Annual report pursuant to Section 13 and 15(d)

Borrowings

v3.22.0.1
Borrowings
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
Borrowings BORROWINGS
Our borrowings as of December 31, 2021 and 2020 are summarized below (dollars in thousands):
  Carrying Value as of As of December 31, 2021
December 31, 2021 December 31, 2020
Stated Interest
Rates(1)
(Range; Wtd Avg)
 Maturity Dates
(Range; Wtd Avg)
Notes and bonds payable:
Fixed-rate notes payable $ 583,807  $ 492,182 
2.44%–5.70%; 3.73%
2/14/2022–7/1/2051; October 2032
Variable-rate notes payable(2)
1,714  45,525 
3.00%–3.00%; 3.00%
10/1/2040–10/1/2040; October 2040
Fixed-rate bonds payable 86,052  89,883 
2.13%–4.57%; 3.45%
1/12/2022–12/30/2030; November 2024
Total notes and bonds payable 671,573  627,590 
Debt issuance costs – notes and bonds payable (3,691) (3,629) N/A N/A
Notes and bonds payable, net $ 667,882  $ 623,961 
Variable-rate revolving lines of credit $ 100  $ 100  2.50% 4/5/2024
Total borrowings, net $ 667,982  $ 624,061 
(1)Where applicable, stated interest rates are before interest patronage (as described below).
(2)Notes were fixed subsequent to the respective fiscal year ends.
As of December 31, 2021, the above borrowings were collateralized by certain of our farms with an aggregate net book value of approximately $1.2 billion. 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 3.72% and 3.95% for the years ended December 31, 2021 and 2020, respectively. In addition, 2020 interest patronage from our Farm Credit Notes Payable (as defined below) resulted in a 28.7% reduction (approximately 135 basis points) to the stated interest rates on such borrowings. See below under “—Farm Credit Notes Payables—Interest Patronage” for further discussion on interest patronage.
We generally borrow at a rate of 60% of the value of the underlying agricultural real estate, and, except as noted herein, the amounts borrowed are not generally guaranteed by the Company. 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, 2021, we were in compliance with all covenants applicable to the above borrowings.
MetLife Borrowings
MetLife Facility
As of December 31, 2019, our facility with Metropolitan Life Insurance Company (“MetLife”) consisted of a total of $200.0 million of term notes (the “Prior MetLife Term Notes”) and $75.0 million of revolving equity lines of credit (the “MetLife Lines of Credit,” and together with the Prior MetLife Term Notes, the “Prior MetLife Facility”). The draw period for the Prior MetLife Term Notes expired on December 31, 2019, with approximately $21.5 million being left undrawn, and MetLife had no obligation to disburse the remaining funds under those notes.
On February 20, 2020, we entered into an agreement with MetLife to remove the MetLife Lines of Credit from the Prior MetLife Facility and create a new credit facility consisting of a new $75.0 million long-term note payable (the “2020 MetLife Term Note”) and the MetLife Lines of Credit (collectively, the “2020 MetLife Facility”).
The following table summarizes the pertinent terms of the 2020 MetLife Facility as of December 31, 2021 (dollars in thousands, except for footnotes):
Issuance Aggregate
Commitment		 Maturity
Dates		 Principal
Outstanding		   Interest Rate Terms   Undrawn
Commitment		  
2020 MetLife Term Note $ 75,000 
(1)
 1/5/2030 $ 36,900 
2.75%, fixed through 1/4/2030
(2)
 $ 38,100 
(3)
MetLife Lines of Credit 75,000  4/5/2024 100 
3-month LIBOR + 2.00%
(4)
 74,900 
(3)
Total principal outstanding $ 37,000    
(1)If the aggregate commitment under the 2020 MetLife Term Note is not fully utilized by December 31, 2022, MetLife has no obligation to disburse the additional funds under the 2020 MetLife Term Note.
(2)Interest rates on future disbursements under the 2020 MetLife Term Note will be based on prevailing market rates at the time of such disbursements. In addition, through December 31, 2022, the 2020 MetLife Term Note is also subject to an unused fee ranging from 0.10% to 0.20% on undrawn amounts (based on the balance drawn under the 2020 MetLife Term Note).
(3)Based on the properties that were pledged as collateral under the 2020 MetLife Facility, as of December 31, 2021, the maximum additional amount we could draw under the facility was approximately $58.4 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).
Under the 2020 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. See Note 11, “Subsequent Events—Financing Activity—MetLife Facility,” for discussion on an amendment to the 2020 MetLife Facility executed subsequent to December 31, 2021.
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 “Prior Farmer Mac Facility”) through December 11, 2018, after which date the Bond Purchaser had the option to continue buying new bonds issued under the Prior Farmer Mac Facility.
On December 10, 2020, we entered into an amended and restated bond purchase agreement (the “Amended and Restated Bond Purchase Agreement”) with Farmer Mac and the Bond Purchaser, increasing the secured note purchase facility to provide for bond issuances up to an aggregate principal amount of $225.0 million (the “2020 Farmer Mac Facility”). In addition, the Amended and Restated Bond Purchase Agreement extended the date up to which we can issue new bonds to May 31, 2023, and the final maturity date for bonds issued under the 2020 Farmer Mac Facility to December 31, 2030. The Amended and Restated Bond Purchase Agreement also included certain adjustments to the Fixed Charge Coverage Ratio definition and the Fixed Charge Ratio Covenant. All other terms of the Bond Purchase Agreement remained the same.
