Q4 2023 Gladstone Land Corp Earnings Call

At this time, all participants are in listen only mode.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during this morning's conference, please press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll now turn the conference over to Mr. David Gladstone, Chief Executive Officer and President. Mr. Gladstone, you may begin. Thank you, Rob. That's a nice introduction.

A question answer session will follow the formal presentation.

If anyone should require operator assistance during this morning's conference. Please press star zero from your telephone keypad.

Please note this conference is being recorded.

At this time I'll now turn the conference over to Mr. David Gladstone, Chief Executive Officer, and President Mr. Gladstone you may begin.

Thank you Rob that's nice introduction this is David Gladstone and welcome to the quarterly conference call for Gladstone land and thank you all for calling in today, we seriously I. Appreciate all the time you take to listen to our presentations and hope we can give you some fairly good news this time before I.

David Gladstone: This is David Gladstone, and welcome to the quarterly conference call for Gladstone Land. Thank you all for calling in today. We seriously appreciate all the time you take to listen to our presentations and hope we can give you some really good news this time. Before I begin, though, I have to start with Michael LaCalce.

Again, though we have to start with Michael the counsel He's our general counsel so Michael take it away. Thanks, David Good morning, everybody. Today's report May include forward looking statements under the Securities Act of 1933, the Securities Exchange Act of 1934, including those regarding our future performance. These forward looking statements involve certain risks.

David Gladstone: He's our general counsel, so Michael, take it away. Thanks, David. Good morning, everybody.

Michael LaCalce: Today's report may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. Now, these forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable, and many factors may cause our actual results to be materially different from the future results expressed or implied by these forward-looking statements, including all the risk factors in our Forms 10-K, 10-Q, and other documents we file with the SEC. You can find them on our website, which is www.gladstoneland.com, specifically the Investors page, or on the SEC's website, which is www.sec.gov.

Uncertainties that are based on our current plans, which we believe to be reasonable and many factors may cause our actual results to be materially different from future results expressed or implied by these forward looking statements, including all the risk factors in our forms 10-K, 10-Q, and other documents we filed with the SEC.

Get them on our website, which is www Gladstone land title specific lazy investor's page or on the Sec's website, which is www dot FCC that G. O V and 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.

Michael LaCalce: 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. Now, today we'll discuss FFO, which is Funds From Operations. FFO 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 on property, plus depreciation and amortization of real estate assets.

Except as required by law today, we'll discuss <unk>, which is funds from operations.

It was 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.

Michael LaCalce: We may also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses. Also, adjusted FFO, which further adjusts core FFO for certain non-cash items, such as converting GAF rents to normalized cash rents. We believe these are better indications of our operating results and allow better comparability of our period over period performance. Please visit our website, once again, at GladstoneLand.com.

They also discussed poor F F O, which we generally define as F. All adjusted for certain nonrecurring revenues and expenses also adjusted <unk>, which further adjusts core F F. All for certain noncash items, such as converting GAAP rents to normalized cash rents and we believe these are better indications of our operating results and allow better.

Comparability of our period over period performance. Please visit our website once again Gladstone land Dot com sign up for our email notification service you can also find us on Facebook keyword. There is the Gladstone companies and on Twitter, where at Gladstone comps.

Michael LaCalce: You can also find us on Facebook, the keyword there is the Gladstone Companies, and on Twitter, we're at Gladstone Comps. Today's call is an overview of our results, so we ask that you review our press release and Form 10-K, both issued yesterday, for more detailed information. Now, with that, I'll turn it back to David Gladstone. Okay. Thank you, Michael.

Today's call is an overview of our results. So we ask that you review our press release and Form 10-K, both issued yesterday for more detailed information now with that I'll turn it back to David Gladstone.

Thank you Michael.

David Gladstone: Let me start with a brief overview of our farmland holdings. We currently own about 112,000 acres on 168 farms and over 46,000 acre-feet of water assets. One acre-foot is equal to about 326,000 gallons.

With a brief overview of our farmland holdings, we currently own about 112000 acres.

168 farms and over 46000 acre feet of water assets, one acre foot is equal to about 326000 gallons.

David Gladstone: So we own about 15 billion gallons of water. And although the land and the water are valued at about $1.6 billion, it'll be interesting to see where the land and buildings go over the next year or two. The changes in the economy, hopefully, take hold. $250 to $500 per acre foot now. $23 million worth of water.

So we own about 15 billion gallons of water.

And although the land and the water that you that yeah and.

At 1.6 billion well it'll be interesting to see where are they.

Land and buildings go over the next year or two the changes in the economy hopefully take hold.

500.

250 $500 per acre foot.

So.

$23 million worth of water.

David Gladstone: And you can't grow anything without the water, so we're in good shape there. We have that all of this land that we own plus the water is worth about $1.6 billion. Our farms are in 15 different states, and more importantly, in 29 different growing regions, and our water assets are all in California. Our farms are leased to over 90 different tenant farmers, all of whom are unrelated to us, and the tenants on these farms are growing 60 different crops, mostly fruits and vegetables and nuts. And you can find these in the produce section of grocery stores, which is where most of our crops, and tenants sell our crops to those people running those grocery stores.

And you can't grow anything without the water. So we're in good shape there.

We have that all of this land that we own plus the water is worth about $1.6 billion. Our farms are in 15 different states.

And more importantly in 29 different growing regions and our water assets are all in California.

Farms are leased to over 90 different tenant farmers on San Martin unrelated to us and our tenants on these farms are growing 60 different crops.

They fruits and vegetables and nuts.

And you can find these in the produce section of grocery stores, which is where most of our crops.

Tenants sell crops to those to those people running those grocery stores now give a quick update some of the tenants issued.

David Gladstone: And now I'll give a quick update on some of the tenants issues, issues that we're continuing to have. We currently have five properties, about 15 of our 168 farms that are vacant. And we also are recognizing revenue from leases with two tenants who collectively lease five of our farms on a cash basis. So we're a little bit behind on that.

Issues that we are continuing to have we currently have five properties about 15 about 168 farms that are vacant and we also are recognizing revenue from leases with two tenants who collectively at least five of our farms on a cash basis, so a little bit behind on that rig.

David Gladstone: Regarding the vacant farms, we're in discussions with various potential buyers or tenants to buy or lease these properties and hope to have all of those in place by this summer. And regarding the two tenants on non-accrual status, one of them is now current in their rental payments to us, and we're continuing to work with the other tenant and to collect from that. A total year-over-year impact on the operations as a result of these two and other tenant issues got sorted out during the year, but decreased operating income by about $1.4 million for the fourth quarter and about 1.7 million for the year. I think you'll see that come up in the next quarter.

Regarding the vacant farms, we are in discussion with various potential buyers are tenants to buy or at least these properties and hope to have all of those in place by this summer.

And regarding the two tenants are on non accrual status. One of them is now current in their rental payments to us and we are continuing to work with it.

Their tenant and to collect from that.

In total year over year impact on the operations as a result of these two and other tenant issues get sorted out during the year, but decreased operating income by about $1 4 million for the fall.

For the fourth quarter and about 1.7 million for the year I think you'll see that come up in the next quarter as we mentioned on the past several calls we continue to be cautious with our new investments because the cost of capital both borrowing costs that we have to pay and equity that we have.

David Gladstone: As we mentioned on the past several calls, we continue to be cautious with our new investments because the cost of capital, both the borrowing costs that we have to pay and the equity that we have to raise, remains very high, and land prices are still too high to make sense in many of the acquisitions that we look at. So, as a result, acquisition activity remains slow for us and probably will for at least another couple of quarters. With inflation still above the Fed's target rate, interest rates are probably going to remain pretty high for the next six months, maybe even a year.

To remain right raise remains very high and the land prices are still too high and makes sense in many of the acquisitions that we look at.

So as a result acquisition activity remains slow for.

US and probably well for at least another couple of quarters with inflation still above the fed's target rate interest rates are gonna remains probably pretty high for the next six months, maybe even a year and when the rate cuts do come might be getting for that.

David Gladstone: And when the rate cuts do come, we might be getting further down; rate cuts may be pushed further down the line, so it may be a while before we can start bulking up again on more land. But overall, our existing farmland portfolio continues to perform as expected, with the exception of those issues that I mentioned just a few minutes ago. We did sell one property after year-end, that is, after December 31st.

Rate cuts might be pushed further down the line. So maybe before we can start bulking up again on more land.

But overall, our existing farmland portfolio continues to perform as expected with the exception of those issues that I mentioned, just about just a few minutes ago.

We did sell one property after a year and that's after December 31st.

