Q4 2021 Gladstone Land Corp Earnings Call
Greetings and welcome to the Gladstone land fourth quarter and year end earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host David Gladstone, Chief Executive Officer, and President. Thank you you may begin.
Alright, Thank you Jessie and it was a nice introduction this is David Gladstone and welcome to the quarter quarterly and annual conference call for Gladstone land and thank you all for calling in today. We appreciate you taking time to listen to our presentation.
We're gonna start out with Michael a counsel, he's our general counsel and Secretary.
And he is also president of Gladstone administration, which is the administrator for all of the Gladstone funds. Michael you want to go sure. Thanks, David and good morning, everybody. Today's report May include forward looking statements under the Securities Act of $19 33, and the Securities Exchange Act.
<unk> 34, including those regarding our future performance. These forward looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable demand factors may cause our actual results to be materially different from any future results expressed or implied by these forward looking statements, including all the risk factors in our forms 10-K and other <unk>.
Documents that we filed with the SEC you can find those on our website, which is www dot Gladstone land Dot com.
Specifically go to the investors page or on the SEC's website SEC <unk> that we undertake no obligation to publicly update or revise any of these forward looking statements whether as a result of new information future events or otherwise except as required by law today, we will discuss <unk> funds from operations now <unk>.
<unk> is a non-GAAP accounting term defined as net income excluding the gains or losses from the sale of real estate and any impairment losses from property.
Plus depreciation and amortization of real estate assets. Then we may also discuss core <unk>, which we generally defined as <unk> adjusted for certain nonrecurring revenues and expenses also adjusted <unk>, which further adjusts <unk> for certain noncash items, such as converting GAAP rents to normalized cash rents and we built.
These are better indications of our operating results and allow you to better compare our performance period over period now we ask that you take the opportunity to visit our website once again at Gladstone land Dot com sign up for our email notification service. So you can stay up to date on what's going on at the company could also find us on Facebook keyword there is the Gladstone.
Companies and our Twitter handle is at Gladstone comps for today's call is an overview of our results. So we ask that you will review our press release and Form 10-K , both issued yesterday for more detailed information you can find them on the investors page of our website and with that I'll turn it back to David.
Thanks, Michael I'll start with a brief summary of our current farmland holdings.
We currently own approximately 113000 acres.
On 164 farms and about 45000 acre feet banked water now.
All of this together at about $1 5 billion.
For the land and the water.
Our farm is located in 15 different states and more importantly, it's in 29 different growing regions. These growing regions determined.
Just about everything about the farm and its ability to grow.
Our farms continue to be 100% occupied and are leased to 85 different tenant farmers all of whom are unrelated to us and the tenants on these farms are growing over 60 different crops.
Given the number of different growing regions tenants farms types of crops.
I think there's sufficient diversification to provide safety and security for the cash flows coming in from the rents.
We believe this diversification helps protect dividends that we pay to our shareholders.
We had another active quarter for the year.
Year, ending 2021 for the year, we had $294 million of new acquisitions.
About half of these $147 million came during the fourth quarter.
And while this is a good year from an earnings perspective, we didn't get to see as much of an impact from the acquisitions in 2021. So we're looking forward to reporting what we hope are even stronger results in 2022.
We had a good year in terms of participation rents in fact, it was a fantastic year.
Accorded about $3 $4 million in additional income during the fourth quarter.
This resulted in US recording total participation rents of about $5 $2 million for the year, which is more than twice the amount recorded in each of the prior two years. This increase was largely the result of our participation rents.
And their components on certain farms, becoming active for the first time in 2021.
We have a few more farms with participation rents.
That are scheduled to come online in 2022, so we should see a little bit of a bump there.
However, we're not yet able to estimate the amount of participation rents for 2022 as these numbers are largely dependent upon the yields achieved on the farms and the prices of the crops that are so so.
We will need to wait until later in the year before we can announce any of these figures we continue to be able to renew all expiring leases without incurring any downtime on any of our farms.
The farms and our primary region our focus.
That is each of the coast as you know were very heavy in California, and Florida, we continue to execute renewals at higher rental rates.
We changed we charged the lease structure.
Up from one of our farms in the Midwest, which was resulting in lower amount of rent recognized upfront and I'll go over that in a bit.
Overall operations on our farms remained strong.
And the demand for products grown on most of these farms remains high.
These are products like berries, and vegetables and nuts.
And as anybody who goes to the grocery store can tell your prices on these and many other types of food continued to increase you are going through inflation.
With regard to the crops that are on these farms.
