Greetings, and welcome to the Gladstone Land Corporation Year-End Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mr. David Gladstone, Chief Executive Officer and President. Thank you. You may begin.

Thank you, Darrell. That was a nice introduction. This is to repeat again David Gladstone, and welcome to the quarterly conference call that we give every quarter. It is our year-end as well. Thank you all for calling in today and we appreciate you taking the time to listen to our presentation. Before I begin, we have to hear from Michael LiCalsi, our General Counsel. Michael?

Thanks, David. Good morning, everybody. 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 statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. The 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-K, 10-Q and other documents we filed with the SEC. Go to our website, gladstoneland.com, specifically, the Investors page or the SEC's website, which is www.sec.gov and you, can find them all there. 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. Definition is 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 may also discuss core FFO, which we generally define as FFO with some adjustments for certain non-recurring revenues and expenses, and then adjusted FFO, which further adjust core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. And we do this, because we believe these are better indications of our operating results and allow better comparability of our period-over-period performance. Now we once again ask you to visit our website that's gladstoneland.com. While you're there, you can sign up for our email notification service. You can also find us on Facebook, keyword there is the Gladstone Companies and on X, which is formerly Twitter our handle there is @GladstoneComps. Today's call is an overview of our results, so we ask that you review our press release and the Form 10-K both issued yesterday for more detailed information. Now with that, I'll turn the presentation back to David Gladstone.

Well, thank you, Michael. I'll start with a brief overview, as I do each time. We have a lot of farmland. We currently own about 103,000 acres on 150 farms and over 55,000 acre feet, which is the way they measure water assets. One acre foot is equal to about 326,000 gallons. So we own over 18 billion gallons of water. And together, the land and the water are all valued at a total of about $1.3 billion. Our farms are in 15 different states and more importantly, in 29 different growing regions. And our water assets are mostly in California. Farms are leased to over 65 different tenant farmers and people who manage the farms; there are a lot of people involved. And the tenants on these farms are growing over 60 different kinds of -- 60 different crops, mostly of fruits and vegetables and nuts. You can find this produce in other sections of the grocery store as well as in the produce section, which is where most of the crops that are grown on any of our farms are sold. We mentioned in previous calls that we continue to be cautious with new investments because our cost of capital remains high. Cap rates on most row crops and farmlands are so low that today, because of those situations, the value of those crops and land remain very high. We also believe it's a good time to conserve cash given the uncertainty of the produce and nut marketplace. And the Federal Reserve is holding interest rates too high today, so hopefully they'll change their mind and reduce it down as time goes on. We completed some farmland sales recently. In December, we sold 11 blueberry farms in Michigan. These are farms that have been giving us some problems.…

Great. Thank you, David, and good morning, everyone. I'll begin by briefly going over our recent financing activity. We did not borrow any new money during the quarter, but during and since the fourth quarter in connection with certain property sales, we did pay off about $23.5 million of loans. Majority of these loans were scheduled to re-price later this year. On the equity side, since the beginning of the fourth quarter, we sold about $20,000 of our Series E Preferred Stock and about $4.7 million of our common stock for the ATM program. Moving on to our operating results, adjusted FFO for the fourth quarter was approximately $3.4 million or $0.09 per share, compared to $5.4 million or $0.15 per share in the prior year quarter. Dividends declared per common share were about $0.14 in both quarters. On an annual basis, adjusted FFO for 2024 was approximately $16.7 million, compared to $20.3 million in 2023 and AFFO per share was $0.47 in 2024 versus $0.57 in 2023. Divided declared per share were $0.56 in 2024 and $0.55 in 2023. And our FFO as defined by NAREIT was $0.58 per share in 2024, compared to $0.62 per share in 2023. Primary drivers behind the decreases in AFFO were recent changes in lease structures on certain farms, lost income from the large farm in Florida that we sold in January of 2024, and certain tenancy issues which has led to vacancies on some of our farms and resulted in both lost revenues and increased costs. Year-over-year fixed base cash rents decreased by about $4.9 million on a quarterly basis and $9.7 million on an annual basis, primarily due to the reasons just mentioned that is lost revenues from the Q1 farm sale and vacancies, as well as structural changes to certain…

Thank you, Lewis. Nice report. We'll continue to stay active in the market show a good acquisition opportunity present itself; and so that we're ready if interest rates come down as well. But as mentioned in prior calls and today, we're still being more cautious on the acquisition front because our cost of capital remains high. And while we have seen a decrease in the pricing of certain permanent crops, farms in the West that is most. That and most of the value of the farms like those growing strawberries remains high. The cap rates on most of these farms are just high enough to cover our financing costs so that make it very advantageous to somebody to rent them. So as a result, acquisition activity remains slow for us, probably will last for another couple of quarters. Interest rates are still too high today and projections for further rate cuts seem to be getting -- keep getting reduced and pushed out farther. So the amount and time of any additional rate cuts remains uncertain to us. But we do hope that rates come down at some point in the near future, so that we can start looking at buying more farms. And just a few final points. We believe that investing in farmland and growing crops that contribute to healthy lifestyles such as fruits and vegetables and nuts, follows the trend that we see in the market today. Overall demand for prime farmland, growing berries and vegetables remains stable to strong in most of the areas that we're in. As mentioned earlier, crop prices are certainly and -- certainly permanent crops, particularly nuts and grapes have been depressed lately. People just not eating enough nuts. We need more of that in order to push the price up. We have…

Thank you. We'll now be conducting the question-and-answer session. [Operator Instructions]. Our first questions come from the line of Gaurav Mehta with Alliance Global Partners. Please proceed with your questions.

