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Presentation

Operator: Greetings. Welcome to Gladstone Land Corporation’s Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce David Gladstone, Chief Executive Officer and President. Thank you, Mr. Gladstone. You may begin.

David J. Gladstone: Well, thank you, Sherry, and that was a nice introduction. This is David Gladstone, and welcome to the quarterly conference call for Gladstone Land. Thank you all for calling in today. We certainly appreciate you taking time out of your busy day to listen to our presentation. Before I begin, we’ll start with Michael LiCalsi. He’s our General Counsel. Michael?

Michael LiCalsi: 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 forward-looking 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 the risk factors listed in our Forms 10-K, 10-Q and other documents that we filed with the SEC, and find them on our website, that’s gladstoneland.com, specifically, go to the Investors page, and you can always go to the SEC’s website, which is 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. 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. And, we may also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses, as well as adjusted FFO, which further adjust core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. And, we believe these are better indications of our operating results and allow better comparability of our period-over-period performance.

And, please visit our website, once again that’s gladstoneland.com, sign up for our email notification service. You can also find us on Facebook, keyword there is the Gladstone Companies and on X, formerly known as Twitter and the handle there @GladstoneComps. Today’s call is an overview of our results, so we ask that you review our press release and Form 10-Q both issued yesterday for more detailed information. With that, I’ll turn it back to David.

David J. Gladstone: Thank you, Michael. I’ll start with a brief overview as I do each time, just so we all know where we are. We are currently on about 112,000 acres, own 168 farms and about 54,000 acre-feet of water assets. One acre-foot is equal to about 326,000 gallons. So, we have nearly 18 billion gallons of water. And together, the land and the water are valued at about a total price of $1.5 billion. Our farms are in 15 different states and more importantly, they’re in 29 different growing areas. And, our water assets are all in California. You don’t need to store much water. If you’re in Florida, you can drill down and get water pretty quickly. Our farms are leased to over 90 different tenant farmers and the tenants on the farms are growing over 60 different types of crops.

But, mostly these are fruits and vegetables and we have a lot of nut trees as well. And, you can find these items in the produce section of the grocery store, which is where most of the crops that are grown on our farms are sold. We’ve been pretty active in leasing since the beginning of third quarter. We executed 21 new or amended leases on farms in eight different states, including leases on only a couple of farms that were previously vacant. On annual row crop farms, we renewed or amended eight different leases, and these renewals are expected to result in an aggregate increase of net operating income of about $309,000 or 11% over that of the prior leases. Overall, we continue to see steady appreciation in consistent rents growing in our annual row crops, which make up about half the portfolio.

Our permanent crop farms, well, we renewed about 13 different leases there. With four of these leases, we adjusted the lease structure whereby we eliminated the base rent and provide the tenant with some cash and growing the crops. In exchange for the base rent, we significantly increases the participation in the rent component of these leases, the major of which will be recognized in the second half of 2025. So, we’re going to go through a little period here with base rents down. As we stated in the prior calls, market conditions around many of the permanent crop farms in the West have been hampered by lower crop prices, higher inputs and, of course, borrowing costs have gone up as well. These conditions make it difficult for the tenants to commit long-term leases that include high-base rents.

As such, we decided to adjust the lease structure on the few farms to help to grow and minimize their fixed cost but also allow us to participate in the upside in the case that farmer has a good year. We believe these lease structures will give us a best chance of making pretty good profit on these farms in the coming years. And, we believe there’s a strong reason for the opinion particularly on two pistachio farms, which we’re doing this time. These are very high yielding properties, the two pistachio farms. And, with a history of high production, that means the crop insurance is going to be good, that is we get a higher rate there, higher opportunity to get our money back. We also continue to see pricing trends in the right direction as for both pistachios and almonds.

