Greetings and welcome to Gladstone Land Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require Operator assistance during the conference, please press . As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Gladstone, Chief Executive Officer and President. Thank you, you may be.

Well, thank you for that nice introduction. This is David Gladstone welcome to the Quarterly Conference Calls for Gladstone Land, and again, thank you all for calling in today. We appreciate you take time out of your day to listen to our presentation. Were first going to start with Eric is in the office today from Michael LiCalsi. Eric is our Deputy General Counsel, and he is also the one of the big guns in administration side of our business. And that's the administrator for all the Gladstone funds. Eric, why don't you start?

Thanks, David. And good morning. Today's report may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. These forward-looking statements involve certain risks and uncertainties that are based upon our current plans, which we believe to be reasonable. 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 Form 10-K, and other documents we file with the SEC. Those can be found on our website, www. gladstoneland.com. Specifically the Investors page. Or on the SEC's website at www.sec.gov. 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. Today, we will discuss FFO, which is funds from operations. FFO is 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 will also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses, and adjusted FFO, which further address core FFO for certain non-cash items, such as converting GAAP rents to normalized cash, cash rents. We believe these are better indications of our operating results and allow better compatibility of our period-over-period performance. Please take the opportunity to visit our website, www. gladstoneland.com and sign up for our e-mail notification service. So you can say up-to-date on the Company. You can also find us on Facebook, keyword, The Gladstone Companies. And we have our own Twitter handle, @GladstoneComps. To today's call with an overview of our results, so we asked you review our press release and Form 10-Q, both issued yesterday, for more detailed information. Again, those can be found on the investors page of our website. Now I will turn the presentation back to David Gladstone.

All right. Thank you, Eric. We start with a brief recap of the current farmland holdings, we currently own about 108,000 acres, and 160 farms and about 45,008 and bake -- acre feet and banked water. All those together total about $1.4 billion in the assets that we own. Our farms are located in 14 different states. And more importantly, in 28 different growing regions and our farms continue to be 100% occupied and are leased to 82 different tenant farmers, all of whom are unrelated to us. And the tenants on these farms are growing over 60 different types of crops. Given the number of different growing regions, tenants, types of crops on our farms, we think this is sufficient diversification to provide for safety and security. The cash flow is coming from the rents, And we believe these diversification helps protect the dividends that we're paying to our preferred as well as our common shareholders. No guarantees in this world. Anything can happen in this life. But right now we're feeling pretty good about getting the money in from rents and paying it out as dividends. We had another strong quarter from the acquisition standpoint and we continue to see a decent number of buying opportunities come our way. And the Fourth quarter, we've gotten off to a nice start. We still have a few farms that we're working on to close before the end of the year hopefully you get them all done. Has been a slow year in terms of the pandemic. has kept people out of the office and that always slows things down. We continue to be able to renew all expiring leases without incurring any downtime on any of our farms, and notable increase in these renewals reflects the positive trends in all…

Thank you, Dave, and good morning, everyone. Again with our balance sheet, during the third quarter our total assets increased by about $60 million due to new acquisitions, which were financed with a mix of debt and equity proceeds. During the quarter, we secured about $31 million of new long-term borrowings at a weighted average rate of 2.75%, which is fixed for the next 10 years. On the equity side since the beginning of the third quarter we raised about $86 million dollars in net proceeds through sales of our common stock under the ATM program, representing a net cost of capital of 2.35% with our recently increased dividend, and over the same time period, we've also raised about $22 million dollars in net proceeds from sales of Series C preferred stock. Moving on to our operating results. First, I'll note that for the third quarter we had net income of about $1.5 million and a net loss to common shareholders of $1.6 million or C/5.2 per common share. On a quarter-over-quarter basis, adjusted FFO for the third quarter was approximately $5.3 million dollars compared to $3.7 million dollars in the second quarter, an increase of about 41%. AFFO per share was C/16.6 in the third quarter versus C/12.6 in the second quarter, an increase of 32%. Dividends declared per share were about C/13.5 in each quarter. The primary driver behind the increase in FFO was an additional participation rent recorded. This was partially offset by an incentive fee earned buyer advisor during the current quarter. During the Third quarter, we recorded about $1.8 million of participation rents versus only $19,000 in the previous quarter. Fixed base cash rents increased by about a million dollars or 6% on a quarter-over-quarter basis, primarily driven by additional revenue earned from recent acquisitions.…

