Q1 2024 Gladstone Land Corporation Earnings Call

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Operator: Greetings and welcome to the Gladstone Land Corporation First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Gladstone, Chief Executive Officer. Thank you, sir. You may begin.

Greetings and welcome to the Gladstone Land Corporation first quarter earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder.

Under this conference is being recorded.

Pleasure to introduce your host David Gladstone, Chief Executive Officer. Thank you Sir you may begin.

David John Gladstone: Well, thank you, LaTanya. That was a nice introduction. And this is, as she said, David Gladstone. And we welcome you all to the quarterly conference call for Gladstone Land. Thank you all for calling in today. We appreciate you taking time out of your day to listen to our presentation. Before I begin, we're going to start with Michael LiCalsi. He's our general counsel. And Michael, go ahead.

Well. Thank you Latanya that was nice introduction and this is as you said, David Gladstone and we welcome you all to the quarterly conference call for Gladstone land.

You all for calling in today. We appreciate you taking time out of your day to listen to our presentation before I began we're gonna start with Michael a counsel. He is our general counsel and Michael go ahead. Thanks. David Today's report May include forward looking statements under the Securities Act of 1933, and the Securities Exchange Act of <unk>.

Michael Bernard LiCalsi: Thanks, David. 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. These forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. However, many factors may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements, including all the risk factors in our Forms 10-K and 10-Q and other documents that we file with the SEC. You can find them on our website, which is www.gladstoneland.com. Specifically, go to the Investors page, or you can find them on the SEC's website at www.sec.gov.

<unk> 34, including those regarding our future performance.

Michael: Looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. There are many factors may cause our actual results to be materially different from any future results expressed or implied by these forward looking statements, including all the risk factors in our forms 10-K, and 10-Q and other documents that we file with the SEC you can find them on that.

Michael: Our website, which is www dot Gladstone land Dot com, specifically go to the investors page, where you can find them on the Sec's website at Www Dot said that G. O V. Now 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 Bernard LiCalsi: 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.

Michael: Except as required by law that today, we will discuss <unk>, which is funds from operations <unk> is a non-GAAP accounting term defined as net income excluding the gains or losses from the sale of real estate and any impairment losses from property plus depreciation and amortization of real estate assets that we may also disk.

Michael Bernard LiCalsi: Now, we may also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses, and adjusted FFO, which further adjusts core FFO for certain non-cash items, such as converting gap rents to normalized cash rents.

Michael: Core <unk>, which we generally define as <unk> adjusted for certain nonrecurring revenues and expenses and adjusted <unk>, which further adjusts core it's our fault for certain noncash items, such as converting cash excuse me GAAP rents to normalized cash rents and we believe these are better indications of our.

Michael Bernard LiCalsi: We believe these are better indications of our operating results and allow for better comparability of our period-over-period performance. Please visit our website, once again, that's GladstoneLand.com, and sign up for our email notification service. You can also find us on Facebook; the keyword there is the Gladstone Companies. We're also on Twitter, and that's at GladstoneCom. Today's call is simply an overview of our results, so we ask that you review our press release and our Form 10-Q, both issued yesterday, for more detailed information. Now, with that, I'm going to turn it back over to David Gladstone. David?

Michael: Results and allow for better comparability of our period over period performance. Please visit our website. Once again, that's Gladstone land Dot com sign up for our email notification service you can also find us on Facebook keyword. There is the Gladstone companies. We're also on Twitter and that's at Gladstone comps.

Michael: This call is simply an overview of our results. So we ask that you review our press release and our Form 10-Q, both issued yesterday for more detailed information now with that I'm going to turn it back over to David Gladstone David.

David John Gladstone: Okay, thank you Michael. I'll start with a brief overview, as I always do.

David John Gladstone: Okay. Thank you Michael I'll start with a brief overview as I always do we currently own about 112000 acres on 168 different farms Ah and about 49000 acre feet of water assets and we are currently increasing that one acre foot is equal to about 326.

David John Gladstone: We currently own about a hundred and twelve thousand acres on a hundred and sixty eight different farms and about forty nine thousand acre feet of water assets, and we're currently increasing that. One acre foot is equal to about three hundred and twenty six thousand gallons, so we're nearly sixteen billion gallons of water. This is protecting our land because without water, the land is not worth much. And together, the land and all the water are valued at a total of approximately $1.5 billion.

David John Gladstone: Gallons. So we're nearly 16 billion gallons of water.

David John Gladstone: Protecting our land because without water lands not worth much.

David John Gladstone: Together, the land and all the Warner are valued at a total of approximately $1 5 billion.

David John Gladstone: Our farms are in 15 different states, more importantly, in 29 different growing regions, and our water assets are all in California. Our farms are leased to 90 different tenant farmers, and the tenants on these farms are growing 60 different types of crops, mostly fruits, mostly vegetables, and a lot of nuts. You can find all of these in the produce section of your grocery store, which is where most of these crops are sold. Let me just veer off for a minute.

David John Gladstone: Arms are in 15 different states more importantly in 29 different growing regions and our Warner assets are all in California.

David John Gladstone: Our farms are leased to 90 different tenant farmers.

David John Gladstone: And the tenants on these farms are growing 60 different types of crops, mostly fruits, mostly vegetables in a lot of nuts.

David John Gladstone: You can find all of these in the produce section of your grocery store, which is where most of these crops are sold me just deviate here a minute when we have diversification like this and we are well diversified.

David John Gladstone: When we have diversification like this, and we are well diversified, you have some problems in each of the regions, and so those are in the diversification that you're trying to maintain. For example, almonds and pistachios both have reduced demand, so prices are low today, and it may take years for the balance to come back. Almonds are an international crop, and people are not eating as many almonds as they did in the past. Therefore, some people cannot afford to buy almonds and pistachios, and that reduced demand makes it a problem for all our farmers in that area.

David John Gladstone: You have some problems and each of the regions and so those are in the diversification that you're trying to maintain for example.

David John Gladstone: Almonds and pistachios are both have reduced demand. So prices are low today and it may take years for the balance to come back almonds are in international crop and people are not eating as many options as they did in the past.

David John Gladstone: The price of producing almonds has risen due to inflation and farming cost.

David John Gladstone: So some people cannot afford to buy ahmanson pistachios and that reduced demand makes it a problem for all of our farmers in that area.

David John Gladstone: And there are farms that have problems. For example, Michigan blueberries had a pretty good crop this year and reasonably good sales, but our farmers... One farmer there had a very tragic accident. He was injured, and he couldn't farm. So we're moving forward with a sale of those farms, and we believe we'll be OK once we've sold them. Hopefully, that happens this year.

David John Gladstone: And there are farms that have problems for example, Michigan blueberries had a good pretty good crop this year and reasonably good sales, but our farmers.

David John Gladstone: One farmer there had a very tragic accident. He was engine he couldn't farm. So we're moving forward with the sale of those farms and we believe we will be okay. Once we've sold them hopefully that happens this year.

David John Gladstone: And we have a few grape farms that do not have the varieties that people want who make wine. So selling them, we're going to try to sell a couple of those as well. Such is the nature of owning farmland. It's just like owning businesses. You don't want stock...

David John Gladstone: And we have a few great farms that do not have the varieties that people want to make wine so selling them.

David John Gladstone: How to sell a couple of those as well.

David John Gladstone: Such is the nature of owning farmland is just like owning businesses you don't want stock I didn't want to stockholders is think that owning farmland is immune from the ups and downs of the economy or the business of farming.