Also California has experienced above average rainfall levels in recent years and most of the reservoirs are still at or above the historic averages. Our current plan is to move forward with the structure for 2025 harvest in these few farms and then hopefully revert back to more traditional leases structures with the rent next year, or we may also sell some of these farms if we think we’re not going to be able to farm them correctly. The remaining non-lease amendments on our permanent crops are expected to result in a decrease of net operating income of about $441,000 from the prior leases. So, we swapped the base rents for participation on the upside. This is the old English way of farming and the King used to own all the land and lease it out in essence to his farmers and they’d give him most of the crop and they’d take some.

Looking ahead, we have seven leases scheduled to expire over the next six months and in total they make up about 2.5% of the total lease revenue. We’re in discussions with various groups and either lease these farms or operate them on our behalf and we may also look to sell a couple of these farms. We do have one that we agreed to sell and we believe have some very valuable farms. So, this new route is the way, is a new option for us. Subsequent to the quarter-end, we also ended into an agreement to sell 11 blueberry farms in Michigan for about $5 million. These are some of our earliest farms. And if you remember, this one is one in which the entrepreneur, the farmer, although he had some very serious accidents. I think he was in hospital for many months.

So, we had to get others to come in and do things to the farms. And finally, we decided just to leave that Michigan area. These are the farms that have tenants issuing results on increased operating costs. So, we’re happy to bring these issues to a close and all of that should close-up before the end of the year. And now, I’ll give a quick update to some of the remaining tenancy issues. We currently have one farm that is vacant, so we’re down there. One farm is in direct operating via management agreement with an unrelated third-party. In addition, we’re recognizing revenue from leases in two tenants and this is collecting lease five of our farms. They have five of our farms, but we’re collecting cash on two of the tenants. Regarding these farms, we’re in discussion with various potential buyers and tenants to buy.

We’re in the situation in which a lot of people are looking for farms again, and that’s always good to see. And, we may use some of them to hire and run our farms and we hope to have an agreement in place by the end of the year on these last two. We may end up listing some of these farms at an auction as we did in Michigan, but I don’t expect that to be a lot of the farms. In total, year-over-year impact on our operating results for these tenant issues was decreased in net operating income for to about $638,000 in the third quarter. And, hopefully next year this time we’re recognizing a lot of profit from operating some farms with our operators that come in and do that. I’m going to stop at this point, and we’ll get Lewis to come in and talk to us about the numbers that he’s got for you.

Lewis Parrish: Okay. 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 we did repay about $13 million of loans that were scheduled to mature or re-price. On the equity side, since the beginning of third quarter, we’ve raised net proceeds of about $80,000 from sales of the Series E preferred stock and about $4.5 million from sales of our common stock through the ATM program. We also continue with the repurchase program on our Series B and Series C preferred stock that was implemented in the second quarter. During the third quarter, we repurchased a total of 176,045 shares of preferred stock at a total cost of about $3.7 million resulting in a book gain of about $231,000.

At an average repurchase cost of $21.22 per share, this resulted in a dividend yield savings of 7.1%. Moving on to our operating results. For the third quarter, we had net income of $6,000 and a net loss to common shareholders of $5.8 million or $0.16 per share. Adjusted FFO for the current quarter was approximately $4.5 million or $0.13 per share, compared to $5.4 million or $0.15 per share in the prior quarter. Dividends declared per common share were about $0.14 in both quarters. AFFO decreased in third quarter of 2023, primarily due to the lost revenue from the farm we sold in January and a decrease in income associated with certain properties that were either vacant, direct operated or on non-accrual status during portions of the quarter.

Fixed base cash rents decreased by about $2.6 million on a year-over-year basis, primarily due to the reasons I just mentioned. Again, that is the lost revenues from the farm we sold and additional expenses related to certain vacancies we continue to work through, as well as lease incentives granted of certain tenants associated with the lease structure changes that we just mentioned and a portion of one rent payment that was paid in water. This was partially offset by a $1.1 million increase in participation rents recorded during the current quarter. These amounts are largely dependent upon when our tenants provide certain information to us, but thus far the increase has been largely driven by stronger production at some of our pistachio farms.

