Farmland Partners(FPI)2025-02-20 20:20Financial Data and Key Metrics Changes - For the full year ended December 31, 2024, net income was $61.5 million or $1.19 per share, an increase from the previous year due to asset dispositions, significant debt reductions, and strong lease renewals [21][22] - AFFO was $14.1 million or $0.29 per weighted average share, significantly higher than the same period in 2023, positively impacted by lower property taxes, reduced interest expenses, and increased sales of specialty crops [21][22][30] Business Line Data and Key Metrics Changes - The gain on disposition of assets was higher due to the sale of 54 properties in 2024, resulting in an aggregate gain of $54.1 million compared to 74 properties and $36.1 million in 2023 [22] - Direct operations revenue increased due to higher sales of citrus, avocado, and walnuts, along with lower impairment and cost of sales [26][30] Market Data and Key Metrics Changes - The company noted a plateau in land values in Illinois, with strong prices for quality properties, while expressing concerns about the California market due to water and regulatory challenges [34][40][41] - The company is monitoring the California farmland market, which is currently dislocated, with many properties available but few large investors entering the market [96][99] Company Strategy and Development Direction - The company has focused on asset sales to return cash to shareholders, evidenced by a $1.15 special dividend [11][12] - Future acquisitions will be considered based on valuation, particularly in Illinois and potentially in the Delta region, while being cautious about California [35][38][41] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for rent increases in 2025, driven by rising grain prices and improving farmer profitability [80][90] - The company anticipates AFFO per share guidance for 2025 to be between $0.25 and $0.30, above the current dividend rate of $0.24 [17][31] Other Important Information - The company has no debt subject to interest rate resets during 2025, and it had undrawn capacity on lines of approximately $167 million at the end of the year [24][25] - General and administrative expenses increased due to a one-time severance expense and a special bonus to executive officers [23] Q&A Session Summary Question: Thoughts on pricing environment for net acquisitions in 2025 - Management indicated a strong focus on Illinois, with a plateau in valuations but strong prices for quality properties, while expressing caution about California due to various challenges [34][40] Question: Thoughts on Ohio Deere dealerships and potential expansion - Management sees potential in the dealership business for current yield and long-term appreciation but will proceed cautiously [46][50] Question: Incremental borrowing rate for new debt - The current incremental borrowing rate is around 6% [55] Question: Impact of USDA funding freezes on tenants - Management does not have tenants exposed to funding freezes and remains focused on quality tenants without reliance on government payments [68][72] Question: Renewal lease terms and asking rates for new renewals - The three-year average on renewal rates is up 12.4%, but 2024 saw a slight decline of 0.8% due to property sales [76][78] Question: Farmers' income outlook and its impact on dividends - Management noted that farm income is climbing back up, driven by grain prices and direct payments, which could support rent increases [87][90] Question: Demand for the FPI loan program - There has been an uptick in demand for the loan program, driven by operators feeling squeezed in 2024 [111]