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Greetings, and welcome to the Gladstone Land Corporation Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Gladstone, Chief Executive Officer. Thank you, sir. You may begin.

Thank you, Latanya. It's a nice introduction. This is David Gladstone, and welcome to the quarterly conference call for Gladstone Land. I want to thank you all for calling in today. We appreciate you taking the time to listen to our presentation. Before we begin, we always ask Catherine Gerkis to -- she's the Director of Investor Relations and ESG. Catherine, why don't you go with your part now?

Thanks, David, and good morning. 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 e-mail notification service and find information on how to contact our Investor Relations department. We are also on X at GladstoneComps 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 nonrecurring revenues and expenses and adjusted FFO, which further adjusts core FFO for certain noncash 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.

Well, thank you, Catherine. I'll start with a brief overview of our farmland holdings as we do every time. Currently, we own about 100,000 acres. It's on about 148 farms and nearly 56,000 acre feet of water assets, which is more than 18 billion gallons. Our farms are in 15 different states and the water assets -- well, all of them in California, that's where it's driest. Our farms are leased to over 80 different tenant farmers who grow over 60 different types of crops on our farms. Most of these are the type of food that you will find in the produce section of the local grocery store, such as fruits and vegetables and nuts. So we're continuing to take a very disciplined approach to new investments, in fact, not doing any except in our existing farms. But no new farms simply because the interest rates are so high that we can't finance them. So we continue to be disciplined as we call it, in investments given interest rates and their cost of capital remains elevated. We're hopeful that the banks will drop their rates in the future. At the same time, cap rates in most row crop farmlands are still too low to make the economies work. During the quarter, we completed the sale of 1 property consisting of 2 farms within that property. Those are in Florida, the sale price was $21.5 million. This is a transaction representing a 36% premium over our original purchase price and generating a gain of about $6 million. We may consider additional selected farms for sales over the next few quarters as part of our ongoing portfolio review. But we are still evaluating the opportunities and being very conservative every time we look at a new deal. And now I'll provide an update on modifications that we've made to certain lease structures and some of our permanent crops farms, those are all in the West. As we discussed in prior calls, due to the market conditions affecting certain permanent crops, particularly nuts and grapes, we adjust adjusted the lease structures on 6 properties to help us grow and with our partner, the grower, reduce their fixed costs while also allowing us to participate in the upside since we're putting up some of the money. In essence, we're accepting a percentage of gross crop sales instead of a fixed rent payment. We also decided to operate 2 properties ourselves with the help of third-party operators. One of the reasons we felt confident going this route in particular farms is that their strong history of higher production. Because crop insurance coverage is largely based on the historical yields, that means we were able to secure a high level of insurance coverage on these farms that we're going to hit our numbers. And we more than did that this year in a number of farms. We're still progressing through the harvest that we did for last year, post-harvest activities on our almonds, pistachios and grape properties in this group, but we're wrapping up the pistachio harvest on 3 farms earlier this month, and we're now receiving proceeds statements confirming the volume delivered to the seller or persons that are working for us to sell the different things such as almonds and pistachios, along with the first cash installment. Based on those statements, we expect to recognize about $17 million in revenue in the fourth quarter from these 3 orchards alone. We also received the first cash payment, a little over $5 million. In addition, subsequent to the quarter end, we transitioned one lease on a large vineyard in Napa, California from structured that included a sizable lease incentive payment back to traditional crop share arrangements. Our goal is to eventually transition all of our leases back to more traditional structure. That is we like receiving fixed-based rents that come in every month rather than waiting to the end of the year to get part of the crop, even though the latter of those alternatives is usually much more profitable than taking monthly payments from someone leasing our property. In other leasing activity, we executed 2 renewals subsequent to the quarter end, expect to result in an aggregate increase in annual NOI of about $65,000 or about 7% on those farms. Looking ahead, I have 11 leases -- we have 11 leases scheduled to expire throughout the rest of 2025 due to some of these leases containing no fixed base rent and others including cash lease incentives, both in exchange for increasing the participation rent component. These leases actually account for negative $651,000 of lease revenue, but not -- doesn't accrue any of the payments we're going to get from selling the crops in our percentage. And that's largely because of the participation rents resulting from these leases, they won't be recognized until after the fourth quarter. That is when we get the numbers in, we'll know what we made. And I think things are looking good on our nut crops. So, we're all happy about that. We're in discussions with both existing and prospective new tenants about leasing these farms, including reverting some of these leases back to the standard lease that we started out with, that is fixed monthly rents or quarterly rents, but in essence, not participating greatly in the sale of it. So, the farmer is doing the farming, and we are just leasing to them. But we've got these farms that we've converted over to where we are putting up some of the money and we get a lot of the money coming in from the sales. So, we'll see how that works out. The first one that we talked about looks good. And I think the rest of these that we have in that with the exception of grapes look good. And now I'll give a quick update of some of the ongoing tenant matters that we're working through. We currently have 6 farms that are vacant and 2 properties encompassing 4 farms are directly operated under management agreements with an unrelated third party. In addition, we recognize the revenue on a cash basis for leases with 4 tenants who collectively lease 7 of our farms. We're actively working towards solutions for each of these situations and are hopeful that a number of them will be resolved over the next -- well, I say several months, but it usually is not working until about 6 months after the year-end. So I'm going to stop here. We've got Bill Reiman online, and Bill is going to give us positive news. Hey Bill, take away.

