Q1 2022 Farmland Partners Inc Earnings Call
It's the relations section of our website under the sub pattern presentation and other materials yesterday afternoon as well for.
For those who listen to the recording of this presentation. We remind you that the remarks made herein are as of today may four 2022 and will not be updated subsequent to this call.
During this call we will make forward looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions impact of acquisitions dispositions and financing activities business development opportunities as well as 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 <unk> adjusted <unk> EBITDA and.
And adjusted EBITDA sorry.
Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing first quarter earnings which is available on our website farmland partners Dot com and is furnished as an exhibit to our current report on form 8-K dated may three 2022.
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 discussed in our press release distributed yesterday and in documents we have.
Filed with or furnished to the SEC.
I would now like to turn the call to our chairman and CEO Paul Pittman.
Thank you James.
So I'll make a few prepared comments about our quarter.
We will look forward to your questions in the Q&A session as well.
This was obviously a very strong quarter for the company.
Essentially we have the wind at our back on all of the major drivers in our business.
Land prices of the assets, we already own are surging higher.
This has also led to more.
Sales and revenue in our <unk> auction in brokerage division.
Rents, especially in the row crop area are increasing substantially.
We have now renewed around 25% of the leases that will need to be renewed at the end of 2022.
And we're seeing rental increases in those renewals in the 15% to 20% range.
The underlying farmer profitability is very very strong despite higher fertilizer prices the increase in grain prices more than compensates.
All of this is fundamentally caused by increasing food demand and decreasing availability of high quality farmland.
But on top of that general long term trend.
The profitability.
Profitability of the farmer and therefore, the strength of our business has been accentuated by.
Poor weather in South America.
<unk> crop in India, now potentially late planting in the United States.
And of course, the unfortunate war in Ukraine, which is limiting Russian and Ukrainian exports.
These things are driving grain prices and farmer profitability higher.
And they benefit our business. However, they are foremost societal perspective disappointing circumstances at least for the poorest people in the world.
For Spi. These factors are showing up in the strength of our.
P&L.
This is most clearly evidenced by the almost 200% increase in <unk> per share.
The strong operating results are complemented by the significantly reduced costs coming from the way, we finance our business we.
We have substantial savings from the conversion of the series B last fall that are now showing up in the income statement.
We have savings from significant debt reduction.
And in addition, after defeating the class action lawsuit or legal spend should decline in the future.
I am happy to report that this has led the board of directors to vote for a 20% increase in the dividend because of the strong results and our positive outlook for the future.
Our pipeline remains very strong and we anticipate doing further acquisitions that will create long term value for our shareholders.
With that I'm going to turn it over to Luca for a few prepared remarks.
Thank you Paul we have seen at this time.
Very very significant amount of investor interest in farmland as an asset class in general and in our company in particular.
This amount of interest is driven certainly by some very very long term factors and characteristics of the asset class, namely.
The stability.
And the.
Characteristics of the asset class in terms of appreciation potential driven by very fundamental microeconomic factors.
There are also some more.
Specific factors driving these interest right now at this juncture in time.
For example, the fact that Ukrainian conflict is really heightened.
<unk>.
The perception.
The reality of the value of producing.
Staple food crops in a truly geopolitically stable <unk> the worlds such as the United States, especially with some of these these farmland in the United States like in the U S. Midwest is some of the best in the World and the most productive in the world.
And then Daryl.
So the other factors related to commodity prices and productivity gains so and so forth that poll recently outlined.
Also farmland has historically been a very very good hedge against inflation and of course at this point in time. There is a lot of interest from investors in that particular characteristics of farmland.
Another structural.
Kind of factor subtracting interest to farmland and to our company is the.
Intrinsically ESG and sustainability friendly nature of the asset class.
We are we have embarked the company in a journey to better formalize our approach to ESG and sustainability and you should see a little bit more from us here in the near future, but we really kind of focused on the definition of sustainability around ESG, specifically that starts with yes with the social aspect.