Thank you. Good morning. I wanted to clarify your comments on the participation and fixed base rent amendments. I think you said $3 million to $3.5 million lower fixed base rent. Is that $3 million to $3.5 million lower from what you guys reported in 4Q?

No, it's more the average base rent for the year in 2024 versus compared to the average base rent in 2025. So it's not Q4 versus looking forward, if you took the annual base rent from 2024 divided by 4, that's the baseline number we're using for that $3 million to $3.5 million swing.

Okay. And so -- and then that lower base rent majority of that you're expecting to get in 3Q and 4Q of 2025, right?

Yes. The majority of that will be -- well, based on our current expectation, we do expect to recover the majority of that and hopefully more if the harvest turns out well in the second half of this year. And then, after the marketing period is over, bonuses and adjustments will get recognized in the second half of the following year.

And so then in 2026, do the leases on these farms, do they go back to how they were in 2024, or do you expect them to continue like in 2025?

It remains to be seen. Our hope is that we can revert these back to the traditional lease price. We're going to kind of be at the mercy of the market and like we were this time. We could have maybe leased it out for a very low base rent and very little, if any upside. But when we ran the numbers, we thought this was a better option for us to take. So when these leases come due at the end of this crop year, we'll have to do that analysis again.

Okay. And then maybe lastly on the sale of Florida farm, I think you mentioned you paid off some debt from the proceeds. What was the use of remaining proceeds from that sale?

Right now it's part of the $50 million that we have cash on hand on the balance sheet. We're just holding that for other uses at this point.

Okay. Thank you. That's all I have.

Okay, next question.

Thank you. Our next questions come from the line of Craig Kucera with Lucid Capital Markets. Please proceed with your questions.

Yes, good morning, guys. First one is for Lou. What are your expectations around interest patronage here in the first quarter?

We should be getting a similar percentage back from the farm credit borrowings, but we have paid off a portion of those loans over the past year. So if I had a ballpark it right now, I'd probably say about 10% less, and that's just because I think we paid off about 10% of those loans for the past year.

Got it. That makes sense. You mentioned that you had three leases expiring here over the next six months and a relatively small amount of rent, maybe 1.5%, but for the year, this is actually a pretty big year, I think in the K you've got north of 17% expiring. Can you give us some color on the remaining lease expirations this year? Maybe a split between what's permanent versus row crop?

Yes. So the leases expiring in the next six months, those are -- most of those are row crop farms. But yes, as you said, that's a small percentage of the overall amount. The remaining leases that are expiring in the second half of the year, the majority of those probably 60% to 70% are on permanent crop farms. Some of these are the leases that we discussed about. We have lease incentive and a high upside on the crop share. So probably about half of the leases that are expiring fall into that bucket. The other half are permanent crop farms that are under traditional leases right now. The half that's under traditional leases, we expect them to remain flat; maybe even can negotiate a rent bump upwards. But remains to be seen at this point. And as we just answered, the remaining leases on the permanent crop farms that are in the kind of lease incentive and high upside bucket remains to be seen. We'd like to be able to revert them back to traditional leases but it's -- we can't say right now what direction we'll have to go on those.

Got it. That's helpful. I guess, given where the preferred is trading, you've been buying it, I think in the 2,050 range. It's still kind of around there. Will you guys anticipate to continue to be out in the market buying back the preferred, maybe getting a small gain?

Yes. This is an easy way for us to make money.

And one more for me, just looking at your real estate expenses here this quarter, there was a pretty decent increase. Is that just related to the taxes and some of the incremental costs with the directly operated farms or anything else going on there?

Yes, exactly. It's that whole bucket of vacant direct-operated non-accrual properties. Some tenants had to terminate their leases early, so they were -- they didn't make those tax payments. We had to make them on their behalf. But yes, it is all related to the properties that have fallen into that bucket.

Okay. Thanks for the color.

Thank you. [Operator Instructions]. Our next questions come from the line of John Massocca with B. Riley Securities. Please proceed with your questions.

Maybe just going back to property operating expense again, I mean is 4Q kind of the good run rate for going forward for the remainder of the year or was there something where either those leases didn't change over until kind of mid-4Q that could cause it to skew higher or one-time expenses that could cause it to kind of skew lower in the quarters of 2025.

