Group 1 - Gladstone Land (NASDAQ: LAND) focuses on owning farmland and leasing it to third-party operators [1] - The REIT has recently shifted its leasing strategy by reducing base rent in favor of a crop sharing and profit sharing lease agreement [1] - This new approach aims to enhance revenue potential through shared profits rather than fixed rental income [1]

Financial Data and Key Metrics Changes - For Q3 2024, the company reported a net income of $6,000 and a net loss to common shareholders of $5.8 million or $0.16 per share, with adjusted FFO approximately $4.5 million or $0.13 per share, down from $5.4 million or $0.15 per share in the prior quarter [27][28] - Fixed base cash rents decreased by about $2.6 million year-over-year, primarily due to lost revenues from a sold farm and additional expenses related to vacancies [29] - The net asset value per common share decreased to $15.57 from $17.59 at June 30, attributed to a $23 million decrease in farm valuations [39] Business Line Data and Key Metrics Changes - The company executed 21 new or amended leases in Q3, with annual row crop farms seeing an expected increase in net operating income of about $309,000 or 11% from prior leases [11][12] - Permanent crop farms had 13 leases renewed, with adjustments leading to a decrease in base rents but potential upside through increased participation rents [13][18] - The company anticipates a total year-over-year swing in fixed base rents of about $20 million due to lease structure changes, impacting revenues over the next five quarters [31] Market Data and Key Metrics Changes - The company owns approximately 112,000 acres across 168 farms, with a total asset value of about $1.5 billion [10] - The market conditions for permanent crop farms in the West have been challenging due to lower crop prices and higher input costs, affecting tenant commitments to long-term leases [14][15] - The company noted strong demand for prime farmland, particularly for vegetables and berries, despite some price depressions in nuts and wine grapes [50][51] Company Strategy and Development Direction - The company is cautious about new acquisitions due to high capital costs and is focusing on optimizing existing leases and tenant relationships [46][47] - Management is optimistic about the long-term trend of investing in farmland for healthy crops, indicating a strategic focus on sustainable agricultural practices [49] - The company plans to revert to traditional lease structures in the future while exploring potential sales of underperforming farms [17][20] Management's Comments on Operating Environment and Future Outlook - Management expressed hope for lower interest rates to facilitate future acquisitions, while acknowledging the current high rates as a barrier [48] - The company expects inflation in food sectors to drive up farmland values over time, particularly in fresh produce [54] - Management remains confident in the production capabilities of their farms, anticipating a good year in 2025 based on participation rents [88] Other Important Information - The company has access to over $160 million in liquidity, including $20 million in cash, and has a significant amount of unpledged properties [40] - The company repurchased 176,045 shares of preferred stock at a total cost of about $3.7 million during the quarter [26] - An impairment charge of about $2 million was recorded due to the write-down of Michigan blueberry farms [36] Q&A Session Summary Question: Can you provide the number of leases expiring in 2025 and how many are permanent crops? - Management indicated that there are 17 leases expiring in 2025, which constitutes about 20% of revenue, with a skew towards annual row crops [58][60] Question: Were the leases amended in Q3 due to expiration or other reasons? - Some leases were amended for various reasons, including pushing out expirations and adjusting terms for better tenant support [62] Question: What is the NOI impact from the sale of the blueberry farms? - The blueberry farms had been an NOI drag, averaging about $125,000 quarterly, and their sale will relieve this burden [76] Question: How will the lease changes impact fixed rent? - The restructuring will lead to a decrease in fixed rent, with a portion of the impact expected to begin in Q4 [70] Question: Is there any stabilization in the California permanent crop market? - Management noted low prices for nuts and grapes but indicated potential stabilization in land values as water sources become a key factor [82][86]

Group 1 - Gladstone Land reported quarterly funds from operations (FFO) of $0.13 per share, matching the Zacks Consensus Estimate, but down from $0.16 per share a year ago, representing an FFO surprise of -3.08% [1] - The company posted revenues of $22.57 million for the quarter ended September 2024, exceeding the Zacks Consensus Estimate by 5.11%, but down from $23.53 million year-over-year [2] - Gladstone shares have underperformed the market, losing about 6% since the beginning of the year compared to the S&P 500's gain of 21.2% [3] Group 2 - The current consensus FFO estimate for the coming quarter is $0.14 on revenues of $22.06 million, and for the current fiscal year, it is $0.52 on revenues of $84.85 million [7] - The Zacks Industry Rank for REIT and Equity Trust - Other is in the top 24% of over 250 Zacks industries, indicating a favorable outlook for the industry [8]

