Gladstone Land Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Mandatorily-Redeemable Preferred Stock

Mandatorily-Redeemable Preferred Stock

12 Months Ended

Dec. 31, 2017

MANDATORILY-REDEEMABLE PREFERRED STOCK

On August 17, 2016, we completed a public offering of 1,000,000 shares of 6.375% Series A Cumulative Series A Term Preferred Stock, par value $0.001 per share (the “Series A Term Preferred Stock”), at a public offering price of $25.00 per share. Simultaneous with the closing of the offering and on the same terms and conditions, the underwriters exercised in full their option to purchase an additional 150,000 shares of the Series A Term Preferred Stock to cover over-allotments. As a result of this offering, we issued a total of 1,150,000 shares of the Series A Term Preferred Stock for gross proceeds of approximately $28.8 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, of approximately $27.6 million. These proceeds were used to repay existing indebtedness, to fund new property acquisitions and for other general corporate purposes. The Series A Term Preferred Stock is traded under the ticker symbol, “LANDP,” on the Nasdaq Global Market. The Series A Term Preferred Stock is not convertible into our common stock or any other securities.

Generally, we may not redeem shares of the Series A Term Preferred Stock prior to September 30, 2018, except in limited circumstances to preserve our qualification as a REIT. On or after September 30, 2018, we may redeem the shares at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends up to, but excluding, the date of redemption. The shares of the Series A Term Preferred Stock have a mandatory redemption date of September 30, 2021. We incurred approximately $1.2 million in total offering costs related to this issuance, which have been recorded net of the Series A Term Preferred Stock as presented on the Consolidated Balance Sheet, and we will amortize these costs over the redemption period, which ends on September 30, 2021.

The Series A Term Preferred Stock is recorded as a liability on our Consolidated Balance Sheet in accordance with ASC 480, “Distinguishing Liabilities from Equity,” which states that mandatorily-redeemable financial instruments should be classified as liabilities. In addition, the related dividend payments are treated similar to interest expense in the Consolidated Statement of Operations.

As of December 31, 2017, the fair value of our Series A Term Preferred Stock was approximately $29.7 million, as compared to the carrying value, exclusive of offering costs, of $28.8 million. The fair value of our Series A Term Preferred Stock is valued using Level 1 inputs under the hierarchy established by ASC 820-10, “Fair Value Measurements and Disclosures,” and is calculated based on the closing stock price as of December 31, 2017, of $25.86.

The dividends to preferred stockholders declared by our Board of Directors and paid by us during the years ended December 31, 2017 and 2016, are reflected in the table below:



Fiscal Year	Declaration Date	Record Date	Payment Date	Dividend per Preferred Share
2017	January 10, 2017	January 20, 2017	January 31, 2017	$	0.132812500
	January 10, 2017	February 16, 2017	February 28, 2017	0.132812500
	January 10, 2017	March 22, 2017	March 31, 2017	0.132812500
	April 11, 2017	April 21, 2017	April 28, 2017	0.132812500
	April 11, 2017	May 19, 2017	May 31, 2017	0.132812500
	April 11, 2017	June 21, 2017	June 30, 2017	0.132812500
	July 11, 2017	July 21, 2017	July 31, 2017	0.132812500
	July 11, 2017	August 21, 2017	August 31, 2017	0.132812500
	July 11, 2017	September 20, 2017	September 29, 2017	0.132812500
	October 10, 2017	October 20, 2017	October 31, 2017	0.132812500
	October 10, 2017	November 20, 2017	November 30, 2017	0.132812500
	October 10, 2017	December 19, 2017	December 29, 2017	0.132812500
	Year ended December 31, 2017			$	1.593750000

2016	September 12, 2016	September 21, 2016	September 30, 2016	$	0.190364583	⁽¹⁾
	October 11, 2016	October 21, 2016	October 31, 2016	0.132812500
	October 11, 2016	November 17, 2016	November 30, 2016	0.132812500
	October 11, 2016	December 20, 2016	December 30, 2016	0.132812500
	Year ended December 31, 2016			$	0.588802083


⁽¹⁾	Represents the cumulative dividend from (but excluding) the date of original issuance through the month ended September 30, 2016.

