aggregate, the pertinent terms of the two loans outstanding from Farm Credit West (collectively, the "Farm Credit West Notes Payable") as of March 31, 2017 (dollars in thousands):



Dates of Issuance	Maturity Dates	Principal Outstanding		Stated Interest Rate⁽¹⁾
4/4/2016 – 10/13/2016	11/1/2040-11/1/2041	$	13,061	3.66%	⁽²⁾


⁽¹⁾	Represents the weighted-average, blended rate on the respective borrowings as of March 31, 2017.


⁽²⁾	Rate is before interest patronage, as discussed below.

During the three months ended March 31, 2017, we received interest patronage of approximately $59,000 related to interest accrued on the Farm Credit West Notes Payable during the year ended December 31, 2016, which resulted in a 21.3% reduction (approximately 76 basis points) to the stated interest rates on such borrowings. This interest patronage is included in Other income on the accompanying Condensed Consolidated Statement of Operations for the three months ended March 31, 2017. There was no interest patronage received related to the Farm Credit West Notes Payable during the prior-year period.

As of March 31, 2017, we were in compliance with all covenants applicable to the Farm Credit West 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 that provides for bond issuances up to an aggregate principal amount of $75.0 million (the “Farmer Mac Facility”). On June 16, 2016, we amended the facility to increase the maximum borrowing capacity from $75.0 million to $125.0 million and extend the term of the Bond Purchase Agreement by two years, to December 11, 2018.

During the three months ended March 31, 2017, we issued four bonds for gross proceeds of approximately $32.4 million, the terms of which are summarized, in the aggregate, in the table below (dollars in thousands):



Dates of Issuance	Gross Proceeds			Maturity Dates	Principal Amortization	Interest Rate Terms
1/12/2017	$	32,400	⁽¹⁾	1/10/2020-1/12/2024	None	2.80%–3.63%, fixed throughout respective terms


⁽¹⁾	Proceeds from these bonds were used for the acquisition of a new property.

The following table summarizes, in the aggregate, the terms of the 13 bonds outstanding under the Farmer Mac Facility as of March 31, 2017 (dollars in thousands):



Dates of Issuance	Initial Commitment			Maturity Dates	Principal Outstanding		Stated Interest Rate⁽¹⁾	Undrawn Commitment
12/11/2014–1/12/2017	$	125,000	⁽²⁾	7/30/2018–1/12/2024	$	81,521	3.10%	$	42,343	⁽³⁾


⁽¹⁾	Represents the weighted-average interest rate as of March 31, 2017.


⁽²⁾	If facility is not fully utilized by December 11, 2018, Farmer Mac has the option to be relieved of its obligations to purchase additional bonds under the facility.


⁽³⁾	As of March 31, 2017, there was no additional availability to draw under this facility, as no additional properties had been pledged as collateral.

As of March 31, 2017, we were in compliance with all covenants under the Farmer Mac Facility.

Debt Service – Aggregate Maturities

Scheduled principal payments of our aggregate mortgage notes and bonds payable as of March 31, 2017, for the succeeding years are as follows (dollars in thousands):



Period		Scheduled Principal Payments
For the remaining nine months ending December 31:	2017	$	3,088
For the fiscal years ending December 31:	2018	21,300
	2019	8,904
	2020	26,675
	2021	5,026
	2022	11,310
	Thereafter	146,075
		$	222,378

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, 2017, the aggregate fair value of our long-term, fixed-rate mortgage notes and bonds payable was approximately $216.7 million, as compared to an aggregate carrying value of $222.4 million. The fair value of our long-term, fixed-rate mortgage 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, 2017, is deemed to approximate their aggregate carrying value of approximately $20.1 million.