Gladstone Land Corporation (NASDAQ:LAND) Q3 2021 Earnings Conference Call November 10, 2021 8:30 AM ET Company Participants David Gladstone - Chief Executive Officer and President Erich Hellmold - Deputy General Counsel Lewis Parrish - Chief Financial Officer Conference Call Participants Rob Stevenson - Janney Montgomery Scott Eddie Reilly - EF Hutton Eric Borden - Berenberg Capital James Villard - Ladenburg Thalmann Operator Greetings and welcome to Gladstone Land Third Quarter Earnings Call. At this time ...

PART I FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20%28Unaudited%29%3A) This section presents Gladstone Land Corporation's unaudited condensed consolidated financial statements for periods ending September 30, 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20September%2030%2C%202021%2C%20and%20December%2031%2C%202020) Total assets increased to $1.26 billion by September 30, 2021, driven by real estate growth, with liabilities and equity also rising Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total real estate, net** | $1,156,928 | $1,046,203 | | **Cash and cash equivalents** | $66,491 | $9,218 | | **TOTAL ASSETS** | **$1,261,836** | **$1,067,289** | | **Notes and bonds payable, net** | $645,967 | $623,961 | | **Total liabilities** | $736,389 | $683,499 | | **Total equity** | $525,447 | $383,790 | | **TOTAL LIABILITIES AND EQUITY** | **$1,261,836** | **$1,067,289** | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202021%20and%202020) Q3 2021 operating revenues increased to $19.6 million, with net income slightly down and net loss attributable to common stockholders widening Statement of Operations Highlights (in thousands, except per-share data) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total operating revenues** | $19,591 | $13,989 | $52,518 | $41,907 | | **Total operating expenses** | $11,207 | $6,858 | $30,609 | $21,395 | | **Net income** | $1,503 | $1,581 | $1,526 | $4,864 | | **Net loss attributable to common stockholders** | $(1,639) | $(837) | $(7,319) | $(1,981) | | **Loss per common share (Basic and diluted)** | $(0.05) | $(0.04) | $(0.25) | $(0.09) | [Condensed Consolidated Statements of Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202021%20and%202020) Total equity increased to $525.4 million by September 30, 2021, driven by common and preferred stock issuances, partially offset by distributions - Total stockholders' equity increased from **$479.3 million** at June 30, 2021, to **$523.3 million** at September 30, 2021[26](index=26&type=chunk) - For the nine months ended September 30, 2021, net proceeds from the issuance of Series C Preferred Stock were **$34.6 million**, and net proceeds from common stock issuance were **$122.1 million**[29](index=29&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20nine%20months%20ended%20September%2030%2C%202021%20and%202020) Operating cash flow increased, investing activities used more cash, and financing activities surged, leading to a net increase in cash Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $20,356 | $11,593 | | **Net cash used in investing activities** | $(149,501) | $(75,620) | | **Net cash provided by financing activities** | $186,418 | $56,794 | | **Net increase (decrease) in cash** | $57,273 | $(7,233) | | **Cash at end of period** | $66,491 | $6,455 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details the company's accounting policies and financial results, including real estate, debt, equity, and related-party transactions [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operations, liquidity, and capital resources, covering portfolio growth, leasing, and non-GAAP measures [Overview](index=32&type=section&id=Overview) The company, an agricultural REIT, owns 160 diversified farms across 14 states, totaling 108,301 acres, leased to 82 tenants - As of the report date, the company owns **160 farms** comprised of **108,301 acres** in **14 states**, leased to **82 different, unrelated third-party tenants**[135](index=135&type=chunk)[136](index=136&type=chunk) Geographic Diversity by Lease Revenue (Nine Months Ended Sep 30, 2021) | State | % of Total Lease Revenue | | :--- | :--- | | California | 64.1% | | Florida | 19.4% | | Colorado | 3.8% | | Washington | 3.4% | | Arizona | 2.8% | | Other | 6.5% | - Most leases are **triple-net** with terms of **3-10 years** for row crops and **7-15 years** for permanent crops; **40 farms** include a variable rent component (participation rents)[139](index=139&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Q3 2021 operating revenue increased 40.0% to $19.6 million due to acquisitions, while operating expenses grew 63.4% to $11.2 million Comparison of Operating Results (in thousands) | Metric | Q3 2021 | Q3 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total operating revenues** | $19,591 | $13,989 | $5,602 | 40.0% | | **Total operating expenses** | $11,207 | $6,858 | $4,349 | 63.4% | | **Operating income** | $8,384 | $7,131 | $1,253 | 17.6% | Lease Revenue Breakdown (in