Q4 2024 Farmland Partners Inc Earnings Call and Business Update
[music].
Thank you for standing by my name is Gail and I will be your conference operator today at this time I would like to welcome everyone to the farmland partners incorporated Q4 and fiscal year 'twenty four earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks.
There will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question kind of press Star. One again I will now turn the call over back to Luca Fabbri, President and C. E O of farmland partners. Please go ahead.
Yeah.
Luca Fabbri: Thank you Gail good morning, everybody and welcome to farmland partners full year 2024 earnings conference call and webcast. We truly appreciate you taking the time to join US for these calls because we see them as a very important opportunity to share with you our thinking and our strategy in a format somewhat less formal and more interactive than public filings and press releases.
I will now turn it over to Nicole to our general Counsel Kristine garrison for some customary preliminary remarks, Christine. Thank you Luca and thank you to everyone on our call. The press release announcing our fourth quarter earnings was distributed after market closed yesterday and supplemental package have been posted to the Investor Relations section of our website under the Sop Hatter events and.
Luca Fabbri: For those who listen to the recording of this presentation. We remind you that the remarks made herein are as of today February 20th 2025 and will not be updated subsequent to this call. During this call. We will make forward looking statements, including statements related to the future performance of our portfolio our identified and potential.
Luca Fabbri: Acquisitions, and dispositions impact of acquisitions dispositions and financing activities business development opportunities as well as comments on our outlook for our business rents and the broader agricultural markets. We will also discuss certain non-GAAP financial measures, including net operating income S. F O adjusted S F.
Luca Fabbri: So EBITDA Ari and adjusted EBITDA Ari definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing our full year 2024 earnings which is available on our website farmland partners Dot com and is furnished as an exhibit to our current report on form <unk>.
Luca Fabbri: 8-K dated February 19, 2025 listeners are cautioned that these statements are subject to certain risks and uncertainties many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations and we advise listeners to review the risk factors discussed in our press release.
Luca Fabbri: <unk> distributed yesterday and in documents, we have filed with or furnished to the SEC I would now like to turn the call over to our executive Chairman Paul Pittman Paul.
Paul Pittman: Thank you Christine So my comments this morning will be a little bit shorter than normal.
Luca Fabbri: The rest of the team.
Luca Fabbri: Details of the success of the year, but I want to hit a couple of titles. We have said for a long long time that owning farmland is fundamentally a total return story.
Luca Fabbri: I think the last 12 months truly prove that.
Luca Fabbri: Our shareholders.
Luca Fabbri: We did a substantial amount of asset sales at very high games, we distributed basically all of that cash.
Luca Fabbri: Our shareholders in the form of a one.
Luca Fabbri: <unk> 15 special dividend early in January and if you recall, we did a similar but somewhat smaller distribution a year earlier also based on asset sales.
Luca Fabbri: At very good prices.
Luca Fabbri: Land is a function of current yield plus appreciation the public markets for most of our life at frankly ignored the second element.
Luca Fabbri: Is the bigger return element of the asset class. We've always said, it's there now two years in a row, we've delivered on that.
Luca Fabbri: We also have focused very very hard on driving revenue higher and therefore <unk> higher.
That's all about increasing rents through time and getting very good pricing in our specialty crops at least for the most recent year.
Luca Fabbri: The other thing we focused on is reducing cost all of that has delivered to shareholders a substantial increase in stock price, particularly in the context of having handed out a $1 15. This year, which is fundamentally should make your stock kind of go down when you think about the.
Luca Fabbri: <unk> of the underlying assets of the company.
Luca Fabbri: The we would delever substantially and bought back quite a bit of stock.
Luca Fabbri: And all of these things together have delivered very substantially for sure all shareholders, including myself.
Luca Fabbri: Which we should all be quite happy with that I'll turn it over to Luca and the rest of the team to make some more comments and I'll see you all in the Q&A.
Thank you Paul I, just want to highlight a couple of points that Paul already alluded to this is what.
Luca Fabbri: What has been a very very strong year over year for the company.
Luca Fabbri: And if I had to kind of point <unk>.
Luca Fabbri: So in very specific elements that drove this performance one would certainly be the fact that now for several several years. We've had very very strong performance in our range renewal and days that is showing up in the numbers for our base rent revenue. This year will also had we also had very strong.
