Gladstone Land Corporation Q4 FY2025 earnings call

Bullet points:

• Sold 6 farms in the year, with details on specific sales like a small blueberry farm in NC with a loss and a Colorado farm with a gain. May consider selling additional farms and using proceeds to pay down debt and buy back preferred stock.
• On acquisition side, financing costs still high, hoping for lower interest rates to grow portfolio. Disciplined approach to new investments due to elevated costs.
• On leasing side, adjusted lease structures for permanent crops, directed operation of two properties with third-party operators, successful harvest of almonds and pistachios, expecting revenue from 2025 pistachio harvest in 2026, modified lease structure for 2026 crop year similar to 2025, role of crop insurance, executed 5 renewals with certain changes, 5 leases expiring in next 6 months, working on ongoing tenancy matters with 9 vacant farms.
• Bill Reiman mentioned exceeding yield objectives in 2025 harvest, renewing modified lease arrangements on top performers, winter precipitation average with strong snowpack, almond bloom status, pistachio and almond market conditions, wine grape market underperforming but some varietals showing signs, water situation with normal to wet year, working on water deals and infrastructure improvements.
• Lewis Parrish updated on financing activity, repaid a note and redeemed Series D term preferred stock, operating results details, liquidity position with $85 million available capital and $185 million unpledged properties, common distributions declared.

In the fourth quarter, net income was about $4.2 million, net loss to common shareholders was $1.8 million or $0.05 per share. Adjusted FFO for the fourth quarter was $14.4 million or $0.38 per share compared to $3.4 million or $0.09 per share in the same quarter last year. For the year, net income was $13.5 million, net loss to common shareholders was $10.5 million or $0.29 per share. Adjusted FFO for the year was $14.4 million or $0.39 per share compared to $16 million or $0.47 per share last year. Fixed base cash rents decreased, participation rents increased. Sold 6 properties in the year totaling $95 million in proceeds with an aggregate gain of about $21 million. Farms are in 14 states, water assets in California with plenty of water currently.

Bullet points:

• Hopeful that worst may be behind in acquisition front as demand for prime farmland stable and some pricing improvements seen, but still cautious due to high cost of capital.
• Expect inflation in food sector to continue higher and underlying farmland values to increase over time, especially for healthy foods like fresh fruits, veggies, and nuts.
• Anticipate higher base price for 2026 pistachio crop when announced in July, and almond prices to rebound with strong demand and light supply chain.
• Expect interest paid in first quarter to be 10%-15% less than 2025 due to loan balance decrease.

Bullet points:

• Uncertainty in crop productions, crop prices, interest rates, input costs, and water availability affecting ability to transition leases back to traditional structure.
• Ongoing tenancy issues leading to vacancies resulting in lower revenues and higher costs.
• Market uncertainties like tariff drama and trade tensions affecting nut crop markets.

Q: Revisit commentary regarding the 5 repositioned farms, how to think about leases and revenue recognition?

A: Same structure as 2025, 2025 crop had revenue in 2025 and portion carryover in 2026, 2026 will benefit from carryover and initial payment, pistachio revenue may have portion in first half and bulk in Q3/Q4, almonds have one property with crop to sell waiting for higher prices.

Q: Expectations for interest paid in first quarter?

A: 10%-15% less than 2025, reflecting loan balance decrease.

Q: Funding of Series D repayment?

A: Line of credit with $10 million outstanding at 5.69% variable rate.

Q: Lending to farmers like competitors?

A: Discussions had, but no solid plans yet, but long term keeping eye on it, current economic conditions not right for risk return profile.

Q: Remaining to be collected for pistachios in direct operated farms?

A: Expect at least $3 million, proxying prior year bonus payment with positive signs.

Q: Value and expeditiousness of vacant assets?

A: Ballpark $50 million, 3 largest close to being income-producing, taking time due to tree removal on big farms.

Q: ATM usage going forward?

A: Focus on other preferred securities, looking to buy back preferred at higher rate if spread favorable.

Q: Impact of water precipitation on strategy?

A: Plentiful supply lowers price, cost-driven strategy to buy water for future use at lower cost, grabbing Article 21 water release opportunities.