Thank you, David. Yes, just to expand a little bit on the 8 properties that are under modified lease agreements or being direct operated with third-party operators. Harvest for the 2025 pistachio, almond and grape crops is nearly complete. Pistachios are all in the barn, as we say. And like David mentioned, we did receive our first payment for that crop. Grapes have just a few tons left to pick and some of the almond crop remains in stockpiles as a whole, but it has all been removed from the field. We expect that to wrap up in the next few weeks. Last quarter, we reported that growing conditions have been nearly ideal and those favorable conditions pretty much continued throughout the fall. We had some higher-than-normal rainfall in the Central Valley of California, but harvest was very smooth and uneventful, which we really like. Our Pistachio orchards performed well above state averages and also exceeded our own internal projections, both crop quality and volume. We had a few almond blocks that underperformed, but the majority surpassed our internal expectations as well. We expect to receive crop insurance payouts for a few blocks that fell short that should make us whole with respect to the growing costs. Fine grapes also delivered strong yields across the board with excellent quality. Excellent growing and harvest conditions we experienced in 2025 have positioned the trees and binds very well for the upcoming 2026 season. While we still need sufficient chilling hours, winter precipitation and favorable weather next year, and it's early, but we're off to a strong start for the 2026 crop. Irrigation, fertilization practice is already underway, and we'll get started on some curing activities as well here into the winter. A few words about crop markets. We have tariffs, trade tensions, geopolitical rhetoric continue to create some uncertainty across many export markets. Nut crop markets are showing notable resilience and strength, particularly for pistachios. Seeing stronger-than-expected demand from -- really from 2 specific markets right now with pistachios, the EU and the Middle East. That's significant because it reduces our reliance on the Chinese market. The Chinese market is still extremely important, but spreading the crop around certainly helps reduce that risk. The result for -- in pistachio, our base guaranteed price of current crop remains consistent with 2024, and we believe there's a strong likelihood that the final price, even though it's going to -- won't be announced for a year from now, and we have a lot of marketing to do, we believe that final price for the 2025 crop will be comparable to 2024 levels. Almond prices rebounded from their mid-summer dip, returned to the levels we saw early in the spring. Since then, prices continue to trend upward, gaining a few cents per pound each week. Sellers that I talked to, marketers are all enjoying this with pricing and demand just continuing to rise each week, and everybody expects this to continue for the next several months. Wine grape markets are the opposite, continue to underperform. Strong yields in the past couple of years combined with declining global consumption created one of the most severe oversupply situations the industry has ever experienced. As a result, a lot of vineyards are being removed around the world. At the pace that this is happening, we expect -- hopefully, within the next year, 18 months, we expect markets to start to turn around. And overall, macroeconomically, the weakening U.S. dollar really works in our favor on all these products that we export, particularly when that’s -- makes our products much more attractive to international buyers. Lastly, I'll touch on water. Nearly identical report as last quarter. We've been in this normal to wet cycle the past few years, including the most recent winter. We remain focused on enhancing our water delivery storage infrastructure across the portfolio. With these wet years, the availability of inexpensive water is strong. So, we've been very strategic about making those acquisitions. So, we continue to build on our nearly 56,000 acre feet of water assets, positioned several of our farms with enough water supply to meet immediate irrigation needs regardless of weather conditions. So, we feel pretty good about that regardless of how this winter ends up. Storage situation in both the federal systems, we're expecting a minimum of 35% and as high as a 50% allocation if we get a dry winter. So, if we get a normal to wet winter, we expect that to be even stronger. So very positive news on the waterfront. And now I'll turn that over to Lewis Parrish, our CFO.