David John Gladstone: I didn't want stockholders to think that owning farmland is immune from the ups and downs of the economy or the business of farming. I think during the rest of the calendar year, 2024, we'll sort out these problems. There are other parts of farming that have problems, such as tomatoes. Mexico has been subsidizing tomatoes and hurting tomato farmers. We are very lucky not to be on tomato farms, so we missed that problem.

David John Gladstone: Thank you and the rest of the calendar year 'twenty 'twenty four will sort out these problems.

David John Gladstone: The other parts of farming that have problems such as Tomatoes, Mexico has been Subsidised subsidizing Tomatoes, and hurt tomato farmers, we are very lucky not to be in tomato farms. So we missed that problem. Likewise, we invest did not invest in citrus, it's been terrible for the citrus farmers and floor.

David John Gladstone: Likewise, we did not invest in citrus. It's been terrible for the citrus farmers in Florida. We have a few citrus trees, but they're not in Florida. The trees have been devastated in Florida by disease, and they may never turn around. There are oranges coming in from being produced in other countries, and there's reduced drinking of orange juice. I remember as a child drinking lots of orange juice.

David John Gladstone: Arda.

David John Gladstone: We have a few citrus trees, but they're not in Florida and the trees have been devastated in Florida by disease, and they may never turn around there or orange is coming in from being produced out of where other countries and theres reduced drinking of Orange juice I remember as a child.

David John Gladstone: Drinking lots of Orange juice people don't drink as much orange juices, They did 20 years ago.

David John Gladstone: So we're smart not to be in the Florida orange juice business. So just to give you that overview, I thought of that last night and decided to put that into our discussion. And now I'll give you a quick update on some of the tenants' issues that we've been working through, and we've been telling you about them. We currently have two properties encompassing four out of the 168 farms that we have. And these are vacant properties encompassing 11 farms in direct operation via the management agreement. So we've had to take over a number of farms and run them on our own.

David John Gladstone: So we're smart not to be in Florida, Orange juice business and so I just gave you that O U S.

David John Gladstone: All of that last night and decided to put that into our discussion.

David John Gladstone: In addition, we're recognizing revenue from leases with two tenants who are collectively leasing four of our farms on a cash basis. Regarding the vacant and farms that are operating, we're in discussions with various potential buyers or tenants to buy or lease these properties. I think we'll have a lot of this done during the next six months, so I'm hopeful that when we report to you in..., in July, we'll have fixed a lot of that. There are two tenants on non-accrual status, one of them is now current on their rental payments to us, and we are continuing to work with a group of other tenants.

David John Gladstone: And now I'll give you a quick update of some of the tenants issues that we've been working through and we've been telling you about them. We currently have two properties encompassing four out of the 168 farms that we have and these are vacant and properties encompassing 11 farms indirect operator.

David John Gladstone: The management agreement. So we've had to take over a number of farms and do them on our own. In addition, we are recognizing revenue from leases with two tenants or collectively leaking leasing four of our farms on a cash basis.

David John Gladstone: Regarding the vacant.

David John Gladstone: And farms that are operating farms weird in discussions with various potential buyers or tenants to buy or lease these properties in.

David John Gladstone: I think we'll have a lot of this done during the next six months. So I'm hopeful that when we report to you in and.

David John Gladstone: In July that we fixed a lot of that.

David John Gladstone: There are two tenants on non accrual status one of them is now current on their rental payments to us and we are continuing to work with a collection of other tenants.

David John Gladstone: On a total year-over-year impact on our operating results, these tenants issued decreased our net operating income by about $750,000 for the first quarter. And, as mentioned on the past several calls, we continue to be cautious with new investments because our cost of capital remains high. More farmland rental rates haven't increased enough to cover all the extra costs that farmers have, and because farmland values remain high, that is, farmers, the people who own the land, the values have remained high, and they want a high price for it. We just don't feel like it's worth taking that risk.

David John Gladstone: On a total year over year impact on our operating results as tenants issued decreased our net operating income by about 750000 for the first quarter.

David John Gladstone: And as mentioned on the past several calls we continue to be cautious with new investments because the higher cost of capital remains high.

David John Gladstone: More farmland rental rates haven't increased enough to cover all the extra costs that farmers have and because farmland values remain high that is the farmers.

David John Gladstone: People, who own the land.

David John Gladstone: As it remains the values have remained high and they want the high price for it we just don't feel like it's worth taking that risk. So as a result of acquisition activity remains slow for us and probably before that or another couple of quarters.

David John Gladstone: So as a result, acquisition activity remains slow for us, and it probably will be for another couple of quarters. With inflation still above the Fed's target, that's the main problem right now, the Federal Reserve needs to cut rates. And that might begin sometime this year, but it won't be nearly good enough for the very large farmers. We don't have many of those.

David John Gladstone: With inflation still above the fed's target. That's the main problem right now is the federal reserve needs to cut rates and that might begin sometime this year, but it won't near me nearly good enough for the very large farmers, we don't have many of those but for the small farmer.

David John Gladstone: But for the small farmer, that really pushes them down pretty bad. But overall, the existing farmland portfolio continues to perform more or less as expected with the exception of those issues I just mentioned. As you know, we sold one of the properties that resulted in a nice gain for us. This was a large farm in Florida that we bought for about $54 million seven years ago. We've gotten rent, nice rents on it, as we've gone along.

David John Gladstone: Really pushes them down pretty bad.

David John Gladstone: But overall the existing farmland portfolio continues to perform more or less as expected with the exception of those issues I just mentioned.

David John Gladstone: And as you know we so one of the properties that resulted in a nice gain for US. This was a large farm in Florida.

David John Gladstone: That we bought for about $54 million seven years ago, we've gotten rent nice rents on it as we've gone along but we sold it and we've got $66 million for it net net of closing costs is about a 10 million dollar gain for us and that's been our.

David John Gladstone: But we sold it, and we got $66 million for it. Net net of closing costs, which is about a $10 million gain for us, and that's been a tremendous winner for us. And I'll note that the price it was sold for was about two million dollars more than we had it appraised at prior to the sale.

David John Gladstone: Mendes winner for Us and I will note that the price was sold it was sold for about $2 million more than we had it appraised at.

David John Gladstone: So during the quarter, we valued it lower than we sold it for. I think that's a good indication that we haven't overpriced a lot of our farms. On the leasing front, since the beginning of the quarter, we renewed or amended four leases on farms in two different states. In total, these renewals are expected to result in a decrease, not an increase, of the annual net operating income of about $800,000 per year

David John Gladstone: Prior to the sale so during the quarter, we valued at lower and we sold it for I think that's a good indication that we have an open price a lot of our farms on.

David John Gladstone: On the leasing front since the beginning of the quarter, we renewed or amended for leases.

David John Gladstone: Arms in two different states in total these renewals are expected to result in a decrease on an increase of annual net operating income of about 800000.

David John Gladstone: That's on the prior leases. However, a majority of the decrease is due to one lease agreement executed on a nut farm in California in which we reduced the fixed base rent in exchange for increasing the upside potential. Participation Rent. Looking ahead, we have five leases scheduled to expire over the next six months. In total, they make up about 9% of our total lease revenue.

David John Gladstone: For a year.

David John Gladstone: And that's on the prior leases however.

David John Gladstone: A majority of the decrease is due to one lease agreement executed on a net farm in California in which we reduced the fixed base rent in exchange for increasing the upside potential.

David John Gladstone: In participation rents.

David John Gladstone: Looking ahead, we have five leases scheduled to expire over the next six months in total makes up about 9% of our total lease revenue.

