Q4 2024 Gladstone Land Corp Earnings Call
Follow the formal presentation, if anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce Mr. David Gladstone, Chief Executive Officer, and President. Thank you you may begin.
Thank you Daryl just a nice introduction and this is to repeat again, David Gladstone and welcome to the quarterly conference call that we'd give every quarter. It is our year end as well.
Speaker Change: You all for calling in today and we appreciate you taking the time to listen to our presentation before I begin we have to hear from Michael accounts say, our general counsel Michael.
Speaker Change: 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 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.
Speaker Change: Different from any future results expressed or implied by these forward looking statements, including all risk factors in our forms 10-K, 10-Q, and other documents, we file with the SEC and go to our website Gladstone land dotcom, specifically, the investor's page or the Sec's website, which is www dot FCC dot geovany can find them all there.
Speaker Change: 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.
Speaker Change: As required by law today, we will discuss <unk>, which is funds from operations <unk> is a non-GAAP accounting term definition 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. We may also discuss core <unk>, which.
Speaker Change: We generally define as <unk> with some adjustments for certain nonrecurring revenues and expenses and then adjusted <unk>, which further adjusts core <unk> for certain noncash items, such as converting GAAP rents to normalized cash rents and we do this because we believe these are better indications of our operating results and allow better compare.
Speaker Change: Our ability of our period over period performance now we once again ask you to visit our website, that's Gladstone land Dot com, while you're there you can sign up for our email notification service you can also find us on Facebook keyword. There is the Gladstone companies and auto racks, which is formerly Twitter handle there is at Gladstone comps.
Speaker Change: Today's call is an overview of our results. So we ask that you review our press release and the Form 10-K, both issued yesterday for more detailed information now with that I'll turn the presentation back to David Gladstone.
David Gladstone: Thank you Michael I'll start with a brief overview overview as I do each time, we have a lot of farm land, we currently own about 103000.
Speaker Change: In acres.
Speaker Change: Wondered 50 farms in over 55000 acre feet, which is the way they measure water assets one acre foot is equal to about 326000 gallons. So we own over 18 billion gallons of water.
Speaker Change: And again, the land and the water all of that and a total of about $1 3 billion.
Speaker Change: Farms are in 15 different states and more importantly in 29 different growing regions and a warner assets, mostly in California.
Speaker Change: Farms are leased to over 65 different tenant farmers and people, who manage their farms or a lot of people involved.
Speaker Change: And the tenants on these farms are growing over 60 different kinds of 60 different crops.
Speaker Change: And mostly are fruits and vegetables, and nuts and you can find this produce in other sections of the grocery store as well as in the produce section.
Speaker Change: This is where most of the crops are grown on any of the farms are sold.
Speaker Change:
Speaker Change: We mentioned in previous calls that we continue to be cautious with new investments because our cost of capital remains high.
Speaker Change: Cap rates in most row crops and farm lands are so low that today because of those situations the bad year.
Speaker Change: Those crops and land remain very high.
Speaker Change: We also believe it's a good time to conserve cash given the uncertainty that produce in that marketplace.
Speaker Change: And the Federal reserve is holding interest rates too high today, so hopefully they'll change their mind and reduce it down as time goes on.
Speaker Change: We completed some farmland sales recently in December we sold the 11 blueberry farms in Michigan. These are funds that had been giving us some problems.
Speaker Change: Recorded an impairment charge on these farms in the third quarter, and then had a small loss in the fourth quarter when we completed the sale.
Speaker Change: These storms had on lease.
Speaker Change: These farms had a negative impact on net operating income of about $400000 in 2024.
Speaker Change: We didn't see a clear path back to profitability. So we sold these forums.
Speaker Change: In January we sold five farms in Florida.
Speaker Change: A sizable gain.
Speaker Change: It represented about a 40% premium over what we had paid or at six and a half years.
Speaker Change: Farmland values in most parts of Florida have continued to go up at a faster pace.
Speaker Change: And the rest of the market, but still.
