Earnings call transcript Q2 2023

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Operator

Greeting and welcome to the Land Corporation Second Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this content is being recorded. It is now my pleasure to introduce your host, David Gladstone, Chairman and Chief Executive Officer. Thank you, sir.

begin. may You

David Gladstone

Latanya you, nice introduction. Okay. for Thank that

Thank our us done our But Michael Gladstone, your he's appreciate appreciate have many you Gladstone and today. we time before calling for day it times and hear to Land. Counsel. for LiCalsi, I efforts. call of to taking quarterly begin, we all We presentation. from the for in You've General welcome conference you out This your the is to David to listen

So Michael.

Michael LiCalsi

Thanks, morning, statements Today's Exchange to believe may under current and notes And report the XXXX, risks reasonable. that Securities be certain performance. regarding uncertainties of our David. plans, XXXX these are everybody. which Good involve on include forward-looking our future we Securities forward-looking Act Act statements concluding of based

or XX-K may risk factors results future statements or Many result go be future to or update the of our in law. find Investors otherwise, forward-looking any as or file page, results them as factors from to our our other And including cause materially on website these on any different XX-Q, at no with the implied and information, forward-looking specifically GladstoneLand.com, all www.sec.gov. documents revise SEC’s website SEC by publicly we expressed whether statements, required by these of we undertake new the a that's obligation except actual events Forms

estate any gains from losses impairment and FFO, plus funds as non-GAAP which operations, discuss of income, term, will of and is sale amortization property, from real from net or is we the real depreciation FFO defined assets. Today losses accounting the excluding estate a

for and better certain rents. are core revenues as FFO period-over-period items, operating also cash results certain of for such expenses, better further converting comparability FFO adjusted adjusts We allow FFO, define and non-cash our to believe generally rents normalized indications performance. which we discuss our which FFO, non-recurring as GAAP may core and We of adjusted these

that’s we up could Now our to notification opportunity again e-mail GladstoneLand.com, sign take company. website, once on you to you for the there, ask the stay up-to-date visit our service

find keyword us Twitter The is @Gladstonecomps. which and on also could is You there Gladstone Facebook, Companies

results, an our you that is press find XX-Q, overview of release Form call ask detailed go Investors of yesterday both for our our today’s to to so page and we And website review information. Again, them. the more issued

Now I'll David back presentation turn the to Gladstone.

David Gladstone

at acre brief Holdings Okay, that a currently bank overview equal gallons. own thank we we XX have is different about also XX,XXX I'll it's to Farmland XXX,XXX and that you, Michael. start about foot have, water. with the farms acres. acre Remember And of of XXX,XXX feet

you for is we that water So together, for the at if of land both XX,XXX and not that lot valued acre a looked irrigation And water, feet those together, water. use times when enough found. about of both at there's we billion the X.X

in Our growing and farms different different are XX more XX importantly in states regions.

all we crops, of XXX% crops nuts. vegetables to that of XX different but mostly the tenants different whom -- ourselves, farms and on occupied include one growing we operate fruits farmers, the unrelated are over XX currently And leased are tenant and our If and types us. over are are to farm these farms

So we are these well diversified different farms. across

done have third-party discussions been operate get quarter, help the hoped of we farm management to We've group. farm. to quite this for this with time and lease with We this had didn't first the it stepped to had quarter, And one we group to new in but by during the tenant remove there. we temporarily

in third get quarter. that we'll hopefully the and now up finishing we're So done

ourselves farming direct preferred our approach. is of option but an exploring leasing property also are this We property the

work their shop. the they're in, of close In sounds payments due up that their tenants decide but to might making partly is products the like tenants one to slow supply of excess to paying to markets addition partial in us

couple a new been so with and we've farm, of lease them We lease sign have growers talking a who to lease soon. likely to we'll -- this

second ongoing. their We still was the new tenant, short up entering challenging more and a lease and from agreement lease term Collecting is terminating grower. with into a new ended

decrease So as this leasing operating to. our in going who time second about a $XXX,XXX for income us issues will the end the more result year on quarter out, total and so far. give to of up impact total $XXX,XXX operations to The farm we're year-over-year these figure this was about for net

to acquisition past couple in always mentioned farms of result for. to -- continue capital. have looking time get good our for And the we conservative to we're of the selective more and risk us. continuing As in these be on good of it's activity above we still farmers more is inflation interest a with remains Mostly target as possible. still rate, calls, slow the be farms. believe farmers We With rise, we that to the a Fed's rates recession type it's a