thousands) | Revenue Source | YTD 2021 | YTD 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Same-property basis** | $38,500 | $40,658 | $(2,158) | (5.3)% | | **Properties acquired** | $13,952 | $808 | $13,144 | 1,626.7% | | **Total Lease revenues** | $52,518 | $41,907 | $10,611 | 25.3% | - The base management fee paid to the Adviser **increased** due to asset growth and a fee rate increase from **0.50% to 0.60%** of Gross Tangible Real Estate, effective July 1, 2021[182](index=182&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) Available liquidity is approximately $135.7 million, with capital used for distributions, operations, debt service, and acquisitions, funded by equity and debt - Current available liquidity is approximately **$135.7 million**, consisting of **$85.7 million** in cash and about **$50.0 million** of availability under the MetLife facility[191](index=191&type=chunk) - The company has **several properties under signed purchase agreements or non-binding letters of intent** and expects to consummate them in the coming months[192](index=192&type=chunk) Net Cash Flow Changes (in thousands) | Activity | YTD 2021 | YTD 2020 | $ Change | | :--- | :--- | :--- | :--- | | Operating activities | $20,356 | $11,593 | $8,763 | | Investing activities | $(149,501) | $(75,620) | $(73,881) | | Financing activities | $186,418 | $56,794 | $129,624 | [Non-GAAP Financial Information](index=48&type=section&id=NON-GAAP%20FINANCIAL%20INFORMATION) This section details non-GAAP metrics like FFO, CFFO, and AFFO, with Q3 2021 Diluted AFFO per share at $0.17, used to assess operational performance Non-GAAP Financial Metrics Per Share | Metric (Diluted, per share) | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | **FFO** | $0.17 | $0.15 | $0.47 | $0.50 | | **CFFO** | $0.17 | $0.15 | $0.48 | $0.51 | | **AFFO** | $0.17 | $0.14 | $0.47 | $0.50 | - Management uses **FFO, CFFO, and AFFO** to assess overall performance, make decisions on acquisitions and equity raises, and determine common stock distributions[205](index=205&type=chunk) [Net Asset Value](index=51&type=section&id=Net%20Asset%20Value) The estimated Net Asset Value (NAV) per common share increased to $13.80 as of September 30, 2021, driven by equity issuances and farmland appreciation Estimated NAV per Common Share Calculation (as of Sep 30, 2021) | Item | Amount (in thousands) | | :--- | :--- | | Total equity per balance sheet | $525,447 | | Net fair value adjustment for real estate | $136,049 | | Net fair value adjustment for long-term debt | $2,230 | | **Estimated NAV** | **$663,726** | | Less: Fair value of preferred stock | $(218,681) | | **NAV available to common stockholders** | **$445,045** | | Total common shares and OP Units outstanding | 32,248,767 | | **Estimated NAV per common share** | **$13.80** | NAV per Share Roll-Forward (Q3 2021) | Description | Per Share Amount | | :--- | :--- | | **NAV at June 30, 2021** | **$13.16** | | Net loss attributable to common stockholders | $(0.05) | | Net change in valuations | $0.33 | | Distributions on common stock | $(0.14) | | Net accretive effect of equity issuances | $0.50 | | **NAV at September 30, 2021** | **$13.80** | [Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable as the company qualifies as a smaller reporting company - This section is **not applicable** to smaller reporting companies[223](index=223&type=chunk) [Controls and Procedures](index=55&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control - Management concluded that disclosure controls and procedures were **effective** as of September 30, 2021[224](index=224&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter that **materially affected**, or are reasonably likely to materially affect, internal controls[225](index=225&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=56&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor is it aware of any threatened material legal proceedings - The company is **not currently subject to any material legal proceedings**[227](index=227&type=chunk) [Risk Factors](index=56&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 - There have been **no material changes** to the risk factors from those previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[228](index=228&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities and no issuer purchases of equity securities during the period - There were **no unregistered sales** of equity securities or **no issuer purchases** of equity securities[229](index=229&type=chunk) [Defaults Upon Senior Securities](index=56&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable [Mine Safety Disclosures](index=56&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable [Other Information](index=56&type=section&id=ITEM%205.%20Other%20Information) The company reported no other information for this item [Exhibits](index=57&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the report, including articles of incorporation, material agreements, and CEO/CFO certifications - Key exhibits filed include the **Fifth Amended and Restated Investment Advisory Agreement (Exhibit 10.1)**, **CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2)**, and the **Estimated Value Methodology for Series C Preferred Stock (Exhibit 99.1)**[231](index=231&type=chunk)