Speaker Change: This is the time for us to sell some of these and finally in February we sold two farms in the Midwest for total gain of about 9% of them were paid for the MTA.
Speaker Change: We had originally budgeted these farms is potato farms, but the market shifted more towards corn and soybean in this region. So we felt the resulting cap rates didn't make sense for us to continue to hold them again.
Speaker Change: Regarding leasing activities since the beginning of the fourth quarter.
Speaker Change: Executed for new leases and amendments.
Speaker Change: The amendment agreement all in the western permanent crop farms.
Two of these leases we adjusted the lease structure in a similar manner to what we've done in a few other farms recently that is we eliminated the base rent.
Or in some cases provided the tenants with cash allowances to grow that grow their produce.
And in exchange, we significantly increased the participation rent component of these leases.
Speaker Change: The majority of which will be recognized in the second half of 2025. So we won't have income from these leases but.
Speaker Change: Near term, but when we sell the crops, we will get a big piece of it.
Speaker Change: And I wanted to touch a little bit more we started prior in prior calls marketing conditions around many of the permanent crop farms in the west, particularly.
That's.
Speaker Change: Hum.
Speaker Change: Great.
Speaker Change: Been hampered by lower crop prices and higher input costs as fertilizer and those kinds of things.
Speaker Change: And of course, the borrowing cost cost saves remain high and as such we decided to adjust the lease structure on five farms to help them grow in.
Speaker Change: Minimize that fixed cost, but also allow us to participate.
Speaker Change: Greatly in the upside.
Speaker Change: In essence, we accepting a percentage of the gross crop sales instead of fixed rent payments.
Speaker Change: May be a big win for US come next year come the end of this year.
Speaker Change: If we assume the worst case scenario and assume that we have a total crop loss on five of them on these platforms.
Speaker Change: Have no problems proceeds from the harvest.
Speaker Change: We expect the crop insurance on these farms to pay us enough money to cover all of our cost and also provide us with a profit.
Speaker Change: Small profit, but I'm Melissa profit.
Speaker Change: This is a government insurance so as a result, where you don't worry about not being able to pay.
Speaker Change: <unk> not done this that often.
And of course, our hope so that we have good production overall and that we don't have to use the crop insurance at all.
Speaker Change: There are a few additional properties that we're looking at possibly doing a similar structure on we're still reviewing the projections and.
Speaker Change: I think the projections were probably looked good on another two or three of these so we may end up in that.
Speaker Change: Our current plan is to move forward with this structure for 2025 and harvest for these firms.
Speaker Change: And then hopefully revert back to more traditional structure next year.
Speaker Change: We may sell some of these properties along the way.
Speaker Change: The other two leases we expect weeks executed recently permanent crop farms are expected to result in a year over year decrease in annual.
Speaker Change: NOI of about $180000.
Speaker Change: Net operating income is how we measure most of the things in our business. So.
Speaker Change: That's a hit I hate to say it.
Speaker Change: Not that much but nonetheless, just hate to lose anything.
Speaker Change: And just as a note on our annual row crops, which make up about half.
Speaker Change: We're continuing to see a steady appreciation.
Consistent rent growth in this category are doing 2024, we've renewed 12 different leases on annual row crops not permanent crops.
Speaker Change: These renewals are expected to result in an aggregate increase in annual net operating income.
Speaker Change: About $556000 or about a 14% increase over prior leases.
Speaker Change: Looking ahead, we have three leases scheduled to expire over the next six months and in total they only make up about one 5% of our total lease revenue. So we should get those done this year and.
Speaker Change: And not lose anything there I hope we're in discussions with the current tenants and perspective, new tenants to lease these farms or if the prices right. We may look at cell a couple of these farms too.
Speaker Change: We believe we have some very valuable for them.
Speaker Change: So selling is an option for us.
Speaker Change: Now I'll give a quick update on some of the remaining tendency issues and we continue to work on in the quarter, we executed lease agreements and certain forms and so the other forums that had previously been either vacant or direct operated by us.
Speaker Change: We currently have five farms that are vacant one partners and direct operation.