David Gladstone: That resulted in a nice gain for us. This farm is in Florida, and we bought it for about $54 million about seven years ago, and we sold it in January for about 66 million dollars. So net of closing costs, this resulted in a cash gain of about $10 million, and remember, during the last seven years, the tenants had been paying rent on the farm. And I'll note the price we sold it for was about $2 million more than its recent appraised value, which leads me to believe that the appraisals that we have on our properties, which go to an asset value, are a little bit low. On the leasing front, since the beginning of the quarter, we renewed or amended seven leases on farms in two different states. In total, these renewals are expected to result in a decrease in annual net operating income from those properties by about $682,000 compared to the prior leases we had on them. However, this includes one lease executed on a property to replace a prior tent that had been placed on non-accrual status.

And that resulted in a nice gain for us.

This farm is in Florida, and we bought it for about 54 million about seven years ago and.

And we sold it in January for about $66 million. So net of closing costs. This resulted in a cash gain of about $10 million and remember given the last seven years, the tenants had been paying rent on the farm.

And I'll note the price we sold out was about 2 million more.

In its recent appraised value.

It leads me to believe that the appraisals that we have on our properties, which.

Go to an asset that you are a little bit low.

On the leasing front since the beginning of the quarter, we were we renewed or amended seven leases on farms in two different states. In total. These renewals are expected to result in a decrease of annual net operating income from those profit is about $682000.

And then the prior leases we had on hand. However, this includes one lease executed on a property to replace a prior 10 that had been placed on non accrual status. This prior lease was fixed with a fixed rent basis, whereas the new leases largely a crop share basis, we usually use that crop share.

David Gladstone: This prior lease was on a fixed rent basis, whereas the new lease is largely a crop share basis. We usually use that crop share where we get part of the profits from, and new leases simply to give the new tenant a chance to feel out how much he can really pay for the property. So excluding this one lease, the remaining lease renewals are expected to result in an overall increase in net investment income of about $504,000, that's about 5.4% over the prior leases. So things are looking good there.

Sure.

Where we get part of the profits from.

And new leases simply to give the new tenant chance to feel out how much you can really pay for the property.

So excluding this one lease the remaining lease renewals are expected to result in an overall increase in net investment income.

Have about $504000, that's about five 4% over the prior leases so looking good there.

David Gladstone: Looking ahead, we only have one lease that is expiring in the next six months, and it makes up less than one half of 1% of our total annualized lease revenue. We're in discussion with a group that wants to lease the farm, and we're currently anticipating an additional vacancy, no additional vacancies, as a result of this or any other upcoming situations. And just a few other items I'd like to mention.

Looking ahead, we only have <unk>.

One lease.

Expiring in the next six months and it makes up less than one half of 1% of our total annualized lease revenue.

We're in discussion with a group of lease groups that wants to lease the farm and we currently anticipating an additional vacancy no additional vacancies.

As a result of this or any other upcoming situations.

Just a few other items I'd like to mention in 2023 that was really a good year for our western portfolio regarding water water is the key to almost everything on the west coast.

David Gladstone: In 2023, that was really a good year for our Westin portfolio regarding water. Water is the key to almost everything on the West Coast, and then 2024 and now are off to a very positive start. There's a lot of rain going on out there and right now, even today and certainly yesterday.

And then 'twenty 'twenty four now is off to a very positive start as lot of rain going on out there and right even today and certainly yesterday.

David Gladstone: Under the Sustainable Groundwater Management Act, or as we call it, SGMA, which was enacted in 2014, certain basins and bases must achieve groundwater sustainability by 2040. So we've got plenty of time to do it, but our team in California has been focused on ensuring that we have a firm understanding of the impact of SGMA on the long-term sustainability of our Western portfolio. And as such, we have been working to develop projects in certain areas that have been identified as having a risk of potential water shortages over the next couple of decades. During 2023, we completed the construction of a large groundwater recharge facility on two of our farms. We entered into various agreements with both local water districts and private third-party individuals to acquire additional water supplies in the near term.

Under this sustainable groundwater management act or as we call it Sigma.

Which was enacted in 2014 certain basins.

Basic message chief groundwater sustainability about 2040.

So we've got plenty of time to do it but our team in California has been focused on ensuring that we have a firm understanding of the impact of Sigma.

The long term sustainability of our western portfolio and as such we have been working to develop projects in certain areas there.

We have identified as having the risk of central water shortages over.

Over the next couple of decades.

During 'twenty two 'twenty three we completed the construction of a large groundwater recharge facility on two of our farms, we entered into various agreements with both local water districts and private third party individuals to acquire additional water supplies in the near term.

And we secured we have secured a long term water supply contract for substantial amounts of our portfolio.

David Gladstone: And we have secured a long-term water supply contract for substantial amounts of our portfolio in the western San Joaquin Valley, California. These acquisitions and projects have already made a large impact on achieving long-term and sustainable water supplies for many of the farms in California. We intend to continue this focus on water security for our farms in 2024, which has started off with another round of historic storms in California. If the rain events continue, we expect the state's water supply to allow for another year of great opportunity for farms in California, allowing us to leverage the projects and contracts secured in 2023 to acquire even more water rights. We have additional water projects that we anticipate completing in 2024 to secure additional water rights. It's important to note that these projects are largely forward-looking. Our portfolio currently has an adequate supply of water, and to date, none of the farms have had to follow, fallow, or reduce plantings. Our goal is to remain in compliance through full compliance of SGMA into 2024, 2040, and beyond.

And the Western Sydney, San Joaquin Valley, California, and these acquisitions and projects have already made a large impact in achieving long term and sustainable water supplies for many of the farms in California.

We intend to continue this focus on water security for our farms in 'twenty 'twenty, four which has started off with another round of historic storms in California.

Yeah, if the rain events continue we expect the state's water supply to allow for another year of great opportunity from farms in California, allowing us to leverage the projects.

And contracts secured in 'twenty, two 'twenty three to acquire even more water rights.

We have additional water projects that we anticipate completing in 'twenty 'twenty four to secure additional water rights.

It's important to note that these projects are largely forward looking our portfolio currently has adequate supply of water and to date, none of the farms have had to fall off.

Followed the farms or reduced plantings are our goal is to remain in case through full compliance of Sigma and 'twenty into 'twenty 'twenty, four 'twenty 40 and beyond.

David Gladstone: While certain other land may have to follow a portion of their farms, thus reducing the amount of planted acreage of certain crops, our goal is to maintain a stable production level on all of our farms. We intend to continue to partner with local groundwater management agencies across California to ensure that we have, unlike any of our farming friends, a sustainable water supply for all of our farms in the West. In Florida, of course, and in the East, it's much easier to get groundwater.

While certain other land may have to follow Palo a portion of their farms, thus, reducing the amount of planted acreage of certain crops have our goal is to maintain a stable production level on all of our farms. We intended to continue to partner with local groundwater management agencies across.

California.

To ensure that we have unlike any of our farming friends sustainable water supply for all of our farms in the west.

In Florida of course, and in the east it's much easier to get groundwater.

David Gladstone: And just one more note regarding weather in California; they've been experiencing another round of storms and flooding over the past few weeks, but fortunately, we've been able to report that none of our farms have suffered any significant damage as a result of these recent storms, and we don't expect our farms to get hurt because we have good runoff programs. And finally, I just wanted to touch on a question we get from time to time from some of our good shareholders, that is, your company pays money to Gladstone Securities to sell the preferred stock that we're issuing in the company. And Gladstone Securities is largely a conduit in this process. It remits a large majority of the fees received to other parties involved in the offering, including participating broker-dealers and wholesalers.

And just one more note regarding weather in California, they're experiencing another round of storms and flooding over the past few weeks. Unfortunately.

They're able to report that none of our farms have suffered any significant damage is there.

After these recent storms.

We don't expect that forms to get hurt we have good run off.

Programs and finally I just wanted to touch on a question we get from time to time from.

Some of our good shareholders.

We pay money that is your company pays money take Gladstone securities to sell that preferred stock that we're issuing in the company Gladstone securities as largely a conduit in this process. It remit a large majority of the fees received two other parties involved.

And the offering including participating broker dealers and wholesalers.

Lewis Parrish: At the end of the day, it's pretty much a break-even business for Gladstone Securities, so we're not making a profit on selling your securities. And please also remember that preferred stock is not included in the calculation of any fees that Gladstone Land pays to the advisor. So I'm going to stop here; that's enough on the operations now; I'll turn it over to our CFO, Lewis Parrish, to talk to you more about the numbers that he's reported in the 10-K. Thank you, David. Good morning, everyone.

In the end of at the end of the day, it's pretty much a breakeven business for Gladstone Securities. So, we're not making a profit out of selling your securities and.

And please also remember that preferred stock is not included in the calculation of any fees that Gladstone land pays for that Sir.