During the fourth quarter the team acquired seven farms about 20000 acre feet of water bank of water.
This is a total of about $147 million that we spent for the all of that.
Overall, the initial net cash yield to us on these acquisitions is about 5%. In addition, all of the leases on these farms contain certain provisions such as participation rents or annual escalations that should push the figure higher in the future.
As a reminder, this bank to water is water that we own our it stored in a water district, we can use the water.
On any of the farm land located in Kern County.
In that sub base and that they have there where we have several farms or we can sell it.
Third parties on the open market our plan is to hold the water to keep.
To help us safeguard our assets in the region against any future water shortages.
All of our farms currently have enough water, but we like the security of having extra water.
On the leasing front since the beginning of the fourth quarter, we executed 10 leases.
And we renewed on properties located in four different states overall.
Overall these renewals are expected to result in a decrease in the annual net operating income of about $138000 from the prior leases.
This decrease is really the results of one lease renewal on one property in which we invested $560000 to cover a portion of the farms operating cost.
In exchange for additional significant participation rents.
Components to about 80% of the gross revenue earned on that farm, we did that because the farm needed. Some additional help based on the current commodity prices and yield estimates. We think we will at least end up similar to where we would have been under the previous lease on this farm well maybe.
Even better if a farmer has a good year.
We will not know the results until the end of the year for this deal that we did.
Excluding this one lease or other lease renewals are expected to result in increases in annual net operating income of approximately 247000 or about 8% over the prior lease.
Looking ahead, we only have one lease scheduled to expire over the next six months and it makes up less than one half of 1% of our total annualized lease revenue.
We're in discussions with the existing tenant on the farm as well as some of the potential new tenants and we arent currently expecting any downtime.
We currently expect.
The new lease on this farm to be relatively flat from where it is today.
There are a couple of items I'd like to mention before we move on.
First one is the ongoing drought in the west and they are still having a problem with water, even though I think they've got some addition of water in this last round that was out there.
Despite some recent record breaking rainfalls in parts of the Western U S. The entire region continues to deal with the drought. However, all of our properties continue to be positioned.
Are they currently have water to complete at least the current crop and most likely all of the other crops that theyre going to grow in the next six to nine months.
We have farms located in water districts those districts have stored water or other supplemental sources to cover our farms for the short term.
Almost all of our farms out west have wells on the site and most of them rely on ground water as their main source of irrigated water.
Or these properties, we are seeing the typical seasonal dropping of the water levels, but not enough to make us upset.
One thing you should know is that wet and dry weather cycles are the norm out west, especially in California.
Without any long term investment we know that we will have both drought periods and wet periods.
So when we underwrite a potential investment out west we look for properties with multiple sources of water, we build in a drive scenario and we also take into account potential government regulations.
Regarding the progress on our ESG policy will continue to work we have a nice list now of things.
Would go into our ESG disclosure.
We will continue to update you on this as we get closer to finalizing these policies.
As mentioned on previous calls, we sometimes come across farmland owners.
Who want to sell both their farm land and their operations as a real estate investment Trust Gladstone land is limited to the ability to operate.
Okay.
One operating companies because operating income is generally not permitted in our real estate investment Trust.
The Gladstone acquisition spec was created to potentially take advantage of these opportunities, whereas Gladstone land could not participate.
Stop here.
That's enough on the operations, so I'll turn it over to our CFO Lewis Parrish, who will talk to you more about the numbers. Louis Alright, Thank you David and good morning, everyone.
Again briefly with our balance sheet during the fourth quarter, our total assets increased by about $90 million due to new acquisitions. These were financed with a mix of debt and equity proceeds.
From a financing perspective since the beginning of the fourth quarter, we secured about $31 million in new long term borrowings at a weighted average rate of three 4%, which is fixed for the next nine plus years.
On the equity side since the beginning of the fourth quarter, we've raised about $49 million in net proceeds through sales of our common stock.
And program and about $35 million of net proceeds from sales of our series C preferred stock.
Moving onto our operating results.
First I'll note net income for the fourth quarter was about $2 million and net loss to common shareholders was $4 million to $4 two per common share.
For the year, we had net income of about $3 $5 million and net loss to common shareholders of $8 $7 million or $28 six per common share.
On a quarter over quarter basis, adjusted <unk> for the fourth quarter was approximately $6 $7 million compared to $5 $3 million in the third quarter, an increase of about 28% and <unk>.
<unk> share was $19.09 in the fourth quarter versus $16.06 in the third quarter, an increase of 19%.