Speaker Change: A management agreement.
Speaker Change: Yes.
Speaker Change: With an unrelated third party I know some of the people in this business and have their own way of doing it with the captive and.
Speaker Change: The use of third parties. So we have some good good people in there. In addition, we are recognizing revenue from leases with three tenants.
Speaker Change: Collectively leased six of our farms on a cash basis, it's usually done on accrual basis, but we're gonna do cash on those just to keep them current.
Speaker Change: Regarding these farms were in discussion with various potential buyers or tenants the vinyl lease these properties.
You get these remaining issues resolved later this year and therefore unable to come to an acceptable resolution.
Speaker Change: And lifting some of these farms for sale.
Speaker Change: Pretty good way of going about getting out of them listing them for sale.
Speaker Change: Total year over year impact of our operations as a result, the tenant issues and these properties will decrease in net operating income of about two and 36.
Speaker Change: Hours and dollars.
Speaker Change: <unk>.
Speaker Change: And that'll hit us in the fourth.
Speaker Change: I'm going to stop here.
Speaker Change: That's just a tasting and I hope we get some good questions at the end, but Lewis who's going to take over now as the CFO of the company.
Lewis: He works with the numbers every day. So let's go ahead alright. Thank you David and good morning, everyone I'll begin by briefly going over our recent financing activity.
Lewis: Would it not borrow any new money during the quarter, but during and since the fourth quarter in connection with certain property sales, we did pay off about $23 $5 million of loans. The majority of these loans were scheduled to reprice later this year.
Lewis: On the equity side since the beginning of the fourth quarter, we sold about $20000 of our series E preferred stock and about $4 $7 million of our common stock through the ATM program.
Lewis: Moving on to our operating results.
Lewis: <unk> for the fourth quarter was approximately $3 4 million or nine cents per share compared to $5 $4 million or <unk> 15 per share in the prior prior year quarter.
Lewis: Dividends declared per common share were about 14 in both quarters.
Lewis: On an annual basis adjusted <unk> for 2024 was approximately $16 $7 million.
Lewis: Compared to $23 million in 2023.
Lewis: <unk> per share was 47 turns at 2024.
Lewis: Versus 55.
Lewis: Into 2023.
Lewis: Is it fair for share with 50 624 from 55 point.
Lewis: And our <unk> as defined by NAREIT was 50 850.
Lewis: <unk> 58 per share in 2024 compared to 62 cents per share in 2023.
Lewis: Primary drivers behind the decrease of the neighborhood, though where recent changes to the lease structures on certain farms lost income from the large farm in Florida that we sold in January of 'twenty Board and certain tenancy issues, which has led to vacancies in some of our bonds and resulted in both lost revenues and increased costs.
Lewis: Year over year, a fixed base cash rents decreased by about $4 $9 million on a quarterly basis and $9 $7 million on an annual basis.
Lewis: Primarily due to the reasons just mentioned that is lost revenues from the Q1 farm sale in vacancies as.
Lewis: As well as structural changes to certain leases, where they had mentioned we reduced eliminated or in some cases provide a lease incentives certain tenants in exchange for a significantly increasing the crop trait.
Lewis: Great.
The results of the crop share components won't be known until the harvest is completed in the fourth quarter of this year.
Lewis: The decrease from fixed base cash rents were partially offset by an increase in participation rents recorded during 2024.
Lewis: During the fourth quarter, we recorded approximately $4 $8 million in participation rents compared to $3 $3 million in the prior year quarter.
Lewis: And for the year, we recorded participation rents of $9 4 million versus $5 $9 million last year.
Lewis: The increase in participation rents was primarily driven by increased yields in certain of our almond et cetera, you'll farms, partly due to the alternate bearing nature of these crops and partially offset by lower prices during the 2012 24 months.
Lewis: So as we mentioned this on last quarter's call, but I think it's worth noting again, just providing an update to some of the numbers.
As a result of the change the lease structure, we made on a few farms, we are expecting a total year over year swing in our fixed base rents of about $13 million. This is 25 versus 2024.