Luca Fabbri: <unk> performance for some of our specialty crop farms delivering very good returns in terms of valuable brands as well as direct operation.
Luca Fabbri: Revenue so that all contributed to the strong performance, including the old saw some structural cost reductions that we were able to perform this year.
Luca Fabbri: Looking broadly more broadly.
Speaker Change: We've done this year, we've done significant asset sales as you are all aware and we were able to not only as Paul mentioned the lever some of that gain to our shareholders in form of a special dividend, but we also.
Speaker Change: Created something we could do that allowed us to reduce our indebtedness and also do some stock buybacks.
Speaker Change: That has resulted also in a much reduced interest expense in conjunction with the reduced interest rates that we saw.
Speaker Change: If I look at the forwards at 2025, you will see that we are putting out a guidance for the year in terms of asset per share of between 25 and 30.
Speaker Change: That is above our current dividend rate of 24 cents as you're all aware dividends are decided by the board on a quarter to quarter basis for the time being we are.
Speaker Change: Staying on course with <unk> 24 per share, but the board will of course as the year progresses evaluate.
Speaker Change: A different approach on dividend, but again, there will be only on a quarter by quarter basis, a decision made by the whole board.
Speaker Change: With that I will turn the call over to Suzanne <unk>, our Chief Financial Officer for her overview of the company's financial performance. Susan. Thank you Luca I'm going to cover a few items today, including summary of the full year for 2020 for review of capital structure, a comparison of full year revenue guidance for 2020.
Speaker Change: I'll be referring to the supplemental package, which is available in the Investor Relations section of our website under the sub head or events and presentations.
Speaker Change: First I will share a few financial metrics that appear on page two for the full year ended December 31, 2024, net income was $61 5 million or $1 19 per share available to common stockholders, which is higher than the same period for 2023, largely due to the impact of dispositions that occurred.
In the fourth quarter of 2024, the significant debt reductions, which resulted in interest savings and the impact of several years of strong lease renewals.
Speaker Change: <unk> was $14 1 million or 29 per weighted average share which was significantly higher than the same period for 2023, <unk> was positively impacted by lower property taxes lower interest expense as a result of the debt reductions increased volume of avocado and citrus sales.
Speaker Change: On our directly operated properties and increased variable farmers.
Speaker Change: Next we will review some of the operating expenses and other items shown on page five.
Speaker Change: Gain on disposition of assets was higher due to dispositions up 54 properties in 2024 with an aggregate gain on sale of $54 1 million compared to dispositions of 74 properties in 2023 with an aggregate gain on sale of $36 1 million.
Speaker Change: As a result of these meaningful dispositions, we were able to lower interest expense by reducing our outstanding debt by $158 5 million net of borrowings. In addition, the dispositions lowered both property operating expenses and depreciation expense.
Speaker Change: General and administrative expenses increased due to a onetime severance expense of $1 4 million and a special bonus of $2 1 million to executive officers. During the year ended December 31, 2024, partially offset by lower compensation and travel expense throughout the year.
Speaker Change: The severance expenses incurred in connection with the previously announced departure of the company's former CFO and treasurer as part of the company's cost cutting initiative.
Speaker Change: Next moving on to page 12, there are a few capital structure items to point out we had undrawn capacity on our lines of credit.
Speaker Change: Proximately $167 million at the end of the year we have.
Speaker Change: No debt that is subject to interest rate reset during 2025.
Speaker Change: Page 14 breaks down the different revenue categories with with comments at the bottom that describe the differences between the periods a few points that I would like to highlight are as expected fixed farm rent did decrease and that's because of the dispositions in 2023.
Speaker Change: The decrease was partially offset by several years of strong lease renewal rates note that the company negotiated to retain the full year of 2020 for rent for the property sold in October of 2024 manner.
Speaker Change: Management fees and interest income increased primarily due to the increase in loan issuances in 2024 under the FBI loan program.
Speaker Change: Direct operations is the combination of crop sales crop insurance and cost of goods sold it was up relative to 2023, largely due to an increase in sales of citrus and avocado and walnuts as well as lower impairment and cost of sales.
Speaker Change: Page 15 is our outlook for 2025.