For federal income tax characterization purposes, dividends paid to preferred stockholders may be characterized as ordinary income, capital gains, return of capital, or a combination thereof. The characterization of dividends paid on our Series A Term Preferred Stock since its issuance is reflected in the following table:



For the Years Ended December 31,	Ordinary Income		Return of Capital		Long-term Capital Gain
2017	82.32594	%	—	%	17.67406	%
2016	100.00000	%	—	%	—	%

EQUITY

Amendment to Articles of Incorporation

On July 12, 2017, we filed an Articles of Amendment with the State Department of Assessments and Taxation for Maryland to increase the number of shares of capital stock that we have authority to issue from 20,000,000 shares to 100,000,000 shares, with the additional 80,000,000 shares of stock being initially classified as common stock, $0.001 par value per share. See Note 11, “Subsequent Events” for a further amendment to our articles of incorporation.

Stockholders' Equity

As of December 31, 2017, there were 98,000,000 shares of common stock, par value $0.001 per share, authorized, with 13,791,574 shares issued and outstanding. As of December 31, 2016, there were 18,000,000 shares of common stock, par value $0.001 per share, authorized, with 10,024,875 shares issued and outstanding.

Non-Controlling Interests in Operating Partnership

We consolidate our Operating Partnership, which is a majority-owned partnership. As of December 31, 2017 and 2016, we owned approximately 93.2% and 87.4%, respectively, of the outstanding OP Units.

On or after 12 months after becoming a holder of OP Units, each limited partner, other than the Company, has the right, subject to the terms and conditions set forth in the partnership agreement of the Operating Partnership, to require the Operating Partnership to redeem all or a portion of such units in exchange for cash or, at the Company’s option, shares of our common stock on a one-for-one basis. The cash redemption per OP Unit would be based on the market price of our common stock at the time of redemption. A limited partner will not be entitled to exercise redemption rights if the delivery of common stock to the redeeming limited partner would breach restrictions on the ownership of common stock imposed under our charter and other limitations thereof.

On September 20, 2017, 221,875 OP Units were tendered for redemption, and on September 29, 2017, we issued 50,000 shares of common stock in exchange for 50,000 of the OP Units, and we satisfied the redemption of the remaining 171,875 OP Units with a cash payment of approximately $2.3 million (approximately $13.21 per OP Unit). On October 6, 2017, 121,875 OP Units were tendered for redemption, and on October 13, 2017, we issued 121,875 shares of common stock in exchange for 121,875 OP Units. On November 28, 2017, 75,000 OP Units were tendered for redemption, and on December 1, 2017, we issued 75,000 shares of common stock in exchange for 75,000 OP Units. On December 27, 2017, 22,403 OP Units were tendered for redemption, and on December 28, 2017, we satisfied the redemption of these OP Units with a cash payment of approximately $299,000 (approximately $13.35 per OP Unit).

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 the OP Units for shares of its common stock. When a non-Company unitholder redeems OP Units and the Company elects to satisfy that redemption through the issuance of common stock, non-controlling interest in the Operating Partnership is reduced, and stockholders’ equity is increased.

The Operating Partnership is required to make distributions on each OP Unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the OP Units held by the Company being utilized to make distributions to the Company’s common stockholders.

As of December 31, 2017 and 2016, there were 1,008,105 and 1,449,258 OP Units held by non-controlling limited partners outstanding, respectively, of which 1,008,105 and zero OP Units, respectively, were eligible to be tendered for redemption. Subsequent to December 31, 2017, 7,700 additional OP Units were tendered for redemption; see Note 11, “Subsequent Events,” for further discussion on the redemption of these OP Units.