And really focusing on how sustainability is to start with the ability to affordably produce food for everybody in the world and this is specific on the heightened right now with the logistical challenges and the scar city of some basic food crops like wheat and corn.
That came from from the Ukraine.
Also of course, another beneficial sustainability as a second tier is that we have to produce affordable food in the most environmentally sustainable way possible.
So that specific to that point do we actually we've always felt that known.
Arts that good.
<unk> practices are very strongly aligned with environmental sustainability and we also believed that our tenants are some of the best farmers in the world.
We had a very strong proof of that when we recently ran a and environmental sustainability survey among our tenants and the results would actually actually surprised even us 97% of our tenants are investing in improving soil health on our farms.
94% of our row crop tenants practice conservation tillage of reducing carbon dioxide emissions in the atmosphere through seven pivotal avenues.
87% use variable rate application technology to limit and optimize the usage of all inputs from seed to chemicals to fertilizer to Walter and 51% participate in federal natural resource conservation programs, they are focusing on enhancing biodiversity, especially.
On the tracks of farmland that are relatively marginal from a from a crop productivity standpoint.
Partly in response to these heightened interest in our company and the asset class would also intensifying our investor relations effort.
There are several conferences for institutional investors that we'll be participating.
Two in the specifically the Janney REIT conference on May 17, its a mutual.
On the institutional Investor Conference on May 25, and 26 in Los Angeles.
NAREIT REIT week on June seven and eight in New York and the Roth Conference on June 22023rd in London.
I encourage all participants to those confidence to reach out to us and the scheduled meetings with us so that we can better present our company.
With that I will turn the call too.
To James again for his remarks on financial performance James Thank you Luca.
I am going to refer to the supplemental package in my comments as a reminder, the packages available in the Investor Relations section of our website under the sub pattern presentation and other materials.
Hey, just one through nine of the package contains the press release and related financial information.
10 to 20 contain the supplemental information.
First I will share a few financial metrics that appear on page two for the three months ended March 31 2022.
Net income was $1 1 million compared to $2 5 million for Q1, 'twenty one Q.
Q1, 2022 and income included $7 million of gain on dispositions of assets down from $3 4 million in Q1 'twenty one.
Adjusted for litigation net income was $2 million compared to 5 million for Q1 'twenty one.
Net income per share available to common stockholders was zero.
Compared to negative two <unk> for Q1 'twenty one.
Adjusted for litigation net income per share available to common stockholders was positive two <unk> compared to positive <unk> for Q1 'twenty one.
<unk> was positive $2 1 million compared to negative $1 6 million for Q1 'twenty one.
Adjusted for litigation and <unk> was $3 million compared to <unk> 9 million for Q1 'twenty one.
<unk> per weighted average share was positive <unk> compared to negative five for Q1 'twenty one adjust.
Adjusted for litigation <unk> per weighted average share was <unk> <unk> compared to <unk> <unk> for Q1 'twenty one.
Total debt at March 31, 2022 was $465 million with further reduction of $16 9 million after the end of the quarter.
Fully diluted share count as of April 29 was $51 4 million.
Next I will draw your attention to page 12.
As Luca mentioned, we have received many questions over the past couple of months regarding Ukraine I'll.
I will make comments on Ukraine, a few minutes ago. So I wont go into depth here.
However, we wanted to provide some high level information that might address questions that investors have.
One of the sources listed at the bottom of the page International Food Policy Research Institute is written many pieces on the impact of the conflict in Ukraine and might be an interesting resource for people looking for more information.
Next I will turn to page 14 to provide an overview of our income statement similar to last quarter I'll take a minute to talk through the table at the top of the page.
We have over 300 farms in the portfolio many of which have multiple revenue streams. We tried to simplify the business into a few baskets described in this table.
We start with fixed payments fixed.
Fixed payments include fixed farmland wind rent solar rent recreation rent tenant reimbursement management fees and interest income on loans.
We consider these fixed payments to be low risk.
