Q2 2021 Farmland Partners Inc Earnings Call
Good day, everyone and welcome to the farmland Partners, Inc. Second quarter 2021 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist progressive and the store key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask a question and you May Press Star then 1. Please note that this event is being recorded.
I would now like to turn the conference over to Paul Pittman, Chairman and Chief Executive Officer. Please go ahead.
Thank you good morning, and welcome to farmland partners second quarter 2021 earnings conference call and webcast.
Appreciate you taking the time to join US for these calls are very important opportunity to share with you our thinking and our strategy.
And a less formal format than public filings and press releases with me today is Luca Fabbri, the company's Chief Financial Officer, I will now turn it over to Luca for some customary preliminary remarks.
Thank you Paul and thanks to everybody who is on this call live. This morning always listening to this call to discuss the recording.
The second quarter earnings press release went out yesterday afternoon.
This call is being recorded and a replay will be available shortly after the and through August 15, 2021, the phone numbers to access the replay are provided in the earnings press release.
For those of you who are listening to the rebroadcast of this presentation. Please remember that the remarks made herein and as of today August 5.2021 and have not been updated subsequent to this initial earnings call.
And this call we will make certain forward looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions and the impact of acquisitions dispositions and financing activities.
Business development opportunities and we also make some comments on our outlook for our business rents and the broader agricultural markets. We will also discuss certain non-GAAP financial measures, including net operating income and <unk>.
And adjusted <unk>, EBITDA and adjusted EBITDA definitions.
Definitions of these non-GAAP and measures as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing second quarter earnings, which is available on our website www dot farmland partners Stockholm and is furnished as an exhibit to our current report on form 8-K dated August 4.2021.
Non.
Listeners are cautioned that these statements are subject to certain risks and uncertainties many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations and we advise listeners to review the risk factors include discussing our press release yesterday.
After market close and in documents, we have filed with or furnished to the SEC.
I would now like to turn the call back to our chairman and CEO of pulp and then Paul.
Thank you very much Luca.
And so.
Where we sit today as a company has me more optimistic than I have been since our IPO.
7 years ago.
This was a solid quarter.
But for the litigation expense.
I'll turn to the company specific items and just a moment, but a few comments about the general market trends and our industry.
Farmer farmer profitability is up materially.
It is probably back to the levels, we experienced in 2012 and 13 era.
And it's been a dramatic and rapid recovery of farmer profitability.
Since last fall.
The big driver there of course is grain prices.
But importantly, this is a demand driven bull market.
And 1 characteristics of demand driven bull markets as they usually last for a reasonably long time.
And at least several years as opposed to a supply shortage bolt market, which can and almost overnight when supply recovers.
And the AG markets, but this demand driven bull market is likely to be with us.
For quite some time.
What that means in terms of the operating business itself is that our rent renewals that we are doing right now and this is really the first time, we've been renewing leases and a strong farm economy.
Because the turnaround occurred.
After we put most of the 2021 leases in place because we're renewing 2022 leases, we're getting increases and row crop rents.
And that or at least and the 7% to 10% range and some as high as 20% or more.
Land prices are also up quite dramatically.
We have been turning down offers from some of our properties that are materially above what we have paid as many of you know.
Over the last several years, even in a down market, we sold quite a few properties that something in the neighborhood of 15 or 20% premium to our purchase price.
And we strongly believe that the assets we own are rapidly appreciating and we'll continue to do so.
For quite some time.
I think the land value appreciation trend should last for several years, it's hard to predict out beyond 2 or 3 years and I.
Inc. We will have that land depreciation trend.
With us for quite some time on.
We have talked in the past that are in a V was and the $14 range.
I don't want to get too specific here because as many of you may know the USDA land value survey comes out tomorrow, and we will do some updating a and b when that occurs but we assume that we are pushing eating.
Substantially above the $14 and a V and.
And going to continue to go higher.
And a sort of non AG related issue that is very powerful for farmland values of course is inflation.
Yeah.
Some different points of view here, but certainly mine is that inflation is with us likely to be here.
With us for quite some time, you can certainly see it and the pricing of almost all goods.
That is obviously very good.
For farmland.