Distributions

The distributions to common stockholders declared by our Board of Directors and paid by us during the years ended December 31, 2017, 2016, and 2015 are reflected in the table below.



Fiscal Year	Declaration Date	Record Date	Payment Date	Distributions per Common Share
2017	January 10, 2017	January 20, 2017	January 31, 2017	$	0.04300
	January 10, 2017	February 16, 2017	February 28, 2017	0.04300
	January 10, 2017	March 22, 2017	March 31, 2017	0.04300
	April 11, 2017	April 21, 2017	April 28, 2017	0.04350
	April 11, 2017	May 19, 2017	May 31, 2017	0.04350
	April 11, 2017	June 21, 2017	June 30, 2017	0.04350
	July 11, 2017	July 21, 2017	July 31, 2017	0.04400
	July 11, 2017	August 21, 2017	August 31, 2017	0.04400
	July 11, 2017	September 20, 2017	September 29, 2017	0.04400
	October 10, 2017	October 20, 2017	October 31, 2017	0.04410
	October 10, 2017	November 20, 2017	November 30, 2017	0.04410
	October 10, 2017	December 29, 2017	December 29, 2017	0.04410
Year ended December 31, 2017				$	0.52380

2016	January 12, 2016	January 22, 2016	February 2, 2016	$	0.04000
	January 12, 2016	February 18, 2016	February 29, 2016	0.04000
	January 12, 2016	March 21, 2016	March 31, 2016	0.04000
	April 12, 2016	April 22, 2016	May 2, 2016	0.04125
	April 12, 2016	May 19, 2016	May 31, 2016	0.04125
	April 12, 2016	June 17, 2016	June 30, 2016	0.04125
	July 12, 2016	July 22, 2016	August 2, 2016	0.04125
	July 12, 2016	August 22, 2016	August 31, 2016	0.04125
	July 12, 2016	September 21, 2016	September 30, 2016	0.04125
	October 11, 2016	October 21, 2016	October 31, 2016	0.04250
	October 11, 2016	November 17, 2016	November 30, 2016	0.04250
	October 11, 2016	December 20, 2016	December 30, 2016	0.04250
Year ended December 31, 2016				$	0.49500

2015	January 13, 2015	January 23, 2015	February 3, 2015	$	0.03500
	January 13, 2015	February 18, 2015	February 27, 2015	0.03500
	January 13, 2015	March 20, 2015	March 31, 2015	0.03500
	April 14, 2015	April 24, 2015	May 4, 2015	0.04000
	April 14, 2015	May 19, 2015	May 28, 2015	0.04000
	April 14, 2015	June 19, 2015	June 30, 2015	0.04000
	July 14, 2015	July 24, 2015	August 4, 2015	0.04000
	July 14, 2015	August 20, 2015	August 31, 2015	0.04000
	July 14, 2015	September 21, 2015	September 30, 2015	0.04000
	October 13, 2015	October 26, 2015	October 29, 2015	0.04000
	October 13, 2015	November 17, 2015	November 24, 2015	0.04000
	October 13, 2015	December 18, 2015	December 31, 2015	0.04000
Year ended December 31, 2015				$	0.46500

During the years ended December 31, 2017, 2016 and 2015, we paid aggregate distributions to common stockholders of approximately $6.4 million, $5.0 million and $4.1 million, respectively.