Financial Data and Key Metrics Changes - Total assets increased by approximately $67 million due to new acquisitions, with no new borrowings incurred during the quarter [20] - Net loss for the second quarter was about $531,000, with a net loss to common shareholders of $3.5 million or $11.07 per common share [21] - Adjusted FFO for the second quarter was approximately $3.7 million compared to about $4.7 million in the first quarter, with AFFO per share decreasing from $17.04 to $12.06 [21] Business Line Data and Key Metrics Changes - Fixed base cash rents increased by about $830,000 or 5% quarter-over-quarter, primarily driven by additional revenues from recent acquisitions [22] - The overall initial net cash yield on new investments was about 5.1%, with lease renewals expected to result in an operating income increase of about $168,000, approximately 10% over prior leases [10][11] Market Data and Key Metrics Changes - The company currently owns 105,000 acres of farmland valued at about $1.3 billion, with farms located in 14 different states and leased to 79 different tenants [8] - The demand for products grown on the farms remains high, particularly for berries, vegetables, and nuts, which contribute to a stable revenue stream [9][30] Company Strategy and Development Direction - The company plans to continue acquiring farmland and has a pipeline of properties under signed PSAs totaling over $100 million, aiming for $250 million to $300 million in acquisitions for the year [51] - The focus on organic and non-GMO crops aligns with market trends towards healthier food options, with 40% of fresh produce acreage being organic or transitioning to organic [30][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of income from farms, with only three leases scheduled to expire over the next six months, representing about 2% of total annualized lease revenue [12] - The company is actively monitoring the impact of drought conditions in the Western U.S. but reported that all farms currently have sufficient water resources [12][14] Other Important Information - The company raised its common dividend to $4.51 per share per month, marking a 50.3% increase in monthly distributions over the past 26 quarters [27] - The company is working on developing formal ESG policies and expects to meet new board diversity standards set by NASDAQ [17] Q&A Session Summary Question: How significant are any of the participating rents likely to be this year? - Management indicated that indications will be clearer in the third quarter, with more definitive numbers expected in the fourth quarter and first quarter of the following year [38] Question: Where have the biggest increases in NAV occurred over the past year? - California has seen the most significant increases, followed by Oregon and Florida, while Washington and Arizona are experiencing slower appreciation [42][44] Question: Can you provide additional color on the current acquisition pipeline? - The company has completed about $85 million in acquisitions so far and is on pace to surpass the previous year's target, with several properties under signed PSAs [51] Question: What are the potential tax implications with the loss of the 1031 exchange? - Management is promoting the up-REIT structure to farmers, but adoption has been slow due to conservative attitudes within the farming community [56][58] Question: Can you elaborate on the water rights purchased? - The company acquired actual water rather than rights, with valuation tied to market indices, and any decrease in value would be treated similarly to real estate impairments [62][63]

PART I FINANCIAL INFORMATION This section details the unaudited financial statements and management's discussion for Gladstone Land Corporation's performance as of June 30, 2021 [Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20Financial%20Statements%20(Unaudited)) This section provides the unaudited condensed consolidated financial statements and related notes for the period ended June 30, 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a significant increase in total assets to $1.20 billion as of June 30, 2021, from $1.07 billion at year-end 2020, driven by real estate acquisitions Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$1,201,634** | **$1,067,289** | | Total real estate, net | $1,104,964 | $1,046,203 | | Cash and cash equivalents | $66,789 | $9,218 | | **Total Liabilities** | **$720,320** | **$683,499** | | Notes and bonds payable, net | $627,408 | $623,961 | | **Total Equity** | **$481,314** | **$383,790** | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For the second quarter of 2021, the company reported a net loss attributable to common stockholders of $3.5 million, an increase from a $2.1 million loss in Q2 2020 