Annual report pursuant to Section 13 and 15(d)

Borrowings

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Borrowings
 12 Months Ended
Dec. 31, 2023
Debt Disclosure [Abstract]  
Borrowings BORROWINGS
Our borrowings as of December 31, 2023 and 2022 are summarized below (dollars in thousands):
  Carrying Value as of As of December 31, 2023
December 31, 2023 December 31, 2022
Stated Interest
Rates(1)
(Range; Wtd Avg)
 Maturity Dates
(Range; Wtd Avg)
Variable-rate revolving lines of credit $ 200  $ 100  7.39% 12/15/2033
Notes and bonds payable:
Fixed-rate notes payable $ 524,199  $ 550,974 
2.45%–5.70%; 3.71%
9/1/2024–7/1/2051; April 2033
Variable-rate notes payable —  1,104 
 N/A
N/A
Fixed-rate bonds payable 52,640  77,776 
2.66%–4.57%; 3.64%
01/12/2024–12/30/2030; August 2026
Total notes and bonds payable 576,839  629,854 
Debt issuance costs – notes and bonds payable (2,928) (3,454) N/A N/A
Notes and bonds payable, net $ 573,911  $ 626,400 
Total borrowings, net $ 574,111  $ 626,500 
(1)Where applicable, stated interest rates are before interest patronage (as described below).
As of December 31, 2023, the above borrowings were collateralized by certain of our farms with an aggregate net book value of approximately $1.1 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 3.79% and 3.77% for the years ended December 31, 2023 and 2022, respectively. In addition, 2022 interest patronage from our Farm Credit Notes Payable (as defined below) resulted in a 24.1% reduction (approximately 109 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, 2023, 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 “Prior 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 “Current MetLife Facility”).
On December 14, 2023, we entered into an amendment with MetLife to extend the maturity dates of the MetLife Lines of Credit from April 5, 2024, to December 15, 2033. In addition, the amendment revised certain covenant thresholds and increased the minimum balance requirement on each line of credit. As part of this amendment, we paid aggregate fees of approximately $188,000 to MetLife.
The following table summarizes the pertinent terms of the Current MetLife Facility as of December 31, 2023 (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  12/15/2033 $ 200 
3M SOFR + 2.00%
(2)
 $ 74,800 
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 
(3)
 1/5/2032 — 
(4)
 100,000 
Totals $ 250,000  $ 37,100  $ 212,900 
(1)Based on the properties that were pledged as collateral under the Current MetLife Facility, as of December 31, 2023, the maximum additional amount we could draw under the facility was approximately $110.2 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 commitments under the 2020 MetLife Term Note and the 2022 MetLife Term Note are not fully utilized by December 31, 2024, MetLife has no obligation to disburse the additional funds under either note.
(4)Interest rates on future disbursements under each of the 2020 MetLife Term Note and 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 2020 MetLife Term Note and the 2022 MetLife Term Note are each subject to an unused fee ranging from 0.10% to 0.20% on undrawn amounts (based on the balance drawn under the respective note).
Under the Current 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 Current MetLife Facility are guaranteed by us and each subsidiary of ours that owns a property pledged as collateral pursuant to the loan documents.
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, as further amended on June 2, 2023, we may issue new bonds under the Farmer Mac Facility through December 31, 2026, and the final maturity date for new bonds issued under the facility will be the date that is ten years from the applicable issuance date. We did not issue any new bonds under the Farmer Mac Facility during the year ended December 31, 2023.
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. As of December 31, 2023, we had approximately $52.6 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 various different Farm Credit associations
(collectively, “Farm Credit”). We did not enter into any new loan agreements with Farm Credit during the year ended December 31, 2023.
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, 2023, we recorded interest patronage of approximately $2.3 million related to interest accrued on the Farm Credit Notes Payable during the year ended December 31, 2022, and during the three months ended September 30, 2022, we received approximately $113,000 of interest patronage, as certain Farm Credit associations paid a portion of the 2022 interest patronage (which relates to interest accrued during 2022 but is typically paid during the first half of 2023) early. In total, 2022 interest patronage resulted in a 24.1% reduction (approximately 109 basis points) to the interest rates on such borrowings. In addition, during the three months ended September 30, 2023, we recorded approximately $111,000 of interest patronage, as certain Farm Credit associations paid a portion of the 2023 interest patronage early. We are unable to estimate the remaining amount of interest patronage to be received, if any, related to interest accrued during 2023 on our Farm Credit Notes Payable.
Debt Service – Aggregate Maturities
Scheduled principal payments of our aggregate notes and bonds payable as of December 31, 2023, for the succeeding years are as follows (dollars in thousands):
Period Scheduled Principal Payments
For the fiscal years ending December 31: 2024 $ 40,656 
(1)
2025 39,020 
2026 18,175 
2027 51,389 
2028 77,808 
Thereafter 349,791 
$ 576,839 
(1)     Subsequent to December 31, 2023, we repaid $16.2 million of expiring bonds.
During the year ended December 31, 2023, we repaid approximately $36.0 million of notes and bonds that were either maturing or scheduled for a price reset. On a weighted-average basis, these borrowings bore interest at a stated rate of 3.73% and an effective interest rate (after interest patronage) of 3.56%.
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, 2023, the aggregate fair value of our notes and bonds payable was approximately $529.4 million, as compared to an aggregate carrying value (excluding unamortized related debt issuance costs) of approximately $576.8 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, 2023, is deemed to approximate their aggregate carrying value of $200,000.
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 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 Financial Accounting Standards Board’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 December 31, 2023, 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 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 $2.2 million will be reclassified as a reduction to interest expense.
We had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk as of December 31, 2023 and 2022 (dollars in thousands):
Period Number of Instruments Aggregate Notional Amount
As of December 31, 2023 4 $ 70,229 
As of December 31, 2022 4 73,392 
The following table presents the fair value of our interest rate swaps and their classification on the Consolidated Balance Sheets as of December 31, 2023 and 2022 (dollars in thousands):
Derivative Asset (Liability) Fair Value
Derivative Type Balance Sheet Location December 31, 2023 December 31, 2022
Derivatives Designated as Hedging Instruments:
Interest rate swaps Other assets, net $ 7,366  $ 9,007 
Total $ 7,366  $ 9,007 
The following table presents the amount of income (loss) recognized in comprehensive income within our consolidated financial statements for the years ended December 31, 2023, 2022, and 2021 (dollars in thousands):
For the Years Ended
December 31, 2023 December 31, 2022 December 31, 2021
Derivative in cash flow hedging relationship:
Interest rate swaps $ (1,641) $ 10,043  $ 464 
Total $ (1,641) $ 10,043  $ 464 
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 December 31, 2023, we did not have any derivatives in a net liability position, nor have we posted any collateral related to these agreements.