Gladstone Land Corporation 2026 Q2 Earnings Call

Please go ahead. Well, thank you, Melissa, for that nice introduction.

This is David Gladstone, and this is the quarterly call for Gladstone Land. Thank you all for calling in today. We appreciate you taking time out of your busy day to listen to our presentation and get some updates from us. First, we'll hear from Katherine Goerke. She's our Director of Investor Relations. She'll provide a brief disclosure regarding certain regulatory matters concerning this call.

Katherine, go ahead. Thank you, David, and good morning all.

Today's call may include forward-looking statements which are based on management's estimates, assumptions, and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the investors page of our website, gladstoneland.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Q and earnings press release, both issued yesterday, for more detailed information. You can also sign up for our email notification service and find information on how to contact our investor relations department. We are also on X @GladstoneCo, as well as Facebook and LinkedIn. Keyword for both is The Gladstone Companies.

Today we'll discuss FFO, which is funds from operations, a non-GAAP accounting term defined as net income excluding gains or losses from the sale of real estate and any impairment losses on property, plus depreciation and amortization of real estate assets. We may 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 metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance. Now I'll turn it back to David Gladstone.

All right. Thank you. Let me just talk about the portfolio we have. We currently own about 98,000 acres across 142 farms, and about 56,000 acre feet of water, which is about 18 billion gallons. Our farms are in 14 different states, and our water assets are all in California. We didn't have any acquisitions or dispositions this active quarter, but quarter end, we sold a property consisting of two citrus farms in Florida for about $3 million. It was a small amount of acreage. The original tenant had defaulted on the lease, and the replacement tenant was at a substantially lower rental rate. Given the continued weakness of the citrus markets, we felt it was best to sell the property and use the proceeds to pay off some related mortgages or some other assets that we want to do something with.

We may consider selling some additional farms over the next few quarters as part of our ongoing portfolio review. If we use most of the proceeds to pay down debt and buy back preferred stock, it would be very strong for us. We'll continue to take a disciplined approach to the acquisitions and staying active in the market, so we're ready when the conditions improve. It makes sense for us to start growing the portfolio again, and that'll be when interest rates have gone down. So anything you can do, talking to the Fed and telling them to lower that rate, we'll be pleased to do some more transactions.

As we've discussed in all of our prior calls, I think forever now, due to the market permanent crops, particularly nuts and wine grapes, we modified the leases structure there so that a handful of farms had to reduce the growers' fixed cost while allowing us to participate more in the upside with higher crop share participation. So we're becoming much more involved in the operations. Overall, the 2025 almond and pistachio harvests were very strong, with yields generally exceeding expectations. While the final pricing of the pistachio crop has not yet been determined, believe that just takes forever to get all these things done. We received indications from certain processes that our final price is expected to be higher than the prior year. So we expect to recognize a meaningful amount of additional revenues from that harvest in the fourth quarter of this year.

We entered into similar arrangements for most of these farms for the 2026 crop. So we're continuing down the same path that we set up to get us through all of that past problems. Majority of the related revenues and earnings, again, being recognized during the fourth quarter. So you'll hear from our accounting staff about how much we've got of that later. I also want to remind everyone that the crop insurance continues to play an important role here, as it helps to limit the downside risk on the farms, particularly given their strong production history. We could be a big year and then have some problems, and insurance always protects us from the big downside. Our goal is still eventually transition these farms that we're doing on a shared basis back to more traditional lease structures with fixed-based rents.

The time of that will depend on several factors such as crop productions, pricing, interest rates, input costs, and most importantly, water availability. We're finding some problems out there with the water availability. Looking ahead, we have six leases scheduled to expire over the next six months. In total, these leases are about 3.5% of our leasing revenue for the year ending 2026. We're currently in discussions with both existing and prospective tenants that we expect to be able to renew each of the leases prior to the expiration. We're also pursuing several alternative revenue opportunities, including water leases. We've got farms that have water, and we can lease that out. And fallowing programs and some of the solar things that I've been talking about in four of our tenants. We've received some cash rent payments from a couple of these tenants during the quarter.

We'll keep them on non-accrual status until we see a consistent pattern of timely payments. We'll stop here and turn it over to our Executive Vice President, Bill Reiman. He's out in California. Is that where you are today, Bill?

Yeah, actually in Idaho today, David.

Thank you. Okay, go ahead.