For federal income tax characterization purposes, distributions paid to common stockholders may be characterized as ordinary income, capital gains, return of capital, or a combination thereof. The characterization of distributions on our common stock during each of the last three years is reflected in the following table:



For the Years Ended December 31,	Ordinary Income		Return of Capital		Long-term Capital Gain
2017	26.84290	%	67.39436	%	5.76274	%
2016	30.65818	%	69.34182	%	—	%
2015	62.29540	%	37.34781	%	0.35679	%

Registration Statement

We filed a universal registration statement on Form S-3 (File No. 333-194539) with the SEC on March 13, 2014 (the “2014 Registration Statement”), which the SEC declared effective on April 2, 2014. The 2014 Registration Statement, which was scheduled to expire on April 1, 2017, permitted us to issue up to an aggregate of $300.0 million in securities, consisting of common stock, senior common stock, preferred stock, subscription rights, debt securities, and depository shares, including through separate, concurrent offerings of two or more of such securities. We issued a total of 4,013,763 shares of common stock and 1,150,000 shares of preferred stock for aggregate gross proceeds of approximately $73.1 million under the 2014 Registration Statement.

On March 30, 2017, we filed a universal registration statement on Form S-3 (File No. 333-217042) with the SEC (the “2017 Registration Statement”) to replace the expiring 2014 Registration Statement. The 2017 Registration Statement, which was declared effective by the SEC on April 12, 2017, permits us to issue up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, warrants, debt securities, depository shares, subscription rights, and units, including through separate, concurrent offerings of two or more of such securities. As of December 31, 2017, we have issued a total of 1,694,075 shares of common stock (excluding 246,875 shares of common stock issued in exchange for certain OP Units that were tendered for redemption) for gross proceeds of approximately $21.2 million under the 2017 Registration Statement.

In conjunction with the replacement of the 2014 Registration Statement, during the year ended December 31, 2017, we wrote off approximately $46,000 of unallocated costs associated with the initial filing of the 2014 Registration Statement. These costs were written off to professional fees and stockholder-related expenses, both of which are included in General and administrative expenses on our accompanying Consolidated Statement of Operations.

2017 Equity Issuances

Secondary Offerings

In March 2017, we completed a public offering of 1,825,749 shares (including 145,749 shares issued as a result of the underwriters exercising their over-allotment option) of our common stock at a public offering price of $11.35 per share. This issuance resulted in gross proceeds of approximately $20.7 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, of approximately $19.6 million.

In September 2017, we completed a public offering of 1,150,000 shares (including 150,000 shares issued as a result of the underwriters simultaneously exercising their over-allotment option) of our common stock at a public offering price of $12.25 per share. This issuance resulted in gross proceeds of approximately $14.1 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, of approximately $13.4 million.

All offering proceeds were used to repay existing indebtedness (which, in turn, was used to fund farmland acquisitions) and for other general corporate purposes.

At-the-Market Program

On August 7, 2015, we entered into equity distribution agreements (commonly referred to as “at-the-market agreements” or our “Sales Agreements”) with Cantor Fitzgerald & Co. and Ladenburg Thalmann & Co., Inc. (each a “Sales Agent”), under which we may issue and sell, from time to time and through the Sales Agents, shares of our common stock having an aggregate offering price of up to $30.0 million (the “ATM Program”). During the year ended December 31, 2017, we issued and sold 544,075 shares of our common stock at an average sales price of $13.04 per share under the ATM Program for gross proceeds of approximately $7.1 million and net proceeds of approximately $7.0 million. Through December 31, 2017, we have issued and sold a total of 608,636 shares of our common stock at an average sales price of $12.75 per share for gross proceeds of approximately $7.8 million and net proceeds of approximately $7.6 million. See Note 11, “Subsequent Events,” for shares of common stock issued and sold under the ATM Program subsequent to December 31, 2017.

On April 13, 2017, we amended each of the Sales Agreements to reference the new 2017 Registration Statement. All other material terms of the Sales Agreements remained unchanged.

Series B Preferred Stock

Subsequent to December 31, 2017, we launched a continuous public offering of up to a total of 6,500,000 shares of the Series B Preferred Stock (as defined below) for total gross proceeds (assuming all shares of the Series B Preferred Stock are sold in the offering) of up to $162.5 million. See Note 11, “Subsequent Events—Equity Activity—Series B Preferred Stock” for further discussion on this offering.