Financial News

Farmland Partners Inc. Reports Full Year 2023 Results

Completed Nearly $200 million of Asset Sales, Demonstrating Gains, and Returning Capital to Shareholders

Farmland Partners Inc. (NYSE: FPI) (“FPI” or the “Company”) today reported financial results for the year ended December 31, 2023.

Selected Fiscal Year 2023 Highlights

During the year ended December 31, 2023, the Company:

  • recorded net income of $31.7 million, or $0.55 per share available to common stockholders, compared to $12.0 million, or $0.16 per share available to common stockholders for the same period in 2022;
  • recorded AFFO of $8.1 million, or $0.16 per share, compared to $15.8 million, or $0.30 per share, for the same period in 2022;
  • completed dispositions of 74 properties for approximately $195.5 million in aggregate consideration, recognized an aggregate gain on sale of approximately $36.1 million, and deferred an additional net gain on sale of $2.1 million in connection with dispositions of certain properties with seller financing;
  • declared a one-time special dividend of $0.21 per share of common stock and Class A Common OP Unit in December 2023 which was paid in January 2024;
  • completed acquisitions of four properties for total consideration of $22.2 million;
  • repurchased 6,551,087 shares of its common stock at a weighted average price of $11.00 per share;
  • decreased indebtedness by $76.4 million, from $439.5 million of total debt outstanding at December 31, 2022, or 40% of net real estate value, to $363.1 million at December 31, 2023, or 38% of net real estate value;
  • increased liquidity to $206.6 million as of December 31, 2023, compared to $176.7 million as of December 31, 2022; and
  • renewed fixed cash farm leases expiring in 2023, which represented approximately 14% of total revenue for 2023, at average rent increases of approximately 20%.

CEO Comments

Luca Fabbri, President and Chief Executive Officer: “Against a backdrop of uncertainty and poor performance in many real estate sectors, in 2023 farmland has yet again demonstrated its strength and stability thanks to its very different fundamentals. We have been able to renew our expiring leases with an average rent increase of approximately 20%, as a testimony of the strength of the farm economy and our tenant base. Our strategy has been to demonstrate concretely the value embedded in our portfolio, selectively disposing of assets and using proceeds to buy back stock at prices we believe to be significantly below fair value per share, reduce leverage, acquire other farms with better long term value generation potential, and distribute a special dividend to our shareholders. The vast majority of our asset sales, and related gains, occurred on farms outside the core of the Corn Belt region, which is the most valuable part of our farmland portfolio. In 2024 we plan to continue to look for opportunities to selectively prune our portfolio, albeit likely at a smaller scale, and further reduce our overhead expenses.”

Financial and Operating Results

  • The table below shows financial and operating results for the years ended December 31, 2023 and 2022.

(in thousands)

 

For the years ended

December 31,

 

 

 

 

Financial Results:

 

2023

 

2022

 

 

Change

Net Income

 

$

31,681

 

$

11,960

 

 

164.9

 

%

Net income per share available to common stockholders (1)

 

$

0.55

 

$

0.16

 

 

243.8

 

%

AFFO

 

$

8,140

 

$

15,761

 

 

(48.4

)

%

AFFO per weighted average common shares

 

$

0.16

 

$

0.30

 

 

(46.7

)

%

Adjusted EBITDAre

 

$

33,403

 

$

34,759

 

 

(3.9

)

%

 

 

 

 

 

 

 

 

 

 

 

Operating Results:

 

 

 

 

 

 

 

 

 

 

Total Operating Revenues

 

$

57,466

 

$

61,210

 

 

(6.1

)

%

Net Operating Income (NOI)

 

$

44,052

 

$

47,054

 

 

(6.4

)

%

___________________

NM = Not Meaningful

(1)

Basic net income per share available to common stockholders. See “Note 9—Stockholders’ Equity and Non-controlling Interests” in the Annual Report on Form 10-K for the year ended December 31, 2023, when filed, for more information.