All right. Thank you, Lewis. Some nice report, and Eric gave us a nice introduction, so we're gliding along here. Acquisition activity remains good for us, we continue to see buying opportunities, we continue to make offers, we sign up people and get them into a position that we can go forward and close. It's been a little bit slow in the marketplace out there simply because people are still reacting to the COVID-19. Just a few final points before -- that I'd like to make before we move too far on, we believe that investing in farmland, growing crops that contribute to healthy lifestyle such as fruits and vegetables and nuts. As following the trend that we're seeing in the marketplace today. Currently about 85% of our total crop revenues come from farms growing the types of food that you'd find in either the produce section or the nut section of your local grocery store. So if you want to see what we grow, just go to the grocery store and you will see it. We consider these foods to be among the healthiest type foods. and we continue to see a growing trend toward our organic among these food groups. About 40% of our fresh produce acreage is either organic or transitioning to become organic. And about 15% of the permanent crop acreage falls into this organic category. We believe the organic sector would continue to be strong, that's a very strong growth area and additions more than 95% of the crops that are grown on our farmland is classified. as being non-GMO. Another major reason our business strategy is to focus on pharma and growing fresh produce is due to the effect of inflation in this particular segment. According to the Bureau of Labor, and the Bureau…

Thank you. At this time we will conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the questioning queue. You may press star two if you would like to remove your question from the Que. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is star one at this time. One moment while we poll for our first question. Our first question comes from Rob Stevenson with Janney, please proceed.

Good morning. David, where is pricing for farmland today versus a couple of years ago, pre -pandemic? When you look at similar properties, are we up 5%, 10% percent, flattish? how do you sort of characterize that across your various sort of property types and markets?

Yes. If you're looking at the Midwest, which is most often the one that's published, it's gone up pretty substantially this year simply because people are making money. They are also buying lots of tractors and those kind of equipment. In the areas that we're in has been a steady increase over the last 10 years and certainly over the last 3 or 4 years. as people have realized that there's other things other than corn and wheat that are growing. And I would say there has been a good 15% increase over the last 3 years.

Okay. And then, given how hot the housing market is, have you guys thought about selling some of your land to homebuilders in some markets where it's bumping up against the farms?

We have a few farms that are inside of the areas like in California. You can't just sell your land to a developer and the developer goes off and builds what he wants too on it. In California, you need to get the local city, you have to be inside the city districts. So if you're in Watsonville you need to be inside of the town limits for Watsonville and then the local government officials can make that decision. If you're outside of that, you have to put it on the ballot for voting, And if you've ever seen ballot for California, they're about four feet long there really a lot of things on those ballots. And one of those would be I want to take that lot that's right next to this one or that one and build houses on it and they always get shot down. Californians and not interested in building more houses. And so you have California pushing now to take neighborhoods and tear down the houses and build apartment buildings or condos, something in order to increase the amount of land that's being used for that, and it's really rough in California, they're probably 15% under a house built for places to live, and they just can't seem to get out of their own way in terms of regulations. And I know a lot of farms that would be that. We have one right inside of Watsonville. It's a small -- mostly blueberries -- no, mostly strawberries in that. And I think someday is someone will show up and want to buy that, but that's not going to be a big hit. It's going to be a nice hit, but they haven't shown up yet. And one reason is, quite frankly, the strawberry fields are…

Then the last one from me, the acquisition vehicle, are the opportunities that you're looking at there, going to be too big for a taxable REIT subsidiary? Is that the reason why you're going that route rather than just putting any of the operations into a taxable REIT subsidiary for the time being?

They're too big and they had overshadowed everything. And as you know, if we bust that regulation, we're out of the wheat business for 5 years. So I don't want to break it in, so that's why we're there. And we keep getting these opportunities showing up and saying we'd like to sell the whole thing and we say we'll -- hang on, as soon as we get public we will be able to distribute some of the $100 million that we have in that SPAC and also give you some publicly traded stock. We're working on some now we've got some in here and once our acquisition call, then we have a date. Anybody know?

No, we don't yet.

We don't have a date yet. Okay. I know he's filing next week is it?

No, it hasn't been the case.