One note to make on revenue over the next several quarters. As a result of the change in lease structures we made on a few farms, we are expecting a total year-over-year swing in our fixed base rents of about $20 million. This figure consists of the base rent that we were previously receiving under the prior leases, plus the cash allowances we granted to some of these tenants. This will be shown as a reduction in our fixed base rents over the next five quarters, beginning with Q4 2024 at a rate of between $3.5 million to $4.5 million per quarter. And, then the majority of the resulting crop share these leases will be recognized as participation rent in the second half of 2025, with the remaining smaller portion being recognized in the second half of 2026.

Right now, we are expecting to recover the full $20 million and possibly more, but we will not know these numbers until later in 2025. So, things play out as we currently expect, we’ll essentially be moving about $20 million from the fixed base rent bucket into the participation rent bucket over the next couple of years. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses decreased by about $140,000 during the current quarter. Related party fees decreased by $800,000 due to a higher incentive fee earned in the prior year quarter. Largely offsetting this was an increase in property operating expenses of $590,000 which is primarily driven by additional costs incurred on properties that were either vacant, direct operated or on non-accrual status.

These costs included additional legal costs, property management fees and real estate taxes. As we bring these issues to a close, which we are expecting to happen by the end of the year, these costs should decrease to a more normalized level. And finally, G&A expenses increased slightly due to additional stockholder related costs and higher professional fees. We also recorded an impairment charge of about $2 million during the quarter, and this was the result of writing the net book value of some Michigan blueberry farms down to the sales prices, per the agreements we entered into subsequent to 9/30. Finally, other expenses decreased primarily due to lower interest expense incurred as a result of loan repayments we made over the past year. With that, we’ll move on to net asset value.

During the quarter, we had 43 farms revalued, all via third-party appraisals. Overall, these valuations decreased by about $23 million or 4.5% from their previous valuations from about a year ago. These decreases were limited to certain of our permanent crop farms as our annual row crop farms continue to appreciate in value. So as of September 30, our portfolio was valued at about $1.5 billion and all of this valuation was supported by either third-party appraisals or purchase prices in the case of water. Based on these updated valuations and including the fair value of our debt and preferred securities, our net asset value per common share at September 30 was $15.57 which is down from $17.59 at June 30. The majority of this certain farms that were reappraised during the quarter as well as the change in fair value of our debt and preferred securities due to changes in market rates.

Turning to liquidity and including availability in our lines of credit and other undrawn notes, we currently have access to over $160 million of liquidity, including about $20 million of cash on hand. We also have nearly $160 million of unpledged properties. Over 99.9% of our borrowings are currently at fixed rates and on a weighted average basis, these rates are fixed at 3.4% for another 3.7 years. As a result, we have experienced minimal impact on our operating results from increased interest rates over the past couple of years. And, with respect to our current borrowings, we believe we are well protected should interest rates continue at elevated levels. Regarding upcoming debt maturities, we have about $39 million coming due over the next 12 months.

However, $21 million of that represents various loan maturities. And, given the value of the underlying collateral, we do not foresee any problems refinancing if we choose to do so. Removing those maturities, we have about $18 million of amortizing principal payments coming due over the next 12 months or about 3% of our current debt outstanding. And in addition, we have about $19 million of loans that they are not maturing, but they have a fixed rate term that is expiring over the next 12 months. And finally, regarding our common distributions, in October, we declared a dividend of $4.67 per share per month for the fourth quarter. At our current stock price of $13.66 per share, this works out to a yield of 4.1%, which is right in-line with the average dividend yield across the entire REIT sector.

Given the changes we recently made in lease structure at certain properties, we believe it prudent to hold the dividend flat at this time and we’ll continue to reassess it as more information regarding the 2025 crop share amount is known. And with that, I’ll turn things back over to, David.