before Just move we on. another note

price hurt food in of cost rates yet their the not stores prices farm grocery are willing our were farms. by capital buying for owners we as are While interest to reduce farms. And of inflation, hurt by the the

farmland us. of we the portfolio issues of much with high news remains overall, those for to expected, the as tenants. high, continues exception the perform pretty So bad existing with the But too couple

a that any leases we Finally, our all any expiring that and to higher on exception incurring renew renewals later. be rate of farms, talk with downtime one mostly continue a without to of able about little I'll

a portion bright unfarmed ground the quarter, sold parcel the acre side, XXX in of Florida. this during farms was our On one of we

our sale initial recognized way, reduce won't was a and on that the lease And $X.X million rent we and farmable. So rest XXX% of the the realized own of by of we’ve the on gain a farm. farm still we recognized ground, the which By selling this since our remainder a return is non-farmable sale investment. it this

these XX net operating of renewed income in different the we beginning a farms are In replace XXX,XXX. lower of however, leases, five since annual in expected in front, the that bushes in leases leases of there the blueberry quarter, in result four these a and the we the of states. total, on were prior about to decrease From on new farms tenant leasing that renewals the to on tenant the for gave On the them some blueberry a exchange Michigan, rent back of previous bringing maintaining are farm.

hopefully leases we'll to that position better be later long-term tenant a farms So a this year. in to

net approximately over $XXX,XXX increase to remaining that the the the prior Including or income farmer, the leases. leases result in are operating of that's of X% annual Michigan nine expected one four in leases an

up X% Looking as leases in annualized as of scheduled to prospective total ahead, expire regarding in next these the new well about we We're lease. farms have discussion within and of current tenants. extensions, that eight makes tenants with each total months, on six

these we Well, relatively aren't as expecting few the from rates these rental same the continuing, as currently hikes the felt slowing be before now other rate is to we Fed’s to expect economy. move impact the results current throughout still Inflation on. is are any we being renewals it on items occur leases. interest an down some, on to downtime mention upcoming But I'd There as the explorations. like

measuring it's this the headline target levels Fed’s However, saying core X%. core And the they inflation. as are keep that latest remain level numbers be which still to and going inflation inflation above of subject is their to X%

called are our Food cooling the farms at Most still mitigate operating food XX-months inflation. prices XX. crops are our of fall that This experiencing. the continue in continue category increases of but which in by signs showing still grown stores, ending expenses was many category food for little of thus grocery help bit, X.X% sold a will down and up to have a home. the prices We should inflation, outpace into outpace farmers to to been June believe

to water the had I since related a With being you projects front been some read of we've wet in working year, lot we've farms. a down probably the XXXX headlines rain. on California, mention they for California things also acquisition of as on slowed want

We capability with improve believe water more becoming working areas projects the We within projects projects comply identified our and in several improvement state been portfolios state's groundwater restrictions, have will interested key to that about. we've portfolio. we water that the on our to various of undertake talked

-- is reduce water and opportunities supply our wet to this maximize our to have overall years, had year. we the dry way, we will term supplies, risk within this the With long years. like the on ensuring water pretty we that in look enough And few shape, current crop more at. demands a our there got good goal state us by past implement want to of allow that our strategy farms, in That'll we're water a year projects projects

River. States River, tension water. Colorado some of of water and there There's mentioned no and ocean or depleted Colorado tributaries levels the any River of on that the the in the the regarding been news in Colorado date up being Thankfully, not There's the all the water United that. generated been one-day there, taking newspapers, have properties reach our will rely its for none in

in the the at properties not that, edge that have but neat we So area. of lay

some so if the we're And headlines not see about you impacted River. Colorado

actual to I'll stop numbers. about our here. talk to over going now Parrish it operations and Lewis enough you turn the on to I'm the That's CFO, to