So I'm going to stop here and that's enough on the operations now I'll turn it over to our CFO Lewis Parrish to talk.

Talk to you more about the numbers that he's reported then.

10-K.

Thank you David and good morning, everyone I'll begin by briefly going over our recent financing activity we.

Lewis Parrish: I'll begin by briefly going over our recent financing activity. We did not incur any new borrowings, but we have repaid about $24 million of loans since the beginning of the fourth quarter that were scheduled to either mature or reset. On the equity side, since the beginning of the quarter, we've raised net proceeds of about $556,000 from sales of the Series E Preferred stock. Moving on to our operating results, for the fourth quarter, we had net income of about $1.8 million and a net loss to common shareholders of $4.3 million, both cents per share. For the year, we had net income of about $14.6 million and a net loss to common shareholders of $9.9 million, or 28 cents per share. On a quarter-over-quarter basis, adjusted FFO for the current quarter was approximately $5.4 million, or $0.151 per share, compared to $6.6 million, or $0.189 per share, in the prior year quarter.

We did not incur any new borrowings, but we did repay about we have we paid about $24 million of loans since the beginning of the fourth quarter that were scheduled to either mature or reset.

And the equity side since the beginning of the quarter. We raised net proceeds of about $556000 from sales of our series a preferred stock.

Moving onto our operating results for the fourth quarter, we had net income of about $1.8 million and a net loss of common shareholders of $4 $3 million also for sure for.

For the year, we had net income of about $14 $6 million and net loss to common shareholders of $9 $9 million or 28 cents per share.

Quarter over quarter basis, adjusted <unk> for the current quarter was approximately $5 $4 million or 15.1 cents per share compared to $6 6 million or 18.9 cents per share in the prior year quarter.

Dividends declared per common share were $13.09 in the current quarter compared to $13.07 in the prior year quarter.

Lewis Parrish: On an annual basis, adjusted FFO for 2023 was approximately $20.3 million, compared to $24.3 million in 2022. And AFFO per share was $0.569 in 2023 versus $0.701 in 2022. Dividends declared were $0.554 in 2023 and $0.546 in 2022.

On an annual basis adjusted <unk> for 2023 was approximately $23 million compared to $24 $3 million in 2022 and F. O per share was 56 nine cents and 23 versus 70.1 cents in 2022.

Dividends declared were $55.04 in 2023, and 54.6 cents in 'twenty two.

Lewis Parrish: The primary drivers behind the decreases in AFO were the lost revenues and increased expenses associated with properties that were either in the vacant, self-operated, or non-returnable status during portions of the year, as well as a decrease in the amount of participation rents recorded and an increase in dividends paid out to preferred shareholders during the period. Despite the lost revenues from vacant, self-operated, and non-accrual properties, fixed base cash rents increased by about $255,000, or 1%, on a quarter-over-quarter basis, and by about $990,000, or 1%, on a year-over-year basis. These increases were largely driven by additional rents earned on capital improvements projects that we completed on certain of our farms. During the fourth quarter, we recorded about $3.3 million of participation rents compared to $4.7 million in Q4 of last year. And for the year, we recorded participation rents of about $5.9 million versus $7.7 million in 2022. Participation rents decreased primarily due to lower yields, coupled with lower pricing for last year's crops.

Primary drivers behind the decreases in even though with the lost revenues and increased expenses associated with properties every year the bacon self operated.

Our school status during portions of the year as well as a decrease in the amount of participation rents recorded an increase in dividends paid out to preferred shareholders during the year.

Despite the loss of revenues from vacant self operated and non accrual properties fixed base cash rents increased by about $255000 or 1% on a quarter over quarter basis, and by about $990000 or 1% on a year over year basis.

These increases were largely driven by additional rents earned on capital improvements projects that we completed on certain of our farms.

During the fourth quarter, we recorded about $3.3 million of participation rents compared to $4 $7 million in Q4 of last year and for the year, we recorded participation rents of about $5 $9 million versus $7 $7 million in 2022.

Participation rents decreased primarily due to lower yields coupled with lower pricing for last year's crops.

Lewis Parrish: The lower yields were expected due to the fact that these crops were harvested at the end of a multi-year drought, and of course, the water landscape in California and the western general area has changed drastically since then. However, pricing continued to be somewhat lower due to oversupply, particularly in the almond market. However, we are starting to see almond prices rebound a bit as global inventories get used up. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses remain relatively flat for both comparable periods.

The lower yields were expected due to the fact that these crops are harvested at the end of a multiyear drought and of course, the water landscape in California, and the West in General has changed drastically since then.

Pricing continued to be somewhat lower due to oversupply, particularly in the arm market. However, we are starting to see almond prices rebound a bit as global inventories get used up.

On the expense side, excluding reimbursable expenses, and certain nonrecurring or non cash expenses. Our core operating expenses remained relatively flat for both comparable periods.

Lewis Parrish: Total related party fees decreased for both periods, and that's primarily due to a lower incentive fee earned by our advisor during the current quarter and year. This decrease was largely offset by increases in certain other core operating expenses, namely property operating expenses and general and administrative expenses. Property operating expenses increased in the current year periods due to higher property taxes and additional property management fees incurred as a result of certain properties being either vacant or self-operated during portions of 2023, and G&A expenses increased due to higher professional fees and additional costs incurred in connection with amending our credit facility with MetLife. One final thing to note on our income statement, we sometimes get reimbursed by our tenants for certain costs, or they will sometimes pay these costs directly on our behalf, as stipulated in the lease agreement.

Total related party fees decrease for both periods and is primarily due to a lower incentive fee earned by our adviser during the current quarter and year.

The decrease was largely offset by increases in certain other core operating expenses, namely property operating expenses and general and.

General and administrative expenses.

Property operating expenses increased in the current year periods due to higher property taxes, and additional property management fees incurred as a result of certain properties being either vacant or self operated during portions of 2023.

And G&A expenses increased due to higher professional fees and additional costs incurred in connection with amending our credit facility with Metlife.

One final thing to note on our income statement, we sometimes get reimbursed by our tenants for certain costs or they will sometimes pay these costs directly on our behalf as stipulated in the lease agreement and these cases, we recorded additional lease revenue and also additional property operating expenses with the amounts I'll say to each other and netting out to zero and the.

Lewis Parrish: In these cases, we record additional lease revenue and also additional property operating expenses with the amounts offsetting each other and netting out to zero. In the past, this amount has been averaging about $50,000 per quarter, however, that figure jumped to nearly $550,000 during the fourth quarter. It still nets out to zero on the income statement, but I just wanted to point out that each of these individual line items, that is lease revenue and property operating expenses, are both inflated by about $500,000 in the fourth quarter from what it has been recently. And finally, other expenses decreased due primarily to lower interest expense incurred as a result of loan repayments made over the past year.

Past this amount has been averaging about $50000 per quarter, however that figure jumped to nearly $550000. During the fourth quarter, it's still nets out to zero on the income statement, but I just wanted to point out that each of these individual line items that as lease revenue and property operating expenses are both inflated by about $500000 in the fourth quarter from what it has been recently.

And finally other expenses decreased due primarily to lower and lower interest expense incurred as a result of loan repayments made over the past year.

With that we'll move on to net asset value, we had 31 farms revalued during the quarter and its all all via third party appraisals.

Lewis Parrish: With that, we'll move on to net asset value. We had 31 farms revalued during the quarter. That's all via third-party appraisals. Overall, these valuations decreased by about $13 million from their previous valuations from about a year ago. So as of December 31st, our portfolio was valued at about $1.6 billion, and all of this was supported by either third-party appraisals or the purchase price. Based on these updated valuations and including the fair value of our debt and all preferred securities, our net asset value per common share at December 31st was $19.06, which is down from $20.33 at September 31st.

Overall, these valuations decreased by about $13 million from their previous valuations from about a year ago.

So as of December 30, <unk>, our portfolio was valued at about $1 $6 billion in all of this was supported by either third party appraisals or the purchase prices.

Based on these updated valuations and including the fair value of our debt and all preferred securities tornadoes the value per common share at December 31st $19.06 just down from $20 33 at September 30.

The majority of this decrease was due to the change in fair value of our fixed long term borrowings and preferred securities as interest rates retreated somewhat from 930 to $12, one as well as decreases in valuations of certain farms that were reappraised during the quarter.

Turning to liquidity, including availability on our lines of credit and other Undrawn notes. We currently have access to over $200 million liquidity, including about $60 million of cash on hand, and we also have over $130 million of Unpledged properties.

