Farmland Partners(US:FPI)2023-07-27 18:58Financial Data and Key Metrics Changes - For Q2 2023, net income was $7.9 million, an increase from $3 million in Q2 2022, representing a $4.9 million increase [19] - Net income per share available to common stockholders rose to $0.14 from $0.04 in the previous year, an increase of $0.10 [20] - AFFO was negative $1.1 million compared to positive $1.1 million in Q2 2022, a decrease of $2.2 million [20] - For the first half of 2023, net income was $9.6 million, up from $4.1 million in the same period of 2022, an increase of $5.5 million [20] - AFFO for the first half was $0.4 million, down from $3.3 million in 2022, a decrease of $2.8 million [20] Business Line Data and Key Metrics Changes - The company sold approximately $52 million in assets in the first half of 2023, with an additional $3 million in early Q3, and has $22 million under contract pending closing [12] - Gains from asset sales were about 33% over net book value for the $52 million closed, and expected gains of about 75% over book value for the $22 million under contract [13] - The company is focusing on reducing volatility in revenue streams by selling farms with water challenges or market volatility concerns [7][8] Market Data and Key Metrics Changes - The overall transaction volume in the marketplace is slowing down due to farmers being cash buyers and high interest rates affecting buying capacity [16][17] - The company noted a decrease in auction and brokerage activity due to a lack of sellers in the market [60] Company Strategy and Development Direction - The company aims to concentrate its portfolio to lessen water risk and volatility of earnings, focusing on high-quality farms [8] - Proceeds from asset sales are primarily used for stock buybacks and debt reduction, with a shift towards debt reduction expected in the near term [9][15] - The company is engaged in broader portfolio optimization, with a focus on acquiring farms that fit its strategy while being less acquisitive than in the past [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the farm economy and the potential for significant appreciation in farmland values [6][11] - Interest rates are expected to eventually decrease, which would positively impact AFFO [11] - The company is cautious about the current economic environment but remains focused on long-term value creation [6][11] Other Important Information - The company has approximately $473.5 million in total debt as of June 30, 2023, with undrawn capacity on lines of credit exceeding $120 million [23] - The company is considering additional distributions to shareholders due to capital gains from asset sales, though specifics are still under discussion [44][45] Q&A Session Summary Question: Expected sales over the remainder of 2023 in specific markets - Management indicated that upcoming auctions are primarily in the High Plains, with potential sales in the West Coast and less in the eastern part of the country [33][35] Question: Impact of revenue volatility on asset sales - Management noted that volatility primarily comes from specialty crops, particularly on the West Coast, and they are looking to reduce exposure in that area [37][38] Question: Guidance on AFFO and capital gains distribution - Management confirmed that the bulk of AFFO is expected in the fourth quarter, and discussions about potential distributions are ongoing [41][44] Question: Update on hedge fund litigation - Management provided an update on ongoing litigation, indicating confidence in their position and minimal financial impact at this time [47][48] Question: Timing of debt repayments and asset sales - Management clarified that proceeds from asset sales will largely be directed towards debt repayment, with a focus on maintaining liquidity [64][66] Question: Buyer demographics for sold assets - Management stated that sales have been to a mix of institutional buyers and local farmers, with a preference to offer farms to current tenants first [68]