Turning specifically to operational and financial performance as I alluded to a few minutes ago and there really is a lag of almost a year before.
And the time the farm economy turns and we start to really see it and our profit and loss statement and the reason for that of course is that we roll over our leases and we roll over about a third of them every year.
So when we rolled the leases for the 2021 year late last summer and during the fall.
In most cases, we weren't and a strong AG economy yet.
As we have gotten to this summer we are at we're rolling those leases over and a very powerful economy, and having a very strong success with lease renewals.
We are back to buying farms and as you've seen and some press releases with bought quite a few farms and we will continue to do that.
And we're finding from time to time, some relative bargains, even though its and appreciating market and we will continue to grow the company.
As you probably noticed in our press release, a few days ago, we have reopened and restarted our loan program.
And this has always been a good program and meets the needs of the farmers.
Putting loans out those loans are usually done in the neighborhood of and.
8% interest rate or an 8% return to the company.
We will and.
Tend to continue to expand that business.
<unk> loan program is fundamentally.
Based on asset values as opposed to cash flows of the farmers what were doing is giving them a chance to to access.
The pent up equity that they have and land.
We generally will only make a loan on a farm, we would be happy to own and if a farmer would happen to default on the loan.
We would continue to on that property.
Our off balance sheet asset management business has continued to grow with the opportunity Zone fund and we intend to help.
It helped that organization continue to grow that business, which obviously increases our management fees, but also increases the total number of acres, we own or manage we are also exploring some other off balance sheet.
Asset management businesses.
To increase the scale of the company and to give us multiple ways to grow.
Even if we are not happy with the equity price at a given point in time.
A few comments about the litigation and the other another big event and this last quarter.
Does that Quintin Matthews and also goes by the name of road a fortunate.
Admitted that essentially made up the entire article and that his article was part of and orchestrated shorten distort attack funded by a hedge fund.
It's a very powerful.
Admission that he made it went so far that he has been banned.
We understand it by seeking alpha from.
Further publishing of any sort Cynthia intentionally.
And.
You know it seems to have intentionally misled.
The market and caused a great deal of damage to the company and to our investors.
We believe that that is a major step and the repair of the company.
And managements reputation.
We also believe that it makes it clear that the class action is frivolous.
It does still continue against us believe it or not.
Hard to imagine with that admission on the part of road, a fortunate and why.
The plaintiffs and their counsel and the class action and think they still should have claims against the company.
But they are at this point at least still pursuing that we do hope they will.
Drop those cases.
Some of the derivative cases have been voluntarily dismissed since that occurred.
We think that the admission of road of Forbes just named.
Substantially increase the probability that we get a recovery from.
From Sabre point, the hedge fund that was involved with all of this.
And.
And we think that the elevated legal spend we've seen and the last quarter or 2 should taper off at least for a while.
And as some of these cases appear to either be going away.
Or lessening.
And the amount of time that we spend on them.
With that I'm going to turn it back over to Luca to go through some of the key financial highlights for the quarter Luca.
Thank you Paul I will not kind of read out to you and you know all the financial metrics that are contained in the earnings release that went out last night and there is however, 1 measure that I want to draw your attention to that I think is the most meaningful if you look at the our financial performance year to date in terms of the SFO.
And you've probably seen and the our earnings release that we are showing at both <unk> is usually calculated and we also further adjusted EBITDA to kind of think houses the effect of the body is.
Legally kind of legal items and progress in terms on litigation.
On the and we believe that there's a lot there kind of really reflects our our 2 core business.
Year to date, we are showing a flow of negative <unk> <unk> versus negative <unk> <unk> for the same period last year now in this call and sorry, it's and improvement in this context I just wanted to demand you also that we have we are subject to a very high degree of seasonality and our earnings because.
While our cost structure is by and large.
Majority co.
Constant through the year, it kind of evenly spread through the 4 quarters of the year, our revenues tend to be very concentrated in the fourth quarter because of certain lead participating lease structures. So I'm just just a quick reminder, especially for newer shareholders.
The company recently.
Also wanted to mention our acquisition and disposition activity year to date, we have completed 4 acquisitions for almost $30 million. We've also sold 15 properties for a total consideration of $31 million and a gain of $3.5 million now the majority of these asset dispositions.