Lewis Parrish: The majority of this decrease was due to the change in fair value of our fixed long-term borrowings and preferred securities, as interest rates retreated somewhat from 930 to 1231, as well as decreases in valuations of certain farms that were reappraised during the quarter. Turning to liquidity, including availability on our lines of credit and other undrawn notes, we currently have access to over $200 million of liquidity, including about $60 million of cash on hand, and we also have over $130 million of unpledged property. Over 99.9% of our borrowings are currently at fixed rates, and on a weighted average basis these rates are fixed at 3.34% for another 4.2 years. As a result, we have experienced minimal impact on our operating results from increases in interest rates.

Over 99, 9% of our borrowings are currently at fixed rates and on a weighted average basis. These rates are fixed at 334% for another 4.2 years.

As a result, we have experienced minimal impact on our operating results from increases in interest rates and with respect to our current debt outstanding. We believe we are well protected showed interest interest rates remain high.

Regarding upcoming debt maturities, we have about $35 million coming due over the next 12 months, however, about $17 million of that represents various loan maturities.

And given the value of the underlying collateral we do not foresee any problems refinancing any of these loans, if we choose to do so.

So removing those maturities, we only have about $18 million of amortizing principal payments coming due over the next 12 months or about 3% of our current debt outstanding.

In addition, we have about $10 million in loans that they aren't they're not maturing, but they have a fixed term fixed rate term debt is set to expire over the next 12 months.

Lewis Parrish: And with respect to our current debt outstanding, we believe we are well protected should interest rates remain high. Regarding upcoming debt maturities, we have about $35 million coming due over the next 12 months. However, about $17 million of that represents various loan maturities.

And one last item to note here our lines of credit with Metlife were set to expire in April 2024, However, during the fourth quarter, we amended the Metlife facility to extend the maturity date of both lines of credit to December if theyre 20, thirty-three so almost a 10 year extension on those lines of credit.

Finally regarding our common distributions, we recently raised our common dividend dividend again to $4.65 per share per month. This marks the 33rd time, we've raised our common dividend over the past 36 quarters, resulting in an overall increase of 55% over that period and with that I'll turn the program back over to David.

Lewis Parrish: And given the value of the underlying collateral, we do not foresee any problems refinancing any of these loans if we choose to do so. So removing those maturities, we only have about $18 million of amortizing and principal payments coming due over the next 12 months, or about 3% of our current debt outstanding. In addition, we have about $10 million in loans that they are not maturing, but they have a fixed rate term that is set to expire over the next 12 months. One last item to note here, our lines of credit with MetLife were set to expire in April 2024, however during the fourth quarter we amended the MetLife facility to extend the maturity date of both lines of credit to December of 2033, so almost a 10-year extension on those lines of credit.

Thank you Louis a nice report and we continue to stay active in the marketplace should a good opportunity present itself, but we're still being more cautious on the acquisition front interest rates are still too high.

But we're hopeful that the rates will be lower this fall so that we can start buying more farms again.

And just a few final points, we believe investing in farmland growing crops that contribute to healthy lifestyles, such as fruits and vegetables and nuts.

It is a trend that we're seeing in the marketplace today overall demand for prime farmland growing berries, and vegetables and nuts.

Stable to strong for almost all the areas, where our farms are located particular, along both coasts.

Lewis Parrish: Finally, regarding our common distributions, we recently raised our common dividend again to 4.65 cents per share per month. This marks the 33rd time we've raised our common dividend over the past 36 quarters, resulting in an overall increase of 55% over that period. And with that, I'll turn the program back over to David. Well, thank you, Lewis. Nice report.

East or the west.

So please remember that purchasing stock in this company is a long term investment in farmland, it's an investment of a stock of two parts.

One part of course is for a strong assets such as similar to go it's a hard asset farmland is dirt.

And that has an intrinsic value because there's a limited amount of good farmland in the United States and it's being used up by urban developers.

David Gladstone: We continue to stay active in the marketplace should a good opportunity present itself, but we're still being more cautious on the acquisition front. Interest rates are still too high, but we're hopeful that they will be lower this fall so that we can start buying more farms again. And just a few final points.

Especially in California, and Florida, where we have many farms and the second part of investing in this stock is unlike gold or other alternative assets and that it's active it's an active investment with cash flows to investors and believing we are better than a bond fund because we keep increasing.

David Gladstone: We believe investing in farmland, growing crops that contribute to healthy lifestyles such as fruits and vegetables and nuts, that follows the trend that we're seeing in the marketplace today. Overall demand for prime farmland, growing berries and vegetables, is stable to strong for almost all the areas where our farms are located, particularly along both coasts, either the east or the west. So please remember that purchasing stock in this company is a long-term investment in farmland. It's an investment of a stock of two parts. One part, of course, is for strong assets such as similar to gold. It's a hard asset.

Dividend, whereas bonds are fixed we expect inflation, particularly in the food sector to continue to increase over time, we expect the value of the underlying farmland to increase as a result, and we expect this especially to be true in the fresh produce food sector as it trends more.

And more people in the United States are healthy food eaters.

We have the cashes.

I mentioned by our CFO to.

Back any of the loans that are coming due we have cash and credit facilities.

Banks that we deal with would love to lend us more money.

So we have cash to pay off loans coming due and we have borrowing capacity to do the same.

David Gladstone: Farmland is dirt, and that has intrinsic value because there's a limited amount of good farmland in the United States, and it's being used up by urban developers, especially in California and Florida where we have many farms. And the second part of investing in this stock is unlike gold or other alternative assets in that it's. It's an active investment with cash flows to investors, and believing we're better than a bond fund because we keep increasing the dividend, whereas bonds are fixed. We expect inflation, particularly in the food sector, to continue to increase over time.

So we are very secure here and if we had to sell off our farms I know.

Get money to pay off any debts that we have so we're strong in that regard. So the downside from my perspective is very low.

Farmers need dirt to grow food and.

We have plenty of dirt and so were great for farmers.

While people are so need to eat farmers need there to produce the food that they eat I'm going to stop here, let's have some questions from those who follow US operator would you. Please come on and help our listeners ask some questions.

David Gladstone: We expect the value of the underlying farmland to increase as a result. And we expect this especially to be true in the fresh produce food sector, as it trends that more and more people in the United States are healthy food eaters. We have the caches, mentioned by our CFO, back any loans that are coming due.

Sure Mr Gladstone.

I'd like to ask a question at this time you May press Star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

You May press star two if he 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 sarkies.

One moment. Please we poll for questions. Thank you.

David Gladstone: We have cash and credit facilities. The banks that we deal with would love to lend us more money. So we have cash to pay off loans coming due, and we have borrowing capacity to do the same. So we are very secure here.

Yeah.

Thank you and our first question today comes from the line of Rob Stevenson with Janney Montgomery Scott. Please proceed with your questions.

Hey, good morning, guys, David the 15 vacant farms, what crops are those in Michigan, and Washington, and does that have more to do with the crop type in its demand today or is it just the financials of the previous tenants there.

David Gladstone: And if we had to sell off our farms, I know we will get money to pay off any debts that we have. So we're strong in that regard. So the downside, from my perspective, is very low.

A lot of its previous tenants. This is mostly Bruce blueberry farms and.

Operator: Farmers need dirt to grow food and... We have plenty of dirt and so we're great for farmers While people also need to eat Farmers need dirt to produce the food that they eat. I'm going to stop here Let's have some questions from those who follow us. Operator, would you please come on and help our listener ask some questions? Sure, Mr. Gladstone. If you'd like to ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue.

We've had one tenant that has had some personal problems and hasnt been able to take care of the farms anyway.

We're gonna get those farms back and listen to somebody else.

Crops are coming out just fine.

Some of the farmer and many of these cases, that's giving us a problem. They havent done a good job of managing their funds and.

As a result, it impacts us, but it won't be for long as some of you remember some time back we had a family who.

Had a large farm from US I guess, there were two farms in that and they got in trouble.

Operator: You may press star 2 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. One moment please while we poll for questions. Thank you. Thank you. And our first question today comes from the line of Rob Stevenson with Johnny Montgomery Scott. Pleased to see you with your questions. Good morning, guys.

Farmer died.

There are real problems, there and we took a bath the first year and then after we got everything stabilized to a rented it out its still paying as agreed.

And we signed a 10 year lease and so the same thing will happen here just takes us a while to get them farming is a slow process and.

David Gladstone: David, the 15 vacant farms, what crops are those in Michigan and Washington and that have more to do with the crop type and its demand today, or is it just the financials of the previous tenants there? Well, a lot of it's previous tenants. This is mostly Blueberry Farms and we've had one tenant that has had some personal problems and hasn't been able to take care of the farms and we've, are going to get those farms back and lease them to somebody else. The crops are coming out just fine.

People, just don't jump on a farm and say Oh, I'm gonna grow some blueberries.

You have to wait for them.

