Operator: Good morning. Welcome to Gladstone Land Corporation Q3 2026 Earnings Call. At this time, all participants are in a listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to Mr. David Gladstone, Chief Executive Officer. Thank you, sir. You may begin.
David Gladstone: Well, thank you, Sherry. That was a nice introduction. This is David Gladstone, and thank you for calling in today. First, we will hear from Catherine Gerkis. She is our Director of Investor Relations, and she will discuss certain terms regulating regulatory matters that are involved with us. Catherine, go ahead now.
Catherine Gerkis: Thanks, David, and good morning, everyone. Today's call may include forward-looking statements, which are based on management's estimates, assumptions, and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website, gladstoneland.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Q and earnings press release, both issued yesterday, for more detailed information. You can also sign up for our email notification service and find information on how to contact our investor relations department. We are also on X @GladstoneComp, as well as Facebook and LinkedIn. Keyword for both is The Gladstone Companies.
Catherine Gerkis: Today, we'll discuss FFO, which is funds from operations, a non-GAAP accounting term defined as net income, excluding gains or losses from the sale of real estate and any impairment losses on property, plus depreciation and amortization of real estate assets. We may also discuss core FFO, which we generally defined 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 GAAP rents to normalized cash rents. We believe these metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance. Now, I'll turn it back to David Gladstone.
David Gladstone: Oh, thank you, Catherine. That was very nice. Let's start out with just letting you know we currently own about 98,000 acres across 143 farms and nearly 56,000 acre-feet of water. That's about 18 billion gallons of water that we have. It's mostly out in California. The farms are in 14 different states, and our water assets, well, they're all in California, where they need to be. We are acquiring one property subsequent to quarter end, but that was not a good news, rather than part of a positive. It was kind of a ending to a negative. We were in a forbearance agreement with one of our tenants, and they defaulted. This was a small row crop company farm in Washington state that served as collateral for the lease and was transferred to us partially to satisfy the outstanding rent obligations.
David Gladstone: During the quarter, we sold a property consisting of two citrus farms in Florida. It was about $3 million, so good positive income. We currently have two other properties under contract to be sold for a total of about $30 million. Let's assume the transaction remains on track, and I think it will. People are coming back in and buying up some properties. One of them should close in Q4, which we're in now, really, and the other is going to be in Q1 of next year. Last time we checked, they were still on going forward, and so we should receive that cash in over the next two quarters. In each case, we look to use most of the proceeds to pay down debt and buy back preferred stock, but we're still evaluating these and other opportunities at this time.
David Gladstone: We continue to take a disciplined approach to acquisitions and staying active in the market. We are ready when conditions improve, and it makes sense for us to start growing the portfolio again. When it does, we will jump in, but we want to make sure that we are only adding the right kind of assets at the right prices. In terms of leases, we discussed in prior calls some of the updates in the leasing activity. Due to the market conditions affecting certain permanent crops, particularly nuts and wine grapes, we modified the lease structures in a handful of farms to reduce the grower's fixed cost while allowing us to participate very strongly in the upside through higher crop share participations. We also continue to directly operate two properties. Who is on the phone that keeps butting in?
[Unknown Speaker]: Need to mute out. That is all.
David Gladstone: I do not know. Yeah, can you mute whoever it is that is bleeding into my conversation? As we have discussed in prior calls, due to the market conditions affecting certain permanent crops, particularly the nuts and the wine grapes, we modified these lease structures on a handful of farms to reduce the grower's fixed cost while allowing us to participate more in the upside through higher crop share participations. We also continue to directly operate two properties with the help of third-party managers. Our group is not managing the farms, but they are hiring people who know how to manage these farms. Overall, in 2025, almonds and pistachio harvests were very strong, with results generally exceeding all of our expectations, and quite frankly, of most people, as underestimated how strong they were going to be, both in terms of yield and in pricing.
