Gladstone Land(US:LAND)2023-05-09 14:12Financial Data and Key Metrics Changes - For Q1 2023, the company reported a net income of approximately $1.8 million and a net loss to common shareholders of $4.3 million or $0.12 per common share [21] - Adjusted FFO for the current quarter was approximately $6 million or $0.17 per share, compared to $6.4 million or $0.185 per share in the prior year quarter [21] - Fixed base cash rents increased by about $850,000 or 4% over the prior year quarter, primarily driven by additional revenues from new farms acquired [22] Business Line Data and Key Metrics Changes - The company owns about 116,000 acres on 169 farms, with a total valuation of approximately $1.6 billion for both land and water [8] - The existing farmland portfolio continues to perform as expected, with a year-over-year impact resulting in a decrease in net operating income of $295,000 due to tenant issues [11] - Five leases were renewed since the beginning of the year, expected to result in an increase in annual net operating income of $598,000 or about 12% [12] Market Data and Key Metrics Changes - The company noted that inflation remains high, with the latest headline inflation number at 5%, down from previous levels but still above the Federal Reserve's target of 2% [14] - Food prices in the food-from-home category are up only by 8.5%, which is expected to help mitigate increases in operating costs for farmers [15] - Water supply in California has improved significantly, with reservoirs at or above historic averages, leading to 100% water allocation for the first time since 2006 [16][17] Company Strategy and Development Direction - The company is being more selective in acquisitions due to rising inflation and interest rates, indicating a cautious approach to capital deployment [11][28] - The focus remains on farmland that grows crops contributing to healthy lifestyles, aligning with market trends towards healthy eating [29][31] - The company expects inflation in the food sector to continue increasing, which should drive up the value of underlying farmland [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the performance of the farmland portfolio despite tenant issues, with expectations of continued strong demand for prime farmland [29] - The company is prepared for potential challenges from government actions and market conditions, maintaining a strong liquidity position [59] - Management anticipates that the current economic environment may lead to a deleveraging year rather than growth, but remains open to opportunities if conditions improve [45] Other Important Information - The company raised its common dividend to $0.046 per share per month, marking the 30th increase over the past 33 quarters [27] - The net asset value per common share as of March 31 was $17.12, up slightly from the previous value [25] - The company has over $190 million in liquidity and $130 million in unpledged properties, providing a strong financial cushion [25] Q&A Session Summary Question: Insights on the acquisition market and farm valuations - Management noted that farm sale prices have increased significantly, particularly in the Midwest, leading to a slowdown in acquisitions due to high cap rates [34] Question: Details on the $40 million debt expiration and refinancing plans - Management indicated that $23 million of the maturing debt is due early in 2024, with plans to assess refinancing options based on interest rates at that time [37] Question: Expectations for operating expenses related to the self-operated farm - Management expects operating expenses to decrease once a lease is secured, with current expenses around $100,000 for the quarter [40] Question: Impact of floods on crop yields and harvest - Management expressed optimism about the benefits of increased water supply for crops like nuts and blueberries, while acknowledging some losses in other crops like strawberries [43] Question: Participation rents outlook for the back half of the year - Management anticipates a decrease in participation rents due to the conversion of some leases to fixed payments, but hopes for increased yields in the following year [56]