Speaker Change: Assumptions are listed at the bottom of the page on the revenue side fixed farms solar wind and recreation rent reflects the full year impact of 2024 transactions as well as lease renewals.
Management fees and interest income is higher due to the increased activity on the FBI loan program variable payments decreased due to the outlook for citrus in row crops, plus the absence of great farms sold.
Speaker Change: The change in direct ops again, thats crop sales crop insurance minus cost of goods sold is primarily due to increased costs associated with maintenance and water.
Speaker Change: On the expense side property operating expenses decreased as a result of savings on the sales that occurred during the year G&A decreased due to.
Speaker Change: Events, such as the one time $1 4 million severance expense and the $2 1 million special bonus.
Speaker Change: Interest expense declined primarily due to realizing a full year impact of debt reductions that occurred in Q4 of 2024.
Speaker Change: The weighted average shares also decreased.
Speaker Change: With a full year impact of the 2020 for share buybacks.
Speaker Change: <unk> forecasted range of <unk> is $12 1 million to $14 7 million or <unk> 25 to <unk> 30 per share.
Speaker Change: This summarizes where we stand today, we will keep you updated as we progress through the year. This wraps up our comments. This morning. Thank you all for participating operator, you can now begin the Q&A session.
Thank you so much.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: Pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Rob Stevenson.
Speaker Change: Janney Montgomery Scott. Please go ahead.
Speaker Change: Morning, guys.
H two.
Speaker Change: Love to get your thoughts right now on where the pricing environment is.
Speaker Change: Relative to where you needed to be to do.
Speaker Change: Net acquisitions in 2025, and if theres any sort of areas of the country.
Speaker Change: Or a crop types that you want to be in longer term that are making sense to do deals today versus the ones that are just far too pricey.
Speaker Change: Yes.
Luca Fabbri: Let me take that one Luca may have some additional comments.
Hi, Rob So so if you looked at our portfolio overall today. It is extremely focused on the state of Illinois, and a little bit more broadly, Indiana and Missouri.
Luca Fabbri: A small set of holdings is still in eastern Colorado, and then basically California.
Luca Fabbri: So Illinois is.
Luca Fabbri: Credibly strong we thought we've talked about this in the past we've kind of reached a plateau stage in terms of valuations in Illinois.
Luca Fabbri: Meeting the market's not driving higher not every single sale.
Luca Fabbri: A new record, but the prices, particularly for good properties remained very strong.
Luca Fabbri: We would continue to buy in Illinois.
Luca Fabbri: If the valuation makes sense as we all know it's a relatively low current yield environment, but a very very high appreciation environment and when you think about the port for all investors. When you think about the portfolio today recognize that the gains we achieved on the sale of the portfolio.
Luca Fabbri: Polio.
Luca Fabbri: At the end of last year, we sold essentially the southeast.
Luca Fabbri: The United States, most of Nebraska and most.
Luca Fabbri: Our delta.
Luca Fabbri: Arkansas, Louisiana, Mississippi properties, those were very high gains, but thats not the best assets with the most embedded value gain.
Luca Fabbri: The best assets with the most embedded value James since we've owned them is really our Illinois properties, where we own approaching 40000 acres.
Luca Fabbri: Turning to Colorado, Colorado is.
Luca Fabbri: Frankly, a little bit.
Luca Fabbri: Goldilocks not too hot not too cold, we are long term not particularly excited about that region because of water limitations in their likelihood that the water limitations just yet.
To be more extensive through time I think.
Luca Fabbri: We will likely gradual gradually exit the high Plains region.
Luca Fabbri: If we were going to go buy.
Luca Fabbri: By more than any of the regions that we.
Luca Fabbri: Where we sold a lot of properties will last.
Luca Fabbri: Last November.
Luca Fabbri: The place we would go back into is the Delta.
Super High quality farms in.
Luca Fabbri: In particular, more feast, Louisiana and southeast Arkansas.
Luca Fabbri: Are very attractive they have.
Luca Fabbri: Many of the characteristics of the Midwest.
Luca Fabbri: With a slightly higher current yield.
Luca Fabbri: Now turning to California.
Luca Fabbri: <unk> remains an area of concern, which we've talked about this in the last probably three or four at least if not a couple of years worth of conference calls.
Luca Fabbri: California has a variety of challenges.
Water being probably the first and biggest challenge.
