Quarterly report pursuant to Section 13 or 15(d)

BORROWINGS

v3.22.2.2
BORROWINGS
 9 Months Ended
Sep. 30, 2022
Debt Disclosure [Abstract]  
BORROWINGS BORROWINGSOur borrowings as of September 30, 2022, and December 31, 2021, are summarized below (dollars in thousands):
  Carrying Value as of   As of September 30, 2022
September 30, 2022 December 31, 2021
Stated Interest
Rates(1)
(Range; Wtd. Avg)
 Maturity Dates
(Range; Wtd. Avg)
Notes and bonds payable:
Fixed-rate notes payable $ 561,118  $ 582,665 
2.44%–5.70%; 3.72%
 10/1/2022–7/1/2051; April 2033
Variable-rate notes payable 1,124  2,856  5.25% 5/1/2044
Fixed-rate bonds payable 81,003  86,052 
2.13%–4.57%; 3.46%
 12/22/2022–12/30/2030; June 2025
Total notes and bonds payable 643,245  671,573 
Debt issuance costs – notes and bonds payable (3,599) (3,691) N/A N/A
Notes and bonds payable, net $ 639,646  $ 667,882 
Variable-rate revolving lines of credit $ 100  $ 100  4.30% 4/5/2024
Total borrowings, net $ 639,746  $ 667,982 
(1)Where applicable, stated interest rates are before interest patronage (as described below).
As of September 30, 2022, the above borrowings were collateralized by certain of our farms with an aggregate net book value of approximately $1.2 billion. The weighted-average stated interest rate charged on the above borrowings (excluding the impact of debt issuance costs and before any interest patronage, or refunded interest) was 3.82% and 3.76% for the three and nine months ended September 30, 2022, respectively, as compared to 3.74% and 3.72% for the three and nine months ended September 30, 2021, respectively. In addition, 2021 interest patronage from our Farm Credit Notes Payable (as defined below) resulted in a 29.9% reduction (approximately 137 basis points) to the stated interest rates on such borrowings. See below under “—Farm Credit Notes Payable—Interest Patronage” for further discussion on interest patronage.
As of September 30, 2022, we were in compliance with all covenants applicable to the above borrowings.
MetLife Facility
On February 3, 2022, we amended our credit facility with Metropolitan Life Insurance Company (“MetLife”), which previously consisted of a $75.0 million long-term note payable (the “2020 MetLife Term Note”) and $75.0 million of revolving equity lines of credit (the “MetLife Lines of Credit,” and together with the 2020 MetLife Term Note, the “2020 MetLife Facility”). Pursuant to the amendment, our credit facility with MetLife now consists of the 2020 MetLife Term Note, the MetLife Lines of Credit, and a new $100.0 million long-term note payable (the “2022 MetLife Term Note,” and together with the 2020 MetLife Term Note and the MetLife Lines of Credit, the “2022 MetLife Facility”).
The 2022 MetLife Term Note is scheduled to mature on January 5, 2032, and the interest rates on future disbursements under the 2022 MetLife Term Note will be based on the 10-year U.S. Treasury at the time of such disbursements, with the initial disbursement priced based on the 10-year U.S. Treasury plus a spread to be determined by the lender. In addition, through December 31, 2024, the 2022 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 2022 MetLife Term Note). If the full commitment of $100.0 million is not utilized by December 31, 2024, MetLife has no obligation to disburse the remaining funds under the 2022 MetLife Term Note. All other material items of the 2020 MetLife Facility remained unchanged.
The following table summarizes the pertinent terms of the 2022 MetLife Facility as of September 30, 2022 (dollars in thousands, except for footnotes):
Issuance Aggregate
Commitment		 Maturity
Dates		 Principal
Outstanding		   Interest Rate Terms  
Undrawn
Commitment(1)
MetLife Lines of Credit $ 75,000  4/5/2024 $ 100 
3-month LIBOR + 2.00%
(2)
 $ 74,900 
2020 MetLife Term Note 75,000 
(3)
 1/5/2030 36,900 
2.75%, fixed through 1/4/2030
(4)
 38,100 
2022 MetLife Term Note 100,000 
(5)
 1/5/2032 —  (6)

