Farmland Partners Inc. announced that it has entered into a purchase agreement to acquire approximately 22,300 acres of farmland in Illinois for a total purchase price of $197 million.
The consideration consists of $50 million in cash, a combination of common stock of the Company and common units of limited partnership interest in the Company's operating partnership ("OP Units") valued at $30 million and $117 million in newly classified preferred OP Units ("Preferred OP Units").
The 2,608,695 shares common stock and OP Units to be issued were valued at $11.50 per share. The Preferred OP Units will receive 3.0% annual cash distributions and will become convertible into OP Units after 10 years. Beginning on the fifth anniversary of issuance, the Company will have an option to call the Preferred OP Units for cash at par plus all accrued but unpaid distributions.
While no lease agreements have been entered into as of yet, the Company intends to negotiate new lease agreements with the tenants who are currently farming the properties. The acquisition is expected to close in the first quarter of 2016, subject to customary closing conditions, including satisfactory completion of the Company's due diligence.
After closing, the Company intends to use the acquired properties as collateral for additional secured debt, which is expected to provide approximately $100 million of capital for additional acquisitions, many of which already have been identified and are in various stages of due diligence and negotiation.
"This farmland acquisition, one of the largest ever, will be a landmark transaction for us, increasing our acreage from approximately 74,400 to nearly 100,000," said Paul Pittman, CEO of the Company.
"The seller has accumulated, over decades, a portfolio of some of the best farmland in Illinois. On top of the benefit of scale, the transaction will strengthen our balance sheet from the financing structure that provides us with a low cost, long-term preferred equity.
Further demonstrating the efficiency of our business model, this transaction will add $197 million of assets totaling over 22,000 acres, which are expected to generate over $6 million in revenue annually, without adding a single employee."
This transaction is expected to significantly strengthen the Company's position in one of the best primary crop growing regions in the world, in step with the Company's strategy to invest in the global food demand theme.
Although no assurances can be given, based on our expectation of the revenue to be generated through this transaction and our assumptions for future potential acquisitions that may be financed by the additional secured debt described above, we expect the overall impact of this transaction to be accretive to AFFO per share by approximately $0.10.
We can provide no assurances that any of our acquisitions under contract or other future acquisitions will close on the timeline that we anticipate, or at all, or that the rents we obtain on acquired farmland will be consistent with our current projections, or that the impact on AFFO will be in the amounts we currently anticipate.