David J. Gladstone: Thank you, Lewis. Nice report. We are continuing to stay active in the marketplace should a good acquisition opportunity present itself. The banks love us and would love to lend us more money. And, but we’re not going in that direction unless interest rates come down. But mentioned in prior calls, we’re still being more cautious in the acquisition front because of our cost of capital remains high. And, while we have seen decreases in prices for certain permanent crops and farms in the West, values of most of the row crops like those grown strawberries has remained very high. And, cap rates on most of those farms are not increasing enough to cover our financing cost. So as a result, acquisition activity has remained, well, non-existent, to say, slow would be a little miss representing, but we’re not doing any new deals given the cost of capital and what you can make on it.

Interest rates are still a bit too high for us despite the Feds cutting interest rates by 0.5% in September. The amount of timing of the further cuts, I just don’t know when they’re going to cut again. It’s been up and down with them. But we’re hopeful that the rates will be lower in the near future so that we can start looking at buying more farms again. And, just a final point I’d like to make. We believe investing in farmland growing crops that contribute to healthy lifestyles such as fruits and vegetables and nuts is a great trend and we are following it and we’ll try to make sure that we continue to get good farmland. Overall demand for prime farmland and growing berries and vegetables remain stable to strong. In fact, the vegetable and berry side is relatively stronger than just about any time I’ve seen in the past.

Almost all of the area our farms are located in, as mentioned earlier, crop prices in certain permanent crops have particularly in the nut and wine grape have depressed lately. We don’t have a lot of wine grapes. We do have grapes, but we don’t have many. They’ve been depressed lately, which has impacted the value of underlying farmland. We’re seeing prices start to turn around in some of these crops, specifically almonds and pistachios, which have been pushed down pretty hard because demand hasn’t been heavy for those. So, we’re hopeful that the worst is over with those two crops and it’s just not clear yet which way it’s going. And, if you hear anything about farms on the West Coast, a couple of our people, one in particular got ran out of his home because of the fire that’s going on.

But remember, these fires are mostly in the mountains, they’re not down where we have crops. And so, please remember that purchasing stock in this Company is long-term and so you’re going to have ups and downs. Historically speaking, long-term remains strong, but there are occasionally some ups and downs that just throw us for a loop. Just like any investment, it’s going to be ups and downs. These are crops. For example, you probably know if you’ve been reading the paper that a lot of the grain crops such as soy and corn, those prices are down and those farmers are not doing well. It’s a difficult time for them these days. We expect inflation, particularly in food sectors, to continue to increase over time. I know everybody complains about having to spend so much for food, but we expect the values of the underlying farmland to increase as the products that they can produce on those lands continues to come out.

We expect especially true in the fresh produce area. If you’ve gone to the store recently and looked at the prices, the trends there, more and more people are eating healthy foods, but at the same time, it’s driving up the prices. I did want to mention one thing that I don’t think we’ve ever talked about before. There are really two values in the farmland that we buy. There is the intrinsic value as I call it and that’s just the dirt that doesn’t go away. It’s like any real asset you hold on to it because these are values that just continue to increase over time. And, there are people who buy farmland, never farm it but rather just hold on to it as a hedge against inflation, just like they do when they’re buying gold. Then there is the usage value, which is some of the land that we have like most of the farmland that’s used to plant crops and sell those for income.

Gold doesn’t have anything like that. So in essence, I think farmland is a much better hold for inflation purposes. I know each time we’ve sold property, it’s been because we are offered really high prices. So, let’s stop at this point and the operator, if you’ll come on and tell people how they can ask questions that would be great.

Operator: Yes, of course. [Operator Instructions] Our first question is from Gaurav Mehta with Alliance Global Partners. Please proceed.

Gaurav Mehta: Yes, thanks. Good morning. I wanted to ask you on your lease expiration. I think you said over six months, seven leases are expiring. But, can you give us a number for 2025, how many leases are expiring and how many of those leases are permanent crops?

Lewis Parrish: Yes, 2025, give me just a minute to confirm this number. We usually look out and the reason we always talk about six months ahead is because we always work on the properties that we’d like to renew with, but always accepting backup offers also and we usually get these lease extensions done pretty quickly. So, if things are like nine months out, 12 months out, it’s not as pressing for us. 2025 and all is about we have 17 leases that are coming due in 2025 and that is a good portion of our revenue, it’s about a fifth of it, 20%. We were seeing any contact with the current tenants on those. And looking at the sorry, give me a minute to open up to 25 leases. You’re just trying to determine which are berries and which are nuts and those kind of things. Okay. Don’t have that number readily available.