Mixed farm rent represents the vast majority of fixed payments as a point of information farmers generally pay $50 to 100% of fixed farm rent before planting generally in the first quarter, thereby creating positive working capital for large portion of the year.
To illustrate that point.
We were about a third of the way through the year as we sit here today and we have received approximately 60% of the fixed farm rent for the year.
The next category is variable payments.
This is rent paid by tenants as a percentage of farm gross proceeds with variable payments, we have exposure to both upside and downside of farm performance, but the downside is often mitigated because cost overruns are borne by the tenants.
Tenants generally make the vast majority of variable payments after harvest in Q4 with some slipping into Q1 of the following year.
As a reminder, we have one large variable rent contracted accounts for approximately $6 $5 million that contracted is very well covered by farm revenue. We considered this large contract would be relatively low risk I'll come back to this contract in a minute.
Direct operations as the next category it has higher risk and variable payments, because we don't have a tenant bearing the risk of cost overruns, but the upside is also higher because youre not sharing firm revenue with the tenant.
We present direct operations in this table in gross profit to make it more comparable to the first two categories.
For direct operations gross profit, we had crop sales and crop insurance, that's insurance received in lieu of crop sales and subtract our cost of goods sold.
Because we're looking at growth direct operations on a gross profit basis. When we sum the values described in this table. The result is total revenue less cost of goods sold.
The last category as other items, which includes revenue associated with auction brokerage and other activities when.
When we consider the amount of revenue less cost of goods sold we want to point out the lower risk parts of our business fixed payments plus that one large $6 $5 million variable rent contract represented approximately 85% of the total for the year 2021.
2022 will be a little bit lower closer to 80% because we have more firms under direct operations.
The chart below the table show the values of these different categories for Q1, 'twenty to Q1, 'twenty. One you will see the fixed payments variable payments direct operations gross profit and other items.
Again, the total on the right hand column is revenue less cost of goods sold.
<unk> 22 was $12 4 million compared to $11 3 million for Q1 'twenty one.
On the next page page 15, we telescope down into the fixed payments and variable payments, creating a bridge from Q1 'twenty one to Q1 'twenty two.
For fixed payment details, we separated out the performance of same row crop firms from other items, such as acquisitions dispositions permanent crops and firms that were non comparable between the periods.
Same row crop farms for row crop farms in the portfolio before January one 2021.
We view same row crop farms in.
We view same row crop farms as the best way to remove the noise from the various activities that are grouped into the other category here.
As you can see performance was up $2 million from Q1, 'twenty, one Q1 'twenty two.
Fixed payments associated with acquisitions dispositions and other items was up $3 million.
And variable payment details, we remind listeners that the vast majority of cash and revenue occurs after harvest in Q4 <unk>.
The variance in Q1 is largely in line with expectations and our full year outlook for variable payments remains the same.
The bridge from Q1, 'twenty, one to Q1 'twenty two.
Is the.
The negative variance in tree nuts was due to timing differences between the years as after harvest revenue slipped from Q4 of 'twenty to Q1 of 'twenty, one while Q1 of 'twenty two did not receive any such slippage from the fourth quarter of 2021.
The negative variance in grapes was a combination of timing difference in lower performance.
On the next page page 16, we outlook update the outlook for 2022.
The table starts with the same category as described on page 14.
Payments variable payments direct operations gross profit and other.
Fixed payments increased due to the additional leases signed and new acquisitions.
Variable payments did not change as a reminder, three citrus farms converted from third party contracts to direct operations in the second half of 2021 thus.
Thus for those citrus farms 2022, overall will have a shift toward direct operations and away from fixed payments and variable payments.
Direct operations gross profit decreased due to citrus pricing changes, while mandarins and oranges or higher lemons are lower caused by export demand changes in shipping issues that major ports theres still relatively early in the season. The industry continues to sell through into the third quarter and we will keep you updated as we have new information.
Other increased due to additional auction business.
On the expense side property operating expenses and general and administration did not change.
Legal and accounting decreased due to lower expected litigation expenses.