100,000 
Totals $ 250,000  $ 37,000  $ 213,000 
(1)Based on the properties that were pledged as collateral under the 2022 MetLife Facility, as of September 30, 2022, the maximum additional amount we could draw under the facility was approximately $110.3 million.
(2)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).
(3)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 remaining funds under the 2020 MetLife Term Note.
(4)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).
(5)If the aggregate commitment under the 2022 MetLife Term Note is not fully utilized by December 31, 2024, MetLife has no obligation to disburse the remaining funds under the 2022 MetLife Term Note.
(6)Interest rates on future disbursements under the 2022 MetLife Term Note will be based on prevailing market rates at the time of such disbursements. In addition, through December 31, 2024, the 2022 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 2022 MetLife Term Note).
Farmer Mac Facility
Through certain subsidiaries of our Operating Partnership, we have 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 (the “Farmer Mac Facility”). As amended from time to time, the Farmer Mac Facility currently provides for bond issuances up to an aggregate amount of $225.0 million. Pursuant to the Bond Purchase Agreement, we may issue new bonds through May 31, 2023, and the final maturity date for new bonds issued under the Farmer Mac Facility will be December 31, 2030.
During the nine months ended September 30, 2022, we issued two new bonds under the Farmer Mac Facility, the pertinent terms of which are summarized in the following table (dollars in thousands):
Date of Issuance Amount Maturity Date Principal Amortization Stated
Interest Rate		 Interest Rate Terms
1/11/2022 $ 1,980  12/30/2030 20.0 years 3.31% Fixed throughout term
2/25/2022 1,710  12/30/2030 25.0 years 3.68% Fixed throughout term
As of September 30, 2022, we had approximately $81.0 million of bonds issued and outstanding under the Farmer Mac Facility.
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 (collectively, the “Farm Credit Notes Payable”) with 13 different Farm Credit associations (collectively, “Farm Credit”). During the nine months ended September 30, 2022, we entered into the following loan agreement with Farm Credit (dollars in thousands):
Issuer Date of
Issuance		 Amount Maturity
Date		 Principal
Amortization
Stated Interest Rate(1)
Interest Rate Terms
Northwest Farm Credit Services, FLCA 1/31/2022 $1,442 2/1/2032 20.1 years 4.65% Fixed throughout term
Farm Credit of Central Florida, ACA 4/5/2022 4,800 2/1/2046 23.8 years 4.36% Fixed through 2/28/2027; variable thereafter
(1)Stated rate is before interest patronage, as described below.
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 Condensed 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, 2022, we recorded interest patronage of approximately $2.8 million related to interest accrued on the Farm Credit Notes Payable during the year ended December 31, 2021, which resulted in a 29.9% reduction (approximately 137 basis points) to the interest rates on such borrowings.
Loan Maturities
During the nine months ended September 30, 2022, we repaid approximately $16.9 million of maturing loans from Farm Credit. On a weighted-average basis, these borrowings bore interest at a stated rate of 4.47% and an effective interest rate (after interest patronage) of 2.89%.
Debt Service – Aggregate Maturities
Scheduled principal payments of our aggregate notes and bonds payable as of September 30, 2022, for the succeeding years are as follows (dollars in thousands):
Period Scheduled Principal Payments
For the remaining three months ending December 31: 2022 $ 13,391 
(1)
For the fiscal years ending December 31: 2023 45,791 
2024 42,111 
2025 39,165 
2026 18,335 
2027 51,564 
Thereafter 432,888 
$ 643,245 
(1)     Subsequent to September 30, 2022, we repaid approximately $432,000 of expiring loans.
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 September 30, 2022, the aggregate fair value of our notes and bonds payable was approximately $581.8 million, as compared to an aggregate carrying value (excluding unamortized related debt issuance costs) of approximately $643.2 million. The fair value of our 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 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 September 30, 2022, 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 equal 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 Condensed Consolidated Balance Sheets. Generally, in the absence of observable market data, we will estimate the fair value 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. In accordance with the FASB’s fair value measurement guidance, we have made an accounting policy election to measure the credit risk of our derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. As of September 30, 2022, our interest rate swaps were valued using Level 2 inputs.
In addition, we have designated our interest rate swaps as cash flow hedges. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is initially recorded in Accumulated other comprehensive income (loss) on the accompanying Condensed Consolidated Balance Sheets and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects. During the next 12 months, we estimate that an additional $1.9 million will be reclassified as a reduction to interest expense.
Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), contains practical expedients for reference rate reform-related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. As of September 30, 2022, we elected to apply hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the
corresponding derivatives. Application of the hedge accounting expedients preserves the presentation of derivatives consistent with past presentation.
We had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of September 30, 2022, and December 31, 2021 (dollars in thousands):
Period Number of Instruments Aggregate Notional Amount
As of September 30, 2022 5 $ 81,489 
As of December 31, 2021 5 82,980 
The following table presents the fair value of our interest rate swaps as well as their classification on the Condensed Consolidated Balance Sheets as of September 30, 2022, and December 31, 2021 (dollars in thousands):
Derivative Asset (Liability) Fair Value
Derivative Type Balance Sheet Location September 30, 2022 December 31, 2021
Derivatives Designated as Hedging Instruments:
Interest rate swaps Other assets, net $ 9,455  $ — 
Interest rate swaps Other liabilities, net —  (1,036)
Total $ 9,455  $ (1,036)
The following table presents the amount of income (loss) recognized in comprehensive income within our condensed consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2022 2021 2022 2021
Derivative in cash flow hedging relationship:
Interest rate swaps $ 3,199  $ 357  $ 10,491  $ 513 
Total $ 3,199  $ 357  $ 10,491  $ 513 
Credit-risk-related Contingent Features
We have agreements with each of our derivative counterparties that contain a provision where if we default on any of our indebtedness, then we could also be declared in default on our derivative obligations. As of September 30, 2022, we did not have any derivatives in a net liability position, nor have we posted any collateral related to these agreements.