Gladstone Land(US:LAND)2023-11-08 18:23Financial Data and Key Metrics Changes - For Q3 2023, the company reported a net income of approximately $3.1 million and a net loss to common shareholders of $3 million, or $0.08 per common share [15] - Adjusted FFO for the current quarter was about $5.6 million, or $0.155 per share, compared to $7.2 million, or $0.207 per share in the prior year quarter [15] - Fixed base cash rents decreased by about $400,000, or 2%, from the prior year quarter [16] - Participation rents also decreased by about $600,000 from Q3 of last year [17] - The net asset value per common share increased to $20.33 as of September 30, up from $19.15 at June 30 and $16.56 at Q3 of last year [19] Business Line Data and Key Metrics Changes - The company owns approximately 116,000 acres on 169 farms, valued at about $1.6 billion, with a diversified portfolio across 15 states and 29 growing regions [7] - The company has been selective in farm acquisitions due to higher capital costs, leading to slow acquisition activity [10] - Nine leases were renewed and amended, resulting in an increase in annual net operating income of about $275,000, or 4.7% above prior leases [11] Market Data and Key Metrics Changes - The company has entered into a water transfer agreement allowing the purchase of up to 15,000 acre-feet of water per year through February 2031, with 7,000 acre-feet purchased for 2023 at a cost of about $1.2 million [12] - Inflation remains above the Fed's target, with headline inflation at about 3.7% [13] Company Strategy and Development Direction - The company is focusing on farmland investments that contribute to healthy lifestyles, such as fruits and vegetables, aligning with market trends [23] - The company is cautious about acquisitions, waiting for prices to adjust downward in the current high-interest-rate environment [23] Management's Comments on Operating Environment and Future Outlook - Management noted that inflation and high interest rates are impacting the operating environment, but they expect conditions to improve over time [13][35] - The company believes that the demand for prime farmland remains stable to strong, particularly for crops like berries and vegetables [24] - Management expressed confidence in the long-term value of farmland, emphasizing its intrinsic value and cash flow potential [25] Other Important Information - The company has access to over $170 million in liquidity and about $155 million in unpledged properties [20] - The common dividend was raised to $0.464 per share per month, marking the 32nd increase in the past 35 quarters [22] Q&A Session Summary Question: What other crops are among the challenged operator farms? - Management identified an oversupply of almonds as a current issue, with international purchases down significantly [27][28] Question: Are there other markets experiencing issues? - Management mentioned a vineyard that is not performing as expected [30] Question: What is the rationale for buying incremental water at this point? - Management indicated that income-producing farms are scarce and expensive, making water acquisition a strategic choice [33][34] Question: What is the current cap rate for acquisitions? - Management estimated cap rates around 5.5% or higher, with expectations for them to decrease in the future [37][38] Question: What factors are affecting tenant performance? - Management noted that inflation and grocery store pricing strategies are impacting tenant profitability [39][40] Question: What is driving the increase in NAV? - The increase in NAV was primarily due to the valuation of preferred securities and the fair value of the portfolio [46][47]