We had previously shared a range of litigation spend of $2 $4 million to $3 million that range is now lowered to one eight to $2 4 million.
Interest expense decreased due to lower debt levels, partly offset by rising interest rates weighted.
Weighted average shares increased due to the.
Sale of shares under the Companys ATM program.
This results in <unk>, and 11, 4% to $14 million range compared to $9, one to $11 $7 million range shared back in February .
<unk> per share it would be in the range of 22 to 28.
Compared to 19 to 25 from back in February .
We are assuming that the litigation concludes in 2022.
<unk> adjusted for the midpoint of the estimated litigation spend would be in the range of $13 $4 million to $16 million compared to 11, 8% to $14 4 million from February .
<unk> per share adjusted for litigation would be in the 27 to 32 range compared to 25 to 31 that we shared with you all back in February .
This wraps up my comments. This morning, I will turn the call back to Paul for concluding remarks.
Yes.
Operator, we're going to go to Q&A.
And then we will conclude after we see if there are any questions from the audience. Thank you.
Meaning if you would like to ask a question. Please press star followed by one on your telephone keypad.
Is there any reason you would like to remove that question. Please press star followed by Tim again to ask a question. Please press star one as a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking your question, we will pause briefly to allow questions you're registering.
Our first question comes from the line of Nate Crossett with Danbury. Please go ahead.
Good morning, Thank you.
I had a question.
Deal flow in our pipeline.
I don't think you guys.
Guidance or kind of acquisition volumes for the year.
But you did $8 million in the quarter.
That was the presentation you put out recently that sure.
That you had $18 million under contract and it was kind of side in the pipeline at around $330 million.
And so is there any way you can just give us a sense.
What we can expect in terms of volumes this year, what the activity looks like over the next three months.
And then also if you could just maybe comment on that.
Cap rates and if youre seeing any changes in <unk>.
Pricing just given the change in interest rates over the last few months.
Sure a bunch of different questions, there Nate and I'll try to answer them, all if I Miss one of them. Please prompt me again, but our pipeline today is as we said in our presentation, probably $300 million or more we track a lot of transactions compared to the number we actually do.
<unk>.
We try to measure ourselves more by doing the right transactions than focusing on a very specific quantity of transactions, we want to be selective do the best deals and the best deals is really balancing a variety of things, it's thinking about the portfolio balance.
In the context of what we already own it is thinking about the cap rate, we can get on a given asset which is different in different regions and then finally in many ways. The most important to me is what is our perspective on the long term measured in five years or greater upside on a given bar.
We want to buy the very very best farms.
And we were.
Now being rewarded for that discipline during the last.
Half a decade or so and.
And that's really what drives which farms we do.
We won't do $300 million of new acquisitions by the end of the year.
There are kind of any case, but we're going to do quite a few.
Next surge in acquisitions is likely to come in the fall.
Because in the fall is when there will be a lot more properties available for sale and they are all right now we're kind of entering a phase where it usually slows down a little bit because it's harder to transact on a farm when their crops in the field as it creates a set of other deal issues you have to have to manage.
Our perspective, though is we'll do we'll do something in the tens of millions of deals in the next quarter.
And it will kind of run I think at roughly that pace, but.
Don't be surprised if it's quite a bit higher or even quite a bit lower than that because really were driven by selectivity.
And doing the right deals. So the other question you asked because we are seeing price changes due to interest rates.
So far no were not.
So many farm acquisitions are done with cash.
Farmland as an asset class overall, only has about 13% of leverage on it. Many many of these buyers show up with cash available for the transaction.
Obvious relief for those farmers, who are using that in the purchase they are likely to.
Pull their horns in a little bit because obviously <unk> increased the cost of carrying that asset, but as I said the overwhelming majority of those.
Sort of farmers or institutions, making these acquisitions are doing it.
With cash and so the increase that is not really having an effect.
At this point in time.
I got most of your questions, but if I missed one feel free to follow up.
No.