We're made 2 DOZ funds. So we are effectively retaining these asset base.
And as.
And kind of.
For revenue generation purposes through management fees.
In the Q, we incurred and new debt and the form of a short term bridge loan of $40 million.
On the interest.
<unk> actually for these loans was almost 50% paid by the seller of the property underlying just transaction.
Year to date, however, our in debt and total indebtedness is down $6 million.
No very much about certainly in line with our intent of gradually reducing the leverage in the company also in and we're seeing on a very strong cash position right now as of the end of the second quarter, we had.
We have about $40 million of liquidity available to us.
More for acquisitions and other purposes.
Also we have engaging quite a bit of activity of equity issuance activity through our other market program.
<unk>, we've issued about 2 million shares at an average price of about $13 and 11.
Generating net proceeds of a little over $25 million.
As we sit today the fully diluted share count of the company is 34 million 300035 shares.
This concludes my remarks. Thank you for your time this morning, and your interest and farmland partners.
Paul we would like to begin the question and answer session.
Thank you and we will now begin the question and answer session.
Ask a question you May press Star then 1 on your Touchtone phone.
And we're using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then 2 at this time, we will pause momentarily to assemble thereof.
Okay.
And my first question today will come from Dave Rodgers with Baird. Please go ahead.
Hi, Paul Hi, Luca Thanks for all the details in your prepared comments on Paul wanted to go back to the leasing spreads obviously, the first time I think since you've come public. We've seen these these strong leasing spreads. So it's a great thing to see him on.
I'm wondering if you could give us a little more detail on the 7% to 10% increase that you talked about maybe the percentage of acreage as a percentage of the portfolio in total that you achieve that on maybe some regional color and then any thoughts around kind of where permanent crops come in and if theres a base reset you would expect to see you at any point in the near term.
Yeah, so the 7% to 10% is what we what we currently would expect portfolio wide on renewals.
We think it may be a little bit of a conservative number.
But it's sort of based on the amount and it's kind of a conservative.
Parison of the relatively small percentage, we've already done and we probably have the re leasing process and we're 25% of it on.
Wait through it and the sense of at least a handshake or a signed lease.
Those numbers are coming in at that 7% to 10% range or above and many cases, so I'm comfortable saying that I think we'll get through the whole process.
7 to 10.
Or better, but a couple of things break our way we may come out on this at a plus 10%.
Across the board we.
And we have some large leases, where we're trying to we're 20% increases and.
If that happens it pulls the whole average up pretty substantially so look this this is a.
And <unk>.
Last quarter, if you recall I worked through some numbers about.
How the improved grain prices change profitability per acre and revenue per acre. If you remember that so think about it this way.
Revenue per acre from that farmers going up.
Bye.
By 2020%, 25%.
We frankly think rents on it would be going up almost that much maybe not all of it.
The biggest beneficiary of higher grain prices should be the farmer themselves with.
But the second biggest beneficiary on actually be the landlord and our view and.
So we're working pretty hard to push it in terms of regional color <unk>.
Strongest increases in the Midwest.
As you all probably recall like $400 million of our portfolios and the state of Illinois alone.
That'd be.
35% to 40% of the whole portfolios, there and those and the places where we're getting increases there.
Quite.
Quite strong really run on 10% or better and the Illinois renewals so far.
The rest of the other grain producing regions.
Planes Delta and southeast.
A little a little below that.
But more like maybe call it 7 or 8.9%.
But we think some of those will come.
Come around and be stronger as time goes by but as is typical.
The Midwest responds, most rapidly to changes and and crop price and terms of the rental market.
Important to note and I know you know this day, but embedded in your question.
We should see a significant increase in rents and each of the next 3 years, because we rollover as I said roughly a third of the portfolio at a time.
Okay.
Okay.
I appreciate that that color, Paul and I guess, maybe a follow up question with regard to the acquisitions and the pipeline can you talk about what the acquisition pipeline looks today I mean now that you are kind of back in the acquisition market give us a sense for what you've been underwriting and where the yields are coming out today. If you are seeing thats appreciation and land combined with the productivity.
Our cap rates changing much and what are your investment cap rates today.