Dividends dividends declared per share were about $13 six in the fourth quarter versus $13.05 in the third.
Annual basis, adjusted EBITDA over 2021 was approximately $20 4 million compared.
Compared to $14 $3 million in 2020, an increase of 42%.
And <unk> share was 66, eight and 2021 versus $64. One in 2020, an increase of 4%.
The year over year increase in the per share figures were a bit muted due to an early lease termination fee received during the first quarter of 2020, which resulted in additional <unk> of about <unk> 10 per share last year.
Dividends declared per share were <unk> $54 <unk> in 2021 and $53 seven in 2020.
Our common dividend payout ratio was about 81% up <unk> in 2021 versus 84% in 2020.
The primary driver behind the increases in <unk> was higher top line revenues, partially offset by increases in related party fees and additional borrowing costs.
Fixed base cash rents increased by about $1 2 million or 7% on a quarter over quarter basis, and by about $17 6 million or 35% on a year over year basis. These increases were primarily primarily driven by additional revenues earned from recent acquisitions.
As David mentioned during the fourth quarter, we recorded about $3 $4 million of participation rents compared to $1 $8 million in the previous quarter.
And for the year that gave us participating rents of about $5 2 million versus $2 $4 million last year.
During 2021, we had 39 farms under leases that had an active participation rent component versus 19 farms during 2020.
And we do have a few additional farms with the participation rent components that are scheduled to come online later in 2022.
On a same property basis, and including participation rents, but excluding income from early lease terminations or 2021 lease revenues increased by approximately $2 3 million or.
Four 5% over that of 2020.
On the expense side, excluding reimbursable expenses, and certain nonrecurring or non cash expenses, our core operating expenses increased by about $679000 on a quarter on quarter basis, and by about $3 6 million on a year over year basis.
These increases were increases were both primarily driven by higher related party fees base management fee paid to our adviser increased due to additional assets acquired during the year, while the increase in the incentive fee was driven by higher pre incentive fee <unk> achieved during each of the current periods.
Removing related party fees, our core operating expenses decreased by about $256000 on a quarter to quarter.
Over quarter basis, and increased by about $652000 on a year over year basis.
The decrease on a quarter over quarter basis was primarily due to less water costs incurred on one of our properties in Colorado, partially offset by additional legal fees incurred to protect water rights on certain farms in California.
The increase on a year over year basis was primarily due to the additional water costs incurred on the east, Colorado, and California properties and an increase in property tax expenses due to certain recent acquisitions and changes in certain lease structures.
Just one last note on expenses during 2021, we incurred approximately $572000 of additional water costs related to the Colorado property. We do not expect these costs to continue into 2022.
And Additionally, we recorded about $282000 of costs related to protecting our water rights on certain farms in California.
We do currently expect these costs to continue at several at similar levels for the next few years.
Moving on to net asset value, we had 24 farms and one cooling facility revalued during the quarter all based on third party appraisals overall these farms increased in value by about in value by about $2 $1 million over their previous valuations from about a year ago.
So as of December 31, our portfolio portfolio was valued at about $1 5 billion.
And all of this was supported by either third party appraisals or the actual purchase prices.
So based on these updated valuations and including the fair value of our debt and all preferred stock our net asset value per common share at December 31 was $14.31, which is up by 51 from last quarter.
Turning to our capital makeup and overall liquidity from a from an overall from a leverage standpoint, and with respect to our borrowings our loan to value ratio on our total farmland holdings on a fair value basis, and net of cash was about 44% at December 31.
Over 99% of our borrowings are currently at fixed rates and on a weighted average basis. These rates are fixed at 336% for another six years.
We believe we are currently well protected on the debt side against any future interest rate hikes.
Regarding upcoming debt maturities, we currently have about $65 million coming due over the next 12 months. However, about $48 million of this represents various loan maturities and the properties collateralized on these loans have increased in value by about by a total of about $24 million since their respective acquisitions. So we do not foresee any problems refinancing any of these.
Loans, if and when we choose to do so.
Removing these maturities, we only have about $17 million of amortizing principal payments coming due over the next 12 months or about 3% of our total debt outstanding.
From a liquidity standpoint, including availability on our lines of credit and other Undrawn notes. We currently have about $115 million of dry powder. In addition to over $35 million of Unpledged properties.
We recently increased the size of our Metlife facility is now gives us ample availability under each of our two largest borrowing facilities and we also continue to reach out to new lenders for additional borrowings, but overall credit continues to be readily available to us for multiple lenders.
Finally, I'll touch on our common distributions.