Key Operating Results (in thousands, except per-share data) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $16,893 | $12,638 | $32,927 | $27,918 | | Total operating expenses | $9,495 | $6,454 | $19,402 | $14,537 | | Net (Loss) Income | ($531) | $182 | $23 | $3,283 | | Net Loss Attributable to Common Stockholders | ($3,469) | ($2,078) | ($5,679) | ($1,144) | | Loss Per Common Share (Basic and diluted) | ($0.12) | ($0.10) | ($0.20) | ($0.05) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2021, net cash from operating activities increased to $17.0 million, while investing activities used $85.0 million, and financing activities provided $125.6 million Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,965 | $9,937 | | Net cash used in investing activities | ($84,950) | ($35,100) | | Net cash provided by financing activities | $125,556 | $36,254 | | **Net increase in cash and cash equivalents** | **$57,571** | **$11,091** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details significant accounting policies, real estate acquisitions, financing activities, and subsequent events impacting the financial statements - During the six months ended June 30, 2021, the company acquired **16 new farms** for a total purchase price of approximately **$85.3 million**[53](index=53&type=chunk)[54](index=54&type=chunk) - In January 2021, the company issued 2,415,000 shares of 5.00% Series D Cumulative Term Preferred Stock for gross proceeds of approximately **$60.4 million**[82](index=82&type=chunk) In February 2021, it redeemed all outstanding shares of its 6.375% Series A Cumulative Term Preferred Stock for approximately **$28.8 million**[83](index=83&type=chunk) - The company sold **4,259,045 shares of common stock** under its At-the-Market (ATM) program during the first six months of 2021, raising net proceeds of **$85.5 million**[109](index=109&type=chunk)[110](index=110&type=chunk) - Subsequent to quarter-end, on July 13, 2021, the company amended its advisory agreement, increasing the base management fee from an annual rate of **0.50% to 0.60%** of Gross Tangible Real Estate, effective for the quarter ending September 30, 2021[124](index=124&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=31&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, liquidity, and non-GAAP metrics, including portfolio details and key performance indicators [Overview and Portfolio](index=31&type=section&id=Overview%20and%20Portfolio) The company is an agricultural REIT owning 153 farms totaling 105,282 acres across 14 states, leased to 79 different tenants growing over 55 crop types - As of June 30, 2021, the company owned **153 farms** comprised of **105,282 acres** in 14 states, leased to 79 different, unrelated third-party tenants[131](index=131&type=chunk)[132](index=132&type=chunk) Geographic Concentration of Lease Revenue (Six Months Ended June 30, 2021) | State | % of Total Lease Revenue | | :--- | :--- | | California | 62.6% | | Florida | 20.5% | | Colorado | 4.2% | | Washington | 3.6% | | Arizona | 2.9% | | Other | 6.2% | [Results of Operations](index=36&type=section&id=Results%20of%20Operations) For Q2 2021, operating revenues increased 33.7% to $16.9 million, while operating expenses rose 47.1% to $9.5 million, resulting in a 19.6% increase in operating income to $7.4 million Operating Results Comparison (in thousands) | Metric | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Total operating revenues | $16,893 | $12,638 | 33.7% | | Total operating expenses | $9,495 | $6,454 | 47.1% | | **Operating income** | **$7,398** | **$6,184** | **19.6%** | - The increase in lease revenue from properties acquired was the primary driver of revenue growth, contributing **$4.4 million** in Q2 2021 compared to just **$87,000** in Q2 2020[166](index=166&type=chunk)[168](index=168&type=chunk) - Depreciation and amortization expense increased by **63.5%** in Q2 2021 year-over-year, mainly due to new farms acquired since March 31, 2020[169](index=169&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company reports strong liquidity with approximately $131.3 million available, comprising $84.3 million in cash and $47.0 million in available credit, primarily used for property acquisitions - As of the reporting date, the company had approximately **$131.3 million** in available liquidity, consisting of **$84.3 million** in cash and **$47.0 million** of availability under its credit facilities[185](index=185&type=chunk) - The increase in cash from financing activities was primarily due to a **$70.2 million** increase in net proceeds from equity issuances and **$31.6 million** in net proceeds from the issuance of Series D Term Preferred Stock after redeeming the Series A Term Preferred Stock[192](index=192&type=chunk) [Non-GAAP Financial Information](index=45&type=section&id=NON-GAAP%20FINANCIAL%20INFORMATION) The company provides non-GAAP metrics including FFO, CFFO, and AFFO, with Diluted AFFO per share at $0.13 for Q2 2021 and an estimated Net Asset Value (NAV) per common share