But how should we be thinking about the delta between the NOI between you guys operating it versus having it lease to a third party tenant for an entire year or is there a <unk>.

Meaningful difference in terms of how that all sort of factors into the bottom line that we need to be thinking about or is that fairly close.

It's close but generally speaking somebody we hire and that was farms. Some of the vacant farms are now being run by people. We have hired to operate them for us. So we are and partially in the farming business with those people.

David Gladstone: It's the problem of the farmer in many of these cases that's giving us a problem. They haven't done a good job of managing their funds. As a result, it impacts us, but it won't be for long, as some of you...

David Gladstone: Some time back we had a family who, had a large farm from us. I guess there were two farms in that. And they got in trouble, farmer died. There were real problems there. And we took a bath the first year.

That's a different process.

Skilled and both growing and selling blueberries strawberries are almonds or anything else.

David Gladstone: And then after we got everything stabilized, we rented it out and it's still paying as agreed, and we signed a 10-year lease then. So the same thing will happen here. Just takes us a while to get them.

So I would say it's.

Once you get into a situation, where you're putting somebody else and to operate the farm and you are in essence backing the farmer.

David Gladstone: Farming is a slow process. People just don't jump on a farm and say, oh, I'm going to grow some blueberries, they have to wait for. How should we be thinking about the delta between the NOI, between you guys operating it versus having it leased to a third-party tenant for an entire year? Is there a meaningful difference in terms of how that all sort of factors into the bottom line that we need to be thinking about, or is that fairly close?

It's a different world people, who are really good at this business.

Never forget one of the politicians describing farming is.

Punch a hole in the ground and drop some seed and then you'll be fine.

Not that at all people don't realize how much.

How much the farmer knows what to do with regard to the farm that they're on.

So it takes us about a year and a turnaround something that goes a little bit sour and in some cases.

David Gladstone: It's close, but generally speaking, somebody we hire and those farms, some of the vacant farms are now being run by people we hired to operate them for us. So we are in partially in the farming business for those, That's a different process. Guild, both growing and selling blueberries or strawberries or almonds or anything else. So I would say once you get into a situation where you're putting somebody else in to operate the farm, and you are, in essence, backing the farmer, it's a different world. People who are really good at this business.

The sour and this is Ben.

Chewing up some of our time so we've used this time.

To get in the water side of the business and making sure that.

When Sigma and these other government agencies demand that you do a b and C that we're ready for that we've got people on staff that are really skilled in this area.

I think everybody in the government side of it we know that were on their side, we want to be completely.

Completely completely away from the idea that we've got to fallow anything.

David Gladstone: I'll never forget one of the politicians describing farming as.., punch a hole in the ground and drop some seed in and you'll be fine and it's just not that at all. People don't realize how much.., how much the farmer knows what to do with regard to the farm that they're on. So it takes us about a year to turn around something that goes a little bit sour. And in some cases, the sourness has been, chewing up some of our time, so we've used this time to get in the water side of the business and making sure that when Sigma and these other government agencies demand that you do A, B, and C, that we're ready for them. We've got people on staff that are really skilled in this area. I think anybody in the government side of it would know that we're on their side, we want to be, completely, completely away from the idea that we've got to fallow anything. I'm sorry, Rob, did I answer your question? Yeah, that's helpful.

I'm sorry, Rob did I answer your question, Yes, that's helpful. And then I know the rains and floods in California caused some damage to structures on one farm, but are they having any negative impact on any of the crops, especially the permanent ones and you know if this continues to go on is that something we need to be careful about.

Well of course, you'd be careful we've got insurance that helps us out a lot and the one situation that you've mentioned, which came out of last year's rainstorm.

It was a few wooden structures that were.

Just not.

Whether ready and so as a result, they are got replaced and the tenant there has helped us out with some additional changes to their lease they didn't have insurance on the trust Trussell that these were on them. So as a result.

David Gladstone: And then I know the rains and floods in California caused some damage to some structures on one farm, but are they having any negative impact on any of the crops, especially the permanent ones? And, you know, if this continues to go on, is that something we need to be careful about? Well, of course, you'd be careful.

They had to take a small loss in essence, so Rob I don't think that's our problem we even have.

Any.

If you may remember the address one of our addresses on one of our farms is San Andreas and there is the San Andreas fault that runs through some of our farms, while that won't destroy their farms could open quite a gap to have to jump over to get the crops.

David Gladstone: We've got insurance that helps us out a lot, and the one situation that you mentioned, which came out of last year's rainstorm, was a few wooden structures that were just not, weather ready and so as a result they got replaced and the tenant there has helped us out with some additional changes to their lease. They didn't have insurance on the trussels that these were on and so as a result, They had to take a small loss in essence. So, Rob, I don't think that's our problem. We even have.., and Andy.

Crops done, but we have insurance for that we pay for that we want to make sure.

Higher insurance for some of the structures that we have so we're pretty well covered from every angle except from.

The problems that some of the tenants had gotten themselves into.

David Gladstone: If you can remember the address, one of our addresses on one of our farms is San Andreas, and there is the San Andreas vault that runs through some of our farms. While that won't destroy the farms, it could open quite a gap for them to have to jump over to get the crops done. But we have insurance for that. We pay for that. We want to make sure we have fire insurance for some of the structures that we have.

The banks are all recovering now there and strong position. Most of these are federal banks federal license and so they're in a good position and I wish the rates would come down if you have any influence on the fed would you. Please use it.

The lower the rates, because we need a lower rate in order to buy farms and so we're just slowing down and making sure that we're gonna be way ahead of everybody else.

David Gladstone: So we're pretty well covered from every angle except for the problems that some of the tenants have gotten themselves into. The banks are all recovering now. They're in a strong position. Most of these are federal banks, with federal licenses.

Our management of the water that's needed on all of our farms in other words, there's another thing that goes on.

Sometimes markets change for example on the Almond marketplace was miserable.

For a while because we have a lot of almonds that are sold outside the United States and I've always believed that Spain, and Italy had most of the amas, but in essence, the United States is producing most of the almonds in the world today and sell to Spain, and one area that world.

David Gladstone: And so they're in a good position, and I wish the rates would come down. If you have any influence on the Fed, would you please use it to get them to lower the rates, because we need a lower rate in order to buy farms. And so we're just slowing down and making sure that we're going to be way ahead of everybody else in our management of the water that's needed on all of our farms. In other words, there's another thing going on.

Was eating a lot of almonds and practically stopped for a while due to the worry of.

The pandemic and so we ended up with a lot of online. So we did in our tenant ended up with a lot of its that they didn't get sold and.

David Gladstone: Sometimes, markets change. For example, the almond marketplace was miserable for a while because we have a lot of almonds that are sold outside the United States. I've always believed that. Spain and Italy had most of the almonds, but in essence, the United States is producing most of the almonds in the world today and selling them to Spain and one area of the world that eats a lot of almonds and practically stopped for a while due to the worry of the pandemic.

And almost all of that has been cleared out now and they've sold homage that they stored the good news is almonds can be stored for a good amount of time and so they are not like strawberries, where if you don't sell them in 14 days you've done.

They can keep them for years actually so we're in good shape today and if we don't have another pandemic probably find the bad thing about a pandemic as all of the restaurants don't use your products. We are lucky that we sell probably more than 90% of our products are sold into grocery.

David Gladstone: And so we ended up with a lot of almonds, or we didn't our tenant ended up with a lot of almonds that they didn't get sold. And almost all of that has been cleared out now, and they've sold the almonds that they stored. The good news is that almonds can be stored for a good amount of time, and so they're not like strawberries where if you don't sell them in 14 days, you

Stores and of course grocery stores went forward and raised rates and the unfortunate thing is they didnt pay us more for our products. So that grocery stores got profitability out of it but every bank thing has come back in line now except that federal reserve and the interest rates and once that happens.

David Gladstone: They can keep them for years, actually. So we're in good shape today, and if we don't have another pandemic, we're probably fine. The bad thing about a pandemic is that all of the restaurants don't use your products. We are lucky that probably more than 90% of our products are sold in grocery stores, and, of course, grocery stores went forward and raised their prices. The unfortunate thing is they didn't pay us more for our products, so the grocery stores got profitability out of it. But everything has come back in line now, except the Federal Reserve and interest rates, and once that happens, I think they'll do something this year, and we'll be back in business growing. And I think we mentioned somewhere along the way that we stand behind our farmers, and if they need more things done on the farm, we'll do that, and we charge them a rate for that, so the rent goes up by whatever we've done for them. And it's been working very well.

Think they'll do something this year, we'll be back in business growing.

And I think we mentioned somewhere along the way that we do stand behind our farmers and if they need more things down on the farm will do that and we charge them a rate for that so that rent goes up by whatever we've done for them and it's been working very well our farmers.