David J. Gladstone: Well, about half of our farms are on the row crops, the berries and things like that. Then the other half is in the nuts and those kind of areas. We do have some crops that are wonderful and that is some of the olive trees that have been around for ages and they’re pretty continue to produce olives. I’m sorry, did you mention something, Gaurav?

Gaurav Mehta: No, I was just clarifying. So half of your portfolio is permanent crops and half is annual growth?

Lewis Parrish: Yes. So, I just looking at the list of ‘25, it looks like it probably is more skewed in terms of number of leases that are on the annual row crop side. I can’t give you an exact probably 60% of the leases that are coming to our row crop and 40% would be of the permanent crop type.

Gaurav Mehta: Okay. That’s helpful. On the third quarter lease amendments, were these leases expiring in third quarter or they were amended for different reasons?

Lewis Parrish: The leases that were amended in Q3?

Gaurav Mehta: Yes. Were they due for expiration or they were amended for different reasons?

Lewis Parrish: A few different reasons. Some of them were expiring in 2024 that we pushed out, some were even expiring in 2028 that we pushed out beyond that. And there are a few others that were amended for other reasons as well. But, I’d say in terms of ones that were pushed out, they were near-term expirations that was probably only a handful of them.

David J. Gladstone: Any other questions, Gaurav?

Gaurav Mehta: That’s all. Thank you.

David J. Gladstone: Okay. Next question.

Operator: Our next question is from Rob Stevenson with Janney Montgomery Scott. Please proceed.

Rob Stevenson: Good morning, guys. Lewis, the 11 Blueberry Farms are part of that 20 vacant direct operated and non-accrual, correct?

Lewis Parrish: Yes, correct.

Rob Stevenson: That you have for sale? Okay. And I think David said that you had another farm that you’ve agreed to sell. Is that part of the 20 as well?

Lewis Parrish: No, that one is leased through middle of next year. Nothing imminent of course, just an agreement we’ve entered into that could close in early next year, but nothing certain at this point.

Rob Stevenson: Okay. So, a quarter from now when you’re reporting fourth quarter, if that Blueberry Farm sale goes through, the number of vacant direct operated non-accrual should be basically halved at that point, right?

Lewis Parrish: Yes, I think assuming that that does close, which it should close in should close this year, I think we’ll be left with one vacant property, one direct operated and then five farms on non-accrual basis.

Rob Stevenson: Okay, that’s helpful. And then anything else at this point that’s looking like it’s headed towards non-accrual or are you fairly comfortable with the remaining farms in the portfolio at this point?

Lewis Parrish: We’re comfortable with the collectability of rent from the other tenants right now. It’s really just two tenants that are on five of our farms in total that have had issues. We have some other leases expiring later this year that we’re working on lease amendments for. It could be a combination of well, these are on perma crop farms, so the ones that are expiring later this year will likely be a similar situation, where we have to remove the base rent and put it more into the participation rent bucket for next year, but we don’t expect those to go on non-accrual basis.

Rob Stevenson: Okay. And then last one for me, the NAV decline, if I think about the $4.76 versus decline, how much of that, I think you said indicated that a lot of that was the permanent crops. But is any of that the row crops? How should I be thinking about the row crops? So, the row crops sort of flat and the permanent crops?

Lewis Parrish: Yes, it’s 100% permanent crops. And the $4 I guess you’re talking about year-over-year from 9/30/2023 that decline is probably about half $2-ish, portfolio valuation and then $2 due to just changes in market rates, change in preferred stock and debt valuation. But on the portfolio side, it is strictly the permanent crop side. We are seeing pretty much the same appreciation in our row crop ground as we have since our inception, the typical 2%, 3%, 4% per year. We are we still see that today, but the depreciation in values is on the strictly on the permanent crop side.