  • See “Non-GAAP Financial Measures” for complete definitions of AFFO, Adjusted EBITDAre, and NOI and the financial tables accompanying this press release for reconciliations of net income to AFFO, Adjusted EBITDAre and NOI.

Acquisition and Disposition Activity

  • During the year ended December 31, 2023, the Company acquired four properties for total consideration of $22.2 million.
  • During the year ended December 31, 2023, the Company completed 74 property dispositions for approximately $195.5 million in aggregate consideration, including $11.8 million in seller financing, and total gain on sale of $36.1 million. In addition, the Company deferred a net gain on sale of $2.1 million in connection with dispositions of certain properties with seller financing.

Balance Sheet

  • The Company had total debt outstanding of $363.1 million at December 31, 2023, or 38% of net real estate value, compared to total debt outstanding of $439.5 million at December 31, 2022, or 40% of net real estate value.
  • At December 31, 2023, the Company had access to liquidity of $206.6 million, consisting of $5.5 million in cash and $201.1 million in undrawn availability under its credit facilities compared to cash of $7.7 million and $169.0 million in undrawn availability under its credit facilities at December 31, 2022.
  • During the year ended December 31, 2023, the Company repurchased 6,551,087 shares of its common stock at a weighted average price of $11.00 per share.
  • In December 2023, the Company declared a one-time special dividend of $0.21 per share of common stock and Class A Common OP Unit which was paid in January 2024;
  • As of February 23, 2024, the Company had 49,231,777 shares of common stock outstanding on a fully diluted basis.

Dividend Declarations

The Company’s Board of Directors declared a quarterly cash dividend of $0.06 per share of common stock and Class A Common OP unit. The dividends are payable on April 15, 2024, to stockholders and common unit holders of record on April 1, 2024.

2023 Earnings Guidance and Supplemental Package

For 2024 earnings guidance, please see page 15 of the supplemental package, which can be accessed through the Investor Relations section of the Company's website.

Conference Call Information

The Company has scheduled a conference call on February 29, 2024, at 11:00 a.m. (U.S. Eastern Time) to discuss the financial results and provide a company update.

The call can be accessed live over the phone by dialing 1-888-596-4144 and using the conference ID 9397607. The conference call will also be available via a live listen-only webcast that can be accessed through the Investor Relations section of the Company's website, www.farmlandpartners.com.

A replay of the conference call will be available beginning shortly after the end of the event until March 10, 2024, by dialing 1-800-770-2030 and using the playback ID 9397607. A replay of the webcast will also be accessible on the Investor Relations section of the Company's website for a limited time following the event.

About Farmland Partners Inc.

Farmland Partners Inc. is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of December 31, 2023, the Company owns and/or manages approximately 171,100 acres in 16 states, including Arkansas, California, Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina and Texas. In addition, the Company owns land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand. The Company has approximately 26 crop types and over 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014. Additional information: www.farmlandpartners.com or (720) 452-3100.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the federal securities laws, including, without limitation, statements with respect to our outlook and the outlook for the farm economy generally, proposed and pending acquisitions and dispositions, financing activities, crop yields and prices and anticipated rental rates. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” or similar expressions or their negatives, as well as statements in future tense. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the on-going war in Ukraine and its impact on the world agriculture market, world food supply, the farm economy, and our tenants’ businesses; general volatility of the capital markets and the market price of the Company’s common stock; changes in the Company’s business strategy, availability, terms and deployment of capital; the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all; availability of qualified personnel; changes in the Company’s industry, interest rates or the general economy; adverse developments related to crop yields or crop prices; the degree and nature of the Company’s competition; the timing, price or amount of repurchases, if any, under the Company's share repurchase program; the ability to consummate acquisitions or dispositions under contract; and the other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and the Company’s other filings with the Securities and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Farmland Partners Inc.

