Shares of Farmland Partners (FPI 1.16%) fell 15.5% over the past week, according to data from S&P Global Market Intelligence, after the real estate company issued a tepid growth forecast and warned that its operating earnings could fall sharply in the coming year.
Farmland Properties purchased 20 properties and sold five in 2022. It also acquired land and buildings for four agriculture equipment dealerships.
Demand for farmland remains high, which is enabling the company to successfully lease its properties at attractive rates. Farmland Properties renewed 95% of its row crop fixed farm rent leases that expired in 2022 at an average rent increase of roughly 16%.
In all, total operating revenues rose by 8.9% year over year to $21.8 million. Its adjusted funds from operations (FFO), in turn, climbed 12.7% to $10 million.
However, adjusted FFO per share declined by 5.3% to $0.18, as stock sales increased its share count by a whopping 47% last year. The company has used the funds raised from these share offerings to acquire new properties and pay down its debt. The company ended 2022 with $439.5 million of total debt outstanding, down from $513.4 million at the end of 2021. Yet despite these moves to reduce its borrowings, higher interest rates are driving up FPI's financing costs.
"Inflation that is helping to push farmer profitability and land values to record levels is also leading to increased interest costs for the company and borrowers worldwide," CEO Paul Pittman said in a press release.
Guidance also probably disappointed investors. The midpoint of the company's revenue outlook for 2023 calls for growth of less than 1% compared with 2022.
Management also warned that the company's adjusted FFO per share could fall by roughly 30%, driven in part by lower crop sales and higher interest expense.
"Supply chain disruptions, weather events, and other factors have resulted in volatility in certain crop yields and crop prices," Pittman said.
Still, looking further ahead, Pittman sees encouraging trends that could help fuel FPI's expansion. "We remain positive on the outlook for the farm economy, as global food demand continues to be very strong and values of premium farms in our Corn Belt, Mississippi Delta, and Southeast regions continue to increase to their highest levels in years," Pittman said.