No that theyre not.

In a position that they can't get money to do some of the things they need to do to keep their farms going.

Rob are we.

Answering your questions what's out Yep. That's that's helpful. Thank you Lewis how much of the quarter over quarter and a decline of 127 was the change in farm values versus the change in debt and other balance sheet items.

So that breakout was.

Is down by a dollar and 27.

A little over 80 80 cents was the change in our long term financing the fixed rate debt and preferred securities and just under 40 cents was.

David Gladstone: Our farmers know that they're not in a position where they can't get money to do some of the things they need to do. I don't know, Rob, am I answering your questions? What's up? Yes, that's helpful, thank you. Louis, how much of the quarter-over-quarter NAV decline of 127 was the change in farm values versus the change in debt and other balance sheet items? So that breakout was...

As a result of the valuation changes.

Okay, and then what did you do with the Martin County disposition proceeds I think it was $66 million or so on a gross basis is that just paying down debt is that said, we haven't earning interest how should we be thinking about that.

We had a little.

Lewis Parrish: It was down by $1.27. A little over $0.80 was the change in our long-term financing, the fixed rate debt, and the preferred securities. And just under $0.40 was the result of the valuation changes. Okay. And then what did you do with the Martin County disposition proceeds? I think it was 66 million or so on a gross basis.

A little about $1.5 million of closing costs, we repaid $16 million of debt.

That were encumbering the property.

We paid another loan since then some small loan and the rest of it right now is earning about 4.5% interest in the bank.

And then last one for me David given your comments about getting a good price. If you sold some of your farms stocks trading at more than a 30% discount to NAV. What are your thoughts in the board's thoughts on potentially selling a few farms in doing some stock buybacks at these levels.

Lewis Parrish: Is that just paying down debt? Is that sitting in, you know, earning interest? How should we be thinking about that? We had about $1.5 million in closing costs. We repaid $16 million of debt that were uncovered by the property. We repaid another loan since then, a small loan, and the rest of it right now is earning about four and a half percent interest in the bank.

I hate it.

Don't want to buy back stock I think we are going to use the money to grow I watch Warren Buffett a lot yeah.

You didn't buy back stock often but I don't know, we could do that but we're just be injuring ourselves for the long term future.

Lewis Parrish: Okay. And then last one for me, David, giving you comments about getting a good price if you sold some of your farms, stocks trading at more than a 30% discount to your NAV, what are your thoughts and the board's thoughts on potentially selling a few farms and doing some stock buybacks at these levels? I hate it.

Okay. Thanks, guys appreciate the time.

Yeah.

Next question Rob.

Next question will be from line of Mike Albany with E F Hutton.

With your questions.

David Gladstone: I don't want to buy back stock. I think we're going to use the money to grow. I watch Warren Buffett a lot, and he doesn't buy back stock often. I don't know.

Hey, good morning, guys.

Yeah, I think most of my questions were answered with the previous caller, but I guess, just if you could provide more color on on crop prices and kind of the supply demand dynamic across various SaaS, yeah, as you mentioned or alluded to kind of that oversupply global oversupply normally.

David Gladstone: We could do that, but we'd just be injuring ourselves for the long-term future. Okay. Thanks, guys. Appreciate the time.

Rob Stevenson: Next question, Rob. Yes, the next question will be from the line of Mike Albanese with EF Hutton. Hey, good morning, guys.

Rising as inventories are drawn down.

David Gladstone: Yeah, I think most of my questions were answered by the previous caller, but I guess just if you could provide more color on crop prices and kind of the supply-demand dynamic across, you know, almonds, berries, pistachios. You mentioned or alluded to kind of that oversupply global oversupply normalizing as inventories are drawn down. I mean, how much runway is there left for kind of normalization or really just any other context you could help me frame that would be helpful.

How much runway is there left for kind of a normalization or really just any other context that you could help me frame that would be helpful.

I think that.

The current.

Current situation with almonds is pretty much over I don't think theres any excess left.

And so that's good there's never been any in strawberries.

Aires every now and then blueberries if the farmer has turned toward.

David Gladstone: I think that the current situation with almonds is pretty much over. I don't think there's any excess left, and so that's good. There's never been any in strawberries or blueberries, every now and then, blueberries if the farmer has turned to or, Doing great, how... any of the juices from blueberries then. He's probably got some leftovers, uh, so it's, it's very low right now. There isn't anybody with a lot of things out there.

Doing great.

Any of the juices from Blueberries then.

He's probably got had some leftovers. So it's it's very low right now there isn't anybody with a lot of things out there.

The Apple growers have gotten strong, which I hate that business simply because it's hard to keep and Apple.

You see them in the stores, they're all Neely.

And.

David Gladstone: Even the apple growers have gotten strong, which I hate that business simply because it's hard to keep an apple. You see them in the stores, and they're all mealy; don't want to be in that business much, even though we've got some out there. The other businesses are hurt sometimes. For cherries, they can get wiped out completely if you get any kind of frost.

Don't want to be in that business much even though we've got some out there.

Other businesses are.

Hurt sometimes.

For cherries chairs can get wiped out completely if you get a.

Uh huh.

Any kind of frost.

And so well.

We don't have that many cherries, so we're lucky in that regard.

I don't think there's much difference and.

Let's say that 2021 prices and amounts.

David Gladstone: And so we don't have that many cherries, so we're lucky in that regard. I don't think there's much difference between, say, the 2021 prices and the amount that we had back then and today, going forward. 2024 is going to be a great year for us because, after all, we're going to slip back into the same.

That we had back then and today.

Going forward 'twenty 'twenty four is going to be a great year for us because.

After all we're gonna slip back into the same.

We were making lots of money before the pandemic and all of that.

David Gladstone: We were making lots of money before the pandemic and all of it. There was erosion to the market. And so I think if you want to put down something... I'll say this.

Roshan to the markets.

And so I think if you want to put down something I'll.

I'll say this.

David Gladstone: 2024 will be fantastic if we get the interest rates going. The markets are good today, and so guys who are growing almost everything these days are in good shape.

'twenty 'twenty four will be fantastic.

If we get the interest rates going.

The markets are good today and so.

Guys who are growing.

Almost everything these days is in good shape.

David Gladstone: Every now and then, as we did in the blueberry business, you have a person who gets himself in trouble, personally as well as having just destroyed his whole business, but that'll come out. Unfortunately, you can't get somebody to take over that farm by snapping your fingers. People want some time to operate it and feel it out, and then we can go in and say, okay, if you want to go next year, then we have to go to a fixed price lease. And they usually are in agreement with us.

Every now and then you have as we did in the blueberry business.

Person, who gets himself in trouble and.

Personally as well as.

Just destroyed this whole business.

But that'll come out Unfortunately, you cant get somebody to take over that farm by snap your fingers people want some time to operate it and feel it out and then we can go in and say Okay. If you want to go next year. Then we would have to go to a fixed price lease and they usually are in agreement.

With us.

David Gladstone: I have to negotiate prices often in those situations because one year is really not enough time for them to explore all the alternatives they have. But we've had good luck in that regard. We've got some interesting farmers out there. I think I mentioned that we have one of the largest farmers in the world doing some of our stuff. In the strawberry area, we have the largest strawberry grower in the country, and he does extremely well there. But I don't know how to help you with that other than to say that pretty much we're back to 2021 or maybe even the beginning of 2022 in terms of pricing and farming, and whatever you grow, you can sell. It's, it's a wonderful marketplace when it does have these crazy things that come along like they did in 2008 when all the marketplaces were upside down, and today, I think we're all in good shape. I think this is the one moment that this business will change. That's pretty much exactly what I was looking for.

After negotiate prices often in those situations because one year is really not enough time for them to explore all the alternatives they have.

But we've had good luck in that regard we got some interesting farmers out there I think I've mentioned that we have one of the.

Largest farmers in the world doing some of our stuff.

The Strawberry area, we have the largest strawberry grower as has our largest farm and does extremely well there but.

But I don't know how to help you with that other than to say that pretty much we're back to 2021 or maybe even the beginning of 2022 in terms of.

Pricing in farming and whatever you grow you can sell.

It's a it's a wonderful marketplace. When it does have these crazy things that come along like they did in O eight when all the marketplaces, we're upside down.

And today.

We're all in good shape I think this is the one moment that this business will change.

Yes.

Got it.

That's pretty much exactly what I was looking for Okay. And then can you just remind me kind of overall portfolio exposure to I guess the participation rent structure and how much of that is if I have captured with these tenants that are having issues.

Lewis Parrish: Okay, and then can you just remind me kind of overall portfolio exposure to, I guess, the participation, the rent structure, and then how much of that is, if any, is captured with these tenants that are having issues? So I'd say about all of the participation rent lease structures are on our permanent crop farms. I think all but maybe one or two.