Lewis: This figure consists of the base rents that we recognized in 2024 under the prior leases.
Lewis: The cash allowances that we granted granted to these tenants for the 2025 craft beer.
Lewis: This will be shown as a reduction in our fixed base rents of about during 2025 at a rate of between three to three and a half million dollars per quarter.
Lewis: And then the majority of the resulting crop share proceeds from these leases will be recognized as participation in the second half of 2025 with the remaining smaller portion being recognized in the second half of 2026.
Lewis: So if things play out as we currently expect them to will essentially be just moving this money from the fixed base rent bucket into the participation rent bucket over the next couple of years.
Lewis: On the expense side, excluding reimbursable expenses, and certain nonrecurring and noncash expenses our core operating.
Lewis: The decrease for both comparable periods.
Lewis: Total with related party fees decreased by $1 million on a quarterly basis and $1 $8 million on annual basis due to incentive fees earned during each of the prior year.
Lewis: On a quarterly basis, our remaining core operating expenses remained relatively flat at slightly higher property operating expenses were offset by slightly lower general and administrative expenses or.
Lewis: On an annual basis the increase in property operating expenses was primarily driven by the additional cost incurred on properties that were either vacant direct operated or non accrual status at some point during the year and.
Lewis: These costs included additional real estate taxes legal costs and property management.
Lewis: The decrease was primarily due to lower interest expense incurred as a result of lower payments made over the past year.
Lewis: With that we'll move on to net asset value we have.
Lewis: 37 farms revalued during the quarter and overall these valuations decreased by about $50 million for the previous valuations a year ago.
Lewis: Decreases were limited to certain of our protein crop arms as our annual row crop bonds continue to appreciate in value.
Lewis: So as of December 31, our portfolio was valued at about $1 4 billion and 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 31 was $14 91.
Lewis: Which is down from $15 57.
Lewis: 30th.
Lewis: The majority of this change was due to the decreases in values violations of certain funds that will be paid during the quarter, partially offset by the change in fair value of certain preferred securities due to changes in market rates.
Lewis: Note that this will be the last time that we will voluntarily publish our LTV calculations and our quarterly reports as our portfolio has grown in size the cost the cost of these recurring appraisals have become quite substantial as we look for ways to reduce costs, we no longer feel that kind of money required for this process is in the best interest of our company or its shareholders.
Lewis: Turning to liquidity, including availability on our lines of credit and other undrawn nodes. We currently have access to over $195 million of capital, including about $50 million of cash on hand.
Lewis: We also have nearly $150 million of Unpledged properties.
Lewis: Over 99, 9% of our borrowings are currently at fixed rates and on a weighted average basis. These rates are fixed at 335% for another three six years.
Lewis: As a result, we are not experienced much of an impact on our operating results from increased interest rates over the past couple of years.
Lewis: Our current borrowings we believe we are well protected should interest rates continue at elevated levels.
Lewis: Regarding our upcoming debt maturities, we have about $38 million coming due over the next 12 months, however, about $20 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: So we're moving those maturities, we only have about $18 million of amortizing principal payments coming due over the next 12 months or less than 4% of our current debt.
Lewis: Finally regarding our common distributions in January we declared a dividend of $4 67 per share per month for the first quarter of 2025.
Lewis: Current stock price of $11.52. This works out to a yield of four 9%, which is higher than the average dividend yield across the entire REIT sector.
Lewis: Given the changes we've recently made in and lease structures at certain properties. We believe it prudent to hold the dividend flat at this time and we'll continue to reassess that as an organization.
Lewis: Prior to 2025 harvest because now.
Lewis: I'll turn the program back over to David. Thank you. Louis Nice to report would continue to stay active in the market should a good acquisition opportunity presented itself.
Lewis: And so that we're ready if interest rates come down as well.
Lewis: But as mentioned in prior calls and today, we're still being more cautious on the acquisition front, because our cost of capital remains high.
Lewis: And while we have seen a decrease in the pricing of certain permanent crops.