Financial Performance - Net income for Q3 2024 was approximately $6,000, a decrease from $3.1 million in Q3 2023, with a net loss to common stockholders of approximately $5.8 million, or $0.16 per share, compared to a loss of $3.0 million, or $0.08 per share, in the prior-year quarter[4] - Total operating revenues decreased by 4.1% to $22,571,000 compared to $23,534,000 in the same quarter last year[11] - Net income dropped significantly by 99.8% to $6,000 from $3,141,000 year-over-year[11] - FFO available to common stockholders decreased by 5.3% to $5,970,000 from $6,306,000[11] - AFFO available to common stockholders fell by 15.7% to $4,526,000 compared to $5,369,000 in the previous year[11] - Cash flows from operations showed a significant decline of 1,808.8% to $(1,367,000) from $80,000[11] Revenue and Lease Agreements - Total cash lease revenues decreased by approximately $2.6 million, primarily due to the sale of a large farm in Florida and reduced fixed base rents from certain properties, partially offset by an increase of approximately $1.1 million in participation rents[5] - The company executed 21 amended or new lease agreements, resulting in an expected aggregate increase in annual net operating income of approximately $309,000, or 11%, from row crop farms, while nine leases on permanent crop farms are expected to decrease annual net operating income by approximately $441,000, or 15%[3] Assets and Liabilities - Total assets decreased by 6.3% to $1,317,935,000 from $1,406,112,000[11] - Total indebtedness reduced by 8.3% to $593,635,000 from $647,672,000[11] - The net cost basis of real estate holdings and related assets is $1,273,579, while the estimated fair value of these holdings is $1,462,362[21] - The fair value adjustment for long-term liabilities is $34,299, contributing to the overall NAV calculation[22] Cash Distributions - The company declared monthly cash distributions of $0.1401 per share of common stock for Q3 2024, an increase of 0.21% from the previous run rate[3] - The current monthly cash distribution per common share is $0.0467, with a total annual distribution of $0.5604[13] NAV and Valuation - The estimated NAV per share decreased by $4.76 to $15.57 at September 30, 2024, primarily due to valuation decreases in certain farms and an increase in the fair value of long-term borrowings[7] - Estimated NAV is $914,286, resulting in an estimated NAV available to common stockholders and non-controlling OP Unitholders of $557,984[22] - Total common shares and non-controlling OP Units outstanding amount to 35,838,442, leading to an estimated NAV per common share and non-controlling OP Unit of $15.57[22] - The company intends to have each property valued by an independent appraiser at least once every three years, ensuring accurate fair value assessments[20] - The company’s valuation policy is approved by the board of directors and includes methodologies such as income capitalization and discounted cash flow analysis[20] - The independent auditors have neither audited nor reviewed the company's calculation of NAV or NAV per share[22] Future Outlook - Forward-looking statements indicate expectations for increases in farmland values and operating revenues, though these are subject to risks and uncertainties[23] - The company cautions against undue reliance on forward-looking statements due to potential economic downturns and competition risks[23] Operational Changes - Cash flows from operations decreased by approximately $1.4 million from the prior-year quarter, largely due to cash allowances provided in new leases and increased payments for water asset acquisitions[7] - In October 2024, the company entered into agreements to sell 11 blueberry farms for total consideration of approximately $5.0 million, expected to close by December 31, 2024[8] - The company continues to acquire water at below-market prices, enhancing water security for its farms[10] Occupancy and Portfolio - The occupancy rate slightly decreased to 99.5% from 100.0% year-over-year[11] - The company owns 168 farms across approximately 112,000 acres, with a farmland portfolio value of $1,462,362,000[13] - Total equity per balance sheet is $691,204, with a net fair value adjustment for real estate holdings of $188,783[21]

Farm Ownership and Operations - The company owns 168 farms comprising 111,836 acres across 15 states in the U.S. and 53,787 acre-feet of water assets in California[109]. - California accounted for 68.1% of total lease revenue in the nine months ended September 30, 2024, generating $43.33 million[112]. - The company has 114 leases in place, with 42 leases expiring thereafter, representing 50.2% of total acreage[114]. - The company’s portfolio is diversified with 94 different tenants growing over 60 types of crops[110]. - The company’s farmland investment focus includes fresh produce and permanent crops, with an ancillary focus on commodity crops[110]. - The company has 29 farms leased under agreements with a variable rent component based on gross revenues, ensuring a minimum rental income[113]. - The lease terms generally range from 3 to 10 years for row crops and 7 to 15 years for permanent crops, with options to extend[113]. - The company is exploring options for nine agricultural leases scheduled to expire within the next six months, including negotiating new lease terms[115]. Financial Performance - Lease revenue for the nine months ended September 30, 2024, was $63.67 million, a significant increase from $65.95 million for the same period in 2023[112]. - For the three months ended September 30, 2024, total operating