Greetings and welcome to the Gladstone Land Corporation Fiscal Year Ended December 31, 2020 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Gladstone. Thank you. You may begin.

Thank you, Jessie. Nice introduction. And this is David Gladstone on the quarterly conference call for Gladstone Land. We always appreciate the time we have with you to tell you about what we're doing, and this is our year-end. So we have little extra stuff. So, Michael LiCalsi is going to do his part, he's General Counsel and he is the President of Gladstone Administration. So Michael, go ahead.

Thanks, David. And good morning. Today's report may include forward-looking statements under the Securities Act of 1933, and Securities Exchange Act of 1934 including those regarding our future performance. These forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable, and many factors may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements including all risk factors in our Forms 10-Q, 10-K and other documents we filed with the SEC, you can find them all on our website, www.GladstoneLand.com, specifically the Investor's page or on the SEC's website at www.sec.gov. Now, we undertake no obligation to publicly update or revise any of these forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. And today, we'll discuss FFO, which is funds from operations, and FFO was a non-GAAP accounting term defined as net income excluding the gains or losses from the sale of real estate and any impairment losses from property plus depreciation and amortization of real estate assets. We'll also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses, and adjusted FFO, which further adjusts core FFO for certain non-cash items such as converting GAAP rents to normalized cash rents. We believe these are better indications of our operating results and allow better comparability of our period-over-period performance. We ask everybody to take the opportunity to visit our website once again, www.gladstoneland.com, sign up for our email notification service. So you can stay up to date on the company. You could also find us on Facebook keywords there is the Gladstone companies. And on Twitter, we're at Gladstone comps. Today's call is an overview of our results, so we ask you that you review the press release and the Form 10-K both issued yesterday for more detailed information. Again, there on the Investors page of our website. With that, I'll turn the presentation back to David Gladstone.

All right. Thank you, Michael. We had the year start out really strong. And now, at the end of the year, we had total of $256 million of new acquisitions. The only difference this year is $156 million of these acquisitions came in the last three weeks of the year. So we didn't get to see much of an impact on earnings from those in the year 2020 but we're all looking forward to the reporting what we are really strong results that we think we're going to have in 2021.

Sure, thank you, David. Good morning, everyone. I'll begin with our balance sheet. During the fourth quarter our total assets increased by about $189 million, primarily due to our new farm acquisitions. From a financing perspective, during and subsequent to the fourth quarter, we secured about $154 million of new long term borrowings at a weighted average rate of 2.83%, which is fixed for the next eight plus years. On the equity side, since the beginning of the fourth quarter, we raised about $65 million in net proceeds through spills of our common stocks. This includes a follow-on offering that we completed in October through which we raised $26 million at an offering price of $14.40 per share, and about $39 million of sales through our ATM program at an average issuance price of $14 70 per share. Over the same time period, we've also raised about $22 million of net proceeds from sales of a Series C Preferred Stock. As of the Series B Preferred Stock, which we recently listed on NASDAQ under the ticker LANDO our plan with the Series C Preferred Stock is to sell it in small amounts over the course of the next several years. So, that we're better able to match the timing of the proceeds coming in with finding new farms to buy. And finally, just last month, we raised about $58 million of net proceeds through the issuance of a new 5% SERIES D term preferred stock, which is also traded on NASDAQ under the ticker LANDM about $29 million of these proceeds were used to redeem our Series A term preferred stocks, which carried a coupon of 6.375% and had a mandatory redemption date of September 2021. Moving on to our operating results. First, I’ll note that for the fourth quarter, we had net income of about $91,000 net loss of common shareholders of $2.4 million or $0.10 per common share. For the year, we had net income of $5 million and a net loss to common shareholders of $4.4 million or $0.195 per common share. On a quarter-over-quarter basis, adjusted FFO for the fourth quarter was approximately $3.6 million compared to $3.1 million in the third quarter an increase of about 14% AFFO per share was $0.147 in the fourth quarter versus $0.143 in the third quarter an increase of about 3%. Increases to the per share figures were a bit muted due to the equity proceeds raised during the quarter, which have not yet been fully invested.

All right, thank you, Lewis, that was a nice report. For us acquisition activity really picked up toward the end of the year, I think some of that was generated by tax laws that are expected to change. And we even today, we continue to see a good amount of buying opportunities coming our way. We probably have about $250 million worth of backlog and we'll probably close on about 80% of that. But certain aspects of our due diligence process have ended taking a much longer time than normal. Due to the various travel restrictions and all the other things going on in the marketplace out there. Some of our banks are all working from home that takes up extra time. Some of the government offices are closed. We can’t get data that we need. But hopefully some of these restrictions will be starting to lighten up in the future and allow us to move a little quicker than we are doing today. Just a final point or two here I’d like to make we still believe investing farmland and growing crop that contribute to healthy lifestyle such as fruits and vegetables and nuts. As well as many of the other tree fruits that we have from cherries and apples and figs and oranges so to make sure hungry for going to lunch today. So following the trend we’re seeing in the market that’s where we want to stay. Currently about 85% of our total crop revenues come from farm that are growing types of food that you find and either the produce of the nuts section of your local grocery store. We consider these foods to be among the healthiest type of foods and we continue to see a growing trend toward organic among these foods. About 40%…

Our first question is coming from the line of Nate Crossett with Berenberg. Please proceed with your question.

