Farmland Partners Inc. Q3 FY2024 earnings call

• Strong third quarter operationally with portfolio restructuring and cost controls. - Cut debt load by almost half. - Sold over $500 million of farmland in last 24 months at significant gains. - Special dividend range $1 to $1.10, driven by tax requirement and business signal. - Internal valuations of assets suggest stock price should be $16 to $17 per share. - California specialty crop assets have more challenging valuation. - Illinois portfolio is most important for appreciation, with plans to concentrate on high-quality land. - G&A expenses increased due to one-time severance and transaction costs, but efforts to control costs ongoing.

For the three months ended September 30, 2024, net income was $1.8 million or $0.02 per share available to common stockholders, lower than Q3 2023 due to dispositions. AFFO was $1.4 million or $0.03 per weighted average share, higher than Q3 2023 due to lower property taxes, depreciation, interest expense, and increased crop sales. For the nine months ended September 30, 2024, net income was $1.2 million or negative $0.02 per share, lower than prior year due to dispositions. AFFO was $4.7 million or $0.10 per weighted average share, higher due to income from forfeited deposits, lower property taxes/depreciation, lower interest, and increased crop sales. Fixed farm rent decreased ~3.5% due to 2023 dispositions, partially offset by 2024 acquisitions and lease renewals. Direct operations (crop sales + crop insurance + cost of goods sold) was up $1.6 million Y/Y due to higher crop sales volume/profitability and lower impairment expense.

• Forecasted AFFO range 2024: $11.8 million to $14.8 million or $0.24 to $0.30 per share, up from prior quarter. - Anticipate special dividend at year end in range $1 to $1.10 per share. - 2025 revenue affected by 2023 dispositions and 2024 acquisitions/lease changes. - Direct operations up due to higher performance in citrus farms under direct operations. - G&A expenses up due to FRI transaction costs, but expected to normalize.

• Risks associated with forward-looking statements, including differences between actual results and expectations. - Uncertainties in valuing California specialty crop assets. - Market risks affecting farmland values and rental rates. - Leverage and debt repayment considerations with potential penalties.

Q: What was the annualized revenue on the 52 farms sold?

A: Susan Landi responded it was approximately $11.2 million.

Q: What drove the increase in crop sales?

A: Luca Fabbri said it was due to a strong crop and good prices at the Condor avocado farm and good performance on citrus.

Q: How does asset sales impact the regular common dividend?

A: Paul Pittman said transactions are accretive, with interest rate savings and other cost savings, so no concern of regular dividend decrease.

Q: Geographic breakdown of sold farms?

A: Paul Pittman said most sold assets were in Southeastern US, Carolinas, Florida, Delta (Arkansas, Louisiana), and Nebraska.

Q: Outlook for rent in 2025?

A: Luca Fabbri expects flat to at best 5% increase in rents, due to challenging farming market and commodity price uncertainties.

Q: G&A expenses normalization?

A: Paul Pittman said efforts to control costs like reducing travel, compensation, and staff, with G&A likely to normalize but small company makes further shrinkage difficult.

Q: Farmland transaction market and election impact?

A: Paul Pittman said farmland market has its own cycle, with current consolidation plateau, and no major impact from election on transactions.

Q: Additional dispositions in Western Arkansas?

A: Paul Pittman said they were farms sold to a company for timber production and carbon offsets, with good price.

Q: Deployment of disposition proceeds?

A: Paul Pittman said proceeds may be used for stock buybacks, debt repayments, and funding special dividend.

Q: Debt repayments and swap on Rabobank facility?

A: Susan Landi said Rabobank loan is ~$11.8 million with amended swap, effective interest rate 3.81%.

Q: Additional loans for FPI loan program?

A: Luca Fabbri said there are opportunities to make loans if they offer substantial spread to cost of capital and have high-quality collateral.