Gladstone Land Corporation Q3 FY2024 earnings call

• Owns 112,000 acres, 168 farms, and 54,000 acre-feet of water assets in CA. Farms in 15 states, 29 growing areas, leased to over 90 tenants growing 60+ crops.
• In Q3, executed 21 new/amended leases in 8 states; annual row crop renewals increased net operating income by ~$309,000 (11%). Permanent crop renewals involved adjusting lease structures, reducing base rents and increasing participation rents, with some farms potentially sold if not farmed correctly.
• Sold 11 blueberry farms in Michigan for ~$5 million; remaining tenancy issues include 1 vacant farm, 1 direct operated via management agreement, and leases in 2 tenants with 5 farms. Year-over-year impact on operating results from tenancy issues was a decrease in net operating income of ~$638,000.
• Financially, repaid ~$13M of loans, raised ~$80,000 from Series E preferred stock and ~$4.5M from common stock ATM, repurchased 176,045 shares of preferred stock at ~$3.7M cost. Net income was $6,000, net loss to common shareholders was $5.8M ($0.16 per share). NAV per common share decreased to $15.57 from $17.59 due to permanent crop revaluations and fair value changes of debt/securities.
• Liquidity: Over $160M in liquidity, ~$20M cash on hand, ~$160M unpledged properties; 99.9% borrowings at fixed rates (3.4% weighted average) with minimal impact from interest rates.

Gladstone Land Corporation owns approximately 112,000 acres of land with 168 farms in 15 states across 29 growing areas and 54,000 acre-feet of water assets in California, valued at ~$1.5 billion total. Annual row crops make up about half the portfolio, with permanent crops being the other half. For the third quarter, adjusted FFO was approximately $4.5 million or $0.13 per share, compared to $5.4 million or $0.15 per share in the prior quarter. Fixed base cash rents decreased year-over-year due to lost revenue from a sold farm, vacancies, lease incentives, and rent paid in water, partially offset by a $1.1 million increase in participation rents driven by stronger production at pistachio farms.

• Seven leases expiring over next 6 months (2.5% of lease revenue) are being discussed for renewal, sale, or operation. Expect a total year-over-year swing in fixed base rents of ~$20M, with $3.5M-$4.5M per quarter reduction in fixed base rents from Q4 2024 and participation rents recognized in second half of 2025 and 2026.
• Held dividend flat at $4.67 per share per month for Q4; will reassess as more info on 2025 crop shares is known. Hopes for lower interest rates in near future to resume acquisitions as cost of capital remains high currently.

• Lease expirations: 7 leases expiring in next 6 months (2.5% of revenue); 17 leases expiring in 2025 (20% of revenue) with uncertainty around renewal.
• Potential sale of farms: Some farms may be sold if not farmed correctly, impacting income.
• Crop price fluctuations: Permanent crop prices (nuts, wine grapes) have been depressed, affecting farm values; while pistachio and almond pricing trends are improving, full impact not yet known.
• Interest rate risks:虽99.9% borrowings at fixed rates, upcoming debt maturities and potential refinancing needs.
• Collectability of rents: Concerns about rent collectability from certain tenants with tenancy issues on 5 farms.

Q: Gaurav Mehta asked about lease expirations in 2025 and breakdown by permanent vs annual crops.

A: Lewis Parrish said 2025 has 17 leases expiring (20% of revenue), approximately 60% are annual row crop and 40% permanent crop leases.

Q: Rob Stevenson inquired about the 11 Blueberry Farms and other sales, and NAV decline.

A: Lewis Parrish confirmed the 11 Blueberry Farms were part of vacant/direct operated/non-accrual, another farm sale is leased through mid-next year. NAV decline was mostly due to permanent crops, with row crops remaining stable.

Q: Craig Kucera asked about participation rent strength and crop types.

A: Lewis Parrish said strength came from pistachios, but final pricing components (like bonus marketing adjustments) won't be known until later.

Q: John Massocca asked about NOI impact from Michigan Blueberry Farms and California permanent crop market.

A: Lewis Parrish said the Michigan Blueberry Farms were an NOI drag (~$165,000 quarterly drag). California permanent crop market pricing is stabilizing/recovering, but land values still affected by past price drops; focus on dual-source water properties.