Thanks for taking the question. Obviously, there's a lot of deal flow towards the end of the year, maybe you can just speak to the current pipeline right now. I know you guys don't give formal guidance, but maybe you can give us the main puts and takes that we should be thinking about for 2021. And then also on the deal flow, I think you mentioned potential tax changes. And I'm just curious if your ability to offer OP Units is helping you get deals?

I haven't seen too much of the OP Units. I think one of the small deals we have, it's about $3 million. They won OP Units. We've got a couple of other small ones that may go down that line. But generally speaking, when you're talking about a larger transaction like that one in the pipeline for about $39 million, they want cash because they want to turn around and use that money to grow their business. I can't answer all those kind of questions of what's going through people's mind. But if the current administration puts in its large capital gains tax, it's going to be - it'll be very hurtful to those people who want to sell and maybe more people will take OP Units. It's just that we finally reached the size that people will take OP Units because we're strong, we're not going to blow away overnight. We've already weathered one of the worst downturns in the history of this country, which is still going on today. It's - we don't have our people back to work. We don't have a lot of businesses operating. So I think we will do very well in this year 2021.

Yes, that's helpful. You mentioned that there was kind of a large deal in the works. I mean, what should we kind of be thinking about it as normalized run rate per volumes in any given year, kind of given your size right now, I know it's not an easy question to answer, but any guideposts?

We'd love to help you build your projections in your computer. Lewis is here, Lewis, why don't you answer that you've got your projections.

So in the past two years, we've done $256 million of acquisitions each year. We have enough in the pipeline, where we could do that. But given that we're just in February, and nothing is closed yet, still a lot left in the year. I think under - we have about 150 million or so under PSAs. Obviously, no guarantee that we can close on all those, right now - we would expect to be able to do about $200 million worth of acquisitions. That's kind of our internal minimum target. We might come in lower than that. Just three years ago, I think we were at about 150 or so. Maybe we'll even beat last year and the year before. But it's kind of early to say, but $200 million is kind of an internal number that we pencil in.

Okay, that's helpful. I had your guide view on funding those acquisitions change in the last three months, just given the fact that your stock has done incredibly well?

So you're telling us to fund those with selling common stocks that what you're saying?

I'm not telling you what to do. I'm just curious, waited more ?

I'm just teasing you, Nate. We always like to blend it together because if you shut down the preferred stock sales, it's hard to start them back up again. So we keep selling $4 million or $5 million a month as we can with that offering and we'll use the ATM program for the common stock, but we don't have any plans to have a big common stock offering.

Our next question is coming from Barry Oxford with D.A. Davidson. Please proceed.

David, getting back to your SPAC, when we look at that, if it does happen, and we kind of go down the road thinking longer term, is it possible, is that the operator of the SPAC would have a lease with land?

Could be as you probably know there are a number of larger companies like down the street from us, you've got a hotel operator, and they have a - not a SPAC, but they have a - what do they have - they have a REIT up the street from us. In fact, one of our people left and went to work for that REIT. So this is Hilton, they're right down the street from us. And their REIT is right up above us. So yes, they do that. I've got a study how they do that? Because I want to make sure there is never any conflict but the answer is yes, if you got a huge purchase in your SPAC, and you needed to sell off, or if you're just using the SPAC sales of real estate, which certainly want the REIT to pick that up. And I think it would, I don't know that anybody is going to come in and I don't even know if we have to do that voluntarily of offer it to the world as long as we got good indications of the value for the each of the farms, and we do that. As you know every quarter, we're valuing our real estate. So I think internally and other folks at have to sign off on any of the valuations, we do in our REIT as well as we have a couple of people on the outside that are looking at it. So I know we can make sure we pay in the right amount, we just have to make sure that we don't have a conflict of any kind.

Right. Now on the acquisition side, I want to make sure that there is not a competition between the SPAC and land. There wouldn't be because, correct me if I'm wrong here, the SPAC would only go after a farm that was being operated.