revenues decreased by 4.1% to $22,571,000 compared to $23,534,000 in the same period of 2023[143]. - For the nine months ended September 30, 2024, total operating revenues decreased by 2.8% to $64,120,000 from $65,946,000 in 2023[144]. - Operating income for the three months ended September 30, 2024, decreased by 26.9% to $6,872,000 compared to $9,398,000 in the same period of 2023[143]. - Operating income for the nine months ended September 30, 2024, decreased by 10.8% to $21,997,000 from $24,670,000 in 2023[144]. - Fixed lease payments for the three months ended September 30, 2024, were $18,913,000, down 10.4% from $21,102,000 in 2023[143]. - Fixed lease payments for the nine months ended September 30, 2024, were $58,578,000, a decrease of 7.3% from $63,180,000 in 2023[144]. - Total operating expenses for the three months ended September 30, 2024, rose by 11.1% to $15,699,000 from $14,136,000 in 2023[143]. - Total operating expenses for the nine months ended September 30, 2024, increased by 2.1% to $42,123,000 compared to $41,276,000 in 2023[144]. - An impairment charge of $2,106,000 was recorded for the three and nine months ended September 30, 2024, with no similar charge in 2023[143][144]. Revenue and Income Metrics - The company recorded lease revenue of approximately $778,000 from 20 farms during the nine months ended September 30, 2024, a decrease from approximately $2.1 million in the prior-year period[118]. - Variable lease payments from participation rents increased by 47.3% to $3,512,000 for the three months ended September 30, 2024, compared to $2,385,000 in 2023[143]. - Participation rents increased significantly by 132.6% to $3,512,000 for the three months ended September 30, 2024, compared to $1,510,000 in the same period of 2023[146]. - Net income attributable to common stockholders for the three months ended September 30, 2024, was a loss of $5,787,000, compared to a loss of $2,964,000 in the same quarter of 2023, representing a 95.2% increase in loss[164]. - Funds from Operations (FFO) available to common stockholders for the three months ended September 30, 2024, was $5,970, down from $6,306 in 2023, reflecting a decrease of approximately 5.3%[191]. - Core Funds from Operations (CFFO) for the three months ended September 30, 2024, was $6,268, slightly down from $6,389 in 2023, a decrease of about 1.9%[191]. - Adjusted Funds from Operations (AFFO) for the three months ended September 30, 2024, was $4,526, compared to $5,369 in 2023, representing a decline of approximately 15.7%[191]. Debt and Interest Rates - The company repaid approximately $13.3 million of loans with a weighted-average interest rate of 4.28% during the period from July 1, 2024, to the date of the filing[122]. - Over 99.9% of the company's borrowings are at fixed rates, with a weighted-average effective interest rate of 3.40% for another 3.7 years, providing protection against rising interest rates[131]. - Interest expense for the three months ended September 30, 2024, was $5,402,000, a decrease of 7.8% from $5,856,000 in the same quarter of 2023[164]. - The fair value of fixed-rate borrowings outstanding as of September 30, 2024, was approximately $500.0 million[204]. - A 2% increase in market interest rates would decrease the fair value of fixed-rate borrowings by approximately $57.2 million[205]. - The company aims to limit the impact of interest rate changes on earnings and cash flows by primarily borrowing at fixed rates[204]. Asset Management and Valuation - As of September 30, 2024, the total fair value of the portfolio is estimated at $1,462,362,000, with third-party appraisals contributing 97.4% of this value[195]. - The estimated net asset value (NAV) per common share is $15.57, calculated based on total equity adjustments and fair value of real estate holdings[199]. - The total equity per balance sheet is reported at $691,204,000[201]. - The net fair value adjustment for real estate holdings is $188,783,000, reflecting the difference between estimated fair value and net cost basis[201]. - The market capitalization rate for the properties is reported at 2.20% to 6.20%, with a weighted average of 4.44%[197]. - The total acres valued in the portfolio amount to 111,836, with 92,397 acres classified as farm acres[195]. - The net change in unrealized fair value of the farmland portfolio resulted in a decrease of $0.65 per share due to net depreciation[202]. - Management believes that the values presented reflect current market conditions, but actual realized values may vary[202]. Liquidity and Cash Flow - Current available liquidity is approximately $164.4 million, consisting of $19.8 million in cash and $144.6 million available under the credit facility with MetLife[169]. - Cash provided by operating activities decreased by 20.7% to $17.966 million for the nine months ended September 30, 2024, compared to $22.657 million in the prior-year period[174]. - Cash from investing activities increased significantly due to proceeds from the sale of the Florida farm, resulting in a net gain of approximately $10.4 million[177]. - Cash used in financing activities increased by 44.6% to $(83.363) million, primarily due to a decrease in net cash proceeds from equity offerings[178]. - The MetLife Facility has $212.9 million of undrawn commitment remaining, with $110.2 million currently available[179]. - The Farmer Mac Facility allows for bond issuances up to $225.0 million by December 31, 2026, with approximately $100.1 million already issued[180].