Consolidated Balance Sheets

As of December 31, 2023 and 2022

(in thousands)

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2023

 

2022

ASSETS

 

 

 

 

 

 

Land, at cost

 

$

869,848

 

 

$

980,521

 

Grain facilities

 

 

12,222

 

 

 

11,349

 

Groundwater

 

 

11,472

 

 

 

17,682

 

Irrigation improvements

 

 

41,988

 

 

 

50,097

 

Drainage improvements

 

 

10,315

 

 

 

12,543

 

Permanent plantings

 

 

39,620

 

 

 

50,394

 

Other

 

 

4,696

 

 

 

6,967

 

Construction in progress

 

 

4,453

 

 

 

14,810

 

Real estate, at cost

 

 

994,614

 

 

 

1,144,363

 

Less accumulated depreciation

 

 

(33,083

)

 

 

(38,447

)

Total real estate, net

 

 

961,531

 

 

 

1,105,916

 

Deposits

 

 

426

 

 

 

148

 

Cash and cash equivalents

 

 

5,489

 

 

 

7,654

 

Assets held for sale

 

 

28

 

 

 

33

 

Loans and financing receivables, net

 

 

31,020

 

 

 

21,921

 

Right of use asset

 

 

399

 

 

 

325

 

Deferred offering costs

 

 

 

 

 

63

 

Accounts receivable, net

 

 

7,743

 

 

 

7,055

 

Derivative asset

 

 

1,707

 

 

 

2,084

 

Inventory

 

 

2,335

 

 

 

2,808

 

Equity method investments

 

 

4,136

 

 

 

4,185

 

Intangible assets, net

 

 

2,035

 

 

 

2,055

 

Goodwill

 

 

2,706

 

 

 

2,706

 

Prepaid and other assets

 

 

2,447

 

 

 

3,196

 

TOTAL ASSETS

 

$

1,022,002

 

 

$

1,160,149

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Mortgage notes and bonds payable, net

 

$

360,859

 

 

$

436,875

 

Lease liability

 

 

399

 

 

 

325

 

Dividends payable

 

 

13,286

 

 

 

3,333

 

Accrued interest

 

 

4,747

 

 

 

4,135

 

Accrued property taxes

 

 

1,898

 

 

 

2,008

 

Deferred revenue

 

 

2,149

 

 

 

44

 

Accrued expenses

 

 

7,854

 

 

 

9,215

 

Total liabilities

 

 

391,192

 

 

 

455,935

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable non-controlling interest in operating partnership, Series A preferred units

 

 

101,970

 

 

 

110,210

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Common stock, $0.01 par value, 500,000,000 shares authorized; 48,002,716 shares issued and outstanding at December 31, 2023, and 54,318,312 shares issued and outstanding at December 31, 2022

 

 

466

 

 

 

531

 

Additional paid in capital

 

 

577,253

 

 

 

647,346

 

Retained earnings

 

 

31,411

 

 

 

3,567

 

Cumulative dividends

 

 

(95,939

)

 

 

(73,964

)

Other comprehensive income

 

 

2,691

 

 

 

3,306

 

Non-controlling interests in operating partnership

 

 

12,958

 

 

 

13,218

 

Total equity

 

 

528,840

 

 

 

594,004

 

 

 

 

 

 

 

 

TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS IN OPERATING PARTNERSHIP AND EQUITY

 

$

1,022,002

 

 

$

1,160,149

 

Farmland Partners Inc.

Consolidated Statements of Operations

Years Ended December 31, 2023 and 2022

(in thousands except per share amounts)

 

 

 

 

 

 

 

 

 

For the Years Ended

 

 

December 31,

 

 

2023

 

2022

OPERATING REVENUES:

 

 

 

 

 

 

Rental income

 

$

49,185

 

 

$

48,879

 

Crop sales

 

 

2,257

 

 

 

5,372

 

Other revenue

 

 

6,024

 

 

 

6,959

 

Total operating revenues

 

 

57,466

 

 

 

61,210

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

7,499

 

 

 

6,960

 

Property operating expenses

 

 

8,660

 

 

 

8,190

 

Cost of goods sold

 

 

4,754

 

 

 

5,966

 

Acquisition and due diligence costs

 

 

17

 

 

 

111

 

General and administrative expenses

 

 

11,274

 

 

 

12,005

 

Legal and accounting

 

 

1,279

 

 

 