Right.
I had a question on the renewal spread I think last quarter I.
I can't remember if you guys were kind of articulated 10% plus or minus but.
The 15 to 20 that you quoted this time did seem like it was an uptick.
And I guess my question is like.
How far out are you going to append to seed those spreads or what are you kind of anticipating.
It's a 2022 phenomenon or is it.
18 months to 24 month phenomenon.
And then I guess like is there any resistance on kind of resetting those rents.
Any color you can give there is helpful.
Sure.
To give everyone. The general context, as a company, we reset rents in annual cycles.
So what I said on the last call was that the reset cycle that is now showing up in our profit and loss statement for the 2022 calendar year was in that 10% ish sort of range, that's what we experienced.
Where we are now is we're starting to renegotiate leases that will kick in in the 2023 years, we are doing that a little bit early frankly normally we would do it in the late summer.
And early fall of this year.
But we started early for the following reason, we're very favorable price situation for farmers and the farmer. If we have renegotiated that we will rent that farm to that farmer for another three years starting.
He knows he's got that lease for 'twenty, three 'twenty four and 'twenty five.
That farmer can go out right now and sell grain and hedge the risk.
It cannot take you cannot put that hedge on if he thinks he is going to lose that far.
So we wanted to start early for the benefit of our tenants as well as ourselves in this cycle of negotiating the 'twenty three 'twenty four and 25% rent package. What we're seeing there is that we're getting kind of a 15% to 20% increase in those rents as I've said, we've we've now released.
About 25% of what we have to do this year and those rental increases are.
Quite strong and higher than we were getting last year.
Think that will continue through this entire lease cycle.
I think it's likely to continue when we start to renew the leases that will be up for renewal.
In 2024.
So I think this is going to go on for a couple of years.
The situation, we find ourselves in with relative grain shortage is not going to get corrected very quickly.
Because we are consuming all of this grain.
We're now having another.
Another season as I indicated in my prepared remarks between short drop in India difficult.
At weather situations South America. So it's a short what they call freenet crop that's their second crop of corn is now getting smaller U S is starting to have significant planting delays, which which puts us at risk of of lowering yields because pollination gets pushed into the two hot time.
The summer and then of course the.
Ukraine or so we've got this sort of a perfect storm that I think is going to lead farmer profitability high and Thats. The best thing for our rental increases as far as your comment about pushback from our farmers.
Yes, we get pushback from our farmers it is as would be expected.
Nobody likes to see the rent increased but there.
They are able to do it and in the and willing to do it.
So I think we will benefit from that.
And so this is this is Barry I've used. This example, before this is an industry where you have these pretty strong upward surges and then a plateau in an upward surge in a plateau and that applies to land price to some degree it applies the grain price certainly applies the rents and the.
Other cost structure, the farmer faces and we find ourselves for the reasons I just expressed in a very strong upsurge period and.
Taking advantage of it while we can.
Hope that answers your question.
Yes, no that's very helpful. I'll leave it there thank you.
Thank you.
Thank you Mr <unk>.
Our next question.
Comes from the line of Dave Rodgers with Baird. Please go ahead.
Hey, Paul Good morning, Thanks for the increasing disclosures on the company as a whole wanted to ask one of the most attractive features obviously a farmland over many years has been generally 100% occupancy of the farms.
Wanted to talk about your direct operations business I guess in the sense that.
It is growing and you talked about it growing again this year. So can you kind of dovetail that the direct operations component in with kind of this 100% occupancy in high demand from farmers.
Yes, so so we do direct operations under two circumstances.
We do it when we have a farm that's sort of in redevelopment for some reason maybe it needs.
Irrigation installed we just bought it and we're going to approve it within irrigation we might direct operated.
Maybe it's.
Bulldozing trees and changing the crop the specialty crop we have planted there it's very hard to lease a farm that's not sort of in good condition. So to speak. So that is that has historically been the direct operations we have done.
Most other institutional managers of farm land use a lease model in row crop and a direct operations model.