Yes.
So the deals we've done recently here and had.
And we announced a really large transaction and in Louisiana, a month ago or so.
That transaction came in and kind of the low low to middle fours and terms of current yield on the cap rate on the property.
And we announced a couple of smaller transactions and we've done on another small 1 recently those are coming on and around 5.
We're actually very happy with those sorts of numbers.
Thank you.
We haven't added a lot of property and the core of the Midwest because we're so heavily weighted there already although we will continue to add those I think realistically those are going to be and the low threes.
We intend to continue to grow this portfolio kind of maintaining.
The cap rate against the asset value that we have today, if not and gradually improving it.
And it's really just a balance and how rapidly we want to grow if you drop if you drop your cap rate expectation by 10 or 15 basis points.
Which which actually is quite a bit when you think about it but.
But if you drop and that amount and you don't win almost every deal.
But we are.
We don't have unlimited cash and we're trying to do the best deals not all of the deals.
And so right now we're pretty happy with cap rates, but you know I think you should expect them to get done in the row crop area between a low of 3 and a high 5 or just over 5 and its very regional region regionally dependent where those cap rates come out.
And then sorry, just the early part of my question just the pipeline overall do you have a pipeline number or something that we do have a pipeline. We've got we've got quite a few deals. We've got a few under contract on right now and we've got quite a few we're looking at.
And I would certainly certainly measured and that kind of $50 million plus and pipeline not to say to all of those deals get done but we have.
And that's to keep us busy for the next couple of months for sure.
Alright, Thank you Paul.
Yeah.
And our next question will come from Rob Stevenson with Janney. Please go ahead.
Hi, Good afternoon, guys just to piggyback on Daves question. So in terms of.
And locations Youre targeting here going forward any differences to the historical mix of what you've done in the past or is it more of the same as anything looking particularly more attractive to you these days or less attractive.
So.
So let me start with a general and then go to the specific so the general posture and policy of the company is that we want to have a broad diversified portfolio that reflects food output on a nationwide basis.
That has historically meant and still does is something like 70.30.
Row crop.
So specialty.
And we will.
And relatively broad stroke stay close to that meaning kind of think of it as $60.40 to $75.25 kind of bracket is where we want to stay on.
As far as specific regions, though and a tactical sense.
We find as I said, the rent rent increases come more quickly and the Midwest and so does appreciation.
So we are actively and aggressively pursuing opportunities in the southeast the high plains and the Delta right now the biggest deal. We've done recently was in fact, and the Delta and what Louisiana, because you get sort of a brief window.
Where you know the appreciation is coming.
Because you're seeing it already and the Midwest, but it just hasn't quite shown up and the value expectations of sellers and some of the other regions away from the Midwest.
And Thats and Thats were just sort of trying to take advantage of that right now.
And so I'd say, we're a little more focused on the southeast and the Delta and the Midwest.
But the Midwest is such an important and growing region.
And we'll continue to grow the portfolio there as well just probably not quite as rapidly as we will on the delta and the southeast.
Okay, and then Paul how should we be thinking about acquisitions over the next couple of quarters on.
On balance on <unk> balance sheet versus doing deals.
For the managed portfolio.
Yes. So I think you should think most of them will be done and the Spi portfolio.
Unless it's in and an opportunity zone, we will do it yet FBI.
And even some of the deals and opportunity zones and will end up taking because I think we have.
Slightly higher access to capital and the opportunity Zone Fund does.
But.
We are.
We are and we think our shareholders should be largely and different.
If we do and the opportunity zone and we get it.
Nice fee income the phrase our overheads and we don't have to commit additional capital.
And if we do it and the in the in the public company owned portfolio as I call. It.
And then we get the <unk>.
Long term appreciation, we do have to finance the asset, but we also get the current yield.
We think it's a win win for shareholders to just fundamentally growth scale, and we love the idea of having ways to grow this business without necessarily having to.
Issue equity or raise debt on the directly on the balance sheet of the public company I think that's good for shareholders. Obviously, we're going down a path that many other Reits have gone down and other sectors and it's worked pretty well to be able to have multiple sleeves of capital.
To grow your portfolio.
