Farmland Partners(US:FPI)2021-05-15 10:46Financial Data and Key Metrics Changes - The company recorded total operating revenues of $11.6 million for Q1 2021, slightly down from $11.7 million in Q1 2020, indicating a strong performance despite a reduced portfolio [22] - Total operating income was $3.1 million in Q1 2021 compared to $5.3 million in the same period of 2020, but adjusted for litigation expenses, the performance would have been $5.6 million [22] - The basic net loss to common stockholders was $0.02 per share in Q1 2021, improved from a net loss of $0.09 per share in Q1 2020, and would have been a net income of $0.07 per share without litigation expenses [23] - Adjusted Funds from Operations (AFFO) was negative $0.05 in Q1 2021, compared to negative $0.01 in Q1 2020, but would have been positive $0.03 without legal expenses [23] Business Line Data and Key Metrics Changes - The company initiated an acquisition program, purchasing approximately $2.9 million in assets without incurring debt, indicating a shift towards growth [10] - The company reduced its debt by $20 million and repurchased a small amount of Series B preferred shares, continuing its deleveraging strategy [11] Market Data and Key Metrics Changes - The company anticipates strong rent increases in the coming quarters, with about one-third of the portfolio rolling over this summer and fall, potentially leading to rent increases of 5% to over 15% [11][39] - There is a significant increase in farmer profitability driven by rising commodity prices, particularly in corn and soybeans, which is expected to last for several years [14][17] Company Strategy and Development Direction - The company is transitioning from a focus on asset sales and stock buybacks to a growth-oriented strategy, aiming to increase assets under management and reduce leverage [10][11] - The company is also establishing a substantial off-balance sheet vehicle related to opportunity zones to enhance growth [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term demand for farmland driven by population growth and GDP increases in developing countries, alongside a decline in arable land per person [13] - The company is closely monitoring inflation trends, noting that farmland is a good hedge against inflation, which could benefit investors [20] - Management acknowledged ongoing litigation expenses but remains confident that these will eventually conclude successfully [21] Other Important Information - The net asset value is estimated to be around $14 per share, with expectations of land value appreciation continuing for several years [12] - The company has seen a significant increase in demand for U.S. food products, particularly from China, which is expected to drive commodity prices higher [18] Q&A Session Summary Question: What determined the 14 dispositions? - The majority of the dispositions were assets contributed to the Opportunity Zone Fund, which allows the company to maintain management fees on those assets [26] Question: What are the fees from the asset management business? - The company receives fees based on assets under management from the Opportunity Zone vehicle, which are set to exceed current overhead costs [29] Question: What is the mix of specialty and row crops in the lease rollover? - The lease rollover is more weighted towards row crops this year, with expectations of improved profitability in that segment [44] Question: How do you view the lease roll-ups this summer? - The company expects rent increases of 5% to over 15% for row crops, driven by improved profitability for farmers [39] Question: Are you seeing more competition for bidding on acres? - There is an increase in both prices and volumes in the farmland market, particularly in high-quality land regions like Illinois [56] Question: How are labor shortages affecting profitability? - Labor shortages are a concern, particularly in specialty crops, but the company has not faced significant operational issues [66] Question: How is the drought affecting specialty crops? - The drought's impact is more significant for non-irrigated crops, but the company is positioned well with irrigated land [70]