Farmland Partners(US:FPI)2023-05-04 18:05Financial Data and Key Metrics Changes - For Q1 2023, net income was $1.7 million, up from $1.1 million in Q1 2022, representing an increase of $0.6 million. Net income per share available to common stockholders increased to $0.02 from $0.00 in the previous year [11] - Adjusted Funds from Operations (AFFO) decreased to $1.6 million from $2.1 million year-over-year, with AFFO per weighted average share dropping to $0.03 from $0.04 [11] - Operating expenses in Q1 2023 were lower by $1.7 million compared to 2022, primarily due to reduced cost of goods sold and general administrative expenses [11] Business Line Data and Key Metrics Changes - Fixed farm rent decreased by approximately $1 million to $1.3 million due to projected dispositions, while solar revenue increased due to a large project in Illinois [14][15] - Variable payments decreased by $0.5 million due to lower performance in grapes and row crops, primarily from lower yields during the Q4 harvest [14] - Direct operations revenue was down $1.1 million in Q1 2023 due to lower crop insurance payments and crop sales, particularly in citrus [14] Market Data and Key Metrics Changes - The USDA projects 2023 to be the second-best year ever for farmer profitability, with strong pricing for crop insurance indicating high revenue potential for farmers [8] - Farmland prices have seen significant appreciation over the past two years, although transaction volumes are slowing due to a scarcity of quality assets for sale [9] - The overall farm economy remains strong despite macroeconomic turmoil, with lenders actively financing farmland purchases [9] Company Strategy and Development Direction - The company plans to sell farms that do not have strong return profiles and focus on trimming its portfolio to enhance overall asset appreciation [6] - Proceeds from asset sales will be used to pay down debt and repurchase stock, with a commitment to close the gap between perceived and market value [6][10] - The company emphasizes the importance of appreciation in farmland value, which is currently undervalued in the public market [5][25] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the tough economic environment but highlights the strength of the farmland market, which remains active and liquid [5] - The company is closely monitoring weather impacts, particularly in California, but has not observed widespread damage to its portfolio [8][29] - Management expects a strong rent lease renewal cycle, although increases may not be as high as previous years due to the current lease vintage [32][33] Other Important Information - Total debt as of March 31, 2023, was approximately $443.6 million, with undrawn capacity exceeding $159 million [12] - The company has renegotiated rates for loans representing approximately $109 million, with further rate resets planned [12] Q&A Session Summary Question: Timing for the 11 farms under contract - Management indicated that the bulk of these sales will close in the second quarter, with some extending into the third quarter [16] Question: Focus of the $80 million in dispositions - Most sales will involve row crops outside the Midwest, with potential sales of specialty crops due to long-term water risks [18] Question: Debt repayment priorities with sale proceeds - The company plans to pay down the highest cost debt first, including floating lines and the Farmer Mac line [20] Question: Update on Saberpoint litigation - There are no new developments; the company is currently on appeal [22] Question: Balancing business scaling versus stock buybacks - Management believes the stock is undervalued and sees buying back shares as a priority to create value for investors [24][25] Question: Weather-related impacts on crops - Management is optimistic about the weather conditions, noting that California's recent precipitation is beneficial for agriculture overall [29] Question: Rent growth expectations - Management expects strong rent increases but acknowledges that they may not reach the levels seen in the previous year due to the current lease base [31][33] Question: Auction process for $40 million of assets - The auction will be handled by MWA for Nebraska assets, with some partnerships for Colorado sales [39][40]