In their specialty crops. The reason they do that is the volatility.
Of your return is high enough that it's relatively hard to get a favorable lease in place.
On the specialty crops and what I mean by that is.
Ferris of the farmer, who might lease it.
He is always cautious because of that volatility so getting a fully fair return over the kind of five year or so average is difficult.
Because what youre going to end up with is if I'm Gonna Liza farm I want a base rent and one of the significant base rent.
And I want that in exchange for giving up the upside.
That you get from direct operations, the farmer to of course says.
That's all great.
What about the downside year, where he is really coming out of pocket.
And taking a loss on direct operations. So what like so many other institutions that we've decided to start doing is at least on some of our specialty crops citrus in particular.
We're going to direct to operate them.
Because we think we will make more money over time, then we will from leasing it and it's really kind of aligning us with I think what other long term managers in the space have done.
We have not actually done it though on all of our specialty crops and I don't think we will we have the relationship with the OLED company, which is which is specialty crops, but truly a long term triple net lease at a great rate they maintain the trees. They pay the taxes they do everything.
And we still get something against our original purchase price thats in the mid sixes as a cap rate.
That's great, but <unk> is a unique company with a very strong balance sheet publicly traded in Singapore.
So we were able to negotiate a lease with them that on balance gives us a pretty high return and a.
At a fixed rent or nearly fixed.
While rent.
<unk>.
And that but on the on the citrus.
We found ourselves unable to get that fixed rent, we wanted and we thought reserved and.
And so we think we'll get capture much more upside.
In the.
Direct operating.
Hope that helps Dave.
That does Paul Thanks, and then maybe a related question around the crop insurance proceeds in the quarter just under $2 million I assume that was related to last year I guess a couple questions. One was that in the guidance originally.
And then two would you anticipate this year actually being able to harvest the crop related to that so maybe I don't want to say double counting but you get kind of to two shots added this year or will we see kind of a crop insurance number again next year, how is that kind of working in your guidance and in your outlook.
I'm going to let James take that at least initially I may add something afterwards, but go ahead James.
Dave So the crop insurance numbers that showed up yes. They were in our original numbers.
And thats crop insurance in lieu of selling the fruit so that was that was anticipated.
As we look out into next year, we don't yet have visibility as to how that's shaking out but we will include that in numbers as we do our work for 2023.
Okay, and then last for me in terms of the rental increases that you guys are seeing I think this year. If you looked at just the fixed same store component you are up about two 1%. It seems like on the farms and that makes sense relative to your roughly 10% increases. So I guess, just kind of translating that to next year 'twenty.
5% or so of the leases are rolling and you're going to get a 15% or 20% increase I mean, the organic growth rate next year should be in that 3% to 4% range. I mean is that the right way, we're thinking about it.
Go ahead, James Yes, it's still early days, but I think that that's essentially the math that we do.
<unk> said we've renewed.
Some percentage of the leases this year, we have a lot more to go.
And so we'll keep you updated but I think that's essentially the math that we do as well and then if I was updating your model right now Dave I'd be using the 15% number not the 20% number just to be cautious were shooting for 'twenty.
No guarantees yet with only renewed about 25%.
Of the acres at this point.
Great all very helpful. Thank you.
Thank you.
Thank you Mr. Roger.
Our next question comes from the line of Craig Kucera with B Riley Securities. Please go ahead.
Yeah, Hey, good morning, guys.
Congrats on putting a lot of the legal issues behind you.
But I'm curious Paul are you in the process or contemplating any sort of pursuits of a recovery related to that.
Yes.
Yes, we are Craig in that.
Good question is one reason that you didn't see us take all of the elevated legal spend away.
We do believe that the class action lawsuit against the company has gone and done at this point.
So we're very happy about that we will continue the pursuit of the hedge fund that was behind all of this.
And are hopeful of getting a significant recovery at some point in the future.
But it's very it's a very big deal.
Have the case against US fully dismissed we always believed that that was frivolous, but it did create financial risk to the company.
