IPO Preview: Farmland Partners

Apr.10.14 | About: Farmland Partners (FPI)

Summary

Seeks to acquire high-quality primary row crop farmland.

Will not have any operating activity until the completion of this offering and the related formation transactions.

No indicated dividend payout rate.

Based in Westminster, CO, Farmland Partners (NYSE:FPI) scheduled a $70 million IPO on the NYSE with a market capitalization of $102 million at a price range midpoint of $15 for Thursday, April 10, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: Baird, BMO Capital Markets, Janney Montgomery Scott

Co-Managers: Mitsubishi UFJ Securities, Stephens

End of lockup (180 days): Tuesday, October 7, 2014

End of 25-day quiet period: Monday, May 5, 2014

Summary

FPI seeks to acquire high-quality primary row crop farmland located in agricultural markets throughout North America.

FPI will not have any operating activity until the completion of this offering and the related formation transactions.

Valuation

Glossary

Pre-IPO grade-score summary
http://gaskinsco.com/scr-rate.htm

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Farmland Partners

$102

39.2

-78.5

1.7

1.8

70%

Click to enlarge

Conclusion
No operations pre-IPO, proforma income statements show a loss. No indicated dividend payout rate.

The rating is avoid.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

FPI is an internally managed real estate company that owns and seeks to acquire high-quality primary row crop farmland located in agricultural markets throughout North America.

The substantial majority of the farms in FPI's initial portfolio are devoted to primary row crops, such as corn and soybeans, because FPI believes primary row crop farmland is likely to provide attractive risk-adjusted returns over time through a combination of stable rental income generation and value appreciation.

Upon completion of a series of formation transactions, FPI's initial portfolio will be comprised of 38 farms with approximately 7,300 total acres, including 33 farms in Illinois, four farms in Nebraska and one farm in Colorado.

In addition, FPI's initial portfolio will include three grain storage facilities. FPI was formed as a Maryland corporation in September 2013 to succeed to the business of its Predecessor.

FPI will not have any operating activity until the completion of this offering and the related formation transactions.

Accordingly, FPI believes that a discussion of the results of operations of Farmland Partners Inc. would not be meaningful, and FPI has therefore set forth below a discussion regarding the historical operations of its Predecessor only.

FPI's Predecessor, FP Land, is a Delaware limited liability company that is 100% owned by Pittman Hough Farms, an entity in which Mr. Pittman owns a 75% controlling interest and in which Mr. Hough and certain members of Mr. Hough's family own the remaining 25% interest.

FP Land owns 100% of the equity interests in two entities, which FPI refers to as the ownership entities, that directly wholly own the 38 farms and three grain storage facilities that comprise FPI's initial portfolio.

Upon completion of the FP Land Merger, FPI will acquire the 38 farms and three grain storage facilities owned indirectly by its Predecessor and assume the ownership and operation of its Predecessor's business.

Dividend Policy

FPI intends to make regular dividend payments.

In order to qualify as a REIT, FPI must distribute to its stockholders, on an annual basis, at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains.

Competition

Competition to FPI's efforts to acquire farmland can come from many different entities. Developers, municipalities, individual farm operators, agriculture corporations, institutional investors and others compete for ownership of farmland acreage.

Other investment firms that FPI might compete directly against could include agricultural investment firms such as Hancock Agricultural Investment Group, Prudential Agricultural Investments and UBS Agrivest LLC. These firms engage in the acquisition, asset management, valuation and disposition of farmland properties.

Use of proceeds

FPI expects to net $64 million from its IPO. Proceeds are allocated as follows:

$12 million to repay outstanding indebtedness, of which $766,000 was advanced by Pittman Hough Farms and will be reimbursed to Pittman Hough Farms with a portion of the net proceeds from this offering;

$55,000 (exclusive of the $766,000 to be reimbursed for amounts advanced by Pittman Hough Farms to repay certain indebtedness) to reimburse Pittman Hough Farms for amounts advanced or incurred in connection with this offering and the formation transactions; and

the remaining net proceeds, if any, for general corporate purposes, including working capital, future acquisitions and, potentially, paying distributions.

Disclaimer: This FPI IPO report is based on a reading and analysis of FPI's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.