2,874

 

Impairment of assets

 

 

5,840

 

 

 

 

Other operating expenses

 

 

144

 

 

 

130

 

Total operating expenses

 

 

39,467

 

 

 

36,236

 

 

 

 

 

 

 

 

OTHER (INCOME) EXPENSE:

 

 

 

 

 

 

Other (income)

 

 

(39

)

 

 

(663

)

(Income) from equity method investment

 

 

(1

)

 

 

(52

)

(Gain) on disposition of assets, net

 

 

(36,133

)

 

 

(2,641

)

Interest expense

 

 

22,657

 

 

 

16,143

 

Total other expense

 

 

(13,516

)

 

 

12,787

 

 

 

 

 

 

 

 

Net income before income tax (benefit) expense

 

 

31,515

 

 

 

12,187

 

 

 

 

 

 

 

 

Income tax (benefit) expense

 

 

(166

)

 

 

227

 

 

 

 

 

 

 

 

NET INCOME

 

 

31,681

 

 

 

11,960

 

 

 

 

 

 

 

 

Net (income) attributable to non-controlling interests in operating partnership

 

 

(768

)

 

 

(286

)

 

 

 

 

 

 

 

Net income attributable to the Company

 

 

30,913

 

 

 

11,674

 

 

 

 

 

 

 

 

Nonforfeitable distributions allocated to unvested restricted shares

 

 

(157

)

 

 

(63

)

Distributions on Series A Preferred Units

 

 

(2,970

)

 

 

(3,210

)

 

 

 

 

 

 

 

Net income available to common stockholders of Farmland Partners Inc.

 

$

27,786

 

 

$

8,401

 

 

 

 

 

 

 

 

Basic and diluted per common share data:

 

 

 

 

 

 

Basic net income available to common stockholders

 

$

0.55

 

 

$

0.16

 

Diluted net income available to common stockholders

 

$

0.53

 

 

$

0.16

 

Basic weighted average common shares outstanding

 

 

50,243

 

 

 

50,953

 

Diluted weighted average common shares outstanding

 

 

58,292

 

 

 

50,953

 

Dividends declared per common share

 

$

0.24

 

 

$

0.23

 

 
Please note: a presentation change to the consolidated statements of operations now groups tenant reimbursement into rental income. Please see “Note 2—Revenue Recognition” of the Annual Report on Form 10-K for the year ended December 31, 2023, when filed, for the detailed components of rental income.

Farmland Partners Inc.

Reconciliation of Non-GAAP Measures

Years Ended December 31, 2023 and 2022

 

 

 

 

 

 

 

 

 

For the years ended

December 31,

(in thousands except per share amounts)

 

2023

 

2022

Net income

 

$

31,681

 

 

$

11,960

 

(Gain) on disposition of assets, net

 

 

(36,133

)

 

 

(2,641

)

Depreciation, depletion and amortization

 

 

7,499

 

 

 

6,960

 

Impairment of assets

 

 

5,840

 

 

 

 

FFO

 

$

8,887

 

 

$

16,279

 

 

 

 

 

 

 

 

Stock-based compensation and incentive

 

 

2,008

 

 

 

1,999

 

Deferred impact of interest rate swap terminations

 

 

198

 

 

 

582

 

Real estate related acquisition and due diligence costs

 

 

17

 

 

 

111

 

Distributions on Preferred units and stock

 

 

(2,970

)

 

 

(3,210

)

AFFO

 

$

8,140

 

 

$

15,761

 

 

 

 

 

 

 

 

AFFO per diluted weighted average share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

AFFO weighted average common shares

 

 

51,810

 

 

 

52,531

 

 

 

 

 

 

 

 

Net income available to common stockholders of Farmland Partners Inc.