David John Gladstone: We're in discussions with groups to lease these farms and aren't currently anticipating any additional vacancies as a result of these. However, two of the expiring leases are on nut farms in California, and those will likely decrease the base rent in exchange for increasing participation rents. That's some of the problems that are out there.

David John Gladstone: In discussion with crews to lease these farms and aren't currently anticipating.

David John Gladstone: Any additional vacancies as a result of these however.

David John Gladstone: Two of the expiring leases on nut farms in California.

David John Gladstone: And those will likely decrease the base rent in exchange for an increasing participation rents.

Speaker Change: That's right.

David John Gladstone: Some of the problems that are up.

David John Gladstone: Just one other item I'd like to mention. As mentioned on the last quarterly call, our team in California has been working to implement various projects and strategies to take advantage of the surplus water supplies that have come to be available in California. As many of you know, there have been huge rains. We've had two very wet winters, which is unusual for California. And the rains have not just been the little things that we sometimes see in the east.

Speaker Change: Just one other item I'd like to mention as mentioned on the last quarterly call. Our team in California has been working to implement various projects and strategies to take advantage of the surplus water supplies.

David John Gladstone: That has come to be available in California.

David John Gladstone: As many of you know they've been huge rains we've had.

David John Gladstone: Two very wet winters, which is unusual for California, and the rains have not just been a little things that we sometimes see in the east. These have been rains a biblical proportions I mean people.

David John Gladstone: These have been rains of biblical proportions. I mean, people have had a lot washed away. And we've had a few farms that were impacted a bit, but one farm actually took on too much water, so they couldn't do as much for it. But it's coming back this year.

David John Gladstone: I've had a lot.

David John Gladstone: Wash your way and we've had a few farms that worse were impacted a bit but one farm actually took on too much water. So they couldn't do as much for it so.

David John Gladstone: It's coming back this year.

David John Gladstone: One such project involved the construction of a lattice groundwater recharge facility on two of our farms, both of which were completed last year. These are, in essence, water banks, allowing us to enter into various agreements with local water districts and private individuals that are expected to result in additional groundwater credits by allowing water to be stored in our water banks. During the quarter, we were able to obtain an additional 2,676 acre feet, or about 872 million gallons of water, credits for a total cash cost of approximately $345,000, or right at $129 per acre foot, These will come in handy as time goes on.

David John Gladstone: One such project involves construction of Atlantis groundwater recharge facility on two of our farms.

David John Gladstone: Both of which were completed last year. These these are in essence water banks, allowing us to earn into various agreements with both.

David John Gladstone: Local water districts and private individuals that are expected to result in additional groundwater credits by allowing water to be stored in our water banks during the quarter. We were able to obtain in addition, 2000 and 676 acre feet.

David John Gladstone: Whereabouts 872 million gallons of water credits for total cash cost of approximately $345000 or right at $129 per acre foot, which is significantly below market. These will come in handy as time goes on valuations of farm.

David John Gladstone: Valuations of farms are now based on how much water they have, and usually they have to have two sources of water. We still believe these types of projects are important in achieving long-term sustainable water supplies for our farms in California, and we intend to continue to focus on water security for our farms throughout 2024. And just to note, our portfolio currently has an adequate supply of water to date. None of our farms have been fallowed or not farmed because of irrigation problems due to the inadequacy of water.

David John Gladstone: <unk> are now based on how much water they have and usually they have to have two sources of water.

David John Gladstone: We still believe these type of projects are important and achieving long term sustainable water supplies for our farms in California, and we intend to continue to focus on water security for our farms throughout 'twenty 'twenty four.

David John Gladstone: And just to note our portfolio currently has adequate supply of water to date, none of our farms have been followed or not farmed because of the ear irrigation problems due to the inadequacy of water in some places there had been problems and we're not seeing that on our farms we are.

David John Gladstone: In some places, there have been problems, and we're not seeing that on our farms. We also wonder about the effect of government regulations. They do regulate... used. So we've gone through that with many of our farms, and we seem to be in good shape there. We do look forward to this project that we have with the reserved water that we have for them could go for at least one year unabated, but I think it may go on for as much as two years based on how much water we've captured. So let me stop here and I'll turn it over to Lewis Parrish. He's our CFO. He knows the numbers, Lewis.

David John Gladstone: Also wonder about the effects of government regulations.

David John Gladstone: They do regulate.

David John Gladstone: Used so we've gone through that with many of our farms and we seem to be in good shape there.

David John Gladstone: We do look forward that this projects that we have with their reserved water that we have for them could go at least one year.

David John Gladstone: Unabated.

David John Gladstone: I think they may go on as much as two years based on how much water we've captured.

David John Gladstone: So let me stop here and I'll turn it over to Lewis Parrish, He's our CFO and.

Lewis Parrish: Yeah, he knows the numbers Lewis.

Lewis Parrish: Thank you, David, and good morning, everyone. I'll begin by briefly going over our recent financing activity. We did not incur any new borrowings during the quarter, but we did repay about $16 million of bonds that matured. And on the equity side, we raised about $250,000 of net proceeds from sales of the Series E preferred stock during the quarter. Now moving on to operating results.

Lewis Parrish: Thank you, Dave and good morning, everyone I'll begin by briefly going over our recent financing activity, we did not incur any new borrowings during the quarter, but we did repay about $16 million of bonds that matured.

Lewis Parrish: On the equity side, we raised about $250000 of net proceeds from sales of the series E preferred stock during the quarter.

Lewis Parrish: For the first quarter, we had net income of about $13.6 million, and net income to common shareholders of $7.4 million, or $0.21 per share. Adjusted FFO for the current quarter was approximately $5.1 million, or $0.143 per share, compared to $5.9 million, or $0.166 per share in the prior year quarter. Dividends acquired per common share were $0.14 in the current quarter, compared to $0.138 in the prior year quarter.

David John Gladstone: Now moving on to operating results for the first quarter, we had net income of about $13 $6 million and net income to common shareholders of $7 $4 million or 21 per share.

Lewis Parrish: Primary drivers behind a decrease in AFFO were the lost income from the farm we sold in January and a decrease in the revenues associated with certain properties that were either vacant or on non-accrual status during portions of the quarter. However, it was partially offset by decreases in certain operating expenses during Q1 2024. Six space cash brands decreased by about a million dollars on a year-over-year basis, primarily due to the reasons just mentioned, that is, lost revenues from the farm we sold and certain other workout properties.

Lewis Parrish: Adjusted episodes of the current quarter was approximately $5 $1 million or $14 <unk> per share compared to $5 $9 million or $16 $616 six per share in the prior year quarter.

Lewis Parrish: This decrease is partially offset by additional rents earned from capital improvements we made on certain of our farms. Participation rents decreased by about $200,000 during the current quarter. This is really just due to the timing of when certain information about crop sales is made available to us. As of filing, we had not yet received enough information to record certain participation rate amounts during the first quarter.

Lewis Parrish: Dividends declared per common share were 14.0 cents in the third quarter compared to $13 eight in the prior year quarter.

Lewis Parrish: Primary drivers behind the decrease in <unk>.

Lewis Parrish: Where the lost income from the farm, we sold in January and a decrease in the revenues associated with certain properties that were either vacant or on non accrual status during portions of the quarter.

Lewis Parrish: This was partially offset by decreases in certain operating expenses during Q1 2024.

Lewis Parrish: Fixed base cash rents decreased by by by about $1 million on a year over year basis.

Lewis Parrish: Primarily due to the reasons just mentioned that is the the lost revenues from the farm, we sold and certain other workout properties.