Our hope is that it comes down a little bit for a couple of reasons. One, the properties, the Michigan blueberry properties that we sold, they contributed a decent amount to that increase throughout the year. I think they had negative NOI of about $400,000 over the course of the year. That should start to come down now. We will -- we are going after the tenant for some additional rent owed. So some legal costs will remain related to those farms. But the cost related attributable to those farms should come down quite a bit. And I think we also had to recognize some kind of catch-up real estate taxes in the fourth quarter. I don't have the exact number here, but amounts that the tenant had owed but was unable to make the payments, so we had to record those or we had to make those payments on their behalf in the fourth quarter. So I don't know exactly how -- I can't say how exactly how much, but we do expect that number to come down a bit in 2025.

Okay. That's very helpful. And then on the dispositions completed in 1Q 2025, were those occupied in revenue producing assets and if so, what's kind of the NOI impact from those sales?

Yes. They were revenue numbers for the farms that we sold in 2025 I think was for the year was about $1 million, $1.5 million, $1.7 million.

Okay. That's very helpful. And then kind of bigger picture, the -- what percentage of kind of the California portfolio if you will today is on this kind of crop share, high upside lease structure and how much kind of remains in a more traditional structure. And I guess, what's the outlook for those assets to stay in the more traditional structure or move to this more of a flow-through structure.

So right now we have five farms that are on this kind of hybrid structure, if you will. As David mentioned, there's another couple, two or three farms that we're looking at. The other farms right now, we believe -- the other farms that are -- other permit crop farms that are in the traditional lease structure. We believe at this time that they will -- we will be able to keep them in the standard structure. On a value basis I don't have that number available or calculated right now. We can get back to you on that. But five farms are in that bucket; two or three more might go there, the rest we expect to stay in the traditional lease structure.

Okay. That's very helpful. And that's it for me. Thank you very much.

Have any other questions?

Thank you. Mr. Gladstone. There are currently no other questions in the queue.

Okay. Thank you very much. I just want everybody to know that this change is hopefully going to be for one year, maybe a few farms will go over into the next year. But our goal is to put everything back together as it was before. This downturn in tree crop processes just tore us into a different area, which is this area of being able to grow the crops and get money out of the crops as opposed to leasing them to somebody who does all that work. We do have somebody in between us. We've chosen people who do that for a living. That is, they go out and they produce the crops. So we don't have anybody on our group of people working in this company that are out in the fields growing either strawberries or nuts. So it's almost the same as it was before, except we put some money up not a lot, as helping the people who grow the crops get them grown and then they will sell them as well. But that's the difference here. And while it looks like it's more chance of losing money is really not because the insurance policies that we get from the U.S. government are so strong that I don't think we could lose any money on these five farms that we have going in that direction. But never know and right now, I feel very bullish that we're going to do a good job this year. If there are no other questions, I'll call this at the end. You got another question?

Well, and I'll just follow-up with a question that John asked earlier. The five farms that are in this hybrid structure right now, they make up about 15% of the California -- the fair value of our California portfolio. On a total basis across the whole country, it's about 6% of our nationwide portfolio.

So if you think about that, we've got most of it covered in the properties that are leased out on a monthly basis. And the rest of them that is the 6% is on this hybrid structure in which we put up some of the capital in order to have the people who are growing the crops get the growth done and we'll see if we made a good bet. My feeling is we're going to make some money on these crops and I don't like to do that because we like things that happen on a monthly basis. So we can pay our dividend on a monthly basis. And this idea that we get a big whopping amount back when the crops come in doesn't bode well for trying to be on time with dividends. So I think we're in good shape, but we have to wait and see what we have as income in the end of the year -- toward the end of the year, we'll know how successful or how much we've got to depend on our insurance. But that's the end of this. We got one more question.

Mr. Gladstone, we do. Yes. Let me bring John back through. Give me one sec here. Next question is coming from John Massocca with B. Riley. Please proceed with your questions.

Thank you so much. Sorry for coming in right at the end of the call. Just I had a quick question that I forgot. With the NAV decision, is that something that's going to be provided semi regularly now, if not quarterly, or is the intention to stop providing NAVs at all going forward? Is that going to say it's now annual or is that -- is the thought process that that cost is too burdensome just in general?

It became really ridiculous, John. We couldn't find people and brokers that would do anything but give us things that we didn't feel reliable. And so we started backtracking and getting a second -- and second opinion. And as a result we've been spending a lot of money trying to find people that can do this. We still would be setting numbers for those internally and maybe we'll go look at that. But generally speaking, trying to get brokers to value these things. We had one broker who was located in Indiana was doing some of the stuff in Florida, which just made no sense. He didn't know the Florida marketplace very well. And as you can see, when we've done sales, we've beaten our -- the valuation that's out there, but just didn't seem to be logical to keep doing that and paying for that. So we'll figure out something to do in April when we come back to you.

I appreciate.

And just -- the cost of those appraisals were running us about $300,000 per year.

I appreciate that additional color in taking that last minute question. Thank you.

Okay. We're assuming there are no more questions.

No more at this time.

Okay. So we'll see you next quarter. Thank you all for calling in.

Thank you so much. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.