David Gladstone: Final pricing on 2025 pistachio crop is expected to be at least 21% higher than it was in 2024, and initial pricing on the 2026 crop has already been announced at 67% above the initial price for the 2025 crop. With overall yields on the 2026 crop coming in significantly lower, we expect pricing to remain strong, which should help partially offset the negative impact of the lower yields, but may not fully make up for the shortfall. Given the uncertainties around the 2026 crop results, which impacted our 2027 earnings, the advisor has waived its incentive fee earned during Q3, and our priority remains preserving the dividend for our shareholders during the time. This is a time of a lot of uncertainty, of course, with regard to farming.
David Gladstone: The United States government has given a lot of money to the big farmers to keep them going. We made enough last year, probably one of our best years. We entered into similar arrangements for most of these farms that we own for the 2026 crop as well. We expect to see smaller earnings pattern next year, with the majority of our related revenues and earnings again being recognized during the H2 of the year. We got to wait that before we can give you much information about what's going on in the crops. I also want to remind everyone that crop insurance continues to play an important role in our company, as it helps to limit the downside risk on these farms where we have a lot riding on the production of nuts and other things.
David Gladstone: Our goal is still eventually to translate these farms back to more traditional leases structures, which is fixed-based rent, but timing for that will depend on several factors such as crop production, as well as pricing and interest rates. When we got in this business, we were borrowing at, I think, 3.5%. The best we could make on it was about 7.5%, and all hell broke loose in the farming business. Looking ahead, seven leases scheduled to expire over the next six months. In total, these represent about 6.8% of our lease revenue year-to-date in 2026. We are currently in discussions with both existing and prospective tenants, and we expect to be able to renew the leases prior to the expirations. I think that will just go along as last year.
David Gladstone: In addition, subsequent to the quarter end, we entered into two agreements with solar companies, granting them options to purchase up to 5,600 acres of farmland in California, both for potential solar development, and that is becoming a big thing in California. The agreements have terms of five to six years, with the combined annual option payments starting at about $331,000, and they will be increasing over time. We are going to get a lot of money back on these if they work out, and no reason they will not work out because everybody needs electricity. Unlike so many of those companies that are building things to produce electricity, we remain in place and have not had to pay much for our land. We also are pursuing several other alternative revenue opportunities, including all our water leases, fallowing programs, and solar leases. I think solar leases are going to be a big thing.
David Gladstone: Wouldn't it be nice if we had solar leases on all of our vacant properties and problem? Discussions continue to progress, and we hope to have some more of these agreements in place over the coming months. Probably in our portfolio, about 10 of these farms that could be converted to producing electricity. Folks from New Jersey know this well because New Jersey has a lot of farms that were taken out of farming and put into producing electricity. Now I will give a quick update on some of the ongoing tenants in matters that we are working through. We currently have seven farms that are wholly or partially vacant, and we are actively working towards solutions to get these farms back into our stable paying leases. Income-producing situations are where we want to be because we are dividend payers.
David Gladstone: Hopefully, we can get some of these situations resolved over the next few months. We are also currently recognizing revenue on cash basis for leases with four tenants. We received some cash rent payments from a couple of these tenants during the quarter, but we will keep them on a cash basis until we see the rest of the payments come in. I will note that these figures include two properties we currently have under contract to be sold, so we can get rid of some of the problems and keep going. I am going to stop here and turn it over to Executive Vice President Bill Reiman. Bill, why do not you come on and give us your report?
Bill Reiman: Thanks, David. Good morning, everyone. You know, the Q3 of the year for us is always exciting with the harvest in full swing. Some of our minor crops, such as cherries and figs, are harvested early in the year, but the harvest of our major crops, such as almonds and pistachios. Well, almonds typically begin in August, sometimes late July. Pistachio generally begins around Labor Day, and wine grape harvest typically starts in September as well. Overall, the season got started with a major heat spell in early spring, which caused crops to develop earlier than usual. Some crops responded well to that, while others, such as pistachios, were negatively impacted. Damage to the 2026 pistachio crop was felt across the entire industry, with production expected to be among the lowest levels we have seen since 2015.