 

$

0.55

 

 

$

0.16

 

Income available to redeemable non-controlling interest and non-controlling interest in operating partnership

 

 

0.08

 

 

 

0.08

 

Depreciation, depletion and amortization

 

 

0.14

 

 

 

0.13

 

Impairment of assets

 

 

0.11

 

 

 

0.00

 

Stock-based compensation and incentive

 

 

0.04

 

 

 

0.04

 

(Gain) on disposition of assets, net

 

 

(0.70

)

 

 

(0.05

)

Distributions on Preferred units and stock

 

 

(0.06

)

 

 

(0.06

)

AFFO per diluted weighted average share

 

$

0.16

 

 

$

0.30

 

 

 

 

 

 

 

 

 

 

For the years ended

December 31,

(in thousands)

 

2023

 

2022

Net income

 

$

31,681

 

 

$

11,960

 

Interest expense

 

 

22,657

 

 

 

16,143

 

Income tax (benefit) expense

 

 

(166

)

 

 

227

 

Depreciation, depletion and amortization

 

 

7,499

 

 

 

6,960

 

Impairment of assets

 

 

5,840

 

 

 

 

(Gain) on disposition of assets, net

 

 

(36,133

)

 

 

(2,641

)

EBITDAre

 

$

31,378

 

 

$

32,649

 

 

 

 

 

 

 

 

Stock-based compensation and incentive

 

 

2,008

 

 

 

1,999

 

Real estate related acquisition and due diligence costs

 

 

17

 

 

 

111

 

Adjusted EBITDAre

 

$

33,403

 

 

$

34,759

 

Farmland Partners Inc.

Reconciliation of Non-GAAP Measures

Years Ended December 31, 2023 and 2022

 

 

 

 

 

 

 

 

 

For the years ended

December 31,

($ in thousands)

 

2023

 

2022

OPERATING REVENUES:

 

 

 

 

 

 

Rental income

 

$

49,185

 

 

$

48,879

 

Crop sales

 

 

2,257

 

 

 

5,372

 

Other revenue

 

 

6,024

 

 

 

6,959

 

Total operating revenues

 

 

57,466

 

 

 

61,210

 

 

 

 

 

 

 

 

Property operating expenses

 

 

8,660

 

 

 

8,190

 

Cost of goods sold

 

 

4,754

 

 

 

5,966

 

NOI

 

 

44,052

 

 

 

47,054

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

7,499

 

 

 

6,960

 

Acquisition and due diligence costs

 

 

17

 

 

 

111

 

General and administrative expenses

 

 

11,274

 

 

 

12,005

 

Legal and accounting

 

 

1,279

 

 

 

2,874

 

Impairment of assets

 

 

5,840

 

 

 

 

Other operating expenses

 

 

144

 

 

 

130

 

Other (income)

 

 

(39

)

 

 

(663

)

(Income) from equity method investment

 

 

(1

)

 

 

(52

)

(Gain) loss on disposition of assets, net

 

 

(36,133

)

 

 

(2,641

)

Interest expense

 

 

22,657

 

 

 

16,143

 

Income tax (benefit) expense

 

 

(166

)

 

 

227

 

NET INCOME

 

$

31,681

 

 

$

11,960

 
Please note: a presentation change to the consolidated statements of operations now groups tenant reimbursement into rental income. Please see “Note 2—Revenue Recognition” of the Annual Report on Form 10-K for the year ended December 31, 2023, when filed, for the detailed components of rental income.

Non-GAAP Financial Measures

The Company considers the following non-GAAP measures as useful to investors as key supplemental measures of its performance: FFO, NOI, AFFO, EBITDAre and Adjusted EBITDAre. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of the Company’s operating performance. FFO, NOI, AFFO, EBITDAre and Adjusted EBITDAre, as calculated by the Company, may not be comparable to other companies that do not define such terms exactly as the Company.

FFO

The Company calculates FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income (loss) (calculated in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate related depreciation, depletion and amortization (excluding amortization of deferred financing costs), impairment write-downs of depreciated property, and adjustments for unconsolidated partnerships and joint ventures. Management presents FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring the Company’s operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from sales of depreciable operating properties, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. The Company also believes that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company’s operating performance with that of other REITs. However, other equity REITs may not calculate FFO in accordance with the NAREIT definition as the Company does, and, accordingly, the Company’s FFO may not be comparable to such other REITs’ FFO.