Luca Fabbri: Second being over planting of many of those crops around the world and the third being sort of labor challenges as it labor and regulatory challenges.
Particularly in the state of California, what that has done is that's put a lot of pressure on asset values in that region.
Luca Fabbri: We think in many cases institutional investors are very scared of that region right now there are people exiting that region.
Luca Fabbri: So thats a place in our portfolio where were we.
Luca Fabbri: We continue to monitor it we're not going to be where long term value players I don't get excited about.
Luca Fabbri: Whether the values up or down in the last 90 days Thats not every time I read an article like that I'd kind of recognize it's written by somebody that doesn't understand the asset class nothing moves on a 90 day cycle in this asset class.
Luca Fabbri: So we're going to kind of monitor watch it if we did approach at a fair price on something we own will likely lighten our exposure to California.
Luca Fabbri: Very unlikely to buy additional assets in California, right now.
But it would likely would lighten up there.
Rob: Rob kind of answers.
Luca Fabbri: Questions Yes.
Rob: Yes, that's very helpful.
Rob: Yes. The other question regarding deployment of capital is high.
Speaker Change: Are you thinking about you guys bought.
Speaker Change: Ohio, Dear dealerships, how are you guys thinking about that business.
Speaker Change: It's hitting whatever return thresholds that you were looking for and Cub.
Speaker Change: Coverage et cetera, and whether or not you would expand and do more of those either in Ohio and or other states.
Speaker Change: Or something of that sort of been going forward to deploy capital.
Speaker Change: So a couple of thoughts on that and.
Speaker Change: And I've talked to many individual investors, particularly our largest ones about this and some of them frankly love the idea of doing more of that and some of them hate the idea. So here's the kind of intellectual challenge when you think about it.
Speaker Change: One of the problems, we face as a company is not enough current income in any given year. Those assets are solid six participant current yield sorts of assets, maybe even six in the house.
Speaker Change: In some cases, they're they're great.
Speaker Change: Current yield tools for us and we believe particularly I believe that the long term appreciation of John Deere dealership footprints, we don't own the dealership, we own the land underneath the buildings as long as you paid fair value going in and fair values about praised.
Speaker Change: Value S case will not not just cap rate on the lease payment. So already paid a fair price for that my view is that asset is likely to appreciate more or less with farmland.
Speaker Change: Or even higher than fund many of these dealerships are located at.
Speaker Change: Important highway intersections or things like that so there's no reason to think they won't won't go up as land values go up.
Speaker Change: This value of the underlying asset won't go up.
Speaker Change: As land values in the AG parts of the United States go up so that would be the that's the argument to do more.
Speaker Change: That we don't have very much exposure to that in the overall portfolio sense today.
Speaker Change: And the the counter argument, which is also sensible it's not the argument I believe in but it's a sensible argument is that look.
Speaker Change: I'll stick to your knitting.
Speaker Change: At some level that John Deere dealership is really just a triple net industrial lease.
Speaker Change: Don't don't confuse that with farmland.
Speaker Change: Stay away from it.
Speaker Change: Both of those things are true so just to answer your question Rob.
Speaker Change: I think we might do a few more of those I don't think youll see us get into its super aggressively.
Speaker Change: Yes.
Speaker Change: If I was having this conversation with the board and the rest of the management you would have people in amongst that group.
Speaker Change: Six or seven people with both points of view that I expressed so I guess those will we may do a few more of those that are particularly attractive, but don't expect us to do a lot of them.
Speaker Change: Okay. That's helpful. And then one last one for me for Susan what is your incremental borrowing rate today.
Speaker Change: If you had if you needed $20 million of debt what would that cost you today and how would you sort of.
Speaker Change: Get that Where's, the best sort of pricing and availability to use today on the debt side.
Speaker Change: Well, let me chime in as well.
Speaker Change: Susan here it kind of holds up.
Speaker Change: The correct number you have to look at it in two different ways. Because we have liquidity that is immediately available to us underlying lines of credit and Thats, a short term kind of spread over sulfur kind of rates, but we can also if we are to structurally increase our debt again, we would.
Speaker Change: We use most traditional kind of loan agreements on three plus year terms that will come at.
Speaker Change: With different.