And at all points in time, and so that's a path we're trying to follow.
Okay. That's helpful and then.
Earlier in the call Paul you said that Youre expecting the litigation cost moderate for some period of time, given how impactful every sort of half a million dollars is still to earnings what type of magnitude should we be expecting in terms of the tapering off of the litigation costs and the back half of the year you guys have been doing sort of call it $2.5 million.
Year to date, I mean does it have that is it a quarter of that.
Rough numbers, I mean, where should we be thinking how should we be thinking about that.
Yes.
And a hazard a guess because I'm a very direct person and that's you know, Rob, but I will certainly be wrong, but I'll give you my honest opinion.
I think it'll be in the neighborhood of half.
Or a little more than that but we still incur so think of it as 50% to 60% of what we've seen in the last couple of quarters. If you look at the posture of the 2 cases.
1 of the debt.
And the case.
Against Rota, fortunate and that and the hedge funds kind of 2 separate and enter brought to SAP and our entities that we're going after there.
Proto Guy Quinton Mathews has given up and accepted and admitted that he.
Fundamentally did something and proper.
And you know payments and a bunch of money and we will continue to pass so.
That would have to spend any money there anymore.
The business decision on the on on the case against save a point, which is in <unk>.
Texas courts.
And the federal system, but in Texas.
And I have to make a financial decision there on whether we think we can recover more than it cost to continue to book Sue It right now we think we can and.
So for now we're still go on after that case, it's on a pretty slow moving position right now.
The class action cases.
Which is which I really find just so frustrating.
It's hard to believe but I find the more frustrating.
And then the case and then we had against the appropriate traders and the shortened distort.
That those cases, and our opinion are driven by lawyers.
I mean, no 1 after what load of Forbes and a admitted.
Can believe that debt.
<unk> case to pursue against the company management.
And it's just it's just beyond the payable.
So frivolous.
So unfair to our existing shareholders and the company that we still have to litigate that but the court system is unfortunately incredibly tilted against companies and shareholders and in favor of class action and lawyers, so and it is what it is and we're going to continue to fight.
But some of the credit and a couple of the what they called the derivative cases and spoke stepped up and said, we'll voluntarily dismissing because given what Rota has admitted it doesn't make any sense to pursue and hopefully that will happen and the class actions again, though that cases and a bit of a slow moving point of view the disc.
<unk> and that case is closed and discovery was of course 1 of the biggest.
Pieces of the cost structure and that case.
Okay are there any important dates and we should be aware of with regards to either of those outstanding litigation and the remainder on 2021 are they likely to be stretching into 2022 at this point.
Well I think the class action is likely to get.
You know it's <unk>.
Probably a late fourth quarter resolution and the class action cases would be my point of view.
The next big not that it will get to trial by them, but thats the next.
Big chance to see that case disposed of in its entirety I think.
And as far as the case against the hedge funds.
And if we continue to move forward on that which I, which at least now I think we will and like I said, it's really just a business judgment.
About whether we can recover more than we than our cost to get it.
That Gainesville drag into the 2022 year. Unfortunately.
Okay.
And we'll be doing will be the 1.
On that the 1 that I can't just stop doing it.
This action case.
And they they make stuff up and we have to respond.
It's the water torture, it's unbelievable.
Alright, and then last 1 from me Foucault were.
From a debt cost standpoint today, where are you finding the best capital and what is that being priced out for you. These days.
Well right now.
Average cost of debt across the entire debt.
Loan portfolio that we have is just shy of 3%.
We are looking.
Some of the repricing going forward.
A little bit on there and some uncertainty mostly because of what's going on with LIBOR. So there is still we're still going through a process of figuring out what what's the right benchmark.
I'm moving to the future replacement of LIBOR is not quite ready for prime time, yet and we find that the prime rate is not a good kind of benchmark. So it's a little bit uncertain on how that will kind of play out in the here and the future, but we on an active conversations with our with <unk>.
Lenders existing and new so.
And that should be able to give some more kind of a meaningful update maybe next quarter.
Okay. Thanks, guys I appreciate the time.
Okay.
And once again, if he would like to ask a question. Please press Star then 1 our next question will come from Craig Kucera with B Riley Securities. Please go ahead.