Lewis Parrish: This decrease was partially offset by additional rents earned from capital improvements, we made on certain of our farms.

Lewis Parrish: Participation rates decreased by about $200000 during the current quarter.

Lewis Parrish: This is really just due to the timing of when certain information about crop sales is made available to us as a filing we had not yet received enough information to record certain participation rate amounts during the first quarter.

Lewis Parrish: So we'll continue to press for information and hopefully be able to finalize it in time for the second quarter filing. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses decreased by over $500,000 during the current quarter. Property operating expenses decreased in the current quarter due to lower amounts spent to protect water rights on certain farms in California, as well as a decrease in both legal fees and property management, and G&A expenses decreased due to lower amounts recorded related to the upcoming shareholders meeting and also a decrease in certain professional tasks.

Lewis Parrish: So we will continue to press release information and hopefully be able to finalize it in time for the second quarter filing.

Lewis Parrish: On the expense side, excluding reimbursable expenses, and certain nonrecurring or non cash expenses, our core operating expenses decreased by over $500000 during the current quarter.

Lewis Parrish: Property operating expenses decreased in the current quarter due to lower amount spent to protect water rights on certain farms in California, as well as a decrease in both legal fees and property management fees and.

Lewis Parrish: And G&A expenses decreased due to lower amounts recorded relating to related to the upcoming shareholders' meeting and also a decrease in certain professional fees of.

Lewis Parrish: Of note, total related party fees remain relatively flat year over year. Finally, other expenses decreased primarily due to lower interest expense incurred as a result of loan repayments we've made over the past year. With that in mind, we'll move on to net asset value. We had 35 farms revalued during the quarter, all via third-party appraisals. Overall, these valuations decreased by about $3.7 million, or 1% from their previous valuations from about a year ago.

Lewis Parrish: Of note total related party fees remained relatively flat year over year.

Lewis Parrish: Finally, other expenses decreased primarily due to lower interest expense incurred as a result of loan repayments, we've made over the past year.

Lewis Parrish: With that we'll move on to net asset value.

Lewis Parrish: We had 35 farms revalued during the quarter all be a third party appraisals overall these valuations decreased by about $3 $7 million or 1% from their previous valuations from about a year ago.

Lewis Parrish: On March 31st, our portfolio was valued at about $1.5 billion, and all of this value was supported by either third-party appraisals or the actual purchase price. And based on these updated valuations and including the fair value of our debt and all preferred securities, net asset value per common share at March 31st was $18.50, down from $19.06 at December 31st, and the majority of this decrease is due to the change in fair value of our preferred securities, as well as a decrease in valuations of certain farms that were reappraised during that time.

Lewis Parrish: So as of March 31, our portfolio was valued at about $1 $5 billion and all of this value was supported by either third party appraisals or the actual purchase prices.

Lewis Parrish: Based on these updated valuations and including the fair value of our debt and all preferred securities net asset value per common share at March 31 was $18 50.

Lewis Parrish: That's down from $19 <unk> at December 31st the majority of this decrease was due to the change in fair value of our preferred securities as well as a decrease in valuations of certain farms that were reappraised.

Lewis Parrish: Okay.

Lewis Parrish: 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 nearly $60 million of cash on hand. We also have over $130 million of unpledged programs. Over 99.9% of our current borrowings are at fixed rates, and on a weighted average basis, these rates are fixed at 3.39% for another 4.2 years. As a result, we have experienced minimal impact on our operating results from increases in interest rates.

Lewis Parrish: Turning to liquidity, including available building on our lines of credit and other Undrawn notes. We currently have access to over $200 million of liquidity, including nearly $60 million of cash on hand.

Lewis Parrish: We also have over $130 million of Unpledged properties.

Lewis Parrish: Over 99, 9% of our current borrowings are at fixed rates and on a weighted average basis. These rates are fixed at 339% for another four two years.

Lewis Parrish: As a result, we have experienced minimal impact on our operating results from increases in interest rates and with respect to our current borrowings. We believe we are well protected should interest rates remain higher for longer.

Lewis Parrish: And with respect to our current borrowings, we believe we are well protected should interest rates remain higher for longer. 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 moving those maturities aside, we have about $18 million of amortizing principal payments coming due over the next 12 months, which is about 3% of our current debt outstanding.

Lewis Parrish: Regarding upcoming debt maturities, we have about $35 million coming due over the next 12 months, however, about $17 million 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.

Lewis Parrish: Removing those maturities, we have about $18 million of amortizing principal payments coming due over the next 12 months, which is about 3% of our current debt outstanding.

Lewis Parrish: In addition, we have about $6 million of loans that aren't maturing, but they have a fixed rate term that's expiring over the next six months, sorry, over the next 12 months. Finally, regarding our common distributions, we recently raised our common dividend again to 4.66 cents per share per month. This marks the 34th time we've raised our common dividend over the past 37 quarters, resulting in an overall increase of more than 55% over that period. With that, I'll turn the program back over to David. Thank you, Lewis. We will continue to stay active in the market.

Lewis Parrish: In addition, we have about $6 million of loans that they aren't maturing, but they have a fixed rate term that is expiring over the next six months I'm sorry over the next 12 months.

Lewis Parrish: Finally regarding our common distributions, we recently raised our common dividend again to $4.66 per share per month. This marks the 34th time, we've raised our common dividend over the past 37 quarters, resulting in an overall increase of more than 55% over that period.

Lewis Parrish: With that I'll turn the program back over to David.

David John Gladstone: Thank you, Lewis. We will continue to stay active in the market should good opportunities present themselves, but many of these farmers will just wait it out. They're not going to sell their farm at a discount, which they would need to do in today's market. So prices of farms have not decreased, not decreased. Some of them have a little bit but need to increase and decrease a lot so that we don't have as many problems renting them out.

David: Thank you Louis and we continue to stay active in the market should good opportunities present themselves but.

David John Gladstone: Many of these farmers I'll just wait it out they're not going to sell their farm at a discount which they would need to do today.

David John Gladstone: In today's market.

David John Gladstone: So prices of farms have not decreased not decrease some of them have a little bit but need to increase decrease a lot. So that we don't have as much problems renting them out interest rates are still too high today, but we're hopeful that rates will be lower by this fall. So that we can start by.

David John Gladstone: Interest rates are still too high today, but we're hopeful that rates will be lower by this fall so that we can start buying more farms again. And just a final note I'd like to make: we believe that investing in this farmland and the farming crops that contribute to a healthy lifestyle, such as fruits and vegetables and nuts, follows the trend that we're seeing in the market today. So we're in good shape in that area of selecting where we're going to put our money.

David John Gladstone: More farms again, and just a final note I'd like to make.

David John Gladstone: We believe that investing in this farm land and farming crops that contribute to the health of the lifestyle, such as fruits and vegetables and nuts follows the trend that we're seeing in the market today. So we're in good shape on that area of selecting where we were going to put our money.

David John Gladstone: Overall demand for prime farmland, growing berries and vegetables, certainly that side is stable to strong, and almost all the areas where we farms are located, particularly along both the coast, east coast and west coast, the east coast of Florida and the west coast of California, this is where the good farmland is for us. And please remember that purchasing stock in this company is a long-term investment in farmland. It is similar to other hard assets such as gold.

David John Gladstone: Overall demand for prime farmland growing berries, and vegetables, certainly that side is stable to strong and almost all of the areas, where we farms are located particularly along both the coast East Coast and West Coast, The East Coast of Florida, and the West Coast, California. This is where the.