Thanks, Bill, and good morning, everyone. I'll start with a brief update on our recent financing activity. During the quarter, we repaid a $10 million bond that was maturing, and this bond was secured by a property that we also sold during the period. On the equity side, since the beginning of the third quarter, we've raised about $10 million through our ATM program. These issuances were made in anticipation of redeeming our Series B term preferred stock, which matures at the end of January 2026. This will allow us to avoid the scheduled increase in the coupon rate from 5% to 8% and also reduce our reliance on our variable rate line of credit to fund that redemption. Turning to our operating results. For the third quarter, we recorded net income of about $2.1 million and a net loss to common shareholders of $3.9 million or $0.11 per share. Adjusted FFO was $1.4 million or $0.04 per share compared to $4.5 million or $0.13 per share in the same quarter last year. The year-over-year decline in AFFO was driven by recent changes to lease structures on certain farms, loss of revenue from farm sales over the past years and ongoing tenancy issues that led to vacancies, resulting in both lower revenues and higher costs. Fixed base cash rents were about $5.4 million lower than in the prior year quarter due to the reasons just mentioned, but mainly the lease modifications on certain properties where we reduced or eliminated fixed base rents or in some cases, provided cash lease incentives in exchange for significantly higher crop share participation. And the results from these crop share components won't be known until the harvest is complete and the crops are sold, which is currently underway. Participation rents increased by about $1.9 million, largely due to the accelerated recognition payments related to the 2024 harvest on certain farms as additional information became available to us earlier this year. This increase was further driven by much stronger pistachio pricing compared to last year. We continue to expect higher participation rents in the fourth quarter of 2025 as a result of the lease modifications we made on certain permanent crop farms. As we discussed on prior calls, these changes have led to lower fixed base rents in fiscal year 2025 compared to '24 and the majority of the resulting crop share proceeds are expected to be recognized as participation rent in the fourth quarter of 2025, with most of the remaining smaller portion being recognized in the second half of '26. So, in essence, we are shifting revenues from fixed base rents to participation rents over the next couple of years. And as a result, most of our 2025 earnings will be realized in the fourth quarter with wider earnings during the first 9 months of the year. On the expense side, excluding reimbursable items and certain nonrecurring or noncash charges, our core operating expenses decreased by about $140,000 this year -- this quarter. Total related party fees fell by about $110,000, driven by a lower base management fee due to recent sales. And our remaining recurring cash operating expenses remained relatively flat as higher property operating costs were offset by lower G&A expenses. Finally, other expenses decreased mainly due to lower interest expense driven by loan repayments made over the past year. Turning to liquidity. We currently have over $170 million of immediately available capital. We also have nearly $150 million of unpledged properties we could use as additional collateral if needed. Over 99% of our borrowings are at fixed rates with a weighted average interest rate of 3.39% locked in for minimum 3 years. This has helped shed us from the volatility in interest rates over the past few years. Looking ahead, we have about $17 million of scheduled principal amortization payments due over the next 12 months. We also have about $25 million in loans with fixed rate terms expiring in the next year, so the loans themselves are not maturing. And finally, regarding our common distributions, in October, we declared a monthly dividend of $0.0467 per share for the fourth quarter of 2025. At our current stock price of $9.24, this represents a 6.1% annualized yield, which is well above the REIT sector average. And with that, I'll turn it back over to David.