of $13.16 Non-GAAP Performance Metrics (per share) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Diluted FFO | $0.13 | $0.11 | $0.30 | $0.36 | | Diluted CFFO | $0.13 | $0.11 | $0.31 | $0.36 | | Diluted AFFO | $0.13 | $0.10 | $0.30 | $0.35 | - The company estimated its Net Asset Value (NAV) per common share to be **$13.16** as of June 30, 2021[212](index=212&type=chunk) This is reconciled from total equity of **$481.3 million** by adjusting for the fair value of real estate and long-term debt[214](index=214&type=chunk) - The estimated NAV per share increased from **$12.69** at March 31, 2021, to **$13.16** at June 30, 2021, primarily driven by the accretive effect of equity issuances (**$+0.70**) and net appreciation in the farmland portfolio (**$+0.20**), offset by distributions and other factors[215](index=215&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable as the company qualifies as a smaller reporting company - This section is not applicable as Gladstone Land Corporation is a smaller reporting company[216](index=216&type=chunk) [Controls and Procedures](index=51&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of June 30, 2021[217](index=217&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[218](index=218&type=chunk) PART II OTHER INFORMATION This section provides other information including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=52&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor is it aware of any threatened material legal proceedings - The company reports no material legal proceedings as of the filing date[220](index=220&type=chunk) [Risk Factors](index=52&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to risk factors from the previously filed Form 10-K are reported[221](index=221&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no sales of unregistered securities and no issuer purchases of its equity securities during the period - There were no unregistered sales of equity securities or issuer purchases of equity securities during the quarter[222](index=222&type=chunk) [Exhibits](index=53&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications, key agreements, and XBRL data files - Key exhibits filed include the Fifth Amended and Restated Investment Advisory Agreement, dated July 13, 2021, and various purchase and sale agreements for the Lerdo Highway property in California[224](index=224&type=chunk)

Financial Data and Key Metrics Changes - The company reported a net income of approximately $554,000 and a net loss to common shareholders of $2.2 million or $0.082 per common share for the first quarter [20] - Adjusted FFO for the first quarter was approximately $4.7 million, an increase of about 31% compared to $3.6 million in the fourth quarter of 2020 [20] - AFFO per share increased to $0.174 in the first quarter from $0.147 in the previous quarter, representing an 18% increase [20] Business Line Data and Key Metrics Changes - Fixed base cash rents increased by about $2 million or 15% quarter-over-quarter, primarily driven by additional revenue from recent acquisitions [21] - Participation rents decreased by approximately $1.2 million compared to the prior quarter [21] - The company executed new leases or extended existing leases on four properties located in California, Colorado, Florida, and Michigan [14] Market Data and Key Metrics Changes - The company owns about 104,000 acres of farmland, valued at over $1.2 billion, with farms located in 13 different states and 27 different growing regions [9] - Demand for products grown on the farms, such as berries and vegetables, remains high, particularly in grocery stores [12] - The company expects new leases on farms to be equal to or slightly higher than current rates [14] Company Strategy and Development Direction - The company continues to focus on acquiring farmland and growing fresh produce, which aligns with market trends towards healthy eating [29] - The company is actively working on developing formal policies related to environmental social governance (ESG) [15] - The establishment of Gladstone Acquisition as a SPAC aims to capitalize on opportunities to buy both land and operating businesses [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the acquisition pipeline, with about $150 million in potential deals being evaluated [41] - The company is navigating uncertainties related to potential tax changes that could impact farm sales [42] - Management noted that farmland continues to perform well compared to other asset classes, with stable demand for prime farmland [34] Other Important Information - The company raised its common dividend to $0.045 per share per month, marking a total increase of over 50% in monthly common distributions over the past 25 quarters [27] - The company has over $100 million in liquidity and about $40 million in unpledged properties [26] - The company recorded about $2.4 million in participation rents in each of the past two years, with expectations for a sizable increase in 2021 [15] Q&A Session Summary