Gladstone Land Corporation Q4 FY2024 earnings call

• Own about 103,000 acres on 150 farms and over 55,000 acre feet of water assets, valued at ~$1.3 billion. Farms in 15 states and 29 growing regions, leased to over 65 tenants growing 60+ crops.
• Sold 11 blueberry farms in Michigan, 5 farms in Florida, and 2 farms in the Midwest in recent months, citing unprofitability or market shifts.
• Adjusted lease structures on some farms, eliminating base rent or providing cash allowances in exchange for increased crop share, with participation rents to be recognized in later periods.
• Renewed 12 annual row crop leases in 2024, increasing annual net operating income by ~$556,000. Three leases expiring over next six months, making up ~1.5% of total lease revenues.
• Net operating income impacted by tenant issues, with five vacant farms and one farm in direct operation, expected to be resolved by year-end.
• Core operating expenses decreased excluding certain items; related party fees decreased, property operating expenses slightly up but offset by lower general and administrative expenses.

Adjusted FFO for the fourth quarter was approximately $3.4 million or $0.09 per share, compared to $5.4 million or $0.15 per share in the prior year quarter. On an annual basis, adjusted FFO for 2024 was approximately $16.7 million, compared to $20.3 million in 2023. AFFO per share was $0.47 in 2024 versus $0.57 in 2023. Dividends declared per share were $0.56 in 2024 and $0.55 in 2023. Fixed base cash rents decreased year-over-year due to farm sales, vacancies, and lease structure changes, while participation rents increased. Net asset value per common share at December 31 was $14.91, down from $15.57 at September 30.

• Expect a total year-over-year swing in fixed base rents of about $13 million in 2025 versus 2024, moving money from fixed base rent to participation rent buckets over the next couple of years.
• Dividend declared for Q1 2025 is $4.67 per share per month, yield of 4.9%, with reassessment based on 2025 harvest results.
• Still cautious on acquisitions due to high cost of capital, expecting acquisition activity to remain slow until interest rates decrease.

• Market uncertainties in produce and nut marketplace affecting farm values and profitability.
• Crop price fluctuations, particularly for nuts and grapes, impacting property valuations.
• High interest rates affecting cost of capital and investment decisions.
• Costs associated with reappraising net asset value becoming burdensome, leading to decision to stop voluntary publication of NAV in quarterly reports.
• Tenant issues leading to vacancies and lost revenues, with potential impacts on net operating income.

Q: Clarify comments on participation and fixed base rent amendments. Is the $3 million to $3.5 million lower fixed base rent from 2024 average versus 2025 average, and when will majority of the recovered amount be recognized?

A: Yes, it's the average base rent for 2024 vs 2025. Majority of the recovered amount will be recognized in 3Q and 4Q of 2025, with remaining smaller portion in 2H 2026.

Q: Expectations around interest patronage in first quarter?

A: Should be similar percentage back but about 10% less due to paying off portion of farm credit borrowings over past year.

Q: Outlook on remaining lease expirations this year, split between permanent vs row crop?

A: Leases expiring in next six months mostly row crop (small percentage). Remaining leases in second half: ~60-70% permanent crop, half under traditional leases (expected flat or potential rent bump), half under lease incentive/high upside crop share (outcome to be seen).

Q: Anticipation of buying back preferred stock?

A: David Gladstone states it's an easy way to make money, so they anticipate continuing to buy back preferred stock.

Q: Real estate expense increase in 4Q, cause and outlook for 2025?

A: Increase related to vacant, direct-operated, non-accrual properties. Expect to come down as costs related to Michigan blueberry properties and catch-up real estate taxes decrease.

Q: NOI impact from 1Q 2025 dispositions and percentage of California portfolio in hybrid lease structure?

A: NOI impact from 1Q 2025 dispositions was ~$1-1.7 million. Five farms in hybrid structure make up ~15% of California fair value portfolio and ~6% nationwide.