Bill Reiman: Unfortunately, our orchards were no exception, and we also had lower production across the board. However, our farms are well insured, and we expect to receive significant insurance proceeds, as David mentioned, related to our 2026 pistachio crop. We also expect crop insurance proceeds from some of our wine grape blocks, where we experienced lower production as well. On a more positive note, the almond crop came in strong across the board. Although we are still processing what was harvested, the trend is for our yields to be up. The almond market is very stable, pricing continuing to strengthen slightly and remaining at profitable levels. Final price of our 2025 crop came in significantly higher than projected. We expect even higher prices for the 2026 crop. Combination of strong yields and stable pricing is really a welcome feeling after several challenging years.
Bill Reiman: We expect these trends to continue as bearing acreage continues to decline. There are no significant signs yet of any increase in new plantings, and even if plantings were to increase, it would be several years before the bearing acreage actually contributed to total almond production increasing. So, we definitely feel the tailwinds in the almond business. The pistachio market, as one might expect given the significantly smaller crop this year, is very strong. Once the extent of the damage from the spring heat wave became apparent, prices really jumped. That helped us close out the 2025 crop at much higher than projected prices. Although the 2026 crop is very small, pricing will be significantly higher than for the 2025 crop. Despite these higher prices, the smaller crop will result in much lower trailing revenue numbers for us over the next 12 to 15 months.
Bill Reiman: Crop insurance proceeds will help offset this decline, but most of those proceeds are expected to be recognized in Q4 of 2026, leaving less revenue from the 2026 crop to be recognized in 2027 than in a typical year. The 2027 crop is expected to be another strong production year, and we are hopeful that current pricing strength will carry into 2027, potentially making it even more profitable year than 2025 was. Because of the alternate bearing nature of pistachios, we like to compare on years with on years and off years with off years. We are watching how 2027 shapes up relative to 2025. Now we are in November with harvest behind us, and planning for the 2027 crops becomes the focus of our ops team.
Bill Reiman: Budgets are being finalized, any new management or modified lease agreements are being put in place so we do not miss a beat with late fall and winter preparations. Though trees and vines still dormant in winter, there is a surprising amount of work that still needs to get done. The wine grape market has not changed much. Crop yields were significantly lower across the Western US. With the industry still facing oversupply, there has not been much relief on pricing. Vineyard removals are accelerating, and we expect that to continue for the foreseeable future. The industry is facing significant challenges with several large producers going out of business, wine assets selling at substantial discounts, and increasing number of properties coming to market. We are seeing, I will say, a lot of consolidation on the production side, declining acreage, wine labels increasingly concentrated amongst larger producers.
Bill Reiman: It is going to be real interesting to see how the industry emerges from this period of restructuring. We do see some signs in the wine market, some shortages in some particular varietals. This is the first positive signs we have seen in a couple of years, so hopefully this is the beginning of the recovery. We are continuing to evaluate our wine grape assets and explore ways to position them, you know, to maximize value, profitability. Although some of our vineyards have remained under lease, allowing us to fare better than many others in the industry thus far, we may take several vineyards under direct operation in the near future. But we do remain hopeful that market conditions will improve soon and put us in a better position to realize the long-term value of these assets. A few words on real estate, on the general real estate markets.
Bill Reiman: I would say overall, we are generally flat. The trifecta of interest rates being where they are, crop inputs experiencing inflation, and crop prices generally being flat, outside of tree nuts, is the main driver of land valuation. We do see some areas gaining strength, driven mostly by the strong crop prices in areas where crops can be grown with plentiful and inexpensive water. There is a strong divergence in values around water cost and availability in California, particularly. Areas with riskier water profile are seeing continued depression of land prices, while properties with good cash flow potential are getting positive attention. Last quarter, we reported that we were seeing a little more lending activity, and that is still the case, although lenders remain cautious, and they are looking for more security with the money they are putting to work.
Bill Reiman: Banks are looking for strong cash flow and equity to secure loans and get deals done. Both aspects are tough to find, but they are out there, but it is like an Easter egg hunt. I will end this on some thoughts about water. The new water year began 1 October, so this is somewhat quiet time of the year as far as water goes, particularly in California. There was a recent late season allocation increase, but it was not super impactful for most growers. It should result in lower costs for current wet water available, but some folks will be able to store a little more, but overall, the impact will be minimal. Most irrigation is done for the season, and we are all watching the weather forecast. Strong El Niño in place, everyone is getting ready for the impact, no matter where they are.