We recently raised our common dividend again to $4 53 per share per month over the past 28 quarters. We've raised our common dividend 25 times, resulting in an overall increase of 51% over this time.
Since 2013, we've paid 108 consecutive monthly dividends to common shareholders totaling $5 52 per share in total distributions and our goal is to continue to increase the dividend at regular intervals.
When considering the relative stability and security of the underlying assets and the related cash flows. We continue to believe that this stock offers a compelling investment alternative, particularly in light of today's inflationary environment.
And with that I'll turn the program back over to David.
Okay. Thank you Louis Nice report acquisition activity remains good for us and we continue to see buying opportunities coming our way.
And just a few final points I'd like to make before we get some questions.
Believe that investing in farmland growing crops that contribute to healthy lifestyles, such as fruits and vegetables and nuts.
Those are the trends that we're seeing in the marketplace today.
Overall demand for prime farmland growing berries, and vegetables remains stable to strong among all of the areas where the farms are located particularly along the west coast, including most of California, Oregon and Washington.
And the east coast, especially in Florida, and some other states.
And overall farmland continues to perform well compared to other assets.
Yes.
The decrease index I mentioned this often because decreases the farmland index, which currently makes up about.
$13 8 billion worth of agricultural properties in the United States.
And has an average annual return of about 12, 6% over the past 20 years with no negative years during that period.
This is equal to that of the overall REIT index and higher than the S&P index, both of which had four negative years over that time period.
Closing, please remember that purchasing stock in this company is a long term investment it's a slow moving piece of machinery that makes money day in and day out.
I think in investment in our stock really has two parts first of all it's similar to goal and that its hard assets. I mean this is Derek it's been there for centuries, maybe even longer.
As an intrinsic value because there is a limited amount of good farmland and it's being used up by urban development, especially in California and Florida.
We have many farms.
In those areas and one point in time somebody will show up in one of our farms. So they can build houses on it.
And second unlike gold and other alternative assets, it's an active investment asset as cash flows to investors and we believe that's better than a.
A bond fund because we keep increasing the dividend.
We expect inflation, particularly in the food sector sector to increase and we expect the values of underlying farmland to increase as a result.
We expect this is especially true for the fresh produce foods sector and the trends of more people in the U S eating healthy foods continues to grow.
Now I will have some questions from those who follow us operator, if you'll come on and tell them how they can ask some questions.
Ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question is coming from the line of Edward Riley with Jeff Hutton. Please proceed with your question.
Good morning, guys.
Good morning.
So you guys really deployed an impressive amount of capital in the fourth quarter.
Sure.
Do you think you could speak to the state of the current pipeline and maybe give us some information on how much capital. You think you may be able to put to work next year.
Now it seems year over year, you are continuously deploying more and more capital do you think that trend will continue.
We're hoping we're hoping so.
As you know in 19, and 20, we had about $250 million of acquisitions each year.
300 $294 million this year.
Each of the years due tend to start off slowly I know we had.
100, I think close to $200 million of acquisitions in the fourth quarter last year close to $150 million. This year. So it takes us time and the beginning of the following year to kind of replenish the.
The pipeline that we've depleted in the fourth quarter and we're seeing that right now we do have deals that.
We're looking at that are in various stages hard to say, what we'll do for the year right now, but internally, we do kind of pencil in a target between $200 million to $300 million and understanding that's a pretty wide range to pencil in but it kind of just all depends on.
The opportunities that we see and which ones fit our investment criteria right.
Right now we have.
Between two and five deals that are that are kind of beyond the initial review stage that we're looking at not sure. If we'll get anything close in Q1, but hopefully by early Q2, we'll have something to announce.
Yes.
Okay, great and what sorts of the capital or do you plan on drawing them to fund these new deals.
Well right now with the availability on our line of credit the Metlife facility and certain other.
Loans that we've closed but have not drawn on yet since we don't have an immediate need for the cash we have $115 million of dry powder that we could deploy today.
That's not even leverage so divided by.
With the 6% LTV that gets us close to $300 million worth of acquisitions. We also have $35 million of Unpledged properties.
So that would be the first source, but anything beyond that we do on our series C.
Wells that are that are continuing to come in strong we have availability under our common ATM.
We've made very good use of during 'twenty, one I think we saw a little over $170 million worth.
That price remains very attractive for us.
And of course additional additional borrowings when we when we do need those as well. So we have plenty of sources of funding right now.
Awesome.
Could you remind me of.
The interest rate on our line of credit.