Lewis: Arms in the west that most.
Lewis: Yes.
Lewis: And most of them.
Lewis: Daniel the farms like those growing strawberries remains high.
Lewis: The cap rates on most of these farms just high enough to cover our financing costs.
Lewis: I get very advantageous to somebody to rent them.
Lewis: So as a result acquisition activity remains slow for US probably will last for another couple of quarters interest rates are still too high today and projections for further rate cuts seem to be kidding.
Lewis: Reduced approach drive father.
Lewis: The amount and timing of any additional rate cuts remains uncertain to us.
Lewis: Well, we do hope that rates come down at some point in the near future. So that we can start looking at buying more farms in just a few final points.
Lewis: We believe that investing in farmland and growing crops that contribute to healthy lifestyle, such as fruits and vegetables and nuts.
Lewis: The trend that we see in the market today overall.
Lewis: Overall demand for prime farmland growing berries, and vegetables remains stable to strong in most of the areas that we're in.
Lewis: As mentioned earlier crop prices are certainly.
Lewis: And certainly permanent crops, particularly nuts.
Lewis: I've been depressed lately.
Lewis: People, just not eating enough nuts, we need more of that in order to push the price up.
Lewis: Oh, we have impacted the values of our underlying farmland, especially knutsen groups.
Lewis: And we're seeing prices that are overall economies of some of these crops just start just starting to turn around.
Lewis: A report yesterday that.
Lewis: Uh huh.
Lewis: Pretty much the countries out of.
Lewis: All of the old nuts.
Lewis: And that shows.
Lewis: And we've got new.
Lewis: New feeling that things are going to go up because they are just not many left.
Lewis: When people stop eating doesn't mean, the trees stopped producing they keep producing so we ended up with the.
Lewis: Prices being cut down to price that didn't work very well for us.
Lewis: But please remember that purchasing stock in this company is is really a long term investment in farmland historically speaking.
Lewis: Long term returns remain strong, but there are occasionally some ups and downs in the marketplace, just like with any investment in areas like this.
Lewis: And now there's a portion of our portfolio in a down cycle that we're working.
Lewis: Moving through.
Lewis: We expect inflation, particularly in the food sector to continue to increase overtime and we expect the advantages of underlying farmland to increase over time as a result, and we expect this to be especially true in fresh produce and.
Lewis: The fresh produce sector all of those trends.
Lewis: Trends as more and more people in the U S eating healthy foods continues to grow.
Speaker Change: And please keep in mind that an investment in our stock really has two parts first it's similar to gold and that it's a hard asset it's more of a land, it's Derek it's not going anywhere.
Speaker Change: An intrinsic value because there is a limited amount of good farmland in the United States and it's being used up by urban development.
Speaker Change: The farm that we sold in Florida is gonna be turned into some housing.
Speaker Change: Well, that's good for us on a onetime basis once they're gone they're gone.
Speaker Change: And second of all unlike gold and other alternative assets.
Speaker Change: Active investment with cash flows to investors. So we believe farmland is better hedge against inflation and goal is for that reason and now we will have some questions from those who follow us operator, if you'll come on.
Speaker Change: Would you please tell them how they can ask some questions and we hope we get a lot of questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment please for our first question.
Speaker Change: Our first question is come from the line of Gaurav Mehta with Alliance Global Partners. Please proceed with your questions.
Gaurav Mehta: Yes. Thank you good morning.
Speaker Change: I wanted to.
Speaker Change: Clarify your comments on.
Speaker Change: The budget speech participation in fixed Bedspreads amendment.
Speaker Change: I think he said, let's viewpoint 5 million lower fixed base rent is that to your point.
Speaker Change: Lower from what you guys reported for Q.
Speaker Change: Yes, it's more the average base rents.
Speaker Change: For the year in 2024 versus compared to the average base rent in 2025. So it's not it's not Q4 versus looking forward. It is if you took the annual base rent for 2020 forward divided divide it by four.