If we would ever have lost that case, which we never really thought we would.
But you never know and then on top of that it is a case you can't get out of right. Its a case against you we can make a business decision at some point in the future if we choose to to stop pursuing the hedge fund to get to.
Get back what they cost us, but we can do that on a.
On a business basis at the time in other words do we think we can achieve more than it costs to continue to pursue it.
That just wasn't the way it worked in the class action, we had to stand there and the ring so to speak and keep fighting.
And obviously we were successful.
No great that's helpful.
And at this point are you able to sort of contemplate what that recovery might be are you still sort of restricted in what you can disclose on that matter.
Yes, it would be very hard for me to quantify it both because it's an ongoing battle and I also would be a very broad range of high quality, if I tried to quantify it.
The damage caused by this.
Is significant but not gonna be able to go into details.
No that's fair.
You raise some additional equity here in the second quarter pay down additional debt.
Most of your debt is relatively long has a relatively long maturity can you comment on which portion of that capital stack.
Priority for pay downs.
Yes, so when we think about paydowns on on our struck our current debt structure.
We think about it really in the following way.
We think about what's the absolute rate on that piece of debt.
What is the alternatives, we could use the cash for I mean, if we have really good deals in front of US we'll continue to do transactions without without levering them that's in effect.
From an overall balance sheet perspective, similar to paying down debt frankly, because you're delevering overall.
We will we will also look at when there is a reset on rates.
Because a lot of our debt instruments.
Might be a 10 year instrument, but it may have a reset every three years or so so if you are coming up with a reset.
In the near future future.
On one of our debts, given what's going on in the background interest rates generally.
You would think about trying to accelerate paying down on those debts that are going to reset and then the final thing we think about which is really important is thinking about what collateral is underneath a given alone because if we can free up a lot of collateral. It gives us an awful lot of financing flexibility. So we're very cognizant.
Creating this relatively large package of assets with no <unk>.
Pledge against them because it opens up all kinds of more efficient ways for us to finance the business going forward.
So that's how that's how we balance it.
Great.
That's helpful.
One more for me I mean thinking about how you converted the series B last year and to comment.
You raise more common pay down more debt.
During the recent deleveraging, it's sort of giving your dry powder for additional acquisitions to lever back up or are you thinking that you want to run the balance sheet with maybe a little bit less leverage over time.
I think it's actually both.
It gives us it gives us the financial flexibility to really grow the company. When there are good opportunities because we've got a lot of liquidity capacity should we need it but our general trend is to have slightly less leverage over time and we have had historically the leverage we had we took the point of view that debt.
To support the overheads on a company you needed to achieve realm.
Relatively significant scale and frankly, we're still a modest sized company by any.
Measure on Wall Street, but we really wanted to get to a good big base of assets because you can't run a public company without it without a pretty solid staff and the minimum number of people. So we used leverage to be able to keep that growth growing in to get big.
Even without doing with equity.
We want to continue to grow we want to grow aggressively.
But I think we are now at a point, where we can probably do that growth with slightly less overall leverage ratios.
This company if you look at the preferred as a debt instrument and its not technically correct, but some people do look at it that way.
We have massively Deleveraged this company in the last 12 months.
On an overall basis when you look at it that way.
And we think Thats good and we think it's one of the things Thats helped our stock price.
Sure.
Positive about it.
But it's always going to be a balance.
But long term I think youll see lower overall leverage levels than you have seen in the past on the company.
Okay I appreciate your thoughts.
Thank you thank you Mitch.
Thank you Mr. Zhang.
There are no additional questions waiting at this time I would like to pass the conference back to Paul Pittman for any closing remarks.
Thank you.
And thank you for all the investors and listeners on this call. We do appreciate your continued support of the company and we will look forward to talking with you either in person or on the next quarterly conference call. Thank you very much.
That concludes the farmland partners, Inc. Q1, 2022 earnings call I Hope you all enjoy the rest of your day you may now disconnect your line.
Okay.