Question: Current pipeline and acquisition guidance - Management indicated that about $150 million in deals are being evaluated, with half to two-thirds under signed PSAs [41] Question: Impact of potential tax changes on OP Units - Management noted that the uncertainty around tax changes is affecting decision-making for potential sellers [44] Question: Pricing trends and competition - Management stated that while there are buyers for farms, competition is limited due to the company's established presence and relationships with farmers [46] Question: Appraisal value changes by geography - Recent appraisals showed value increases in areas like Salinas and Florida, while the Midwest remained relatively flat [51] Question: Status of Gladstone Acquisition investments - Management confirmed that no investments have been made yet as they await the first tranche of SPAC funding [53] Question: Source of other income in Q1 - The $2.2 million of other income was attributed to interest patronage from Farm Credit loans, expected to be recurring annually [56]

Financial Data and Key Metrics Changes - For the fourth quarter, the company reported a net income of approximately $91,000 and a net loss to common shareholders of $2.4 million, equating to $0.10 per common share [23] - The annual adjusted FFO for 2020 was about $14.3 million, a 27% increase from $11.3 million in 2019, with AFFO per share rising to $0.641 from $0.568, a 13% increase [24] - The payout ratio using AFFO was about 84% in 2020 compared to 94% in 2019, indicating improved cash flow management [24] Business Line Data and Key Metrics Changes - Rental income increased by approximately $1.1 million or 8% quarter-over-quarter and by about $12.3 million or 31% year-over-year, primarily due to additional revenues from recent acquisitions [24] - Participation rents for 2020 totaled about $2.4 million, slightly up from $2.3 million in 2019, with expectations for further increases in 2021 [25] Market Data and Key Metrics Changes - The company owns approximately 101,000 acres across 137 farms, valued at about $1.2 billion, marking a significant milestone in farmland ownership [12] - The majority of crops grown are sold to grocery stores, which has insulated the company from downturns affecting restaurants and schools [12] Company Strategy and Development Direction - The company is focused on acquiring farmland that grows healthy food products, with 85% of total crop revenues coming from produce and nuts [34] - The strategy includes a strong emphasis on organic farming, with about 40% of fresh produce acreage being organic or transitioning to organic [35] - The company is also exploring opportunities through a new SPAC, Gladstone Acquisition, to acquire operating assets of farms, which aligns with its growth strategy [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand for agricultural products, particularly fresh produce, which has remained strong during the pandemic [12] - The company anticipates continued growth in the organic sector and views farmland as a hedge against inflation, given its historical performance compared to other asset classes [35][38] - Management does not expect significant lease terminations in 2021, indicating stability in the agricultural sector [62] Other Important Information - The company raised its monthly dividend to $0.04495 per share, marking the 21st increase in 24 quarters, reflecting a commitment to returning value to shareholders [30] - The loan-to-value ratio for total farmland holdings was about 53% as of December 31, indicating a conservative leverage position [28] Q&A Session Summary Question: Current pipeline and deal flow for 2021 - Management indicated a strong pipeline with about $250 million worth of potential acquisitions, expecting to close on approximately 80% of that [33][45] Question: Funding acquisitions and stock performance - Management plans to blend funding sources, including preferred stock sales and ATM programs for common stock, without major common stock offerings anticipated [51] Question: Competition in the acquisition market - Management noted no new significant competitors entering the market, with the same group of institutional investors remaining active [60] Question: Expectations for lease terminations in 2021 - Management does not foresee large lease terminations, citing the agricultural sector's resilience during economic downturns [62]

