Farmland Partners aims to bridge the GAAP

For the first time, Farmland Partners shared a net operating income figure on its earnings call this week, alongside readings of non-GAAP revenue, designed to give investors a clearer picture of the annual rhythms of its business.

On its first-quarter earnings call Tuesday, Farmland Partners (FPI) for the first time released a net operating income figure – alongside estimates of other earnings – at $5.3 million.

Previously, Farmland Partners had not released a figure for NOI, a measure that falls outside of generally accepted accounting principals. Chairman and chief executive Paul Pittman said on the call that FPI was releasing the numbers in hopes of improving the value of its stock, which has under-performed and restrained the company’s acquisitions amidst a market he described as offering “incredible” opportunities.

The farmland REIT also reported a net income loss of $2 million, and $7.15 million in GAAP revenue in Q1. The company also provided measures of $2.43 million in additional revenues not reflected by GAAP that came from its acquisition of American Farmland Company, leases and acquisitions signed intra-quarter and lease termination payments.

Pittman told Agri Investor that providing the new information was part of the company’s gradual development and was designed to encourage investors not to overreact to quarterly reporting on what is fundamentally an annual business.

FPI will provide the net operating income figure every quarter going forward, Pittman said, and information on revenue from transaction closings and lease rentals between quarters when necessary.

Paul Pittman
Paul Pittman

“GAAP accounting, for better or for worse, is how people keep score,” Pittman said. “What we try to do is minimize these discrepancies between economic reality and GAAP accounting as much as we can. In a quarter where they are major – in this case a couple million dollars – it’s worth pointing out to people.”

David Rodgers, senior real estate research analyst at Robert W. Baird, told Agri Investor that the difference between GAAP-measured revenue and FPI’s actual business is reflected by the fact that the company received $17 million in Q1 rental income, but only recognized about $5 million in NOI.

FPI already releases statistics that allow analysts to approximate a NOI figure, according to Rodgers, who said the statistic is an important measure used in evaluating REITs in other property sectors.

He said that FPI’s move to provide more information was a step in the right direction that would help improve the stock price, but Rodgers highlighted that the underlying business remained the same.

“Not much has changed on any of the farms,” Rodgers said. “This is all happening because accountants and lawyers in Denver decided they need to do certain things for GAAP reasons.”