Lewis Parrish

going briefly any our Thank of did morning, activity. about good of incur over million not $X borrowings We I'll future. since scheduled were by pay financing the quarter, the begin beginning new the you, Dave. there during did quarter, we And everyone. loans

net and the the of sales stock million On common quarter, million Series of our we sales from of the our proceeds side $X stock Preferred raise E equity programs. beginning ATM of since through about $X from

our to on Moving results. financial

second million $X.X income we per $X.XX and the shareholders net about of common quarter, For common net $X.X to million share. of income or had

operations, the of be the comparing discussion quarter of I'll following quarter XXXX. the corresponding with For XXXX second of second

in $XX.X uninvested to The FFO in driver in sheet carry our quarter million, was top decrease share or approximately year increase compared or the $X.X prior line balance costs current $X.X million, behind an $XX.X per quarter. in per higher capital was Adjusted offset a partially for revenues. share, primary AFFO by the to incurred

as be lease which well XXXX, in by year. rate cash year decrease from rent by revenues offset component additional as new fixed earned X% over driven until fourth known revenues later And quarter result we increasing a past that participation the increase in the about quarter over was the the for we prior won't base base the increased self-operated on exchange lease. primarily acquired a reduced the farms fix year. executed partially non-accrual and of this To rents in by the in This properties, in $XXX,XXX,

full the collection properties, a recognize their to payments cash continue non-accrual deemed we until the future time will rental to of on again probable. Regarding leases be these basis that is from such revenues

David And replace the As we caught to during we tenant up are second is finalizing mentioned, us. did third the a one replace payments tenant. with rental quarter currently close to to tenant turns and the

accrual are year. the optimistic of end return that will we So of to status by the these all properties full

basis, the quarter. by increased rents, and our over On about XXXX or little the $XXX,XXX X% same property including a revenues year QX that slightly of over lease participation prior

fees, side, collection fees from was operating certain to non-recurring in remove primarily expenses related current and $XXX,XXX. portfolio increased new excluding by year. legal tenants. operating decrease partially driven year. expense non-cash about assets That Property lease year. additional $XX,XXX. increased repairs expense maintenance $XXX,XXX offset party agreements, party by quarter a or increased A by the $XX,XXX the This we that over was for year. with our fees our the On about efforts operating If driven That expenses, just additional about incurred from increased related core past certain during added core and connection last by expenses the rent by by drafting our we expenses primarily expenses in from reimbursable with by last Total

decreased In recognized XXXX shareholders first in by to previously annual $XX,XXX. quarter. That's to related addition, the G&A about being costs the meeting expenses primarily due

market money loan increase repayments income income made interest rates due year. and to over on other and to higher Finally, due decreased earned and to accounts payoffs interest the expense past additional due balances

over the ago. quarter, year Now move during on third by about revalued via a $XXX,XXX to about asset their valuations we'll value. these previous party appraisals. in had value from Overall, net We increased all slightly farms XX farms

supported by So as valued of billion third at party purchase our prices. portfolio was at all $X.X was the approximately or the XX which June either appraisals

driver is at of up common Based by $XX.XX, share including fixed fair liquidation at of our these on valuations the the June particularly XX. was debt valuation increase on C security our our Previously, updated for Series was value approach. preferred preferred from and and change waterfall stock. The securities, the value this net the rate asset our was preferred and valued value over based XX, which its value in securities, main of at debt March this $X the

valuation our as to market with listed on NASDAQ began based end, accordance listed preferred in on securities. we on policy, buying security However, publicly all the in it quarter price at do its June, being

for weighted our liquidity, to years Turning other X.X unpledged lines XX.X% borrowings $XXX are a at powder, average basis, have Over of about X.XX% these we over another are undrawn fixed availability properties. including rates. million have fixed currently our and rates out. of credit currently million and of $XXX notes, and at on we also dry And of

experienced rates. have the minimal from result, we in As impact recent interest increases a

do to loans. However, to the versus factor in play repay decision our a new also impact maturing refinance finance our increases and ability acquisitions

With protected load, are respect the hikes to we our believe foreseeable any -- against further current interest future for any we future. debt well rate

upcoming about have coming million maturities, Regarding $XX due over XX we next the months. debt

that of in since increased and maturities. various property by value a loans million And $XX total of is loan represents have million acquisitions. about collateralized the $X these respective their However,

don't current these only so. to Removing choose principal next of X% than to of any we XX loans, outstanding. coming over we less foresee refinancing payments of our the if do those any we have or million maturities, $XX months, about amortizing So problems

increase distributions, over common common that per per XXst our the time our This share we've again raised dividend XX finally, an common quarters, resulting period. raised dividend recently overall marks regarding our of $X.XXX past we to And the month. XX% over in

With back that, I'll the turn over program to David.