Company Overview - The company owns 137 farms comprising 101,079 acres across 13 states in the U.S.[16] - The company has diversified its crop portfolio, now including permanent crops such as almonds, blueberries, and wine grapes, in addition to annual row crops[16] - The company operates under an Umbrella Partnership Real Estate Investment Trust (UPREIT) structure, controlling 100.0% of the common units of limited partnership interest in the Operating Partnership[16] - The company’s shares of common stock began trading on the Nasdaq Global Market under the symbol "LAND" on January 29, 2013[16] - The company has issued 6.00% Series B and Series C Cumulative Redeemable Preferred Stock, and a newly-designated 5.00% Series D Cumulative Term Preferred Stock[16] - The company is externally managed by Gladstone Management Corporation, with administrative services provided by Gladstone Administration, LLC[16] Investment Strategy - The investment strategy focuses on acquiring triple-net-leased farmland and farm-related properties, with plans to expand geographically across the U.S.[18] - The company anticipates future acquisitions of farmland that grows commodity crops on a selective basis[16] - The company plans to continue expanding its crop varieties, focusing on fresh produce and certain permanent crops[18] - The company may also acquire commercial properties that support agricultural communities, enhancing its portfolio[17] - The company aims to maximize stockholder returns through monthly cash distributions, land appreciation, and capital gains from property sales[17] Financial Management and Risks - The company faces risks related to tenant defaults and the potential inability to pay rent, impacting cash distributions to stockholders[12] - The company is subject to various risks including adverse weather, economic changes, and regulatory developments affecting its concentrated real estate portfolio[12] - The company’s cash flow is exposed to risks related to declining crop prices and lower-than-average crop production due to its participation rent component[12] - The company intends to use leverage by borrowing against properties to maximize investment opportunities[18] - The company employs a leveraged strategy to maximize returns, with no limitations on borrowing against single investment properties or overall borrowing levels[26] Tenant and Lease Management - The company’s farmland investments are primarily leased to independent farming operations, which may have limited financial resources[12] - The company evaluates tenant creditworthiness based on experience, financial strength, and adherence to quality standards[24] - Rental income is primarily generated through triple-net leases, with terms ranging from 3 to 10 years for annual row crops and 7 to 15 years for permanent crops[21] - The majority of leases are structured as triple-net leases, with original terms ranging from 3 to 10 years for annual row crops and 7 to 15 years for permanent crops[21] - The company monitors tenant credit quality through periodic site visits and has not identified any changes in credit quality to date[25] Geographic Expansion - The company currently owns properties in 13 states and intends to acquire more farmland in regions like the Pacific Northwest and Mid-Atlantic[18] - The company currently owns properties in 13 different states across the U.S. and plans to expand its geographic focus to other areas in the Southeast, Pacific Northwest, Midwest, and Mid-Atlantic[25] Operational Structure - The company does not currently have any employees and relies on the Adviser and Administrator for necessary services[37] - As of December 31, 2020, the Adviser and Administrator collectively had 67 full-time employees, with 36 in investment management and due diligence[38] - The company anticipates that the number of employees from the Adviser and Administrator dedicated to its matters will increase as more investments are acquired[37] Compliance and Regulations - The company is subject to various environmental laws and regulations, which could impose significant liabilities and affect its operations[41] - The company expects that compliance with various laws and regulations will not materially affect capital expenditures or results of operations for the year ending December 31, 2021[41] - The company has adopted a policy to minimize conflicts of interest, requiring independent director approval for transactions involving officers or directors[28] COVID-19 Impact - The company granted short-term rent extensions to two tenants due to COVID-19, totaling approximately $340,000 in semi-annual rental payments[40] - The company has not received further requests for rent relief from tenants since the initial COVID-19 impact, indicating a potential stabilization in rental income[40] - During 2020, the company granted short-term rent extensions to two tenants totaling approximately $340,000 due to COVID-19 related delays[40] Competition - The company faces competition from various entities, including agricultural investment firms and other agricultural REITs, which may impact its market position[39]

Gladstone Land Corp (NASDAQ:LAND) Q3 2020 Earnings Conference Call November 5, 2020 8:30 AM ET Company Participants David Gladstone - Chief Executive Officer Michael LiCalsi - General Counsel & Secretary Lewis Parrish - Chief Financial Officer & Assistant Treasurer Conference Call Participants Craig Kucera - Wunderlich Securities Operator Greetings and welcome to the Gladstone Land Corporation Earnings Call for the Quarter ended September 30, 2020. At this time, all participants are in a listen-only mode. A ...