Hey, guys.
And we saw sequential pick up and the cost of goods sold line item I believe that's affiliated with your development properties can you comment on what's your budgeting for 2021 in that regard for replanting trees, and vines and things of that nature.
Yeah.
Yes.
Luca I'm going to turn this to you if you know the answer.
That line I don't think reflects volume.
<unk> and.
Trees that reflects.
And the input costs.
Accumulated over time as it relates to the farms, we direct operate.
When we direct operating it is usually a farm that has and some sort of redevelopment process.
But it won't be you would end up capitalizing that.
The tree and the volume cost. This is the actual operating cost. So those farms and then offset by the revenues look I don't know if you can take it to.
And to the specifics.
That Craig asked for I certainly cant.
Yes.
And I also don't have the figure on my Fingertips day, Youre asking for Craig However debt.
Variation in debt number from year to year is not so much related to the 2 kind of input costs, but to the number of properties and to which properties. We are directly operating and each given crop year.
So the.
On the other side on the revenue side. There is some variability also within the same at the same time and just as a reminder.
And we usually direct operate on a very opportunistic basis.
It's kind of depending on specific circumstances with tenants and <unk>.
Crops and development status and so on so forth.
So hope that helps but unfortunate I don't have the specific number ready for you.
And that's fine I can I can circle back offline.
And I guess my second question relates to the decision to reopen farm lending.
Is that really tied to kind of getting close to winding down litigation and feeling like a lot of those allegations are behind you or are you actually seeing increased demand for those types of loans that you want to take advantage there.
We had incredible demand for that program all the way through the last 3 years and.
And we lost an immense amount of revenue by not keeping that program open, but we thought that since it was the core.
Of the accusations against the company.
And then it was just sort of imprudent to keep making loans.
Plus we were taking our capital and buying our own stock back at something like 50 cents on the dollar and our opinion and so it just didn't seem like a very good place to deploy capital with those 2.
Issues overhanging.
And as we saw the stock price recover and then.
And they had.
The 1 of the.
The major sort of perpetrators of the short and distort attack admit that.
The other.
This article was largely falls.
We felt like it was great to get back and that business.
And we like about that business is.
That it addresses 1 of the challenges of our asset class. This is a relatively low current yield asset class and has a wonderful long term hold depreciation low risk asset class, but look investors once and yield as well and so the long program really helps us and our view there.
Because it gives us a reasonably strong current yield.
And.
And still exposure to farmland with the relatively low risk profile associated with that.
And then on the off chance that it alone doesn't get repaid we're happy to own those assets.
So, we're we're kind of thrilled to be back and the business.
Just felt like the stock price from sort of depressed and it was and the litigation was as heated as it was for a while and it was.
Hard to be keep doing those loans.
Okay and thanks again.
Yes.
And our next question will come from Buck Horne with Raymond James. Please go ahead.
Hey, thanks for the time.
I'm just curious if you could just walk us through.
How drought conditions are playing out across Europe.
<unk> and farms over the course of the summer here. If there is any issues with water shortages and your neck of the woods and just kind of any thoughts on potential impact for specialty crop performance later this year.
Yes, so so well divided into especially drop and California in particular, and then the row crop regions.
On the row crop regions, where we own farmland have largely been actually pretty rainy and wet this year the.
And the drought the severe drought you read about and the row crop production regions actually starts cleared and the Pacific Northwest, we and agriculture called the PNW and so it runs from kind of Washington, and Oregon, All the way across.
Montana.
Code as in debt, Minnesota.
We have 1 farm and South Dakota, it's kind of right on the edge of it.
Been affected to some degree small row crop farm, but they've gotten a few range I think it will be not a great year, but on okay year and away from those areas.
Eastern Colorado and what happens.
And it has to do with where the jet stream sitting is if you get the northern Rockies as dry as they are you tend to get the central and southern Rockies and the <unk>.
Plains east of them wetter eastern Colorado as add on.
Western Kansas and 1 of the wetter years.
That it has had in quite some time.
So youre pretty much okay is the answer on the row crop side.
On the expense on the specialty crops, and California, very difficult water environment and California.