It's right. It has a floor of two 5% and that's where it's at right now, it's LIBOR plus a spread of two 2%.
Okay Gotcha Gotcha.
I'm curious too.
Kind of know what was impacting the operations of the farmer and the Midwest, whose operating expenses.
Guys.
Chosen to cover in exchange for.
Participation rents.
What sort of problems was that was that farmers seeing so we had we had.
One farmer that was leasing two farms from us.
And this farmer was getting into getting into bankruptcy. So we were releasing him from the lease from bringing on a new tenant.
One of the farms that new tenant we were bringing on he was very familiar with and he was confident enough to sign a long term lease with us.
The other one was relatively new to him so rather he wasn't comfortable signing a long term lease on that farm. So.
While we did was we just did a one year lease where we'll pay well front and the majority of the operating costs are fixed amount and in return we will get a large majority 80% of gross proceeds on the farm at the end of the year.
As you know commodity prices are very strong right now we're confident in the farmers' ability and the yields that are.
Possible on this farm. So we think were excuse me, we think we're going to come out ahead, but of course, no guarantee of that but at the end of this this first lease year hopefully this tenant will become more comfortable with a farm and we will be able to sign up a long term lease with him at the end of the year.
Great and just to confirm the increase in operating expenses I believe you guys said 560000.
Is that right, yes that was the one that was a fixed commitment that we.
Gave to this new tenant yes.
Got it.
<unk>.
Finally could you could you give us an update.
On this back.
Regarding any potential developments there.
Congratulations on the new IPO.
On the asset management firm would love to hear some of their objectives as well.
Hard hard to talk about other funds during this conversation but.
Quite frankly, we've got some opportunities and we're going to try to get those done soon so that this bank can get funded.
No guarantees, it's always hard to get those things done and much harder than we ever thought it was going to be.
The reasons for getting in that business.
No.
Right now the spec.
Cruising along.
And we're hopeful that we'll have something to announce in the next I don't know.
And.
60 days.
As far as the.
The rest of the companies they are all doing extremely well.
Each of our four public companies Theyre doing extremely well, including this one of course.
Okay, Great I don't want to hog the line, so I'll turn it over to other analysts. Thank you guys.
Thank you. Our next question is coming from Craig you Sarah with B Riley Securities. Please proceed with your question.
Yeah, Hey, good morning, guys.
Wanted to talk first about variable rents clearly a pretty major increase year over year and this maybe a tough question to answer but if you were to take a guess how much would you attribute to food inflation versus maybe rolling out an increasing number of leases with a variable rent component.
Youre right that is a difficult question to answer we can see.
W say that.
Certain crops.
Gave us a better return than others.
Pistachio pricing for example that was very high for us the yields we're getting on those farms almond pricing for conventional conventional pricing was down a little bit. This year, so that was slightly offset but the majority of our.
Revenues for 'twenty, one were coming from the pistachio crop.
I know that doesn't exactly answer your question, but I think that might be the best we can do right now.
Okay. That's helpful. I appreciate the color there.
And certainly to kind of the water issues that you had at a few farms, whether that's in Colorado or in California, which you're expecting to be a little more sustainable.
That influencing how you're thinking about underwriting and are those types of considerations increasingly coming into the market in regards to pricing.
I think everybody who buys a farm is I'm looking at the water very carefully.
California goes through good times and bad.
It's sort of in the middle right now and it may get worse and that May get better we seem to be in a good position to handle either one of those.
And they thought the snow pack in the mountains was going to be much bigger than it is today, but it didn't quite live up to that.
To get some more rain out that way, but.
If you are in the business that we're in you're constantly looking at the weather to determine whether the water is coming in from the ocean side.
Is it all.
All of the.
Things that are going on out there.
Coming across.
The.
Part of the business that is unbelievably difficult to predict is the weather and <unk>.
I now have much more.
<unk> for the people who are trying to forecast weather because we.
We have no way of really knowing what's going to happen, although over the years I've been at it now about 20 years.
We seem to come out Okay every year and so I'm hopeful that we do the same thing this time.
Our guys, who run stuff in California.
Especially in Oxnard as well as Watsonville are all looking at the weather machine that's out in the ocean and trying to guess, which way it's going to go and how much water is coming in.
So it's a risk, but generally speaking the people out there get buy and almost all of the farms have wells that have enough water.
To do the job of growing our crops.
Doesn't mean that they will always have it but they do today.
So.
I'm grateful that we can continue to do what we're doing we don't have that kind of problem in Florida, and so wed like Florida for that reason is that.