Bill Reiman: Much of the Pacific Northwest expects to be drier, while most of California and the Southwest expect to be wetter. Of course, anything can happen, so we will prepare for what we think is likely, but stay ready for the opposite. We are finding some good water purchase opportunities. We remain diligent and conservative with what we go after. Our goal is to only acquire water at prices that fit the economics of our crops in a particular area. Should El Niño result in significant flood water, we could see ourselves grabbing as much of that as we can to store in our water banks. As we have stated before, our strategic water goals is really to strengthen the overall water security of the portfolio through both long and short-term strategic water purchases, continue to invest in water delivery and storage infrastructure, and identify opportunities to create synergies across our farm assets.
Bill Reiman: That is it for me. Now I will turn it over to our CFO, Lewis Parrish.
Lewis Parrish: Thanks, Bill, and good morning, everyone. I will start with a brief update on our recent financing activity. We did not secure any new borrowings during the quarter, but we did pay off two mortgages totaling about $5 million, and one of which was paid off in connection with the property sale that David mentioned earlier. Given where our stock has been trading, we have had very limited activity under the ATM program lately, issuing just about $1.5 million of common stock at an average cost of capital of about 5.7%. We have also continued to execute on our preferred repurchase program. Since 1 July, we have repurchased about $13 million of our preferred stock under the program at an average repurchase yield of 7.3%, resulting in a total gain of about $1.3 million on those repurchases.
Lewis Parrish: Turning to our operating results for Q3, we recorded net income of about $11 million and net income to common shareholders of $6.1 million, or $0.14 per share. Adjusted FFO for Q3 was $15.1 million, or $0.35 per share, compared to $1.4 million, or $0.04 per share, in the same quarter last year. Common dividends declared were $0.14 in both quarters. The improvement in AFFO was primarily driven by an earlier-than-usual announcement of the 2025 pistachio crop bonus by our primary processor, and that allowed us to recognize certain revenue amounts sooner than usual. Higher almond and pistachio prices also contributed to increased participation rents and profits from direct farming operations. These increases were partially offset by higher property operating expenses.
Lewis Parrish: I will also note that 2025 was a bit of a transition year for us as we shifted certain farms to modified lease structures or direct farming operations. So 2026 represents our first full crop cycle under these new arrangements. Year-over-year, fixed base rents decreased by about $400,000, and that was primarily due to lost revenue from vacant and non-accrual properties, as well as property sales completed over the past year. Participation rents increased by about $11.4 million due to the early announcement of the bonus payment for the 2025 pistachio crop, as well as continued strong pricing for almonds and pistachios. Direct farming operations also generated a net profit of about $2.9 million during the quarter, largely driven by those same factors. On the expense side, our recurring cash operating expenses increased by about $1.1 million, primarily due to higher property operating expenses.
Lewis Parrish: The increase in property operating expenses was largely driven by supplemental water costs we incurred on one property pursuant to our lease obligation, higher professional fees associated with protecting water rights on certain farms in California, and additional costs related to properties that were vacant, direct operated, or on non-accrual status. Total net related party fees remained relatively flat compared to the prior year quarter, and G&A expenses increased slightly, primarily due to higher professional fees. Finally, cash flows from operations increased largely as a result of higher cash receipts from participation rents and crop sales, a decrease in cash allowances paid to certain tenants, and lower interest payments. Turning to liquidity, we currently have over $105 million of immediately available capital and over $110 million of unpledged properties that could be used as additional collateral.
Lewis Parrish: About 92% of our borrowings are currently at fixed rates, and on a weighted average basis, these borrowings bear interest at 3.57% for another 2.1 years. Looking at upcoming debt maturities, we have roughly $34 million of loans maturing over the next 12 months. Given the value of the underlying collateral, we do not anticipate any issues refinancing these loans should we choose to do so. In addition, we have about $16 million of scheduled principal amortization payments due over that time. We also have about $132 million of loans with fixed rate terms that are scheduled to reset over the next year, although the loans themselves are not maturing. This includes about $130 million of loans under our MetLife facility that are scheduled to reprice in January 2027.
