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Gladstone Land(LAND) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2022, the company reported a net income of approximately $1.8 million and a net loss to common shareholders of $3.6 million, equating to $0.074 per common share [20] - Adjusted FFO for Q3 was about $7.2 million, up from $4.5 million in Q2, with AFFO per share increasing to $20.07 from $12.9 [20] - Dividends declared per share rose to $0.137 in Q3 from $0.136 in Q2, driven by an increase in participation rents [21] Business Line Data and Key Metrics Changes - The company acquired four venues in Washington State and Oregon for about $37 million, yielding a net cash yield of approximately 6.2% [9] - Six leases were renewed, expected to increase annual operating income by about $281,000, or 10% over prior leases [10] - Participation rents recorded in Q3 were about $3 million, a significant increase from only $20,000 in the previous quarter [21] Market Data and Key Metrics Changes - Inflation remains high, with the latest headline inflation at 8.2%, while food prices at home increased by 13% [11] - The value of the farmland portfolio increased by about $17 million, or 3.7%, with Florida farms appreciating by an average of 11% [22] - The portfolio was valued at approximately $1.6 billion as of September 30, with a net asset value per common share of $16.56, up by $0.96 from the previous quarter [23] Company Strategy and Development Direction - The company is being more selective in acquisitions due to rising inflation and interest rates, focusing on conservative capital management [9] - Plans to enhance water security include purchasing water on the open market and acquiring long-term water contracts [13] - The company aims to continue investing in farmland that supports healthy lifestyles, aligning with market trends towards fruits and vegetables [27] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the impact of inflation and rising costs on farmers, particularly regarding water and fertilizer [38] - The company anticipates that food prices will continue to rise, potentially outpacing general inflation, which may benefit farm operators [12] - Management is cautious about new acquisitions, preferring to wait for more favorable market conditions [39] Other Important Information - The company has over $175 million in liquidity and $100 million in unpledged properties, with 99% of borrowings at fixed rates [24][25] - The company has experienced minimal impact from recent interest rate increases, with upcoming debt maturities manageable [26] Q&A Session Summary Question: What percentage of the farms had a value change quarter-over-quarter? - About 1/3 of the portfolio was revalued in Q3, with Q4 expected to be lighter at 18% to 20% [32] Question: What was the impact on the NAV calculation from the debt adjustment? - The debt adjustment impacted NAV by $0.55 per share [33] Question: What is the current cost for new debt? - The current cost for new debt is in the mid-5s, around 5.5% to 5.6% [34] Question: Any commonality on the $1.3 million of late rent payments? - The late rent payments are primarily associated with almond crops in California [42] Question: Can you comment on the water situation for farms with raw crops? - The main concern is with tree crops, particularly almonds, which require significant water [46] Question: What is the breakdown of participation rents? - Pistachios account for about 2/3 of participation rents, with almonds making up 20% to 25% [51] Question: What are the current cap rates for acquisitions? - Cap rates are mixed, with nut farms seeing lower valuations compared to produce farms [58]