Got enough water to finish out all the crops on our farms this year, but the price of that water has gone up. So it was a line item and your cost structure of the tenant and it is it will and as that relates to our crop share profit.
Probably going to be hurt a little bit by that increased cost.
But on balance this will be up and our view will be a better.
Year for specialty crops than last year now granted that's off a pretty low base, but even with the water problems that should be better than last year, because the markets are back open.
Recall and listened to conference calls for months for multiple quarters with us.
And our lemon crop basically was on sold last year and that sort of thing isn't happening this year with the reopening from Covid.
So all in all water has gotten more expensive we have for this season and not to get the crops done.
And the overall year will.
And we'll be better in 2021 and 2020.
Alright sounds good thanks for that update and a lot of color. Thank you.
And my follow up is just kind of more of a strategic question just thinking through.
Utilizing the ATM and certainly having some low cost equity.
But still.
Right.
And well below your when you believe NAV and of course, you believe and of course rising here.
Walk us through the rationalization of that trade off of issuing equity below NAV.
And in terms of the impact for shareholders and if that trade off continues to make sense now that the stock is maybe closer to $12.13 here.
Well as you know.
You noticed we issue stock.
Rice average price of 13.11.
So we sort of agree with you as a comment on the on the question of.
As it gets close to 12.
And probably don't want to be issuing a lot of ATM stock, particularly if we think the NAV is higher.
Obviously every time, we go to issue equity of any nature.
Our first consideration is how does it compare to the.
Is it accretive.
And our balance sheet.
And.
And then the second question is is it accretive.
In a income statement since and we have to manage and back and forth between those 2 things.
At sort of a $13 plus our view was look we can do things with that money.
That increase the cash flow of the company defray the overheads of the team across a bigger asset base and a way that on balance is a positive.
For investors.
If we are.
And as the price goes lower that justification gets harder and harder to make sure youre not on <unk>.
Exactly and know where that line is except to tell you that certainly when the stock was down 7 or $8 <unk> was we're not selling any of it and.
And the stock was $20 would try to sell a lot of it and <unk>.
Everything in between we got it and just kind of manage back and forth.
Balancing both the balance sheet considerations.
In terms of asset value.
Since the enhancing the revenue on the company.
And so that's kind of.
We just want to maintain that flexibility and.
And that's what you saw with the ATM.
Perfect and I appreciate the explanation and thanks guys. Good luck.
Yes.
And our next question will come from Joe and Judy Private Investor. Please go ahead.
Yes. Good afternoon I just had a question on Europe for based on what Youre thinking is on that and I know you.
And mandatory converted coming this October.
Sir you have the cost and that's fine and I guess, 6% plus the appreciation and Youre looking 8 and 9% at least and.
Just kind of what Youre thinking right now is what you intend to do with that.
Yes.
I think we've made up our mind, what we intend to do with it but I'll give you a bit of a framework on how we think about it.
First is we have a lot of flexibility I think we have any time between October and 3 years from then.
To make a decision and to do either buyback with cash or to convert it.
We want to maintain the flexibility to do either of those things.
We think we're in an environment, where our stock is going to continue to appreciate we think.
Asset values are going up and our asset class pretty rapidly.
So there's a set of arguments about waiting and watching that appreciation and hopefully the stock price appreciate with it and then there's a set of arguments like you begin to make let's say, it's a relatively expensive.
Piece of paper and if we could get it taken out and we should do it sooner rather than later so we're just we're going to watch it and.
And I'll just do whatever we think is the best for long term shareholder value.
At the time was an important point that we were.
We don't need to be in a rush, but we're certainly focused on.
I don't really have any and then.
Further answer than that.
Thank you.
And this will conclude our question and answer session I would like to turn on the conference back over to Paul Pittman for any closing remarks.
Great well. Thank you all of this has been as I said at the beginning and exciting order for the company.
A lot of really good news in terms of what we're going to see come in terms of increased earnings in the coming year as well as putting some of the litigation behind us and seeing land values go back up.
And go up strongly so we feel like we're on a good place and we'll have a good year in front of us.
Thank you for your continued interest and our company and.
And look forward to talking with you again next quarter.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Yeah.
And then.
[music].
And then.
[music].
Yeah.