Speaker Change: That was half the baseline number we're using for that $3 3 million to $3 5 million swing.
Speaker Change: Okay.
Speaker Change: And so and then.
Speaker Change: That lower baseband majority of that you're expecting to get and thank you and talk to you a 25 right.
Speaker Change: Yes, the majority of that will be well.
Speaker Change: Based on our current expectation, we do expect to recover the majority of that and hopefully more if the harvest turns out well.
Speaker Change: In the second half of this year and then.
Speaker Change: After the marketing periods all of our bonuses and adjustments will get recognized in the second half of the following year.
Speaker Change: Yeah.
Speaker Change: And so then in 'twenty.
Speaker Change: The leases on these bonds do they go back to how they were in 24 or do you expect them to continue like in 'twenty five.
Speaker Change: It remains to be seen our hope is that we can we can.
Speaker Change: Revert these doctors.
Speaker Change: We're kind of going kind of be at the mercy of the market and like we were this time a week.
Speaker Change: He could have maybe leave it out for a very low base rent and.
Speaker Change: Very little if any upside, but when we ran the numbers. We thought this was a better option for us to take.
Speaker Change: And so ended up new leases come due at the end of this crop year will have to do that analysis again.
Speaker Change: Okay, and then maybe lastly on the sale of Florida Farm I think you mentioned you paid out some debt from the proceeds but rather use the remaining proceeds from that sale.
Speaker Change: Right now it's.
Speaker Change: Part of the $50 million that we have.
Speaker Change: Cash on hand on the balance sheet.
Speaker Change:
Speaker Change: We're just holding that for other uses at this point.
Speaker Change: Okay. Thank you that's all I had.
Speaker Change: Okay next question.
Speaker Change: Thank you. Our next question is come from the line of Craig Sarah with Loop capital markets. Please proceed with your question.
Craig Sarah: Hey, good morning, guys the.
Speaker Change: The first one is for Lou what are your expectations around interest patronage here in the first quarter.
Speaker Change: Where we should be getting a similar percentage back from the farm credit borrowings, but now we have paid off a portion of those loans over the past year or so.
Speaker Change: If I had to ballpark it right now I'd, probably say about 10% less of that is just because I think we paid off about 10% of those loans for the past year.
Speaker Change: Got it that makes sense.
Speaker Change: You mentioned that you had three leases expiring here over the next six months and a relatively small amount of rent, maybe one 5% but.
Speaker Change: But for the year. This is actually a pretty big year I think in the K got north of 17% expiring can you give us some color on the remaining lease expirations. This year, maybe a split between what's permanent versus row crop.
Speaker Change: Yeah. So the the leases expiring in the next six months those are much less of those our row crop farmers, but yes. As you said, it's a small percentage of the overall amount.
Speaker Change: The remaining leases that are expiring in the second half of the year. The majority of those probably 60% to 70% are on corn crop farms.
Speaker Change: Some of these are the leases that we discussed about.
Speaker Change: Rehab lease incentive and a high upside on the crop share.
Speaker Change: So I'd probably about half of the half of the leases that are expiring fall into that bucket. The other half are on.
Speaker Change: Pardon me crop volumes that.
Speaker Change: Our under traditional leases right now.
Speaker Change: Assets under traditional leases, we expect them to remain flat, maybe even can can negotiate a rent bump up upwards, but we need to be seen at this point.
Speaker Change: And as we just.
Speaker Change: Third the remaining leases on the terms of our farms that are in the kind of lease incentive and high upside bucket remains to be seen we'd like to be able to reverting back to a traditional leases, but it's.
Speaker Change: Can't say right now what what direction, we'll have to go on those.
Yeah.
Speaker Change: Got it that's helpful.
Speaker Change:
Speaker Change: I guess, given where the preferred is trading you've been buying it I think in the 2050 range. It's still kind of around there would you guys anticipate to continue to be out in the market buying back the preferred and maybe getting a small gain.
Speaker Change: Yeah.
Speaker Change: This is an easy way for us to make money.
Speaker Change: And one more for me.