So I'd say about <unk> of our permanent most all the all of the participation rents lease structures are on our permanent crop farms I think all but maybe one or two.

Lewis Parrish: But I'd say a little less than one-third of our leases have a participation rent component. In the past couple of years, both 2022 and 2023, we've averaged about $90 million in total lease revenues. We've had participation rents of between $6 and $7 million. So I think that's a kind of normal run rate for us right now as far as percentage participation rents go. Participation rents are a percentage of total lease revenues, if that's what you're asking.

But it's a little less than one third of our leases have a participation rent component.

In the past couple of years, both 2022 and 'twenty three we've averaged about $90 million of total lease revenues.

We've had participation rents are between six and 7 million. So I think that's a kind of normal run rate for us right now as far as percentage of participation rents participation rents as a percentage of total these revenues.

Lewis Parrish: Yeah, that's helpful. Thank you. That's it for me again.

That's what you're asking.

Yeah. That's helpful. Thank you.

From my head.

Operator: Okay. Operator, would you come on and see if there's anyone else with a question? Sure. The next question is from the line of Barry Oxford with Collier. Great, thanks guys.

Okay, Operator would you come on and see if there's anyone else with a question sure. The next question is from the line of Barry Oxford with Colliers.

Great. Thanks, guys.

David Gladstone: David, when you think about acquisitions, and let's say interest rates stay roughly where they are, just move down ever so slightly, what would you have to see in the cap rate environment movement to make buying farms attractive? Well, if this farmer will drop the price, then it works. But most of the farmers are long-term holders, and when you offer them something that makes the numbers work, lower than they believe their farm is worth, And remember, a lot of these farms are farms that have been in families for years, so they're not willing to get rid of them. They'll just continue to farm them. So, Barry, I don't think at the end of the day you're going to see much happen unless interest rates come back in line with where they were in 2021. So they approach it more from a personal than, you know, an institutional marketplace. I hear this phrase every time: my great-grandfather started here and migrated from wherever, and so it's a beautiful story.

David when you think about acquisitions, and let's say interest rates stay roughly where they are just moved down ever so slightly what would you have to see in the cap rate environment movement to make buying farms attractive to you.

Well all of this to this pharma world dropped the price then it works, but most of the farmers are long term holders and when you offer them something that makes the numbers work.

It's lower than they believe that farm is worth and.

And remember a lot of these farms are farms that have been in families for years, so they're not willing to get rid of them.

They'll just continue to farm them.

So Barry I I don't think at the end of the day.

You're going to see much happen unless interest rates come back in line with where they were in 2021.

So they approach it more from a personal.

Then.

Institutional marketplace.

I hear this phrase every time my great grandfather started [laughter].

<unk> from wherever and so it's a beautiful stories Unfortunately the taxing.

David Gladstone: Unfortunately, the taxing that's going on now by the government keeps a lot of these guys from selling because they owe so much money when they sell. So they do try to do 1031s, and of course, we offer to give them stock in our company or partnership interest, which we have a partnership underneath our company. And some of them take it.

That's going on now by the government keeps a lot of these guys from selling because they owe so much money when they sell so they do try to do 10 31 and of course, we offer to give them stock in our company our partnership interest, which we have a partner partnership underneath our company.

And some of them take it.

David Gladstone: We have not gotten many to take all of it in terms of stock, and with the stock down as far as it is today, it's almost better just to try to do everything in cash. So, it's a peculiar situation we're in, but it happens every now and then, just as in 2008 and 2009, when people were scared to death. A lot of these farmers are people who want to get out of the business altogether. They want to sell the operating part, and they want to sell their land, which is the part we love. We don't really want to be in the operating part that often for various reasons, but generally speaking, we want to be in a passive position rather than in the operating business.

Not gotten many to take all of it in terms of stock and with the stock down as far as it is today its almost better just to try to do with the thing in cash.

So it's it's a peculiar situation we're in but it happens every now and then just as an OE no nine when people are scared to death.

A lot of these farmers are people, who want to get out of the business altogether. They want to sell the operating part and they want to sell their land and the land is the piece we love.

We don't really want to be in the operating part that often.

And for various reasons, but generally speaking we want to be in a passive position rather than.

In the operation business and so if.

David Gladstone: If the world changes a little bit on interest rates, I think we'll be explosive in terms of what we can do. Many of the farmers are 58, 59, 60, and they want to sell and liquidate simply because they're tired and worn out from years of farming. Farming is a very difficult situation for almost everybody, chewing your nails over the price of fertilizer, and it just goes on and on and on. So, from my perspective, I think, eventually, people like us and maybe a few others who are out there will end up owning most of the farmland. We haven't seen it yet, but what people keep arguing about is that China is buying up this farmland. They are only interested in the ones that are right next to an airport or something like that.

If the world changes a little bit on interest rates I think he'll be explosive in terms of what we can do many of the farmers are 50, 850, 960, and they want to sell and liquidate simply because they are tired worn out from years of farming.

Farming is a very difficult situation for almost everybody here.

Sure your nails over the price of fertilizer.

And it just goes on and on and on.

So from my perspective, I think eventually people like us and maybe a few others who are out there will end up owning most of the farmland.

We haven't seen what people keep arguing about them is that China is buying up this farm land. They are only interested in the ones that are right next door in the airport or something like that.

David Gladstone: For example, the buyer of our farm down in Florida was not buying it for anything other than they believe in the next 10 to 20 years going to be able to sell pieces of that farm to people who are in the home building area. As you probably know, millions of people have moved to Florida, housing prices there just keep the housing people very busy. That farm that we sold down there will probably have... Two golf courses and God only knows what else on it with hundreds of houses, uh... but it's not going to happen to work for us because we need ordinary income coming in every month to meet our dividends so we sold it to somebody who's going to end up holding it for a while and selling off big chunks of it to home builders down there, We have another big farm right next to that farm, so we will be the benefactors of that craziness that's going on in Florida in terms of housing prices, and Barry, I just don't see anything to hold us back except the interest rate craziness that's going on now and I think they're going to drop the rates somewhere along here, and if the Fed will drop it by a quarter of a point.

For example, the buyer of our farm down in Florida was not buying it for anything other than they believe in the next 10 to 20 years going to be able to sell pieces of that farm to people who are in the homebuilding area. As you probably know millions of people have moved.

To Florida and.

Housing prices there just keep the.

Housing people very busy that farm that we sold down there will probably have.

Two golf courses and God only knows what else on it with.

Hundreds of houses.

But it's not going to happen to work for us because we need ordinary income coming in every month to meet our dividend. So we sold it to somebody who's going to end up holding it for a while and selling off big chunks of it to homebuilders down there.

We have another big farm right next to that farm. So we will be the benefactors of that craziness, that's going on in Florida in terms of housing prices.

And Barry I, just don't see anything to hold us back except the interest rate craziness, that's going on now and I think they are going to drop the rates somewhere along here.

And if the fed will drop it by a quarter of a point.

David Gladstone: All hell will break loose because the banks will be dropping their rates so that we can use them. And there are plenty of farmers who want to sell. And I don't know how we'll solve the problem unless we can find somebody who wants to operate the farm, because the people who are selling really want to get out. And I think for us, our time is here today. Right. No, that makes all the sense in the world.

All Hell would break loose, but the banks will be dropping their rates. So that we can go use it and there are plenty of farmers, who want to sell and I don't know how we solve the problem unless we can find somebody who wants to operate up arm because the people who are selling really want to get out and I think for us.

Our time is here today.

Right no that makes it makes all the sense of the World and then David in your prepared comments, you mentioned mentioned something about California and water in banking more what are you seeing opportunities there when we start to see some troubles here on the first quarter or first half of the year.

David Gladstone: And then, David, in your prepared comments, you mentioned something about California and water and banking more water. Are you seeing opportunities there? Will we start to see some dribbles here in the first quarter or first half of the year? Dribbles, meaning what?

Derivative bowls, meaning a lot of selling.

David Gladstone: A land water bank. Oh, we got, as I mentioned, 15 billion gallons banked. Yeah, I bet.

Lab water bank.

Oh, we got as I mentioned 15 billion gallons back a bit I mean are you going to be doing more.

David Gladstone: I mean, are you going to be doing more? Yes, we will buy more. We will get enough that will take us to probably the rest of this century. We want to get it because once it gets in the ground in one of the aquifers, you can hold on to it for a long time, and unless people are willing to pay, we've been offered to buy water at prices that are ridiculous. I mean, some guy wanted us to pay a thousand dollars for an acre foot, and that would have been, Bay, about $50 million worth of water. We sold them at $1,000. Under $500, we did the math on it, and that would be about $20, $23, $24 million. We sold them at $500.