Rob Stevenson: Okay, that’s helpful.

David J. Gladstone: And talking about number of crops, the ones we had in Michigan that we sold at auction, there are a lot of small farms there. We put those on the books when we were tiny and just beginning in the area. So, we made a mistake of picking that one tenant who was very careless and got himself in trouble. But that will all be gone this year.

Rob Stevenson: Okay. Thanks, guys. Appreciate the time this morning.

David J. Gladstone: Sure. All right. Anybody else have a question?

Operator: Yes. Our next question is from Craig Kucera with Lucid Capital Markets. Please proceed.

Craig Kucera: Hey, good morning, guys. I may have missed this, but what were the crop types and locations for the four farms where you restructured the leases?

Lewis Parrish: Two are pistachios and two are wine grapes.

Craig Kucera: Got it. And was there any impact to fixed rent this quarter from the restructuring or is that expected beginning in fourth quarter?

Lewis Parrish: There was a little bit this quarter. This quarter is probably about well, if you take out the participation rents, maybe it’s $500,000 to $1 million decrease from, I guess, the normalized level. But that was more on the wine grape farms, because they’re more in a calendar year and those restructurings happened earlier in Q3. On the two pistachio farms, those that switchover will start in November 1st. So, we’ll have a portion of it impacting Q4 and then all of it impacting quarters one, two and three next year.

Craig Kucera: Okay. And kind of changing gears looking on the participation rent side, there was pretty good strength year-over-year. Were there any particular crops where that strength came from?

Lewis Parrish: The pistachios, higher production on our pistachio farms so far. We don’t have the data in for all of the full population of the properties that have crop share, but of the ones we’ve received so far, that’s the one kind of year-over-year change we’re noticing is the crop share. Now pricing overall, we are seeing as David said, we are seeing that trending in the right direction, but pricing is kind of two components here earlier in the harvest year, you’re told what the minimum pricing is that processors will pay. And then about a year or 15 months later, they tell you what your bonus and adjustment amounts are due to quality bonuses, just marketing adjustments that happen over the marketing period. Those amounts aren’t known yet, so we can’t really compare year-over-year pricing yet, because we don’t know the that final component of the pricing.

We won’t until we should have a good idea in December, but it won’t really be known until probably January, maybe February.

Craig Kucera: Got it. And just kind of thinking about here in the fourth quarter, I think the last few years your fourth quarter participation rent has been maybe 40% to 60% higher than what you got in the third quarter. Is that kind of ballpark with what you guys are expecting here in the fourth quarter?

Lewis Parrish: That’s what we are hoping for. We’re still we don’t have all the data to say for sure, but that’s kind of what we’re hoping for as well.

Craig Kucera: Okay. Thanks. That’s all for me.

David J. Gladstone: Okay. Do we have any other questions?

Operator: We have one final question from John Massocca with B. Riley Securities. Please proceed.

John Massocca: Good morning.

David J. Gladstone: Good morning.

John Massocca: So, maybe touching on the Michigan Blueberry Farms that you sold, what’s kind of the NOI impact from that? Were those putting off any cash flow for you? Or were they kind of an NOI drag given some of the operating issues there historically?

Lewis Parrish: They were definitely an NOI drag. We’ve had tenancy issues with these particular farms for a while. I think if you look at the last year or so, the average quarterly drag on NOI was about $125,000 and not to mention the interest expense was probably another $40,000. So, call it all in $165,000 or so drag on net income. The amounts we are receiving is they are enough to pay off the debt, so we’ll be relieved of the NOI drag and also the interest expense.

John Massocca: Okay. And then thinking about the lease changes in the quarter, just to kind of clarify that $20 million annualized number you’re talking about that kind of moves from being steady on a four quarter basis to if participation rents are as expected back end loaded in ‘25. All those numbers, that’s just the nine properties I believe it is where you moved into this percentage rent situation that didn’t include all the tenants?