Speaker Change: Just looking at your real estate expenses here this quarter.
Speaker Change: There was a pretty decent increase is that just related to the taxes in some of the incremental costs with the directly operated farms or anything else going on there.
Speaker Change: Yes exactly.
Speaker Change: That whole bucket of Bacon direct operated and non accrual.
Speaker Change: Properties. Some some tenants that we terminated their lease early so they were they didn't make those tax payments, we had to make them on their behalf.
Speaker Change: But yes. It is all related to the properties that have fallen into that bucket.
Speaker Change: Okay. Thanks for the color.
Speaker Change: Thank you as a reminder, thank you as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Our next questions come from the line of John Osaka with B Riley Securities. Please proceed with your question.
John Osaka: Good morning.
Speaker Change: Morning, John.
Speaker Change: Maybe just going back to property operating expense again, I mean is <unk> kind of the good run rate for <unk>.
Speaker Change: Going forward for the remainder of the year or was there something where either those leases didn't changeover until kind of mid four Q that could cause it to new higher one time expenses that could cause it to kind of skew lower.
Speaker Change: Yes.
Speaker Change: In the quarters of 2025.
Speaker Change: And our hope is that it comes down a little bit for a couple of reasons one.
Speaker Change: The properties, the Michigan Blueberry properties that we sold they contributed a decent amount to that increase throughout the year I think on that.
Speaker Change: They had negative NOI of about $400000 dollars over the course of the year.
Speaker Change: That should start to come down and that we will we are.
Speaker Change: Going out to the tenant for for some additional rent owed so some legal costs will remain related to those funds but.
Speaker Change: The cost related attributable to those volume should come down quite a bit.
Speaker Change: And I think we also had to recognize some kind of catch up real estate taxes.
Speaker Change: In the fourth quarter I don't have the exact number here but.
Speaker Change: <unk>.
Speaker Change: The amounts that the tenant had owed but was unable to make the payments. So we had to record those or we had to make those payments on our on their behalf in the fourth quarter.
Speaker Change: So I don't know exactly how I can't say exactly how much but we do expect that number to come down a bit in the in 2025.
Speaker Change: Okay. That's very helpful and then on the dispositions completed in <unk> 25.
Speaker Change: Those occupied in revenue producing assets and if so what's kind of the NOI impact from those sales.
Speaker Change: Yes, they were.
Speaker Change: Revenue numbers for the farms that we sold in 25, I think was for the year.
Speaker Change: About 115, $1 7 million.
Speaker Change: Okay.
Speaker Change: That's very helpful and then kind of bigger picture.
Speaker Change: What percentage of kind of the California portfolio, if you will today.
Speaker Change: Is this kind of <unk>.
Speaker Change: Sure.
Speaker Change: Hi, upside lease structure, and how much kind of remains in a more traditional structure.
Speaker Change: And I guess, what's the outlook for those assets to stay in the more traditional structure or move to this.
Speaker Change: More of a flow through restructure.
Speaker Change: So right now we have five farms that are on this.
David Gladstone: Kind of hybrid structure, if you will and as David mentioned there is another a couple two or three farms that we're looking at.
David Gladstone: The other the other farms right now we believe the other farms that are other Permian crop aren't there the traditional lease structure. We believe at this time that they will we will be able to keep them in.
David Gladstone: Standards structure.
David Gladstone: On a valley.
David Gladstone: Value basis, I don't have that number available or cash.
David Gladstone: Calculated right now we can get back to you on that but.
David Gladstone: Five bonds are are in that bucket, two or three more might go there. The rest we expect to stay in the traditional lease structure.
David Gladstone: Okay.
David Gladstone: That's very helpful and that's it for me. Thank you very much.
Speaker Change: Any other questions.
Speaker Change: Thank you Mr. Gladstone there are currently no other questions in the queue.
Speaker Change: Okay. Thank you very much.
Speaker Change: I just want everybody to know that this change is hopefully going to be for one year may be a few farms will go over to the.