Lewis Parrish: We are in discussions with MetLife about refixing these rates, and we are also exploring financing alternatives with other lenders, as well as other options, including using proceeds from potential property sales to pay down a portion of the notes. Finally, regarding our common distributions, in October, we declared a monthly dividend of $0.0467 per share for Q4. At our most recent closing stock price of $6.88, this represents an 8.1% annualized yield, which is well above the REIT sector average. With that, I will turn the program back to David.
David Gladstone: Well, thank you, Lewis. Overall demand for prime row crop farmland remains relatively stable across most of our regions, and particularly along the coast of California. We are also starting to see some signs of improvements in certain permanent crops, both in the price of the permanent crops as well as broader economics around these crops. So we are hopeful that the worst may be behind us now, but it is still too early to say. This year will say a lot to us about where we are going, and I expect it to be different from the past, but strongly in our favor. In closing, over the long term, we expect inflation, particularly in the food sector, to continue to move higher, and we expect the values of the underlying farmland to increase. So if we start selling some more land, it will be to rid ourselves of some more of the preferred stock.
David Gladstone: We expect this to be especially true in the healthy foods, such as fresh fruits and vegetables and nuts, and long-term trends toward healthier eating continues to grow. Now I will open up for some questions from those who are listening. Operator, would you please come on and help our listeners ask questions?
Operator: Thank you. 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 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. Our first question is from Gaurav Mehta with Alliance Global Partners. Please proceed.
Gaurav Mehta: Thank you. Good morning. I wanted to ask you on the participation rents expectations for Q4. Are you able to provide some color on what you are expecting for Q4? Is it going to be similar to what you guys received in participation rents last year?
Lewis Parrish: Sure. It might not. As we said, we did recognize some crop share rents that would typically be recognized in Q4 early in Q3 because of that earlier announcement. I do not know that we would say it is going to equal Q4 of last year. It is really made up of three components for us. We have the variable, the crop share rents from our standard leases. We have net crop sale profits from our direct operative farms, and then we have insurance payments, which are expected to play a much larger role in the 2026 crop. From, I guess, if we are just talking about the crop share from standard leases and the profits from our direct operations, I would probably say we might be similar to where we were at Q3 of last year. The wild card here is the insurance payments.
Lewis Parrish: As Bill mentioned, we might be able to recognize a lot of that in Q4. Some of it could come into Q1 next year, but if it all comes in Q4, it could push us to where we were in Q4 of last year. We are not sure of the exact timing of those payments quite yet. I think on the low end, similar to Q3 last year. On the high end, maybe similar to Q4 of last year.
Gaurav Mehta: Understood. Second question on the balance sheet. You talked about some fixed rate term resets expected next year. Can you remind us where are the interest rates on the debt that is expected to reset, and where do you expect the new interest rate to be?
Lewis Parrish: Yes. Right now, it is 98% of that repricing amount are the MetLife loans. Right now, that is about $128 million, $130 million that is going to reprice in January. Right now, the weighted average rate on those loans is about 3.5%. Today, we would probably be looking at roughly 250 basis points of an increase if we were to refix those right now. But again, we are continuing discussions with MetLife and also talking with other lenders to try to get some competitive bids. As I mentioned, we are also looking at alternatives of maybe using proceeds from potential property sales to repay all or a portion of those notes.
Gaurav Mehta: All right. Thank you. That is all I had.
David Gladstone: Okay. Operator, would you come on and see if there are some more questions?
Operator: Yes. Our next question is from Craig Kucera with Lucid Capital Markets. Please proceed.
Craig Kucera: Yeah. Hey, good morning. Of the $17 million of variable lease payments that were made this quarter, can you give us a breakout of what was related to the 2025 pistachio bonus versus other crop types?
Lewis Parrish: Don't have that exact breakout in front of me, but if I had to give a guess, it's probably close to 70% of that amount.
Craig Kucera: Okay, that's helpful. As we think about 2027, given your commentary about comparing on-years versus off-years, can you give us a sense of what the yield was off of the 2024 crop for pistachios and how that compared to 2025, understanding the pricing's going to be much higher, of course?