That's great. That's the first test of course and we have conflicts, because we've got four companies and they're all involved in different parts of the marketplace. And so we've set up a method of reviewing each one of those of who is going to take it. For example, you might have a buyout that's being worked on by a buyout fund, and our lending company would like to help them. So that would mean pretty automatically that we couldn't have the buyout fund doing it if we're going to do the lending on it. So it's the thing we go through every time, every deal comes through, we have a form we fill out, we go through it, the Board reviews it every quarter of where we sent these deals. So allocation of deals is something that we deal with every single quarter with our Board and justifying why went one place or the other. I think we have it covered. When you have the two business development companies that operate under the 1940 Act, the problem there is we have to get - how we're doing it signed off by the SEC. And we do have an agreement with the SEC that allows us to determine where it goes as well as which can invest in it. So it is filled with bureaucracy and paperwork, but I think it's worked for us for a long time. And I had the same situations when I was running another company. And we had multiple funds. So it's not unusual. And the fact that someone like Hilton, who is right here in our backyard is doing it for their operating business, which is next door and doing it for their REIT, which is just up the street. I think we can do the same thing if we can justify the way they're doing it.

Okay, that makes sense. And then last question on the acquisition side, David, as you're out there competing in the marketplace. Have you seen new types of institutional investors come in? Or are you competing against kind of the same, cast of characters?

I haven't seen anybody new show up, but we've seen some changes in those people that are out there. But generally speaking, it's the same crowd and we don't see any giant gorilla showing up and saying, I'd like to be in the acquisition business.

Our next question is coming from Craig Kucera with Wunderlich Securities. Please proceed.

Are you expecting any large lease terminations in 2021 like we saw in early 2020?

No, not expecting it. Of course it could happen. But we don't see anybody that's having those kind of problems. Generally speaking, the agricultural world has missed this big recession that we find all our companies grinding through. And we've been very lucky in that it hasn't touched us at all. I think it's actually increased the sales of most of our agricultural goods and the grocery stores and doing better because of that. Whether it'll change now that everybody is getting a shot in their arm, I don't know, I think it's going to take a while, Craig, before things lighten up. When we get back, everybody is thinking that boy, when we get everybody vaccinated the world will come back together. I think you're looking at a two to three year, upward tick, you still have 850,000 people on their welfare rolls for this month. So I mean, this week, so it's still a big number of claims. And that's very hard to put back together, and it'll come back together. But just like in 2008, it took a long time to get there. And yes, in two, three years, we'll look back at this, pull out our little mask that we put on and laugh a little bit, but it'll be a while before we get there.

And just thinking about your property operating expenses, I know you've shifted more and more of your leasing toward triple net. You look to the back half of this year, it's running close to 300,000 a quarter, is that a pretty good run rate for 2021 as you're thinking about it?

What do you think, Lewis? Is that a fair thing for him to put in his projections?

I think the third and fourth quarter were pretty flat, so that's a pretty good normalized number for us going forward. Again, last year, we had some additional operating expenses to a lot of costs for to rent some commercial grade generators, to run some wells that hadn't been connected to the permanent power grid yet. But the past two quarters been pretty flat, we didn’t buy a lot of new farms in the fourth quarter. I think all the one of those leases are triple net. So one of those properties we'll have some real estate taxes on, but there shouldn't be much of an increase to our runway for the past two quarters.

Got it. And I'd like to talk about your leasing and negotiations here in the fourth quarter and earlier this quarter. You go back to 2019, you're getting pretty solid double-digit increases in rents or most of the 2020 in fact through third quarter. Some of that, you were transitioning from double nets, triple net, maybe had reduction of expenses, but we're seeing good double-digit NOI spreads. Can you give us some color on sort of what happened in fourth quarter and earlier in this first quarter, was there anything unique to those situations or crop types to have rents slip a bit?

The two main leases where we took rent hits, were on some - actually the only two dry land farms that we own in our portfolio out in Colorado. Now, those are the two leases that David mentioned that retains the lease structure, we reduce the base rent in exchange for adding a crop share component to them, there were no crop share components in the prior leases. I think the base rent was about cut in half. And as David was saying, if the farmer has an average or good year, we expect to come out pretty similar in the end, of course, by giving their grower this rent structure, which we did to help him out. We are a little bit at risk if he has a bad year, we'll come in lower than we were previously. We won't know that until probably Q4 this year. But we did just - these leases we only renewed them for two years. So hopefully after a couple years, if commodity prices continue their higher trends they are right now we're hopeful of being able to negotiate a better lease here in the next couple of years on those two properties.

Any other questions?

Mr. Gladstone, we have no additional questions at this time. Would you like to make any additional closing remarks?

Well, we appreciate everybody calling in and giving us some good questions. Hopefully, we've updated you now so you can move forward with the projections and we'll be out there working for you. That's the end of this conference, and thank you all again.

Thank you. Ladies and gentlemen this does conclude today's teleconference. Once again we thank you for your participation. And you may disconnect your lines at this time.