Speaker Change: Next year, but our goal is to put everything back together as it was before this.
Speaker Change: Downturn in and treat crop.
Speaker Change: Processes, just tourists into a different area, which is this area of.
Speaker Change: Being able to grow the crops and get money out of their crops as opposed to leasing them to somebody who does all of that work. We do have somebody in between US we've chosen.
Speaker Change: People, who do that for a living that as they go out and they produce crops. So we don't have anybody on R. R.
Speaker Change: Sure.
Speaker Change: Group of people working in this company that are out in the fields growing either strawberries or not so.
Speaker Change: It's almost the same as it was before except we put some money up not a lot.
Speaker Change: As <unk>.
Speaker Change: Helping the people who grow the crops get them grown and then they will sell them as well.
Speaker Change: But that's the difference here and while it looks like it's more.
Speaker Change: Chance of losing money.
Speaker Change: Really not because the insurance policies that we get from the U S government.
Speaker Change: So strong that I don't think we could lose any money on the spot farms that we have going in that direction.
Speaker Change: But never know and right now I feel very bullish that we're going to do good job this year.
If there are no other questions I'll call. This at the end you got another question.
Speaker Change: And I'll just follow up with a question that John asked earlier.
Speaker Change: The five farms that are in this hybrid structure right now they make up about 15% of the California, the fair value of our California portfolio.
Speaker Change: On a.
Speaker Change: Total basis across the whole country, that's about 6% of our nationwide portfolio.
Speaker Change: So if you think about that we've got most of it covered in the properties that are leased out on a monthly basis.
Speaker Change: And the rest of them that is the 6%.
Speaker Change: Is on this hybrid structure in which we've put up some of the capital in order to.
Speaker Change: Half the people who are growing their crops yet the growth are done.
Speaker Change: And we'll see if we've made a good bet.
Speaker Change: My my feeling is we're going to make some money on these crops.
Speaker Change: And I don't like to do that because we like things that happen on a monthly basis. So we can pay our dividend on a monthly basis and this idea that we get.
Speaker Change: A big whopping amount back when the crops come in.
Speaker Change: Bode well for trying to be on time with dividends. So I think we're in good shape, but.
Speaker Change: We have to wait and see.
Speaker Change: What we have as income.
Speaker Change: In the end of the year towards the end of the year, we will know how successful or.
Speaker Change: How much we've got it depend on our insurance, but that's the end of this.
Speaker Change: Great.
Speaker Change: Got one more question, we do get let me bring John back through give me one second here Alright next question is coming from John Masako with B. Riley. Please proceed with your questions.
Speaker Change: Thank you. So much starts are coming in right at the end of the call. It just I had a quick question that I forgot.
Speaker Change: We see <unk> decision.
Speaker Change: Is that something is going to be provided semi regularly now if not quarterly or is the intention to start providing any.
Speaker Change: At all going forward because that seems to me, it's like no annual or is that.
Speaker Change: Is the thought process does that cost us too burdensome.
Speaker Change: In general.
John: They came really ridiculous John we couldn't find people and brokers that would do anything but give us things that we didn't feel reliable and so we started backtracking in getting a second.
John: Second opinion and as a result, we have been spending a lot of money trying to find people that can do this.
John: We still would be setting numbers for those internally.
John: And maybe we'll go look at that but generally speaking trying to get brokers to value. These things. We had one broker was located in Indiana was doing some of the stuff in Florida, which just made no sense.
John: He didn't know the Florida marketplace, very well and as you can see when we've done sales.
John: We've beaten.
John: The valuation that's out there but.
Just didn't seem to be logical to keep doing that and paying for that so we'll figure out something to do.
John: In April when we come back to you.
John: I appreciate it.
John: The cost of those appraisals were running us about $300000 per year.
John: Okay I appreciate that additional color and taking that last my question. Thank you.
John: Okay. We're assuming there are no more questions.
Speaker Change: No more at this time.
Speaker Change: Okay. So we'll see you next quarter. Thank you all for calling in.
Speaker Change: Thank you. So much. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.