AFFO

The Company calculates AFFO by adjusting FFO to exclude the income and expenses that the Company believes are not reflective of the sustainability of the Company’s ongoing operating performance, including, but not limited to, real estate related acquisition and due diligence costs, stock-based compensation and incentive, deferred impact of interest rate swap terminations, and distributions on the Company’s preferred units.

Changes in GAAP accounting and reporting rules that were put in effect after the establishment of NAREIT’s definition of FFO in 1999 result in the inclusion of a number of items in FFO that do not correlate with the sustainability of the Company’s operating performance. Therefore, in addition to FFO, the Company presents AFFO and AFFO per share, fully diluted, both of which are non-GAAP measures. Management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO. AFFO is not intended to represent cash flow or liquidity for the period and is only intended to provide an additional measure of the Company’s operating performance. Even AFFO, however, does not properly capture the timing of cash receipts, especially in connection with full-year rent payments under lease agreements entered into in connection with newly acquired farms. Management considers AFFO per share, fully diluted to be a supplemental metric to GAAP earnings per share. AFFO per share, fully diluted provides additional insight into how the Company’s operating performance could be allocated to potential shares outstanding at a specific point in time. Management believes that AFFO is a widely recognized measure of the operations of REITs and presenting AFFO will enable investors to assess the Company’s performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and AFFO per share, fully diluted and, accordingly, the Company’s AFFO and AFFO per share, fully diluted may not always be comparable to AFFO and AFFO per share amounts calculated by other REITs. AFFO and AFFO per share, fully diluted should not be considered as an alternative to net income (loss) or earnings per share (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to net income (loss) earnings per share (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor are they indicative of funds available to fund the Company’s cash needs, including its ability to make distributions.

EBITDAre and Adjusted EBITDAre

The Company calculates Earnings Before Interest Taxes Depreciation and Amortization for real estate (“EBITDAre”) in accordance with the standards established by NAREIT in its September 2017 White Paper. NAREIT defines EBITDAre as net income (calculated in accordance with GAAP) excluding interest expense, income tax, depreciation and amortization, gains or losses on disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s pro rata share of EBITDAre of unconsolidated affiliates. EBITDAre is a key financial measure used to evaluate the Company’s operating performance but should not be construed as an alternative to operating income, cash flows from operating activities or net income, in each case as determined in accordance with GAAP. The Company believes that EBITDAre is a useful performance measure commonly reported and will be widely used by analysts and investors in the Company’s industry. However, while EBITDAre is a performance measure widely used across the Company’s industry, the Company does not believe that it correctly captures the Company’s business operating performance because it includes non-cash expenses and recurring adjustments that are necessary to better understand the Company’s business operating performance. Therefore, in addition to EBITDAre, management uses Adjusted EBITDAre, a non-GAAP measure.

The Company calculates Adjusted EBITDAre by adjusting EBITDAre for certain items such as stock-based compensation and incentive and real estate related acquisition and due diligence costs that the Company considers necessary to understand its operating performance. The Company believes that Adjusted EBITDAre provides useful supplemental information to investors regarding the Company’s ongoing operating performance that, when considered with net income and EBITDAre, is beneficial to an investor’s understanding of the Company’s operating performance. However, EBITDAre and Adjusted EBITDAre have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

In prior periods, the Company has presented EBITDA and Adjusted EBITDA. In accordance with NAREIT’s recommendation, beginning with the Company’s reported results for the three months ended March 31, 2018, the Company is reporting EBITDAre and Adjusted EBITDAre in place of EBITDA and Adjusted EBITDA.

Net Operating Income (NOI)

The Company calculates net operating income (NOI) as total operating revenues (rental income, tenant reimbursements, crop sales and other revenue), less property operating expenses (direct property expenses and real estate taxes), less cost of goods sold. Since net operating income excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expenses, other income and losses and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and leasing farmland real estate, providing a perspective not immediately apparent from net income. However, net operating income should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect general and administrative expenses, interest expense, depreciation and amortization costs, other income and losses.

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