Yes, we will buy them all we will not that will take us to probably.

Rest of the.

The rest of this century.

We want to get.

Once it gets in the ground and one of the aquifers.

You can hold onto it for a long time and unless people are willing to pay we've been offered.

Land to buy water at prices that are ridiculous I mean, some some guy wanted us to $5000 an acre foot that would've been.

Oh boy.

$50 million worth of water sold it at $1000 on at 500, we did the math on it that would be about 2023 'twenty 4 million.

So 500 acre.

David Gladstone: We've done something unique, and I hate to mention it too much because I'm afraid people will copy us, and that is we've been able to take a lot of the water that's running off of these farms and into the..., and our farms, and we are putting it into some vacant areas on our farm. We've built berms, pumped water into that area, and then in some places, we just left it in there, and other places... We're over the aquifer, so it will trickle down into the aquifer. We get credit for that. We probably are doing that at the rate of... $20, $30 an acre. A little bit higher, you'd say.

We've done something unique I hate to mention it too much I'm afraid people copy us and that is we've been able to take a lot of the water that's running off of these farms.

Yeah.

And to the <unk>.

Farms, and we're putting it into some vacant areas on our farm we felt berms.

Pumped water into that area and then some places we just left it in there and other places where over the Aqua first so it will trickle down into the Aqua, we get credit for that and.

We probably are doing that at the rate of.

$20 $30 an acre foot.

Yeah.

A little bit higher you say, okay zero markup CFO.

David Gladstone: It's your markup, CFO. Anyway, we've really skinned the cat very well on this. Our guys are experts in all the water problems in California. I wish there was some way to use the one in Florida, some way we could get water from Florida where you stick a hole in the ground, and you get water out to California. And I think by the end of this century, they will be growing more vegetables and things in Florida than we do in California. So they'll be shipping the vegetables to California rather than vice versa. Its water is key in California. If you don't have water, you have nothing. Might as well turn it on. There's a group that's buying land above the capital of California.

Anyway, we.

We've really skinned the cat very well on this our guys are.

Our experts in all the water problems in California, I wish there was some way to use the one in Florida. Some way, we could get water from Florida, where you stick a hole in the ground and you got water.

Out in California.

Bye bye.

By the end of this century.

We'll be growing more vegetables and things in <unk>.

In Florida than with you in California, So there'll be shipping the vegetables to California, rather than vice versa.

So.

Water is key in California, you don't have water you had not been myself.

There's a group that's buying land.

The capital of California.

David Gladstone: And that's the worst land you've ever seen in your life for water. There's none there. So as a result, they're going to, quote, build a city there. But I don't know what they're going to do for water. They've got hundreds of acres, and I'm just interested in watching what's going on. These are some really big technology guys that are deciding they're going to do something out there with all of that land, calling it New California. So anyway, we'll watch that one from afar.

And that's the worst land you've ever seen in your life of water. There is none there. So as a result, they are going to build a city there I don't know what theyre going to do for water.

But it's they've got hundreds of acres in.

Just.

Interested in watching what's going on or.

There are some really big technology, guys that are deciding to do.

Something out there with all of that plan.

Calling it new cattle, new California, So anyway, we'll watch that one from a farce high risk.

David Gladstone: High risk. And so for us, we're just going to go back to the way we've always done things, which is buy as much property as we can with enough water. A lot of the properties are now being discounted by the people who value these properties. You don't have at least two sources of water. All of our farms have at least one.

And so for US we're just going to go back to the way, we've always done things, which is buy as much property as we can with enough water a lot of the properties are now being discounted by the people who value of these properties.

All have at least two sources of water.

All of our farms have at least one and now we're buying all of this water that we've got they've got more than two two sources. So you may see our asset values go up because we have enough water to prove them out and it will be a beautiful thing yes. The draft comes in we have all of this.

David Gladstone: And now, by buying all of this water that we've got, they have more than two sources. So you may see our asset values go up because we have enough water to prove them out. And it will be a beautiful thing if the drought comes and we have all this water. That's our guys, buy our water, we'll have an agreement with them, it will be us. We now have finance pipes that go from one farm to another. We finance pipes that go from the aquifer to a number of different farms.

Water.

Our guys bye.

By our water will have an agreement with them.

It will be.

We now have.

Finance pipes that go from one part to another we've financed pipes that go from the Aqua for.

To a number of different farms. So we're in great shape that'd be like one of those type companies down in that.

David Gladstone: So we're in great shape and will be like one of those pipe companies down in Heron Bases, where they take the oil out of the place, and we'll be that, hopefully, with water as well. So we're just building a different company than any of us thought about building until Sigma came along and now is going to push everybody into being. Water. Lots of water for their own crops.

Permian basis.

Where they take the oil out of that place and will be that hopefully with water as well. So we're just building a different company than any of US thought about building until Sigma came along and now it's gonna push everybody into B.

Yeah.

Water.

Plenty of water for their own crops.

David Gladstone: For There are some articles out there about some of the people who grow pistachios and almonds because you lose a tree, you've lost everything in that business. There were water rights that were pushed over to one side, and nobody knew about it except this one guy who follows one of the growers out there, and he wrote a nice article about how they took water from one place, moved it to another, and we've seen people tear down Teardown, 15, 20,000 acres of almonds and pistachios because they don't have enough water to grow them. It takes an almond tree about a gallon of water for every nut they produce.

Or are there some articles out there about some of the people and pistachios and almonds.

Because you lose a tree you've lost everything.

And that business and.

There won't water rights that work.

Pushed over to one side and nobody knew about it except this one guy who follows one of the growers out there and he wrote a nice article about how they took water from one place to another.

And we've seen people.

Tear down 15 20000 acres.

Almonds and pistachios.

Because they don't have enough water to grow it takes them. It takes on commentary about a gallon of water for every night they produce.

David Gladstone: So it's very difficult. Keep an eye on the future. So I think we're in great shape now and I applaud the effort of our guys in getting enough water together. Other questions? No, that's it for me.

So it's very difficult to keep on almond trees strong for the future.

So I think we're in great shape, now and I applaud the effort of our guys and getting enough water together, so that would be in trouble.

Other questions.

No that's it for me I'll yield the floor. Thanks, so much David for the commentary.

David Gladstone: I'll yield the floor. Thanks so much, David, for the commentary. Okay, and we have anybody else? One more coming? Yes, we have one more question. It's from the line of Michael Vanna with Maxim Group.

And we got anybody ask one more comment I, yes, we have one more question that is from the line of Michael Van <unk> with Maxim Group.

Operator: Okay, thank you. My question is just on the impact of the sale in the first quarter here of that farm, the impact on net asset value, that just that, in and of itself, the sale, is it going to be 10.4 million? In other words, the amount over cost, or is it $2 million, the amount over the appraised value? It would have been $2 million over the appraised value because the previously appraised value was what we had on the books as far as the NAV calculation went.

Okay. Thank you.

My question is just on the impact of the sale.

In the first quarter here of that farm.

The impact on net asset value just that in and of it.

Itself. The sale is is it going to be $10.4 million in other words.

The amount over cost or is it 2 million the amount over the appraised value.

It would it would would've been $2 million over the appraised value because the previously appraised value with what we had on the books as far as the NAV calculation goes. However, we did already mark that up at 12 31. Since we did have a PSA in place at as of 12 31, so that sales price that increased sales price is.

Lewis Parrish: However, we did already mark that up at 1231 since we did have a PSA in place as of 1231. So that sales price, that increased sales price, is reflected in the NAV calc as of 1231. Oh, OK. All right, thank you. Rob. Thank you. We have no further questions, Mr. Gladstone. I'll turn the floor over to you for closing remarks. Well, we certainly appreciate all of you listening to this and asking good questions, and we hope to see you next quarter. And if you can, jot down a couple of extra questions to ask. We only talk to you once a quarter.

<unk> in the calculus of 12 31.

Oh, okay.

Alright, thank you.

No problem.

Thank you.

We have no further questions Mr. Gladstone I'll turn the floor over to you for closing remarks.

Well, we certainly appreciate all of you listening to this and asking good questions and hope to see you next quarter and if you can jot down a couple of extra questions to ask we have time to talk to you and we only talk to you once a quarter. So get your questions ready. So we can talk some more about what's going on out there.

David Gladstone: So get your questions ready so we can talk some more about what's going on out there in the farming world in California and in Florida. That's all for now. Thank you very much. Thank you, Mr. Gladstone. This will conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.

In the farming World in California, and in Florida. That's the end of this thank you very much.

Thank you Mr. Gladstone and this will conclude today's conference you may disconnect. Your lines at this time and we thank you for your participation.

Okay.

Yeah.