Lewis Parrish: Bill, you want to take that one?
Bill Reiman: Yeah. Could you repeat that question?
Craig Kucera: Yeah. I am just trying to figure out when you have a down year with pistachios on your farms, what the yield would be relative to what it was off of the 2025 crop, just for thinking about future revenue from the pistachios.
Bill Reiman: Yeah, it really runs the gamut. Not to sound elusive, but it really depends. We have seen it is inconsistent. We have seen down years be 25% of an on-year. 2026 is, overall, California's overall production is about 800 million pounds versus 1.6 billion the previous year. It was half, generally speaking, but then you have to factor in the impact of the pricing, right? Does the percent that the yield goes down by, does the price go up by a significant enough percentage to fill it in? Sometimes it does, sometimes it does not. It is really hard to just kind of place a general percentage on it. I do not know if that helps
Craig Kucera: Okay
Bill Reiman: answer your question.
Craig Kucera: No, that actually was perfectly what I was looking for.
Bill Reiman: Okay.
Craig Kucera: You ramped up asset sales, or looking to sell more, certainly assets held for sale. Are those related to the impairment charges you took in Arizona and Washington, or are you looking to sell farms from other parts of the country?
Lewis Parrish: Yes, the impairment was related to those sales.
Craig Kucera: Okay, great. Let's see here. As you are going through leasing here in Q4, are you expecting any additional modified lease agreements, or do you anticipate that the three that you have will kind of be the ones that remain under modified leases?
Lewis Parrish: No, we are not looking at any additional changes towards modified leases at this point. I will let Bill speak to this, but we are actually taking one, and it is a smaller property, but we are taking one property out of the. We are planning to take one property out of the modified lease structure and put it into more of a traditional lease, and that is a small almond farm. Bill, any more color you want to give on that one?
Bill Reiman: Yeah. We do not anticipate any other modified leases. We have been getting inquiries going back to traditional leases. Like Lewis said, we have one smaller almond farm that is going back to a traditional. It is coming off the modified lease with us and going back to a standard lease. We just kind of evaluate it case-by-case basis, weighing those returns. So, yeah, just one less going into next year, and I do not anticipate any new ones for 2027.
Craig Kucera: Okay, that is helpful.
Lewis Parrish: One thing I will add there, Craig, is on the direct operated side, related to the tenant that was in default, David mentioned, we acquired one property as part of a forbearance agreement. They operate a couple of vineyards up in the Pacific Northwest. We might end up having to take those back under direct operations. So, not modified lease, but we might have a couple of vineyards added to the direct operated bucket next quarter, or in the Q4.
Craig Kucera: Got it. With the third-party solar agreement, did you say that was on vacant land, or that is land that is currently being farmed?
Bill Reiman: On both. One of the agreements is on Well, actually, they are both leased, so they really are not vacant. They are on farm-
Lewis Parrish: One was vacant last quarter though, right?
Bill Reiman: Oh, that is true. Yeah.
Lewis Parrish: Yeah. One was leased, and the other one is now also leased, but on top of that, there is the solar purchase option agreement.
Craig Kucera: Got it. Okay. That is it for me. Thank you.
David Gladstone: Operator, can you give us the last question?
Operator: Yes, sir. Our last question is from John Massocca with B. Riley Securities. Please proceed.
John Massocca: Yeah, good morning. Maybe thinking about the kind of overall farm transaction market in terms of acquisitions and dispositions. Sorry. How is that being impacted by the move in interest rates, if at all? Is that kind of changing any kind of strategy you have around maybe selling some underperforming assets and using proceeds to kind of pay down parts of the capital stack? Just kind of curious how that's progressing.
David Gladstone: Lewis, go ahead.
Bill Reiman: Well, it's a-
Lewis Parrish: Bill, you want to start?
Bill Reiman: Yeah. It is a buyer's market for most farmlands at this point in time. So it is difficult to get things sold, and particularly difficult to get things sold at a value that is helpful to us. For example, our farm in Arizona we had under contract, just yesterday, the buyer canceled. So, we had a pricing that we liked, but after doing their due diligence, they determined that what that was going to cost them to operate, it was too expensive, so they backed out. So it is really, really difficult to get these things, to get transactions closed. Right now, the buyer pool is really just strategics. Very, very few investors. Institutional activity is really at a very low level. So, going out and selling a bunch of properties to free up capital, that is not a quick process at this time. It is going to be a grind.