Speaker Change: Interest rates at the rig rates and different interest rate exposure risks, having said that Susan yes, where we are right around 6% right now.
Speaker Change: The incremental borrowing rate.
Speaker Change: That's very helpful. Thanks, guys I appreciate the time this morning, Robert Rob I, just I want to connect I want to connect with them on Standalone basis.
Speaker Change: One of the disconnect what Lucas Robert and Susan said to your question for a second so if you wanted to go borrow really quickly it's right around that 6% rate. If we termed it out I think we would be at that rate.
Speaker Change: Okay. That's helpful guys I appreciate it.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Again, I would like to remind everyone that.
Speaker Change: If you would like to ask a question press star one telephone keypad. Thank you. Your next question comes from the line of Macquarie.
Speaker Change: Raymond James Please go ahead.
Speaker Change: Hey, guys. Good morning, Congrats on the great quarter, and all the progress last year.
Speaker Change: Asset sales great job.
Speaker Change: Curious if you can just share maybe a few high level thoughts on some of the headlines and articles that are out there about.
Speaker Change: The freezing of funding that seems to be going around for the various USDA programs.
Speaker Change: A lot of farmers.
Speaker Change: You had been exposed to in some sort of cost sharing agreements and.
Speaker Change: I'm wondering if that.
Speaker Change: You know if there are any particular tenants or farmers in your portfolio that are exposed to any sort of funding freezes or how do you think that plays out over the course of the year.
Speaker Change: Yes, so Bob. Thank you. Thank you for your kind words, and here's kind of my perspective on on that.
Speaker Change: So the when you look at the USDA budget.
Speaker Change: You got to think about it in two relatively large separate buckets.
Speaker Change: The first bucket is snap.
Speaker Change: Acyclic food stamps.
Speaker Change: <unk> two <unk>.
Speaker Change: Low income people on throughput.
Speaker Change: And that is a huge percentage of the budget I don't have that off top my head what it is but it's.
Speaker Change: A.
Speaker Change: Large large large percentage of the overall USDA project.
There is a sense.
Speaker Change: Washington D C under the Trump administration that there needs to be a little bit less of that.
Speaker Change: Nobody wants to be Scrooge I don't think but they think there is some waste fraud abuse.
Speaker Change: In that program, there and I'm pretty sure. There is they also think.
Speaker Change: One of the if you remember back to the Clinton administration I'm older than most of you on the call.
Speaker Change: Bill Clinton got very focused on the fact that that are providing a food stamp program forever Disincentivize. These human beings to go out and create a successful and fulfilling life for themselves and so maybe we need some some program changes that make it a short term safety net not a forever safety.
Speaker Change: And I think those things are coming back around.
Speaker Change: The second bucket of the of the foreign program is is things that are delivered to farmers and theres a lot of different different pieces of that.
Speaker Change: Direct payments there is AD hoc disaster payments in their crop insurance.
Speaker Change: At least to my way of thinking the most important piece of that is crop insurance.
Speaker Change: That is a very good program. It is a good program for farmers, but it is a good program for all U S citizens.
Speaker Change: And the reason for that is that program really cements food security.
Speaker Change: We are such a productive countries in terms of food production that one bad year does not cause a problem in terms of food supply causes a little bit increase in pricing, but nobody is going to go hungry.
Speaker Change: Where we would have a problem is in the United States is if we had two bad years in a row. Our crop insurance does is it lets that farmer, who had a really bad year go back and plant again. The next year, therefore, making sure. We havent don't have two bad years in a row.
Speaker Change: And so that program is very very good.
Speaker Change: Again direct payments and AD hoc emergency payments in particular and to some degree in crop insurance.
Speaker Change: There is waste fraud and abuse there.
I'm sure that the current USDA team.
Speaker Change: Is going to focus on getting rid of that.
Speaker Change: Body in Washington is focused on that or at least should be.
Speaker Change: We as a company.
Speaker Change: Partly because I was a real pharma for a long time, we just stay away from tenants, who are we think abusing the system at all.
Speaker Change: We don't want anything to do with a tenant who is doing what they call it shorts farming.
Speaker Change: So we don't have any of those tenants, we just and we also.
Speaker Change: We're very very focused on making sure we got farmers, which app.
Speaker Change: Sensible economic.
Speaker Change: Results without regard to government payment on their thoughts.