David John Gladstone: The good farmland is for us.

David John Gladstone: And please remember that purchasing stock in this company is a long term investment in farmland.

David John Gladstone: It's similar to other hard assets such as goal.

David John Gladstone: Farmland dirt that just stays where it is and continues to produce is wonderful, and as long as we have water in California, I think we're going to be in good shape. A lot of things are being driven by urban developers, especially in California and Florida, where we have many farms. And unlike gold and other alternative assets, this is an active investment with cash flows to investors, and we believe we're better than a bond because bonds don't die.

David John Gladstone: Farmland dirt that just stays where it is and continues to produce is wonderful and as long as we have water in California, I think we're going to be in good shape.

David John Gladstone: A lot of things are being driven by urban developers, especially California, and Florida, where we have many farms.

David John Gladstone: And unlike gold and other alternative assets.

David John Gladstone: It's this is an active investment with cash flows to investors and we believe we are better than a bond because of bonds.

David John Gladstone: You don't get the bond interest rate going up on the existing bonds, so we're expecting inflation, particularly in the food sector, to continue to increase over time, and we expect the values of the underlying farmland to increase as a result. We expect this especially to be true in fresh produce and the food sector, as the trend of more people in the U.S. eating healthy foods continues to grow. So rather than me continuing to explain what we're doing, maybe we'll get some questions. Latorreo, would you want to come in and tell them how to do that?

David John Gladstone: Yeah.

David John Gladstone: You don't get the bond interest rate going up on the existing bonds. So we're expecting inflation, particularly in the food sector to continue to increase over time, and we expect the values of the underlying farmland to increase as a result, we expect this especially to be true in fresh.

David John Gladstone: Produce.

Latorreo: Food sector.

Latorreo: And the trend of more people in the U S eating healthy foods continues to grow so wed rather than may continue to explain what we're doing maybe we get some questions Latoya would you want to come in and tell them how to do that.

David John Gladstone: Yes.

Operator: Hi, we're ready for the Q&A, please.

Latorreo: Hi, we're ready for the Q&A. Please.

Operator: Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. 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 while we poll for our first question. Our first question comes from Rob Stevenson with JANI. Please proceed.

David John Gladstone: Yeah.

Latorreo: Thank you we will now conduct a question answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Robert Chapman Stevenson: Formation tone will indicate your line is in the question queue.

Operator: You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for our first question.

Operator: Our first question comes from Rob Stevenson with Janney. Please proceed.

Robert Chapman Stevenson: Good morning guys. David, are all of the 14 of the Michigan farms leased to the same operator that you talked about as having the accident, or are there multiple operators there?

Robert Chapman Stevenson: Hi, good morning, guys.

Robert Chapman Stevenson: David or all of the 14, the Michigan farms at least at the same operator that you've talked about is having the accident or there are multiple operators in there.

David John Gladstone: There are multiple, but I think it's only two now. We're down to two.

Robert Chapman Stevenson: There's multiple but I think it's only two now were down to two.

David John Gladstone: It was the same operator, but now we are working with a couple of different groups to lease, operate, and potentially sell down the road.

Robert Chapman Stevenson: It was the same operator, but now we are working with a couple of different groups for.

David John Gladstone: To lease and operate and potentially sell down the road.

David John Gladstone: Okay, so all of the 14 Michigan farms that you talked about are blueberry farms.

David John Gladstone: Okay. So all of the 14, Michigan farms Ah.

David John Gladstone: You talked about our blueberry farms.

David John Gladstone: Okay, and then are all five of the California farms nut farms, or is there something else in there as well that's causing you issues?

David John Gladstone: Yes.

David John Gladstone: Okay, and then are all five of the California farms nut farms or is there something else in there as well, that's causing you issues.

David John Gladstone: No, it's all nuts. Sorry to say it that way.

David John Gladstone: No it's all nuts.

David John Gladstone: Sorry to say it that way.

David John Gladstone: Okay, and then I guess lastly, Beau, just to wrap it up, what was, what is the Washington farm growing? And the Nautical.

David John Gladstone: Okay, and then I guess lastly, just to wrap it up what was what is the Washington farm growing.

David John Gladstone: It's in the non accruals.

David John Gladstone: That was cherries, apples, and wine grapes. We're in the process of removing the permanent plantings and marketing them to either be sold or leased as open ground or kind of like a new development project for a potential buyer.

David John Gladstone: That was cherries, and apples and wine grapes.

David John Gladstone: We're in the process of removing the permanent plantings and.

David John Gladstone: Marketing it to either to be sold or leased as open ground or kind of like a new development project for a potential buyer.

David John Gladstone: Okay, and then I guess while we're talking about what farms were growing, the Florida farm that you had the big gain on, what was that growing? Was that oranges, or was that something else?

David John Gladstone: Okay, and then I guess, while we're talking about.

David John Gladstone: What farms, we are growing the Florida farm that you had the big gain on was what was that growing was that oranges or is that something else.

David John Gladstone: Now it's vegetable produce kind of stuff that you'd see in the grocery store I don't think there was lettuce there But I think it was a lot of a lot of produce that you'd see in the grocery store in the produce section It was a very nice farm unfortunately You're getting bombarded from the people in Mexico and they can't make as much money so people wanted us to lower the rent and we decided we wouldn't play that game of trying to beat the people in Mexico so we put it up for sale and as you probably have guessed there are a lot of people who want farmland in Florida because it's being redeveloped. In fact, if you look around not too far from where that farm is, you'll find a lot of new golf outing places and just as a note, we have the big farm right next to this one, so there may be another one that comes along, we'll see.

David John Gladstone: I always vegetable protos kind of stuff that you would see it in the grocery store I don't think there was lettuce, there, but I think it was a lot of lot of produce that you'd see it in the grocery store in the produce section. It was a very nice farm. Unfortunately.

David John Gladstone: Hey, getting bombarded from.

David John Gladstone: From the people in Mexico, and they can't make as much money. So people wanted us to lower the rent and we decided we wouldn't play that game of trying to beat the people in Mexico. So we've.

David John Gladstone: Put it up for sale and as you probably can guess there are a lot of people who want farmland in Florida, because it's being redeveloped and.

David John Gladstone: In fact, if you look around not too far from where that farm is you'll find a lot of new golf and golf outing places and at.

David John Gladstone: Just as a note we have the big farm right next at this one so there may be another one that comes along we'll so we'll see it's a it's a different kind of farm.

David John Gladstone: It's a different kind of farm, a water farm, and the state of Florida is paying us to clean up the water that's coming down there, so we're in good shape on that, so we'll have to keep that one for a while, but ultimately, we may want to get out of that, and there are people that like that, having farmland that's leased to Florida.

David John Gladstone: Water farm and.

David John Gladstone: The state of Florida is paying us to clean up the water that's coming down there so.

David John Gladstone: We're in good shape on that so we have to keep that one for a while but ultimately we may want to may.

David John Gladstone: You may want to get out of that and there are people that light.

David John Gladstone: Having farmland that's leased to Florida.

Lewis Parrish: Okay, and then I guess to wrap up this topic, Lewis, the 750,000 impact from the 20 farms, is that spread relatively evenly on a per farm basis among the 20, or are there certain of those farms that represent a disproportionate amount of that 750?

Speaker Change: Okay, and then I guess to wrap up this topic.

Lewis Parrish: Louis the 750000 impact from the 20 farms is that spread relatively evenly on a per farm basis, among the 'twenty or is there a certain of those farms represent a disproportionate amount of that 750.