David Gladstone

Lewis a you, report. thank nice was Okay, that

cautious good of borrowing the mentioned, We much raising really opportunity front. as active and acquisition we're in Fed the on before is of cost price cost to itself. the But should though than farms continue more borrow really marketplace due is to a higher was This stay rates. haven't even fallen to the farms, presented being the the them kept it

any the and A finally this to that nuts crops that point in contribute few to. healthy believe farmland we fruits susceptible of be in such and you following to trend. place investing to is good that the be only because today. or you'd market demand in of the to crops. it's items vegetables lifestyle a It's seeing should We where if not were those changes some market as We're corn see corn

Overall in and the demand particularly each for located, well. United that growing berries coast. too An farms our prime in farmland performing the vegetables overall alone is remain farmland all stable, almost where the are States are strong of areas

is their them is For has our return farms the exactly NCREIF is example, to had about XX the property no than during $XX.X negative farmland of in index calculation same NCREIF over more each with billion S&P indexes, of that overall That because index theory six be for index agricultural negative the index. This worth timeframe like hope the that both past and that all XX.X% of farmland $X.X one, the period. or better and years a versus we the has which over REIT billion years, good zero does. been years

because States. in used the being we increasing development, to this to United better it's it. asset long on farmland, a fund dividend. that urban limited intrinsic investment has active parts amount So an it's in cash move company, two And Florida, that questions. California a over farms. of a there's a is asset value stock stock then in than keep dirt, and especially by other we our have term farmland many this couple in good investment. asset investors. alternative items we and bond closing, And to It's go the and gold if of flows can we you're gold gives that similar and It's purchasing in believe a where to with And unlike hard remember Please farmland it's because second, it's we're it's

particularly this to especially to to to the result. people food healthy the of as the inflation, And we produce as increase a farmland in values and be trends We expect increase, underlying expect expect the in and they continue our sector in continue that are United true fresh area, foods that favor are more the States grow in eating in to we direction.

ask Tanya Now us and to tell and I'm come how to ask going the to operator, stop questions. on

Operator

first Rob [Operator comes Our Instructions] question Stevenson Montgomery. Janney from with

Rob Stevenson

for your pricing thoughts more back Good And assets morning, on of any this the today? about is, year? on market your acquisitions half the commentary guys. contract in given farms David, robust how then selling any

David Gladstone

we nonperforming to sell. or But the the as now Rob, somebody some that could bought certainly that have, Xx goal to is in I XX problem as up continued if would farming my to go assets years are find farms Well, we'd price willing be amass price that in that They've about area. bind the ago farms the many paid. possible

So has It it's area. low a risk. downside good

don't right we now. anything under so contract have And

We have chomping the gals on to farmers. are believe something. and going at here discussions some And with guys bits buy me,

buy borrow to farm say, and going a not not X.X% me would of, a cap I'm money rate then going X.X%. at pay on that So to I'm

hurry. a in of in to to would lenders come a That's and These the interest good drop are a and that buy down. farmers for rates position their time to term position the way to in we business a direction. been us farms. do federal But not get back These buying wish are some be long I rates in have allow from

get they only so want. they're price if that going it And to they the do

of kind we're So hold. on

on lot a right effort now our We water. of are concentrating

now. water plenty As you know, have we of

of water putting However, state encouraging store that can them we in. and allowing firms the fixing our believe we to And on so farms do everyone in to or some California of us is it not, are some by go that.

the place. think I ahead in are way curve water terms of in of we putting

years, I of the enough transactions couple think of next push water having two for got today into in got in underground. water of that we've a direction enough XXXX terms we've and us would the

don't gone the water. it buy think I and that during are of different plenty back they're so talk terms there rates, have aquifers about them want new farms, to buying trying will up all happen. These some, this of to time we of to in fill cap But farmers starting down

the them, about now. of Some as you know, is farmer average XX

than of are more XX% by And in the owned United States farms the individuals.

somewhere the going some to are as that borrow way settle as ready We've up water. to about talked people and along reasonable I don't So to answered people be their as I things hope get continue and we an certainly get it's We'll the happen. quite price do more estate, to can raising older your have we'll if talking for that, equity. question. I having your think but line, that along be to we offering but long time

Rob Stevenson

Louis, revenue XX%, up And lease operating is which first helpful. REIT. where showing increase half net big like the issues Is line? ask operator up? both? line, The a were more a that Is with than the -- property is $XXX,XXX, property it operators expenses reason is which at the in why for are That's I these expense the it the

half million there color operating to wanted first the back $X is rate a if a run and the I half? get for good expense So