Speaker Change: So I don't think anything that's done in that area hurts us in any kind of meaningful way in fact it Mike.
Speaker Change: No.
Speaker Change: People like us that have <unk>.
Speaker Change: Relatively speaking higher quality land in the higher highest quality farming regions.
Speaker Change: Long winded answer, but I hope it helps.
Speaker Change: No that definitely helps.
Speaker Change: I appreciate the thoughts I just wanted to also I kind of want to clarify maybe I wasn't clear on the question because I was there.
Ken: Ken I think it was more thinking through.
Ken: These inflation reduction act capex projects that a lot of farmers had undertaken putting in a lot of money to whether it's doing environmental upgrades are fencing or something some other money that they were putting upfront that they were going to do a cost sharing arrangement with the government on.
Speaker Change: Just wondering if any of your portfolio of farms.
Speaker Change: Taken advantage of that program, where it's been a lot of capex money or some sort of financial risk due to funding being cut back.
Speaker Change: No.
Speaker Change: So the quick answer.
Speaker Change: No I mean, we as a company.
Speaker Change: Do not.
Speaker Change: Credibly rare circumstance would we ever do.
Speaker Change: Directly pursue.
Speaker Change: Some sort of government program payments, either by pushing attendant to get it and share it with us or by getting it directly although seldom OE eligible for <unk>.
Speaker Change: Director.
Speaker Change: So we're.
Speaker Change: Just.
Speaker Change: Don't want to play in that.
Speaker Change: In that space.
Speaker Change: We just we just really don't know I mean to be fair. If you had massive reduction in cash flow coming from the USDA <unk>.
Speaker Change: <unk> agriculture community that has a negative impact on a large land owner like us because they're just less capital in that.
Speaker Change: But I mean, the impact on US is very very muted for the reasons I just explained as to the specifics again I don't know exactly what.
Speaker Change: What the administration and the USDA will do but my sense is that anything that sort of a pre existing contractual obligations a cost share on something fulfilled.
Speaker Change: Fill the obligation and that's just that's just the contract.
Speaker Change: I think it's going forward will those programs change is the more.
Speaker Change: The more relevant question.
Speaker Change: Gotcha Gotcha very helpful. I appreciate that and just one quick last one is if you could share kind of what your renewal lease terms in terms of your.
Speaker Change: Asking rates on new renewals for this spring are going out at.
Speaker Change: How do you think that.
Speaker Change: Through for the year.
Speaker Change: Sure so on renewal rates.
Speaker Change: If you look back over the last couple of years. The three year average on renewal rates is up 12, 4%.
Speaker Change: That is.
Speaker Change: That is based on incredibly strong renewals.
Speaker Change: In the last two years prior to 2020 for year 2024 year was essentially flat to slightly down about a point.
Speaker Change: Eight negative.
Speaker Change: Our rent renewal rate now recognize that number is really kind of we are this year, because we had worked our way through renewing most of the rents on those properties. We sold then those were very high quality properties. We sold those properties. So they are not in that statistic.
Speaker Change: So it's kind of a.
Speaker Change: Kind of a sloppy statistic this year with that with selling a 25% or 30% of the portfolio.
Speaker Change: But but but the big takeaway is.
Speaker Change: Really strong rental increases three years ago, and two years ago and sort of flattish this year, because even if we'd have had all those properties we sold still on this statistic.
Speaker Change: But it might have been slightly positive, but it wasn't going to be kind of a 12% again. So what are you kind of I guess, what made the comment about plateau in land values, you got that comp flat.
Speaker Change: Plateau in rents as well now for the coming year.
Speaker Change: I think we're going to be back in a cycle, where we can push rent increases again.
Speaker Change: If you pull up soybean or corn chart corn in particular.
Speaker Change: The last six months <unk>.
Speaker Change: <unk> seen a relatively significant increase in corn price, therefore, increasing profitability of farmers and when you go out to have that rent roll discussion.
Speaker Change: Particularly in our portfolio, which is very row crop centric.
Speaker Change: <unk>.
Speaker Change: Happiness related to grain price makes that rent negotiations here.
Speaker Change: Got it very helpful guys. Congrats again on all the progress good job.
Speaker Change: Your next question comes from the line of BARDA and the Robin here.