So it will happen soon. You'll get a copy of it, obviously, Rob, and maybe by then we'll have something a little more firmed up. I don't think it's going to be a problem finding things to buy, we've seen a lot of those and what we want to do is buy several relatively large ones and start out as a diversified group rather than one that just does one thing. and then continue to buy smaller farms and operations and have a good operating team. We don't have an operating team now. We'd have to tap one of our tenants to do some of that, but I don't know how all of that's going to work out until we buy the first couple of farms.

Okay. Thanks, David, guys. I appreciate it.

Next question.

Our next question comes from Eddie Rowie (ph) with EF Hutton please proceed.

Hey guys, congrats on a strong quarter. This is the second quarter in a row where at least renewables will contribute to over 10% in growth in net operating income. Is this more indicative of the individual farms whose leases were renewed or is it indicative of the general environment were in terms of inflation, you think?

We think it's a little bit of both. I mean, obviously there are certain pockets in the country where if we were renewing leases in those regions. It might be more muted increase or maybe even flat, but with a couple of the farms that we've negotiated where there's -- where those negotiated -- negotiations have taken place. In Northern California, Michigan, certain parts of Florida, Midwest. And that's where we're seeing renting those particular areas are increasing slightly particularly in the Midwest, as David mentioned, with the commodity prices this year. But Florida has been a pretty strong market consistently. Central and Northern California has -- Southern California cap rates have compressed a little bit there, but none of our lease renewals have been in that area lately, so it's a little bit of both.

Gotcha. Gotcha. And where are most of the lease renewals and upcoming year taking place?

In the rest of 2021 is just one farm. We have three leases in 21 that are expiring over the next, well, I guess actually over the next 6 months, 3 leases. But 2 of them are tenant termination options that are exercisable within the next 5 days. We do not believe the tenants want to exercise the option on either one of those, so it's really just one renewal that we're working on and it's on a farm in Colorado that we're close to finalizing negotiations with a tenant. The gross rent is likely to remain flat, but we are expecting a significant decrease in the amount of operating expenses we will be able to look for so we would expect hopefully an increase in NOI for us there.

Got it, got it. Turning to financing, it seems like you guys have a pretty healthy loan to value ratio right now. Could you talk a little bit on what your plan of action for funding new deals is going forward?

Well, we have three ways of generating funds for that. One, of course, you've touched on and that's the borrowings. There are lots of lenders in the agricultural space in the U.S. we have I think there's five federal, large banks that do lending and we've used them pretty, pretty much every time. We also have a couple of large institutions. Rabobank is the largest in the world in terms of agricultural lending. We've done a little bit with them, but not a lot. And in addition to that, we've got MetLife. Is the largest in the United States, and we've done a deal to them. So there's plenty of leverage. And it doesn't seem to be impacted by banks that might have problems. so we're in good shape there. We also sell some preferred stock. We've got a number of those outstanding and we participate by selling non-traded preferred. That's more expensive, it's about 6%, but we use it when we need a little extra leverage. It's that kind of situation. And quite frankly, the ATM program has been very strong. What have you got from that one?

I've got about $86 million over the past four months or so.

We've been selling stock through that ATM program and using it to buy 5 by farms that are generating 5%, 6%. After leverage, we've got a good ratio and the nice thing about leverage is that it doesn't go up until the end of it and we've got long-term mortgages on these things. So as a result, the spread is sort of locked in for years and years and years. and so, for us -- the next movement for us is going to be to raise money some other way, and I don't have any other way right now, but all of those that I mentioned are just wonderful places to get leverage. Now, that's going to change over time and that will reduce how much we can pay for a farm and all of these farmers know that. So we've had good transactions with admin as you probably know, we do from time-to-time, have people that will take up reach shares that is. And that's a non-taxable transaction whereby we give them shares of our stock and they give us their farm and it's quite nice for them and for us because that's another way of raising equity. So we're in good shape on the financial side. We don't see any problems unless something blows up and -- I don't see that happening in right now.

Got you.

And I will add the use of some of the sources that David mentioned in the past where we would almost always get a loan simultaneously with the acquisition, with all the equity proceeds that we've been able to bring in. What we've been doing and we will be probably will continue to do is buy these farms with equity proceeds and then close on a loan, but not draw I until later. We want to close on a now because interest rates are very attractive, as we said it earlier, we've got 2.75% fixed debt for the next 10-years this quarter. But we want to lock in these rates, but not drawing them yet until late down the road when we actually need the additional proceeds..