During the year ended December 31, 2021, we issued two new bonds under the 2020 Farmer Mac Facility, the pertinent terms of which are summarized in the following table (dollars in thousands):
Date of Issuance Amount Maturity Dates Principal Amortization Stated Interest Rate Interest Rate Terms
2/4/2021 $ 2,460  10/31/2028 25.0 years 3.13% Fixed throughout term
11/10/2021 1,290  12/30/2030 25.0 years 3.32% Fixed throughout term
Pursuant to the Amended and Restated 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. As of December 31, 2021, we had approximately $96.4 million of bonds issued and outstanding under the 2020 Farmer Mac Facility.
Farm Credit Notes Payable
From time to time since September 2014 through December 31, 2021, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements (collectively, the “Farm Credit Notes Payable”) with 13 different Farm Credit associations (collectively, “Farm Credit”). During the year ended December 31, 2021, we entered into the following loan agreements with Farm Credit (dollars in thousands):
Issuer Date of
Issuance		 Amount Maturity
Date		 Principal
Amortization
Stated Interest Rate(1)
Interest Rate Terms
Farm Credit West, FLCA(2)
1/28/2021 $ 2,073  11/1/2045 24.5 years 3.23% Fixed through 12/31/2027 (variable thereafter)
Mid Atlantic Farm Credit, ACA 3/3/2021 960  6/1/2045 24.4 years 3.80% Fixed through 1/31/2031 (variable thereafter)
GreenStone Farm Credit Services, FLCA 8/17/2021 7,980  8/1/2046 25.5 years 4.00% Fixed through 7/31/2031 (variable thereafter)
Golden State Farm Credit, FLCA 9/28/2021 15,960  7/1/2051 30.0 years 3.75% Fixed through 9/30/2031 (variable thereafter)
Golden State Farm Credit, FLCA 9/28/2021 6,840  7/1/2046 25.0 years 3.75% Fixed through 9/30/2031 (variable thereafter)
Farm Credit Florida, ACA 12/13/2021 3,174  1/1/2047 25.0 years 4.13% Fixed through 12/31/2031 (variable thereafter)
(1)Stated rate is before interest patronage, as described below.
(2)Loan proceeds used to repay a previously-issued loan with an outstanding balance of approximately $1.4 million and a stated interest rate of 4.99%.
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.
Interest Patronage
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 expense is accrued. During the three months ended March 31, 2021, we recorded interest patronage of approximately $2.2 million related to interest accrued on the Farm Credit Notes Payable during the year ended December 31, 2020. In addition, during the three months ended September 30, 2020, we recorded approximately $306,000 of 2020 interest patronage, as certain Farm Credit associations prepaid a portion of the 2020 interest patronage (which related to interest accrued during 2020 but is typically received in 2021). In total, we recorded approximately $2.5 million of 2020 interest patronage related to our Farm Credit Notes Payable, which resulted in a 28.7% reduction (approximately 135 basis points) to the interest rates on such borrowings.
Other Borrowings
During the year ended December 31, 2021, we entered into loan agreements with certain other lenders, the terms of which are summarized in the following table (dollars in thousands):
Lender Date of Issuance Amount Maturity Date Principal Amortization Stated Interest Rate Interest Rate Terms
Rabo AgriFinance, LLC(1)
3/11/2021 $ 3,780  12/1/2030 25.0 years 3.27% Fixed throughout term
Rabo AgriFinance, LLC(1)
3/11/2021 630  12/1/2022 None
(interest only)		 2.44% Fixed throughout term
Rabo AgriFinance, LLC(1)
11/10/2021 22,620  12/1/2030 25.0 years 3.42% Fixed throughout term
(1)Loans were issued as variable-rate loans but were subsequently fixed through our entry into interest rate swap agreements with the lender (as counterparty).
Debt Service – Aggregate Maturities
Scheduled principal payments of our aggregate notes and bonds payable as of December 31, 2021, for the succeeding years are as follows (dollars in thousands):
For the Fiscal Years Ending December 31, Scheduled
Principal Payments
2022 $ 51,534 
2023 45,696 
2024 41,846 
2025 38,889 
2026 18,043 
Thereafter 475,565 
$ 671,573 
Fair Value
ASC 820, “Fair Value Measurement (Subtopic 820)” (“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 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, 2021, the aggregate fair value of our notes and bonds payable was approximately $663.8 million, as compared to an aggregate carrying value (excluding unamortized related debt issuance costs) of approximately $671.6 million. The fair value of our long-term 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 and variable interest rates applicable to the MetLife Lines of Credit, their aggregate fair value as of December 31, 2021, is deemed to approximate their aggregate carrying value of $100,000.
Interest Rate Swap Agreements
In order to hedge our exposure to variable interest rates, we have 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 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, 2021, 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. The following table summarizes our interest rate swaps as of December 31, 2021 and 2020 (dollars in thousands):
Period Aggregate Notional Amount Aggregate Fair Value Asset Aggregate Fair Value Liability
As of December 31, 2021 $ 82,980  $ —  $ (1,036)
As of December 31, 2020 14,077  —  (1,500)
The following table presents the amount of income or loss recognized in comprehensive income within our consolidated financial statements for the years ended December 31, 2021 and 2020 (dollars in thousands):
For the Year Ended December 31, 2021 For the Year Ended December 31, 2020
Derivative in cash flow hedging relationship:
Interest rate swaps $ 464  $ (1,110)
Total $ 464  $ (1,110)
The following table summarizes certain information regarding our derivative instruments as of December 31, 2021 and 2020 (dollars in thousands):
Derivative Liability Fair Value
Derivative Type Balance Sheet Location December 31, 2021 December 31, 2020
Derivatives Designated as Hedging Instruments:
Interest rate swaps Other liabilities, net $ (1,036) $ (1,500)
Total $ (1,036) $ (1,500)