Lewis Parrish: The nut farms would be weighted more heavily in terms of the income differential.

Lewis Parrish: The nut farms would be weighted more heavily in terms of the income differential.

Robert Chapman Stevenson: Okay, that's helpful. And then I guess the other question I have is, you guys talked in detail about the water. You bought some more. You have a lot of it on the books now.

Speaker Change: Okay. That's helpful and then I guess the other question I have is you.

Robert Chapman Stevenson: You guys talked in detail about the water.

Robert Chapman Stevenson: You bought some more you have a bunch of it.

Robert Chapman Stevenson: On the on the books now.

Lewis Parrish: Does that get marked to market on a regular basis? And I guess the question here is, is it with all of the rain and everything in the aquifer? Is that water worth less today than if we were in a drought situation, and so that's going to fluctuate like securities mark to market on a quarterly basis, or is that, or is GAP not treating it similarly?

Robert Chapman Stevenson: Does that get mark to market on.

Robert Chapman Stevenson: On a regular basis and I guess the question here is is it with all of the rain and everything in the aquifer.

Lewis Parrish: Paul is that water worth less today than if we were in a drought situation and so that that's going to fluctuate like securities Mark to market on a quarterly basis or is that gap not treating it similarly.

Lewis Parrish: Now, these are being held at cost on our books, and the water we've acquired lately, it's including the cash base, the cash amount we paid for about $130 per acre foot. Some of that we did get granted from a water district, so we didn't pay any money directly for the water. But so on our books, including the cash we paid, plus the income recognized as a result of receiving that water, I think it's on our books for maybe $290 or $300 per acre foot.

Lewis Parrish: These are being held at cost on our books and the water we've.

Lewis Parrish: The water, we've acquired lately, it's including the cash base cash amount, we paid of about $130 per acre foot.

Lewis Parrish: Some of that we did.

Lewis Parrish: Get granted from a water district, so we didn't pay any money directly for the water.

Lewis Parrish: But so on our books, including the cash we paid plus the income recognized us as a result of receiving that water I think it's on our books for maybe 290 or $300 per acre foot that is still below market even in a wet year as we were last year average year as they're calling it right now.

Lewis Parrish: That is still below market, even in a wet year, as we were last year, or average year, as they're calling it right now. But keep in mind that just a few years ago, water was trading regularly for between $1,500 to $2,000 plus per acre foot. So that's the time that we're really holding it for. It doesn't mean we're going to sell it for that amount, We may very well keep it to use on our own farms and make sure that our farms are optimizing their production potential.

Lewis Parrish:

Lewis Parrish: But keep in mind that just a few years ago and water was trading regularly for between 500 to 2000 plus per acre foot.

Lewis Parrish: So that's the that's the time they were really holding afford and that doesn't mean, we're going to sell it for that amount, we very well may keep it too to use our own Barnes and make sure that our farms are optimizing their production potential but.

Lewis Parrish: Even in an average or wet year, the rate that we're able to acquire water at as a result of some of these projects is still below market rates, and we'll be just even that much better off during drier, critical years.

Lewis Parrish: Even even than the average of what year, it's the rate that we're able to acquire water rate as a result of some of these projects is still below market and will be just even that much more so better off during a dryer critical years.

Robert Chapman Stevenson: Okay, and then last one for me, how are you guys thinking about selective pruning in the portfolio? So obviously, you know, you may wind up selling some or all of the 20 farms that you talked about, etc. there that are having issues, but any other farms, you know, similar to the Florida asset, which isn't under any real duress, etc., that you guys are thinking about monetizing by either, you know, redeploying into something else, or buying back stock, or reducing debt, or anything along those lines at this point, given the market prices for land in certain of your markets.

Speaker Change: Okay, and then last one for me.

Robert Chapman Stevenson: How are you guys thinking about it.

Robert Chapman Stevenson: Selective pruning in the portfolio. So obviously.

Robert Chapman Stevenson: You may wind up selling some.

Robert Chapman Stevenson: Are all of the the 'twenty farms that you talked about et cetera.

Speaker Change: There are.

Robert Chapman Stevenson: Having issues, but any other farms similar to the Florida asset, which isn't under any grill duress et cetera that you guys are thinking about monetizing and either redeploying into something else or buying back stock or reducing debt or anything along those lines at this point given the market prices for land and certain of your Mark.

David John Gladstone: Well, if you pay us enough, we'll sell it all to you, but it's not, the prices aren't that different, so we aren't out marketing right now. However, I do think that marketing on some of the farms that we have, that we've identified, as we've talked about for you, to sell, may tell us we should sell some other land as well, but we're not out there looking for sales It's an interesting market, Rob.

Robert Chapman Stevenson: <unk>.

Robert Chapman Stevenson: Well, if you pay us enough with solid all day, but.

David John Gladstone: It's nice that prices arent that different so we arent out marketing right. Now however, I do think that marketing on some of the farms that we have that we've identified as we've talked about for you to sell.

David John Gladstone: I may tell us we should sell some other land as well, but we're not out there looking for sales every day yeah. It's.

David John Gladstone: I just, I look at that, and I see these farmers, and you talk to them about selling the farm, and to us, and they go back to, you know, two or three generations that they've owned the property, and so it's like an emotional thing to make a sale. We're the same way.

David John Gladstone: It's an interesting market and Rob I, just I look at that and I see these farmers and you talk to them about selling the farm and to us and they go back to.

David John Gladstone: Two or three generations that they've owned the property and so it's it's like an emotional thing to make.

David John Gladstone: Sale, where the same way, we have good farms and it would be kind of facility or sell them. If we can keep them rented and making money for us that's our business holding farms and renting them out so probably not.

David John Gladstone: We have good farms, and it would be kind of silly to sell them if we can keep them rented and making money for us. That's our business, holding farms and renting them out. So probably not as desirous as some people who may want to just exit, but we're not going to go sell everything we have.

David John Gladstone: As as desirous of some people who may want to just exit, but we're not going to go sell everything we have there is I believe and no way of proving it today.

David John Gladstone: There is, I believe, and no way of proving it today, a difference between what we're valuing these at and what we could get for them, but it's not huge. These analysts that, and these brokers who buy and sell farms all the time are people who know what the price of a farm is worth. Unfortunately, most of them have been hired by families that want to move the farm from dad to son or daughter, and as a result, they're looking for the lowest possible value for the farm.

David John Gladstone: Difference between what we're valuing these end.

David John Gladstone: And what we could get for them, but its not huge these analysts that these.

David John Gladstone: These brokers who.

David John Gladstone: By itself arms, all the time are people, who know what the price of a farm is worth.

David John Gladstone: Unfortunately, most of them have been hired by families that want to move the farm from dad to a son or daughter and as a result, theyre looking for the lowest possible value for their farm. So these guys that are in the evaluation business have been trained to do very low ball kind of values that helps us.

David John Gladstone: So these guys that are in the valuation business have been trained to give very low-ball kind of values. It's not the true value. So I don't know if any of the farms that we own today are worth so much more than what they've been valued at. So for us, if somebody came in and said, "Your farm's worth a billion dollars, it's sold." So we're not in the business of buying and selling farms for capital gains, as are some other people. Did that answer your question?

David John Gladstone: When we were getting ready to buy something but.

David John Gladstone: It's not the true value, but so I don't know if any of the farms that we own today are worth is so much more than what they've been valued at so for us if somebody came in and said.

David John Gladstone: Your farms worth a billion dollars.

David John Gladstone: <unk>.