The water tables are high.
It's easy for us to figure out what kind of water, we're going to get in Florida.
So, we'll just keep pedaling, along and trying to get the right farm and the good news is that you have a history.
Virtually every farm I mean, I track some of those farms when I was buying early.
Back into the 19 thirties, and they were growing turnover at the time and it's changed every year. Since then in terms of what your plan.
And what you decide to do with that far.
Got it.
Changing directions.
You typically book the vast majority of your interest patronage in the first quarter can you give us a sense of how youre thinking about that year in 2022.
So internally.
We usually pencil in AR.
Similar amount as the prior year.
We do believe that to be conservative because every year, we do have additional loans from farm credit so.
If the payout ratio or a percentage stays the same that we should have more but.
As you know these amounts are never guaranteed it theoretically could be zero for them from any given association, we think that's a remote possibility but.
We don't really know until they announce it.
We've only been told by one association so far about the payout.
Came in as expected.
But we have 13 different associations, we borrow from so theres still a lot a lot more information to come.
I will say I think last year in total we recorded.
I think it was $2 $5 million of.
Patronage $300000 of that did was a prepayment of.
Of interest payment is due to.
The farmer growers difficulty with Covid.
So I would ask.
All else being equal.
It may not come in quite as high as last year, I think about $2 $2 million was a regular payout $300000 was additional so.
We're expecting somewhere in that range, but again, we won't know until until.
Another month or two out.
Got it and just one more for me.
I feel like a year or two ago. You were you were raising rents pretty aggressively the farm economy was was really going.
And this is the first quarter, obviously for more of an anomaly you had a pretty decent rent roll down.
Subsequent to the yearend, but I guess I'd be curious as to as you think about the other leases expiring this year.
Just the ability of farmers to kind of push through maybe some of their higher operating costs such as fertilizer.
Some of the other components of the business.
Well keep in mind that the roll down from.
The 2022 renewals. So far is really just that one anomaly that one lease where we fronted the expenses.
If you take out that one lease or other leases renewed in 'twenty to 2022 have increased by about 5%.
Not maybe not as high as the 8% to 10% that we had in the prior years, but.
It's only been a couple of farms that we've renewed so far this year.
And on the farm that we did.
Take the roll down from.
We are expecting to recoup all of that or at least the majority of it if not all in and then some.
At the end of the year when the crop share numbers do come in and so we think at the end of the day will be okay with that farm, but the roll down is I just want to point out of the roll down is really a function of that one change in lease structure.
I only have one lease coming due over the next six months, we do expect that lease to be pretty flat from where it is right now.
We have a few more leases coming expiring in the latter half of the year.
We've begun negotiations, but it's it's too early to.
To give you an estimate on that but we don't we don't currently foresee any significant roll downs on any of those.
Okay. Thanks, I appreciate it guys.
Okay.
Thank you as a reminder, if you would like to ask a question at this time. Please press star one on your telephone keypad. Our next question is coming from the line of James Villard with Ladenburg Thalmann. Please proceed with your question.
Good morning, guys.
Good morning could you give us some can you give us some more color on I guess, what you are seeing cap rate outlook as you kind of get started in 2022.
I don't think Theres any big change coming in cap rates.
There are some things going on in the marketplace. Today of course that may change everything, but all of the inflation thats going on but that hasnt hurt us in the past so I don't expect it to hurt us now.
But cap rates should remain in the 5% to five and a half for good solid properties and that's where we play.
Yes, just one more.
As you kind of highlighted with the weather.
Issues that you mentioned does it have any impact I guess.
Participating rents.
Something that just happens every year that you've just kind of baked in or is it more of a onetime thing.
Well, that's one of those variables based on weather and it's really hard to.
Forecast the weather.
As a result, I don't think there's going to be much of a change in terms of the way that we do business.
I would love to find a way to cover it.
Find some insurance for whether it would be nice.
Everybody is ensuring the weather.
So where we're at the mercy of the weather.
Weather gods, and don't know, where we're going to get what.
But it just seems to work out every year.
Okay.
Yes.
Thanks for the answers I appreciate that that's all for me.
Okay next question.
Once again, ladies and gentlemen to ask a question. Please press star one on your telephone keypad.
It appears we have no additional questions at this time, so I'd like to pass the floor back to management for closing remarks.
Okay. Thank you very much I appreciate everybody, calling in and we'll see you next quarter at the end of this call.
Ladies and gentlemen, this does conclude today's teleconference and webcast. Once again, we thank you for your participation and you may disconnect at this time.