Financial Performance - Total operating revenues increased by 54.1% to $41,907,000 for the nine months ended September 30, 2020, compared to $27,203,000 for the same period in 2019[152]. - Net income attributable to the Company surged by 505.3% to $4,812,000 for the nine months ended September 30, 2020, from $795,000 in the prior year[152]. - Operating income increased by 60.5% to $20,512,000 for the nine months ended September 30, 2020, compared to $12,782,000 in 2019[152]. - For the three months ended September 30, 2020, total operating revenues increased by 27.0% to $13,989 million from $11,012 million in the same period of 2019[150]. - Net income for the three months ended September 30, 2020, was $1,581,000, compared to $523,000 for the same period in 2019, representing a significant increase[188]. Lease and Rental Income - Total annualized straight-line rent for existing leases as of September 30, 2020, was $41.9 million, an increase from $27.2 million in the same period of 2019, representing a 54% growth[50]. - The company reported lease revenues of $13,989,000 for the three months ended September 30, 2020, compared to $11,012,000 for the same period in 2019, representing a year-over-year increase of approximately 26.9%[105]. - Fixed lease payments rose by 42.7% to $37,450,000 for the nine months ended September 30, 2020, from $26,236,000 in the prior year[152]. - The company granted rent extensions totaling approximately $343,000 to two tenants due to COVID-19, which were fully collected post-September 30, 2020[115]. - The company anticipates rental payments to continue being paid on time for the foreseeable future, despite potential future rent relief requests[121]. Borrowings and Debt Management - As of September 30, 2020, the company had total borrowings of $503.5 million, up from $481.9 million as of December 31, 2019, reflecting a 4.4% increase[54]. - The weighted-average interest rate on borrowings was 4.03% for the nine months ended September 30, 2020, compared to 3.99% for the same period in 2019[55]. - The company has adequate liquidity to cover near-term debt obligations and operating expenses[121]. - The company issued a New MetLife Term Note with an aggregate commitment of $75 million, maturing on January 5, 2030, with an undrawn commitment of $75 million as of the reporting date[57]. - Scheduled principal payments for the aggregate notes and bonds payable total $495.1 million as of September 30, 2020, with $15.4 million due in the remaining three months of 2020[63]. Equity and Stock Performance - The estimated net asset value (NAV) per common share as of September 30, 2020, is $11.97, up from $11.06 as of June 30, 2020, reflecting an increase of approximately 8.2%[196]. - The closing price of common stock on September 30, 2020, was $15.02 per share, indicating a premium over the estimated NAV per common share[199]. - The company issued approximately $30.148 million in Series B Preferred Stock and $15.525 million in Series C Preferred Stock since January 1, 2020[180]. - The Series B Preferred Stock began trading on Nasdaq under the ticker symbol "LANDO" on October 19, 2020[112]. - The company filed a universal registration statement allowing for the issuance of up to $1.0 billion in securities, with total gross proceeds of approximately $9.2 million from common stock issued under this statement by September 30, 2020[94]. Operational Highlights - The company expanded its portfolio from 12 farms leased to 7 tenants at IPO to 127 farms leased to 75 tenants, growing over 50 different types of crops[122]. - The company currently owns 127 farms comprising 93,999 acres across 13 states in the U.S.[119]. - The company acquired 12 farms since July 1, 2020, with a total purchase price of $74.772 million and annualized straight-line rent of $3.970 million[129]. - The company has several properties under signed purchase agreements and is actively seeking additional acquisitions despite the COVID-19 pandemic[171]. - The company plans to complete capital improvements on various farms, with obligations extending through Q3 2024 and Q2 2025 for several locations[86]. Fees and Expenses - Total fees to the Adviser for the three months ended September 30, 2020, amounted to $1.899 million, compared to $862,000 for the same period in 2019[83]. - The base management fee under the 2020 Advisory Agreement is calculated at an annual rate of 0.50% of the prior calendar quarter's Gross Tangible Real Estate[72]. - Total operating expenses, net of credits, increased by 23.0% to $6.858 million from $5.575 million in the same period of 2019[150]. - Interest expense for the three months ended September 30, 2020, was $5.202 million, an increase of 18.2% from $4.401 million in the same period of 2019[150]. - General and administrative expenses decreased for the three months ended September 30, 2020, primarily due to lower professional fees[167]. Market and Economic Conditions - The ongoing COVID-19 pandemic is expected to impact the company's operations and financial condition, with potential effects on rental rates and farmland values[120]. - The geographic diversity of the portfolio mitigates exposure to economic issues in any single market[124]. - The farmland portfolio's value is expected to remain stable, with no anticipated credit freeze in agricultural lending[121]. - The company has not received additional requests for rent relief from tenants due to COVID-19, and expects rental payments to continue being made on time[173]. - The company expects rental rates on upcoming lease renewals to remain relatively flat compared to existing leases[128].