Great. That makes sense. Thank you, guys.

Other questions?

Our next question comes from Eric Borden with Berenberg Capital. Please proceed.

Hey, guys, good morning. On a kind of c -- could you talk about the volumes in the quarter? What was the mix in terms of deal size there? And then kind of maybe going forward given your favorable cost of capital, what's the appetite to target larger deals or maybe portfolio about there in terms of farmland?

Yeah. There are not that many that come up with big farms, other than the fact that the farms continue to go up in price and some areas

So I think we'd love to get some big farms; 5,000 acres would be great, we can find acreage here and there and everywhere. We also want diversification. So getting one huge farm like we have in Southern California, there are not that many people that can lease it. We've leased it to one of the largest strawberry operators in the country and they are strong, big, and lots of cash flow, so we like that. But to get to these much larger farms, there aren't that many farmers that can take down that much. So we have to be very careful not to get into buying whereby we have a large farm but we don't have a tenant. So we like the onesie - twosies, there are not a lot of players there and that's our forte, it's being able to negotiate those and offer the seller a good price for the farm, but also tax free if they want to do the right transaction. We'll keep doing what we're doing and the diversification is really important for me. I don't want to get into a situation where we've got a couple of big farms that are going to hurt us.

I appreciate that. And then maybe on the acquisition front, kind of historically Q4 seems to be a key time to acquire farms, but given the constraints as it relates to COVID, do you think you'll see more farmers come to market in Q1 or will there be some rollover there into the new year?

Probably, I would guess we never know if they're going to be able to close on time. We had one situation in which after the review of everything, we found that we were about a half-acre, maybe it was more on somebody else's farm that we were -- that the farmer was farming and we had to get that undone before we close. And of course that's got to go through the government in California. So that's always a pain. And not that they are bad people. It's just that COVID has stepped their scheduling. As a result, we get -- we don't get really quick response on that. You sit for a while waiting for it to close. I think the bottom line, Eric, is that we're known in the marketplace now. We were not known 5 years ago very much, and so now everybody knows who we are that's going to sell a farm, and so they show up on our doorstep and we're just sitting there working with them trying to get them to move to a point where we can get the deal done. And unfortunately, a lot of these farms are tied up in history. That is, it's been in the family for 5, 6 generations and there's a lot of emotional in the sale of that. It just is one of those things that it's been in our family for 6 generations or 3 generations, whatever it is, and they don't want to let it go for what it's really worth. if somebody who's farming it. And while we can always agree to look at somebody doing the -- some third-party doing the review, it doesn't mean you're going to get the farm just because you got to review it with the . There's…

Yeah. Last one for me, and then it's relating to potential development opportunities. I know in the past you talked about potential deforestation around the farmlands. certain farms. And I was just curious, is that potential -- does that land, does that give you an opportunity to increase the acreage per farm, or is that really not how I should be thinking about it?

Probably not the way to think about it only because the deforestation is up in the mountains and we don't grow anything in the mountain, so they're not part of that whole problem. and it's really sad. People burned down -- had burned down houses and a lot of trees have been lost that are up in the mountains. But at the end of the day, problem for us is we just need good flat farmland, and that's what we're looking for, so I think from our standpoint you shouldn't look at it that way, you should consider it. Gee, they've got some farm land, the farmer is going to sell it. If you sometimes have taken a small plane from Watsonville down to Oxnard, 2 smaller airports you can go through. And as you fly over that part of the everything is in farmland that isn't in houses. And so over time, there's no doubt in my mind that over time those places will go away. That used to be in Watson Watsonville there's a Company that you probably know. It's that sparkling apple juice and a lot of non-alcoholic drinker’s drink that in place of champagne. And they've been around forever in a day. And all of that farmland that we farm there in Watsonville plus thousands of other acres used to be filled with apple trees. And those all got chopped down and put into berries and some of the other ground crops because it was much more profitable. And they now get a lot of their apples from up in the mountains of Washington and maybe some of the other apple tree makers. so it's just a changing thing that goes on almost every day out there, and we're seeing more and more people needing place to live so it's going to continue with pressure on all of those places. I don't know, Eric, we're -- we just are following a huge transition in land from agricultural to places to live. It won't happen in my lifetime completely, but I'd say 50 years a lot of that will be gone. And it will be cashed in by us and other people who own farms.

So, hang in there.