Bill Reiman: I would say that that process of liquidating assets to redeploy that capital and some of it is just, it is going to be slow, and it is going to be slow for a while.
John Massocca: Okay. Are you seeing movements in kind of cap rate to compensate for that, or is there just a buyer-seller disconnect out there given where interest rates have moved?
Bill Reiman: No, that is a great question because that is what happens. Interest rates go up, cost of money goes up, transactions slow down, profitability starts to come back. So, we definitely see certain crops that have good profitability, almonds and pistachios, yeah, we are definitely starting to see cap rates coming back, to compensate for that. So, we expect those trends to just kind of gently continue. One thing that is, the one positive with interest rates is they, yeah, they came up and we are adjusting to that, but for the last 18 months, it is relatively stable. So, that stability gives confidence in the industry, and then we can build profitability back in. As guys, like in the wine grape market, as it cleans up, it is kind of sad, people losing their jobs and companies going out of business, but that is capitalism.
Bill Reiman: As it cleans itself up, we expect that profitability to come back, and it will come back. We were watching all of those things and figuring out how our assets play into that, and what we can do to position ourselves so that we maximize values and returns in the future.
John Massocca: Okay. On a more technical level, you mentioned some crop insurance in certain crop types. Can you give maybe a little more color on the seasonality? I think it is something that is going to hit in Q4, but then the impact in terms of lost crop revenue is in 2027. Just curious how we should think about that impacting the top and bottom line, both in Q4 and in 2027.
Bill Reiman: So-
Lewis Parrish: Yeah.
Bill Reiman: Go ahead, Lewis. I was just going to say that generally speaking, with crop insurance proceeds, let us compare those to the normal crop revenue. The crop insurance proceeds come right away, they come right after harvest. In fact, we have received some payments already. Comparing to the typical crop revenue on those crops, that lags 15 months, sometimes longer, it shifts that revenue stream. With crop insurance, obviously, it is kicking in when you have had a problem. So, the profitability, if you are getting crop insurance payments, then whatever that was for, or a particular crop, or in some cases, just a particular block, one block out of one farm, it could be that specific, means that you had probably lower yields and had to make a claim because what level of revenue you were insured to, you are dropping below that.
Bill Reiman: So your overall profitability obviously is taking a hit wherever you are. Because we are insuring to a level that covers our cost, covers our investment in the crop. We are not insuring profitability. I think that is probably, I do not know, Lewis, what you can add to that. It is probably the best way I could describe it.
Lewis Parrish: Yeah, I think that pretty much covers it. Nothing to add here.
John Massocca: Okay. Last one, maybe for Lewis. How are you thinking about the preferred stock repurchase program going forward? Is that something we should just expect a steady utilization of, or could that be a little bit more variable based on where capital needs are in any given quarter?
Lewis Parrish: Yeah, definitely the latter. Our line of credit, we are using that right now, and that is going to reprice again in January. It reprices every 3 months. We will weigh the cost of that versus the cash needs versus the cost of the preferred or what yield we are able to buy it back at. Frankly, right now, the common is, based on last night's closing prices, yielding a little bit higher than the preferred. We are going to weigh the best use of any funds that we have available versus other needs. Possibly some acquisitions, although I do not see that in the near term trumping either one of these repurchase options.
Lewis Parrish: If things stayed how they did during Q3, then yes, I would expect it to continue, but we will have to see where interest rates go and what the yields on all of our securities look like.
John Massocca: I appreciate all that detail. That's it for me. Thank you very much.
David Gladstone: How are we doing on any more questions?
Operator: There are no further questions at this time.
David Gladstone: Well, we're disappointed. We like it when people ask us a lot of questions, so we hope you all just get ready for the next one and give us a lot of questions about it, and we'll do our best to answer. That's the end of this, and we thank you all for being with us, and we'll see you next quarter.
Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