Lewis Parrish: Yes, four properties, we in the new leases we removed the participation rent component and in some cases, we gave the tenants a cash allowance to cover certain capital and operating costs. Those two numbers together is about is what makes up that $20 million swing, that will decrease our fixed base rents over the next five quarters beginning with this Q4, ‘24. And again, the quarterly rate quarterly decrease rate is about $3.5 million to $4.5 million. And then in the second half of ‘25, we will be able to record the majority of the resulting crop shares. Now there will be a portion, what I was just mentioning about the second component to the pistachio pricing, the bonus marketing adjustments, that amount will not be known until the second half of ‘26. So, if I had to guess today, we’d probably be able to record about 75% to 85% of the resulting total crop share amount in second half of ‘25 with the remaining amount in the second half of 2026.

John Massocca: Is that based on kind of performance already or is that based on just for pricing is today on pistachios?

Lewis Parrish: Just based on our now, this is limited experience for us in terms of the pricing breakout, because we aren’t directly involved too much, but just based on our limited experience of if you take the total amount received for a crop year once the marketing period is over, how much of that is guaranteed upfront and paid on a set schedule versus how much comes after the marketing period is over?

John Massocca: And is that rent level pretty much going to be reliant slowly on pistachio operations or is there any almonds kind of flowing through those numbers?

Lewis Parrish: It’s all pistachio. I mean, we do have some almond properties where we have crop share leases on, but that is not in this bucket of four leases or four properties that we change the leases on. These four properties are pistachios and wine grapes.

David J. Gladstone: We do have some crop share that’s coming in this quarter or next quarter or this Q4, we should have some not from these new leases, but yes, we will have we’re hoping for a good amount as we do every year.

John Massocca: And then I guess the bigger picture, sticking with the California kind of permanent crop market. I mean, you’ve talked a bit and there’s been kind of data to this point that maybe that pricing is kind of stabilizing to starting to recover. Has that filtered through in what you’re seeing in the market? I mean, I know you’re probably not actively out there buying properties in California, but has there been some land value stabilization, some kind of transaction market stabilization in terms of California permanent crop farms?

David J. Gladstone: Well, what we see in the price of farms right now is very, very low prices on nuts and grapes and wine grapes. So, that’s what hurt us. And of course, when you move from monthly payments from a farmer into participation rents, you’ve now backloaded everything instead of getting those nice payments in the first, second and even in the third quarter, you get most of your payments in the fourth quarter. That’s what I meant by we’re going to collect a good amount of money from participation rents. This year that we’re in, maybe in the first quarter of next year, and so it’s very difficult to pay dividends, not that we’re in trouble with my dividends, but that’s why we went down the road of leasing out our farms is because we get payments coming in that we can meet our dividends with.

Now we’re getting the payments, but they’re not in the first or second quarter. They’re in the last half of the year. And so you’re making payments on your dividend and going to get the money and a little bit later.

Lewis Parrish: John, I’d add your question about the pricing of farms. I think in California, the main driver is still water. Is it a single source water property or dual source. As we’ve said, most of our properties are dual source. We do have a handful of single source water properties and that’s where a lot of our focus has been in buying additional water assets or creating infrastructure to, for example, building pipelines to these farms that only have groundwater, so that they effectively do have a second source of water and can hold their values better than a lot of the fire sale prices we’re seeing on farms that only have one source of water.

John Massocca: Okay. I appreciate the color. That’s it for me. Thank you very much.

David J. Gladstone: Okay. Do we have any other questions?

Operator: There are no further questions at this time. I would like to hand it back off to management for closing remarks.

David J. Gladstone: All right. Well, thank you all for following us. We’re going to have a good year next year because we’re going to be in the participation rent side of the business and we’ve got some farms that we know are great producers. We don’t know the price, of course, what we’re going to be getting next year, but we’re going to have a good production year in 2025 and that’s the first part of everything of how much you produce. So that’s the end of this and we’ll see you all next quarter. Thank you for calling in.

Operator: Thank you. This will conclude today’s conference. You may disconnect at this time.