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Company Overview - Gladstone Land (NASDAQ:LAND) is a farmland owning REIT with a portfolio of 111,836 acres across the US, primarily in California, Florida, and Colorado, producing grains, fruits, tree nuts, and wine grapes [2] - The total portfolio value has increased from $75 million at its IPO in 2013 to approximately $1.5 billion today, representing a 15-fold growth [4] Company Performance - Despite significant portfolio growth, Gladstone Land has produced a negative 7.2% price return since its IPO, with total returns being modestly positive due to dividends [4][6] - The REIT has seen a 489.1% increase in shares outstanding and a 1,670% increase in total long-term debt from 2014 to 2024 [6] Market Demand and Yield - Farmland demand remains high globally, with a downward trend in arable land per capita, while yields per acre for crops like corn and wheat continue to rise [7] - Gladstone Land maintains high occupancy levels, with a weighted average of 99.8%, although it recently hit its lowest level since the IPO at 98.8% [8] Rental Income and Financial Stability - Rental income growth has been inconsistent, with no net gains in 2022 and 2023, but 2024 is projected to improve [8] - The REIT has a stable debt maturity profile and lease expirations, navigating interest rate changes without significant disruption [10][14] Valuation and Returns - The REIT trades at about 23 times funds from operations (FFO), with expectations of flat growth from 2023 to 2026 [14][17] - Preferred shares of Gladstone Land yield 7.1% and are currently undervalued, providing a more attractive return compared to common shares, which have returned about 4% [20]

Financial Data and Key Metrics Changes - The company reported a net loss of $823,000 for the second quarter, with a net loss to common shareholders of $6.7 million or $0.19 per share [22] - Adjusted FFO for the current quarter was approximately $3.7 million or $0.103 per share, compared to $3.6 million or $0.102 per share in the prior year quarter [22] - Dividends declared per common share increased to $0.140 in the current quarter from $0.138 in the prior year quarter [22] Business Line Data and Key Metrics Changes - Fixed base cash rents decreased by about $1.1 million year-over-year, primarily due to lost revenue from a sold farm and other properties [23] - Participation rents increased by $1.1 million during the current quarter, largely due to additional information related to prior harvests [23] Market Data and Key Metrics Changes - The company owns approximately 112,000 acres on 168 farms, with a total value of about $1.5 billion [7] - The company executed 11 new or amended leases, resulting in an expected increase in annual net operating income of about $465,000 [8] Company Strategy and Development Direction - The company remains cautious on acquisition activity due to high capital costs and is focused on evaluating profitability outlooks for certain permanent crop farms [29] - The company is actively acquiring water assets to enhance farm desirability and mitigate water supply issues [10][14] Management's Comments on Operating Environment and Future Outlook - Management noted that while crop prices for almonds and pistachios have been depressed, there are signs of recovery, particularly in exports [11][12] - The company is optimistic about future price increases for almonds and pistachios, driven by strong demand, especially in India [13][31] Other Important Information - The company has access to about $180 million in liquidity, including over $30 million in cash [26] - The net asset value per common share decreased to $17.59 from $18.50 due to decreases in valuations of certain farms [26] Q&A Session Summary Question: What is the exposure of the portfolio to almonds and pistachios? - Approximately 20% of revenue is from pistachios and about 8-9% from almonds [36] Question: What are the current interest rates for refinancing the $46 million debt expiring in the next 12 months? - The weighted average interest rate is about 3.4%, with potential refinancing rates expected to be around 200 basis points higher [38] Question: Are the vacant farms all related to nuts? - Yes, all the vacant farms are related to nuts [40] Question: What is the outlook for participation rents in the second half of 2024? - Participation rents collected in 2023 were minimal, and expectations for 2024 are uncertain but may be similar to previous years [44][50] Question: What assets are being considered for potential dispositions? - The company is evaluating assets, particularly those with poor performance due to current market conditions for almonds and pistachios [52]