David John Gladstone: So we're not we're not in the business of buying and selling arms for capital gains as are some other people did that answer your question Bob.

Robert Chapman Stevenson: Yes, David, that did, and thank you very much. Okay. Do we have any more questions? The next question comes from John Massocca.

Speaker Change: Yes, David.

Speaker Change: And thank you very much.

John James Massocca: Okay, you guys do.

John James Massocca: Do we have any more questions. The next question comes from John Masako with B Riley. Please proceed.

John James Massocca: The next question comes from John Massocca with B Raleigh. Please proceed.

John James Massocca: Good morning.

John James Massocca: Good morning, John.

John James Massocca: Maybe as I think about the farms you currently are operating or have under kind of a management agreement as opposed to a lease, what's the likelihood of any of those moving to a more traditional lease here in the next couple of quarters, just given where we are in terms of the growing season for whatever the affected farms are.

John James Massocca: Maybe as I think about the farms. You currently are operating or have under kind of a management agreement as opposed to a lease.

John James Massocca: What's the likelihood of any of those moving to a more traditional lease.

John James Massocca: Here in the next couple of quarters, just given maybe where we are in terms of the growing season for whatever the affected farms are.

David John Gladstone: Yeah, your point one is very pertinent for that. People don't buy farms when they're out of the season that they use. They like to buy it a month or so before their season starts, but we're into that, and we know things will come along as time goes on, so if I had a farm that was going to be leased and we were holding it as an operating business, we make that known to everybody so that we are all feeling the effects of leasing. And I think a lot of these farms, John, it just depends on what the economy does.

Speaker Change: Yeah. Your 0.1 is very pertinent for that people don't buy farms when they're out of the season that they use they like to buy it.

David John Gladstone: A month or so before their season starts but.

David John Gladstone: We're into that and we know things will come along as time goes on so if I had a farm that was gonna be leased.

David John Gladstone: And we were holding it.

David John Gladstone: Operating business.

David John Gladstone: We make that known to everybody. So that we're all feeling the effects of leasing and I think a lot of these farms.

David John Gladstone: John It just depends on what the economy does if you have an economy, that's rolling along and people have money, they will buy berries, and thereby nuts, but.

David John Gladstone: If you have an economy that's rolling along and people have money, they'll buy berries, and they'll buy nuts, but given the strength of the economy now and the lower end that eats berries and nuts... that's one of the things they're not doing. They're not eating as much of those things as in the past. That's not really true of strawberries, although strawberry prices have increased. A lot of other things have increased, but I don't think that we're going to be out there trying to figure out a way to sell every single farm tomorrow. It's just not our business.

David John Gladstone: Given the strength of the economy now.

David John Gladstone: The lower end that <unk> berries and.

David John Gladstone: And nuts are just that's one of the things that are not doing they're not eating as much of those things is in the past and that's not really true.

David John Gladstone: Strawberries, although berry prices have increased in.

David John Gladstone: A lot of other things that increase but I don't think that we're going to be out there trying to figure out a way to sell every single farm tomorrow, It's just not our business.

David John Gladstone: Yes.

John James Massocca: Okay, but I guess maybe, you know, as we think about, for instance, the other operating revenue line item. Is the expectation that that is where it is in 1Q but kind of, you know, notable for the next couple of quarters, just given, you know, you may have some operating farms in the portfolio here until 4Q?

Speaker Change: Okay, and I guess, maybe as we think about for instance, the other operating revenue line item.

John James Massocca: Is the expectation that that is.

John James Massocca: Where it is in <unk>, but kind of.

John James Massocca: Notable for the next couple of quarters, just given you may have some operating farms in the portfolio here until <unk>.

Lewis Parrish: John, a couple of things on that. First, that other operating revenue was not due to direct farm operating revenue. That was due to water that we got granted by a water district for allowing others to store water in our water basin. So that was not cash income based on our estimated fair value of the water credits we received through those projects, but to your question about the farms that are under operating management agreements, the revenue we expect to recognize from those in the next couple of quarters is going to be very minimal.

Speaker Change: John a couple of things on that first that other operating revenue that was not due to direct farm operating revenue that was due to a water that we got granted by water district for allowing others to store.

Lewis Parrish: Water in our water banks. So that was that was noncash income based on the our estimated fair value of the water credits, we received through that through those projects.

Lewis Parrish: But to your question about the funds that were that are under operating management agreements.

Lewis Parrish: The revenue we expect.

Lewis Parrish: Recognized from those in the next couple of quarters is going to be pretty very minimal.

Lewis Parrish: Converting it to a lease, converting those properties to a standard lease versus just outright selling them, that's something we're currently working through. I don't know that we can put a probability of X percent will be leased, X percent will be sold. A lot of moving parts right now, talking with a few different groups, but the revenue recognized over the next couple quarters from those operations, I would expect to be

Lewis Parrish: Converting it to a lease converting those properties to a standard lease versus just outright selling them. That's something we're currently working through.

Lewis Parrish: I don't know that we can put a.

Lewis Parrish: The probability of X percent will be least X percent will be sold.

Lewis Parrish: Kind of.

Lewis Parrish: A lot of moving parts right now talking with a few different groups, but.

Lewis Parrish: The revenue recognized over the next couple of quarters from those operations I would expect to be very minimal.

John James Massocca: Okay, I appreciate the clarification there. And then, as I think about, I think you mentioned you had, of the two tenants that are on a cash basis, one of them had paid either all or kind of a partial rent. Was that in the quarter? Was that subsequent to quarter end? And how should I think about how much of maybe the annual rent owed would have been paid in that period?

Lewis Parrish: Okay.

Lewis Parrish: The clarification there.

John James Massocca: And then as I think about I think you mentioned you had.

John James Massocca: Of the two tenants that are on a cash basis one of them had.

John James Massocca: Either all or kind of partial link was that in the quarter or was that subsequent to quarter end.

John James Massocca: And how should I think about our.

John James Massocca: How much of maybe the annual rent owed would've been paid in that period.

Lewis Parrish: So of those properties, nothing was recognized in Q1 because the tenant who is current, his payments are due in May and November. So we recognize.

John James Massocca: So none of those properties nothing was recognized in Q1, because the tenant who is current his payments are due in may and November. So we recognized basically six months of that revenue six months of revenue from those properties in Q4 nothing in Q1.

Lewis Parrish: Basically, six months of that revenue, six months of revenue from those properties in Q4, nothing in Q1, and then his next payment is due this month, so assuming we do get those amounts, we'll recognize those amounts in Q2. In total, that's probably about $300,000 or $400,000 of revenue across all of the farms that that one tenant leases from us.

Lewis Parrish: And then his next payment is due this month, so assuming we do get those amounts.

Lewis Parrish:

Lewis Parrish: We will recognize those amounts in Q2.

Lewis Parrish: In total that's probably about three or $400000 of revenue across all of those the farms are that one tenant.

Lewis Parrish: <unk> from us.

John James Massocca: Okay, and that's per period, per kind of payment period, or annually?

Lewis Parrish: Okay.

Lewis Parrish: For a period for kind of Panther annually.

Lewis Parrish: That is the amount for six months. So two times that amount would be the annual rent amount from those farms.

John James Massocca: That is the six months amount so two.

Lewis Parrish: Two times that amount would be the annual random out from those farms.

John James Massocca: And then with the California leases that are expiring in the quarter, I mean, what percentage or what kind of amount of leases expiring this year does that make up?

Lewis Parrish: Okay.

Lewis Parrish: And then with the California, four leases that are expiring in the quarter, I mean, what percentage or what kind of amount of.