Lewis Parrish

both first half bit and the net revenue year, And the think operating item That's From little those is our received mentioned, expenses. other than the combination of about places. revenue. it's income a the operating I a impact in have properties up of $XXX,XXX. David showing on the year-over-year property -- we in any for cash, the recognized it's amounts not So line

amounts, we've revenue rest release are The side new most a also the alone, both with costs item up of chunk a as had is the rent to about of of think those the those line we that sign properties said, decrease fees those of big the incurred collection in kind script, operating On -- legal of expense I $XXX,XXX year-over-year. fees incurred we leases amounts. property to, legal and on and help

on -- we the Coast And our and have while two number to to primarily they breakout of dollars damage rest for couple go been vacating increase maintenance repair factors. have repairs hundred as the the on to farms were of that, I just two expense looking increased categories. rights cost from that for properties. And did has West some The for flooding. and Florida possibly damage exact protect these water One, hurricane tenants and as other of farms a prepares don't But of after those California. the bucket thousand in well the the was on to one,

Rob Stevenson

helpful. fourth. to jump jump Okay. guys revenues, in my you another and then quarter between quarter-over-quarter XX%, it, That's major call see second And then third from XX% question, third last typically and notable a

Some in have been of you in because a year. this bunch that the by done has back have acquisitions acquisitions of half the guys of started the previous years driven benefiting

the get it really acquisitions? haven't Is should going we going also to the seasonality you so How revenues sold, the sizable to be half should rents about going on of But acquisition be that? the the thinking see some in adding thinking that of cetera? be because in we not to of jump of Is that be percentage et year? about back crops How the this side. because still -- it you're of are anything year done the the less

Lewis Parrish

this will acquisition less don't job that front years just will we increase you in prior The that as us year. the aid be probably said, than because have on

years. prior of we as a the and add to a one those we base lot on is, from we I'm status. that hopeful issues full So a to back flat the rent, be will Right restore properties on now, that quarter. X than in issues fourth back accrual tenant these shore can get up -- fixed have with more you I'd everything The these caveat will, if kind in it

add increase going the a in majority is the the year bump, the participation have So rents years. slight second the prior of the half from to in they but as of will come that

participation I biggest $X trying still had factors, rents get and but think before still on gathering the to not pricing to where sure data land of we're around We're We're info of year last our $X around yield information million we're going the that, on year, yet. yield million. satiates we farms.

So that, where on early last we'll probably call. was in Last to than slightly rents, it's year should front follow too but say less good participation earnings but a we year. pretty be it'll year quarter's color next that have the more

Operator

Hutton. question next from Our EF proceed. Edwin comes with Najarian Please

Edwin Najarian

Good morning, guys.

kind You of quickly, just go real in Thanks. mentioned much preferred a how of C. just the calculation. can so the of wondering and sense in NAV within sort was change terms biggest could valuation E I BC change the the in the through the Series we if you change the the Series those of of stock get drove of each

Lewis Parrish

Sure.

listed now. been a over year has B the for So

its I at several it's price valued fixed for market income been -- that's a That So mean prices market quarters. security.

as the know C is of before was liquidation rates approach I that a it valued I'm is this, share. on that non-listed, but would its on its valued the Series it say, up, security. was probably go where So listed, to $XX of comes -- going waterfall But Series last per E The don't I value quarter but still at down. I And liquidation demand $XX from at for security so change value per go that's the is recording, Series on C of me just a the reason XX% quote share. interest to based is want

trading However, in XX. was June share per to it it at got and June, listed we $XX -- closer

valuation it policy value its on market So once price. as based we it public gets our listed, says,

So approximately that's $XXX $XXX to on to close million at at to June that got of down $XX XX. million $XX March marked XX from quarter-over-quarter a value change I guess,

Edwin Najarian

Okay.

helpful. That's Okay.

So and B, then the actually, the in very well, the really, E in change correct? the C little I vast majority no guess, from change and

David Gladstone

Correct.

Edwin Najarian

much. very Thanks terrific. Okay,

Operator

further the As questions to closing Instructions] the are in like queue, no call would [Operator I you comments. back turn there for to over

David Gladstone

much We we always are very all meetings. than these more there you thank questions. Well, asking at for get questions hope

to have quarter So questions. we'll wait your answer until to next

of that's and the again, thanks end So this.

Operator

Thank today's you. This teleconference. does conclude

and You you this your at thank great your may day. for disconnect have participation, a time, and lines

Gladstone Land (LAND) 8 Aug 232023 Q2 Earnings call transcript