Core Insights - Gladstone Land (LAND) reported quarterly funds from operations (FFO) of $0.10 per share, missing the Zacks Consensus Estimate of $0.12 per share, and down from $0.11 per share a year ago, indicating a -14.17% surprise [1] - The company posted revenues of $21.3 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 4.04%, compared to $21.21 million in the same quarter last year [1] - Gladstone has not surpassed consensus FFO estimates in the last four quarters, while it has topped revenue estimates three times in the same period [1] Financial Performance - The FFO for the previous quarter was expected to be $0.15 per share, but the actual was $0.14, resulting in a -6.67% surprise [1] - Current consensus FFO estimate for the upcoming quarter is $0.17 on revenues of $22.89 million, and for the current fiscal year, it is $0.60 on revenues of $87.22 million [4] Market Performance - Gladstone shares have declined approximately 4.4% since the beginning of the year, contrasting with the S&P 500's gain of 9% [2] - The Zacks Industry Rank for REIT and Equity Trust - Other is in the top 39% of over 250 Zacks industries, indicating a favorable industry outlook [5] Future Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and the trends in estimate revisions [2][3] - The current Zacks Rank for Gladstone is 3 (Hold), suggesting that shares are expected to perform in line with the market in the near future [4]

Financial Performance - Net loss for Q2 2024 was approximately $823,000, a significant decline from net income of approximately $7.9 million in Q2 2023[3] - AFFO for the quarter was approximately $3.7 million, or $0.103 per share, compared to approximately $3.6 million, or $0.102 per share, in the prior-year quarter, reflecting a 1.5% increase[3][8] - Cash flows from operations decreased by approximately $2.0 million from the prior-year quarter, largely due to timing of cash rental receipts[6] Revenue and Income - Total cash lease revenues remained relatively flat, with fixed base cash rents decreasing by approximately $1.1 million, offset by an increase in participation rents of approximately $1.1 million[4] - The company executed three amended lease agreements expected to increase annual net operating income by approximately $70,000[2] - The distribution run rate on common stock was increased by 0.22%, with monthly cash distributions totaling $0.1398 per share during Q2 2024[2] - The company increased its distribution run rate by 0.21%, marking the 35th distribution increase over the past 38 quarters, with a total increase of 55.7%[7] Asset Valuation - The estimated NAV per share decreased by $1.56 to $17.59 at June 30, 2024, primarily due to valuation decreases in certain farms[6][8] - The estimated NAV available to common stockholders and non-controlling OP unitholders is $630.465 million, with an estimated NAV per share of $17.59[19] - The fair value adjustment for long-term assets is $213.801 million, while the fair value adjustment for long-term indebtedness is $50.778 million[18][19] Company Operations - Gladstone Land Corporation owns 168 farms across approximately 112,000 acres in 15 states, with total assets valued at approximately $1.5 billion[11] - The company owns approximately $1.5 billion of farmland and water assets, with ongoing discussions to lease or sell six properties[7] - Gladstone Land's farms primarily grow annual row crops and permanent crops, with a focus on fresh produce such as berries and vegetables[11] - Approximately 30% of the company's fresh produce acreage is organic or in transition to organic, while over 20% of its permanent crop acreage falls into this category[11] Shareholder Returns - The company has paid 138 consecutive monthly cash distributions since its IPO in January 2013, with a current monthly distribution of $0.0467 per share, equating to $0.5604 annually[11] - The company repurchased 140,777 shares of its Series B and C Preferred Stock at an average price of $20.56 per share, resulting in a total gain on repurchase of approximately $274,000[2] Future Outlook - The company anticipates benefits from increases in farmland values and operating revenues, as well as expected increases in capitalization rates[20] - The company is committed to maintaining or growing its portfolio and FFO, despite potential risks and uncertainties in the economic environment[20] Performance Metrics - The company’s FFO, CFFO, and AFFO metrics are adjusted for non-cash items and non-recurring expenses, providing a clearer picture of sustainable operating performance[13][14][15] - Gladstone Land has increased its common distributions 35 times over the past 38 quarters[11]