John James Massocca: Leases expiring this year does that make up.

Lewis Parrish: So I think we said we had five leases expiring over the next six months, and two of those are on nut farms. However, I don't know the exact percentage, but the majority of the, Let me back up. I think five of those five leases make up about 9% of our annualized revenues. I don't know the exact breakdown, but more than two out of five leases generate 40% of that revenue, but more than 40% of that revenue is attributed to those nut farms. I don't have that exact breakout right now, but it is more than half of that 9% annualized revenue amount.

John James Massocca: So what we I think we said we have five leases expire over the next six months two of those are on nut farms. However, I don't know the exact percentage, but the majority of the.

Lewis Parrish: Well, let me back up I think five of those five leases they make up about 9% of our annualized revenues.

Lewis Parrish: I don't know the exact breakout, but more than two out of five leases, 40%, but more than 40% of that revenue is attributed to those net farms.

Lewis Parrish:

Lewis Parrish: Don't have the exact breakout right now, but it is more than more than half of that 9% of annualized revenue amount.

Speaker Change: Okay. That's helpful.

John James Massocca: That's helpful. And then kind of the bigger picture, I mean, given some of the stress we've seen in the California market, you know, you've had some bankruptcies. Are you seeing that stress?

Lewis Parrish: And then kind of more big picture I mean, given some of the stress we've seen in the California market.

John James Massocca: You've had some bankruptcies are you seeing distressed maybe acquisition opportunities things were.

David John Gladstone: Maybe acquisition opportunities, things where you have some corporate farmers that are in a lot of trouble, where maybe, even with all the risks associated with the current operating environment in California, it makes sense for you to acquire assets.

John James Massocca: You have some corporate farmers that are in a lot of trouble, where maybe the even with all the risks associated with the current operating environment in California. It makes sense for you to acquire assets.

David John Gladstone: Well, we haven't seen that many good purchases. There have been some huge bankruptcies. Not us, not our people, but some people that we've seen going under. And there have been fire sales.

David John Gladstone: Well, we haven't seen that many good purchases there have been some huge bankruptcies.

David John Gladstone: US not our people, but some people that we've seen going under and they have been fire sales, we see one or two small farms that might be fire sales, but it's really has not had the impact yet that you would expect.

David John Gladstone: We've seen one or two small farms that might be fire sales, but it really has not had the impact yet that you would expect because many of these farmers are, if you want to say it the right way, just small businesses. And small businesses, especially in this environment, probably are impacted much more than large businesses because of the interest rate. We have farms that people will lend us money on; that's not a problem for us.

David John Gladstone: As many of these farmers or if you want to say it the right way or just small businesses and small businesses, especially in this environment probably are impacted much more than large businesses.

David John Gladstone: Because of the interest rates.

David John Gladstone: We have farms that people will lend us money on we're not.

David John Gladstone: Not a problem for us.

David John Gladstone: The agricultural banks are constantly talking to us about borrowing more money, and they love us because we've always paid our debts. So, as a result, we don't have the problem of lack of money; we have the problem of cost of money. And that's true for all the small business people, if you look at small business America. The rates where they are today, including all the inflationary things that are going on, have hurt small businesses more than large businesses. If you're a big business, you have huge amounts of money that you're holding on to. So, John, I don't know how to tell you how to judge that.

David John Gladstone: Agricultural banks are constantly talking to us about borrowing more money.

David John Gladstone: And they love us because we've always paid our debt. So as a result, we have not.

David John Gladstone: <unk> had the problem of the lack of money we have the problem of the cost of money and that's true for all of the small business people. If you looked at small business America.

David John Gladstone: The rates, where they are today, including all the inflationary things that are going on have hurt small businesses more than large businesses, if you're a big business.

David John Gladstone: You have huge amounts of money that you are you're holding on to.

David John Gladstone: So John I don't know how to tell you how to judge that we all spend I mean, I lie awake at night trying to say to myself why has this quarter going to be.

David John Gladstone: We all spend, I mean, I lie awake at night trying to say to myself, "How's this quarter going to be?" It's a moving target of trying to figure out what's going to happen in California. Florida is probably more stable than California, so we're glad of that because we have a lot of land in Florida. And as you know, the dirt doesn't go away.

David John Gladstone: It's a moving target of trying to figure out what's going to happen in California, Florida is probably more stable than than California. So.

David John Gladstone: Were glad of that because we have a lot of land in Florida and as you know the dirt doesn't go away somebody will use it to farm at some point in time in.

David John Gladstone: Somebody will use it to farm at some point in time, and that's the good news. The bad news is you just don't know when some farmer is going to be able to step up and rent more property and grow more food. The government needs to slow down the inflation rate because all the inputs go up, but it doesn't necessarily flow through to the... farmer. I mean the person who's buying those products in the grocery stores.

David John Gladstone: That's the good news the bad news is you just don't know when some farmers going to.

David John Gladstone: Be able to step up and rent more property and grow more food.

David John Gladstone: It's the government needs to slow down the inflation rate because all the inputs go up.

David John Gladstone: But that doesn't necessarily flow through to the.

David John Gladstone: Farmer I mean, the person who is buying those products in the grocery stores, we had an odd situation in that.

David John Gladstone: We had an odd situation in that a lot of grocery stores were increasing the price of some of our products, but they weren't passing it on to the people who were growing them. So you had the grocery stores making more money, and people who were selling were not making more. And given how fragmented all of these industries are, I mean, there are really tons of people that are in all of these areas.

David John Gladstone: A lot of the grocery stores, we're increasing the price of some of our products.

David John Gladstone: But they werent passing it on to the people who are growing them. So you had that grocery stores, making more money and people who are selling we're not making more and given how fragmented. All of these industries are I mean, they're really tons of people that are in all of these areas.

David John Gladstone: You would think that they'd have some pressure on the grocery stores, but they don't. And so the grocery stores really decide what they're willing to pay for things. And of all the things that grocery stores worry about, do they have the product? If somebody produces the strawberries and sells them to them, they're happy. They're just not willing to give up more money to get that certainty. It's happening a little bit more now that some of the farms aren't there competing with other farms, but it's still not a one-to-one kind of ratio. I don't know, John. Did that help you?

David John Gladstone: Would think that they would have some pressure on the grocery stores, but they don't.

David John Gladstone: So the grocery stores really decide what they are willing to pay for things in.

David John Gladstone: Of all the things that grocery stores worry about is do they have the product if somebody produces the strawberries and sells it to them they're happy.

David John Gladstone: We're just not willing to give up more money to get that certainty, it's happening a little bit more now that some of the farms aren't they're competing with other farms, but it's still not a one to one kind of ratio.

Speaker Change: I don't know John does that help you.

John James Massocca: No, that's really helpful, Culler. I appreciate it. And that's it for me. Thank you very much.

John: No that's really helpful color I appreciate it and that's it for me. Thank you very much.

Operator: Okay, Latoya, I don't think we have any more questions, do we?

Speaker Change: Okay. That's all you I don't think we have any more questions do we have no more questions back to you for closing comments.

David John Gladstone: No more questions. Back to you for closing comments.

Operator: Well, we're disappointed. We like people asking questions because we get to answer those, and hopefully, it helps everybody understand the business we're in. And that's the end of this conference, and we thank you all for calling in.

Speaker Change: Well, we're disappointed we liked people asking questions because we get to answer those and hopefully it helps everybody understand the business we're in.

Operator: And that's the end of this conference and we thank you all for calling in.

Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.

LaToya: Thank you. This does concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.

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