Speaker Change: <unk> please.
Speaker Change: Please go ahead.
Speaker Change: Thank you Rob for your comments today following up on you said that you think you can raise rents.
Speaker Change: How do you think of that in terms of income levels being hit so badly in the last year. I mean, do you think thats change going to be changing on a go forward basis, and I'm asking that because.
Speaker Change: What can we think about dividends being paid through cash flow versus selling of assets or.
Speaker Change: Historically been able to access the credit markets, which with interest rates. This high I assume youre not going to want to do that so where do you see farmers income you mentioned that you think farmer income and corn is going to go up.
Speaker Change: Is that more looking forward that.
Speaker Change: Income levels have bottomed out on given where commodity prices are that.
Speaker Change: And labor et cetera.
Speaker Change: Yes.
Speaker Change: Recent recent data coming out of.
Speaker Change: The USDA and other places as we suggest this farm incomes kind of climbing back up that's partly these large direct payments.
Speaker Change: Better.
Speaker Change: Sure.
Speaker Change: <unk> at the end of last year, but it's also kind of increase in grain price and that's that's kind of.
Speaker Change: And a nurse depends whether youre looking through.
Speaker Change: Youre looking through something a wide angle lens are narrow angle and so if you look to the narrowing of the loans were probably a little better than we were last year.
Speaker Change: But now let's look at the at the wide angle lens, because that's what's really important.
Speaker Change: This idea that farmers are on <unk>.
Speaker Change: Legs has.
Speaker Change: Just.
Speaker Change: Just so overdone.
Speaker Change: We are.
Now in certainly the top 10.
Speaker Change: Economic return years ever for American farmers.
Speaker Change: Something <unk> said without government payments would be the eighth best year ever and with government payments as the sixth best year ever.
Speaker Change: So.
Speaker Change: Ill be blunt.
Speaker Change: I'm somebody who really understands these statistics company understands statistics. This is just blown totally out of proportion.
Speaker Change: Farmers are.
Speaker Change: Grain prices are going up profitability is going up you'll be able to push rents up a little bit <unk>.
Rice's are going down profitability is going down.
Speaker Change: You're probably not going be able to push rents very far which is a year. We just kind of went through and so this is why us as a company.
Speaker Change: Anytime times are good grab those rent increases while you can.
Speaker Change: And and then Juno B.
Speaker Change: Be a little more gentle.
Speaker Change: In a year, where you can.
Speaker Change: And so thats kind of our approach. So we think we'll be able to continue to.
Speaker Change: Pushing up rents.
Speaker Change: Context of long term average rent increase.
Speaker Change: Three years or 4% a year.
Speaker Change: We see a 10 or 12% year.
Speaker Change: Think about that as 10 or 12% forever in your model think about it is that's making up for the year of zero.
Speaker Change: Alright.
Speaker Change: Long term averages are modeling cat, three or 4% and something like that.
Speaker Change: And are you seeing distressed buyers coming in into California at all which maybe signals a bottom of the market.
Speaker Change: Because the banks are giving away assets right now.
Speaker Change: Youre kind of looking for.
Paul Pittman: Luca you want to take this question I mean, I've thought about it that you might have thought about it more so go ahead.
I'll talk to the army.
Speaker Change: Sure.
Speaker Change: That's right that's fine.
Speaker Change: <unk>.
Speaker Change: We see the California farmland market as still being fairly dislocated.
Speaker Change: There is.
Speaker Change: A lot of there are a lot of as you probably know very well there are lots of product is under market there.
Speaker Change: There are probably willing buyers that are having stepped into the market yet.
Speaker Change: So there is a fundamental misalignment between supply and demand for for farmland assets that will take probably a little longer.
Speaker Change: To resolve.
The unfortunately, the long term uncertainties, there regarding sigma will their visibility and so on so forth.
Speaker Change: We remain kind of top of mind for a lot of operators. However.
Speaker Change: Good good performance for example, walnuts it performed better than expected.
Speaker Change: <unk> performed really well in 2024.
We are expecting a little bit of digging up of interest we are seeing specifically more than from investors is from small little behaviors that had a pretty decent 2024 that.
Speaker Change: Now looking to biodiesel barstools here and there we so far we haven't seen really any big investors will begin to the market to buy in large quantities, mostly because a lot of those investors are already present in California, and therefore, they already feel the habit, whether it'd be the exposure to the market.