Sounds good. Thank you guys. I appreciate it. Okay. We have any more questions?

Our next question comes from With Please proceed.

Good morning, guys.

Good morning.

Just one quick one. How do you think inflation expectations are impacting your acquisition volume?

Maybe some there, obviously inflation in berries and other ground crops are pretty steep right now. And so the farmer is making good money and he wants more money than he wanted before. So yes, it's following through. The difference is that a lot of the leases that we have in place now go up in price when inflation goes up. So it helps us. We have stopping points as we call it, where in 3 years or 5 years we assess the marketplace and to the extent that the marketplace has gone up, we are able to push up the price of our rents. We also have, as we've mentioned many times now, the ownership in some of the crop and as the crop prices go up, we benefit as well on that. So we've kind of sheltered ourselves from inflation. We're not in the crops that people rent by the year. For example, a lot of the corn crops are rented on an annual basis and they of course have a chance to jack-up the ran every year. We've tried to stay away from that and just put some bumps in there for us, and all of ours have some kind of way of the price going up, and it's worked very well. I think there's always tension between what you want to do on something like that, and because if the prices of the crop go down, our REIT doesn't go down. So we only have a chance to move REIT s up rather than any other methods. And like many of the other REITs, we have built into our leases. 2% increases every year, 3% increases every year, and that pretty much takes care of the way inflation is going. However, at the rate of the…

I guess just kind of following up on that are you seeing any I guess in the negotiations you are having on new potential leases, are you seeing more pushback on your ability to get percentage rent agreements?

No, I don't think so. I think we always -- there's a dance that goes on between buyers and sellers and we're no different from anybody else, they're pushing whatever they think they can get, which they should do. But I think the negotiations go pretty straightforward. Most people have already heard about us. They've already read about us. They're probably some shareholders that come with their land. But I think negotiations go pretty straightforward and some sellers, as I mentioned in another part of the presentation, have an emotional attachment to their land and they just don't want to sell it at the average price that's going on. They have their whole history. I know when we bought a farm in Oxnard, it had an old fashion house on it. We ended up tearing down the house. And after we tore it down, I realized that one of the families there, all of their children who are in their 60s now, had grown up in that house. And I regretted it from that standpoint, but we had to get rid of it because we were afraid they were going to come in and tell us it's one of those protected areas that we couldn't tear down the house. It was a beautiful old farm house, but it didn't fit the farm. It hadn't been lived in for years and years and years. So it was not in good shape. Anyway, I think there's a lot of people in the California areas that -- I went recently, there was a family with 24 members in the family that had come over about a 100 years ago, and each of those 24 people had the right to stop any sale. I had 23 of them lined up -- no, I'm sorry, 22 of them lined up, but there were 2 hold-outs and we couldn't get them to agree so it's still sitting out there. I guess it already for somebody else to take over it. At some point in time and sell it off, but it will get sold. There's just nobody there that wants to size it's in its growing garlic Konami, people can grow garlic.

I guess, just following up on that. Is there -- have you seen a change -- I'm guessing we're more getting at. Is there changing 1 verse -- and I guess it's pre -installation scare, looking back a year?

No, we haven't seen anybody say, gee, it's worth more this year because of inflation. I'm sure somebody argues that, we don't spend a lot of time on it. We usually have an appraisal. We need to keep the uprate within the confines of the appraisal because that's what we borrow against. Whatever the appraiser says, the banks will usually give us 60% of that in terms of a long-term mortgage. So we don't have a lot of room to go outside of that appraised relationship that we're in every time we do a deal. So they know what we can, and we tell them, here's what we can pay. And they either keep coming back and negotiating or they stop and go away and you know at this, as we call it, the smaller end of the spectrum that just aren't that many people out there bidding against us. I'm sure we'll see somebody come and do the same thing. We're doing at some point in time so far, note that one is there, and as you probably know, we have a huge team of people in both Florida -- and not are huge team in Florida, but a huge team in California, just are everywhere there. Everybody knows us.

Yes. Thank you for the color. It was a great answer.

Okay. Thank you. Any other questions?

There are no further questions in queue at this time. I would like to turn the call back over to Mr. Gladstone for closing comments.

Well, thank you all for asking questions. Hope you come with a lot of questions next time, it’s always great just a chat about things that are on your mind and we will see you next quarter. That's the end of this call.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation and have a great day.