Speaker Change: Okay. Thank you told your specific question I think we are at or near the bottom right now.
Speaker Change: But it's yes.
Speaker Change: You never can predict exactly where the bottom is.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you.
Your next question comes from the line of Craig the chatter with lucid capital markets. Please go ahead.
Speaker Change: Yes, good morning, guys.
Speaker Change: I would like to talk a bit about the FBI loan program you had a pretty sizable increase in your loans outstanding in the fourth quarter and with just like to get your thoughts on where you see demand do you expect to see continued higher demand in that segment.
Speaker Change: Yes.
Speaker Change: It's partly demand Craig and it's partly focus on it.
Speaker Change: As we have shrunk the portfolio.
Speaker Change: We've done a good job controlling costs, but we are a public company. So there is a four.
Speaker Change: To how much we can lower costs of being public is expensive in terms of a board outside legal filing fees accounting et cetera.
Speaker Change: So we actively as we got deep into the transaction we did last.
Speaker Change: Paul.
Speaker Change: We sold such a large portion of our portfolio. We consciously said, we've got to reach out and increase loan program.
Speaker Change: Obviously, not by taking on a ton of additional risk, we hope, but by making loans at higher at high interest rates and with fees and things like that in a way that helps us on our cash flows.
Speaker Change: With the sale of some of the properties that was important.
Speaker Change: And so that's what we did and Thats, what you really see in the numbers again, we're an asset based lender.
What we do is we serve a role in the marketplace.
Speaker Change: Farmers are often.
Speaker Change: And people who own AG land are often very sort of cash for but asset rich most lenders don't want to touch that.
Speaker Change: Because it's a bad loan, but its because they are not in a position to.
Speaker Change: To own that asset if necessary.
Speaker Change: On the other hand, or <unk> business, relying agricultural assets, so as long as I've.
Speaker Change: And our team feels like we're very covered.
Speaker Change: In terms of collateral value.
Speaker Change: We'll we'll make loans and.
Speaker Change: And that's what we do we're not we're not scared of.
Speaker Change: Taken the property if we have to.
Speaker Change: So.
Speaker Change: That's why we're able to kind of expand there is just not many people that will take that asset value approach.
Speaker Change: Lending in.
Speaker Change: And.
Speaker Change: When we take that approach is not that.
Speaker Change: The obvious question, how do you get paid back at the guidance cashless terrible.
Speaker Change: The reality is he has got lots of that that borrower probably has lots of assets and what are you really doing is trying to buy a little time and you can either sell the asset you wind him money against or sell some other asset cleanup cleanup.
Speaker Change: Clean up the family business balance sheet, and that's that's what kind of role we play in the market and as I said as long as we've got.
Speaker Change: Good position on terms of loan to value.
Speaker Change: Doesn't scare us at all and we can generate very strong interest rates and fees related to those transactions.
Speaker Change: Right I know that's always been a program you hope to grow more than it had in the past.
Speaker Change: Just one more from me has there been any increase maybe in inbound calls since the administration change and all the shakeup going on that we discussed on the call today.
Speaker Change: Yeah.
Luca Fabbri: Luca you may be.
Speaker Change: Luca runs the company on a day to day basis now Luca.
Luca Fabbri: I don't know.
Speaker Change: So you have a point of view express it.
Yes, we've seen a little bit of an uptick in inbound inquiries related to the loan program I don't really think personally that it's related to the administration change.
Speaker Change: Just more of a.
Speaker Change: In those some some marginal operators felt a little squeezed in 2024 and that has increased.
Speaker Change: Need for the type of product that we offer.
Speaker Change: Not sure what's going to happen here in the coming months, especially given the fact that commodity prices have kind of bounced back quite a bit.
Speaker Change: Okay, great. Thanks for the color.
Speaker Change: Thanks, Greg.
Speaker Change: Thank you everyone and that concludes our Q&A session for today I will now turn the call I'll go back to Luca Savi, President and CEO of farmland partners. Please go ahead.
Speaker Change: Thank you Dale and thank you everybody. We appreciate your interest in our company and look forward to updating you on our activities and results in the coming quarters have a great day.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect have a nice day everyone.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].