Thank you, Lewis. We continue to stay active in the marketplace should a good acquisition come along. But quite frankly, I'm not sure we're going to do any acquisitions this year, but we'll keep looking, maybe one day one will pop up that we like. But as mentioned on prior calls, we're still being much more cautious on the acquisition front because the cost of capital remains very high. Market outlook. Overall demand for prime farmland growing berries and vegetables remains stable in almost all of the areas where our farms are located. So, a lot of underlying value there in those farms. As mentioned earlier, prices for certain permanent crops have been depressed recently, which along with other factors, has impacted the value of the underlying farmland. However, we are seeing signs of improvement as both crop prices and broader economics of some of these crops. So, we are still in a good position for long term. So hopefully, that the worst may be behind us. When all of the crops were having problems, we clearly were covered by the price of the land that we own. In closing, we expect inflation, particularly in the food sector to continue to increase over the time, and we expect the values of the underlying farmland to increase as time result. We expect this especially true of the healthy foods such as fresh nuts, fruits and other vegetables, which is the trend in America and all over the world for that matter. Trend is more for people in the U.S.A. eating healthy foods and that continues to grow. Now we'll stop and have some questions from those who follow us. Operator, would you please come on and help them how they can ask the questions?

[Operator Instructions] The first question comes from Rob Stevenson with Janney Montgomery Scott.

David or Bill, I might have missed it, but can you talk about how that $16.9 million of revenue from the Pistachio harvest was versus what you were expecting? And how does this compare with what that crop would have generated a few years ago?

Well, if you're talking about a few years ago, they were leased. And so, all you would have gotten in is whatever we were charging on the lease. Now we've moved and increased the probability of getting higher rates, who knows. But at the point now, we are probably 2 or 3x the amount that we would have received. So it was a very positive thing that we're getting now from feedback of where the leases have gone, that is from fixed rate to variable rate. And the variable has been very nice. Now we've gotten some nice numbers in. And we believe when you hear us in the fourth quarter, we will have a lot of this ironed out and you'll know what we made on what we invested. That's close as I can get to just giving you a straight number.

Okay. And then, Lewis, the -- you talked about redeeming the Series B. What's the cost associated with that and the timing?

So, the Series D, that's coming due January 31, 2026. Right now, it's at a 5% coupon. At that date, if not redeemed, it goes up to 8%. So, we plan -- at this time, we've looked at all options, leaving it out there, absorbing 8%, which is obviously not what we want to do. Refinancing it is still expensive and also a lot of upfront costs. So, the plan right now is to take it out, redeem it to avoid that coupon with a mixture of common stock and line of credit. We've been issuing common stock at about 6.1%. The line of credit is just south of 6%. So right now, the cost would look to be about 6%, higher than the 5% that the security is currently yielding, but of course, much lower than the 8% that it would otherwise go up to.

Okay. And there's roughly $60 million of debt out there?

Correct. Yes, $60.4 million.

The next question comes from Craig Kucera with Lucid Capital.

I think you mentioned that you might sell some of the permanent crop farms out West if you can't restructure the lease, and you're obviously looking at a number of different options there. But I'd be curious to get your thoughts on the depth of the transaction market out on the West Coast right now.

Well, the banks aren't lending as lower rate as they used to when we first bought these, but they're circling in that direction, and we're hopeful they'll come up with a lower rate. But nice thing about this note that we're paying off is it doesn't come due, it just changes its rate. So, liquidity is not a problem. We know the money is there, and we don't have to give it back. On the other end of it, if we give it back, we cut the rate to 0, obviously. So, I think we're in very good shape. Last year this time, there were some dim moments here in the office as we contemplated what was going on in the marketplace. But today, we have a breath -- I think there's maybe one farmer that's having some real problems, and we may lose that farmer. But otherwise, there seems to be a breath of fresh air in the marketplace out there. And I'm talking mostly about California, other stuff we have in Florida and in the Midwest, they're paying as agreed, and we're in good shape.

Got it. And -- yes. Yes, it does. It does. Just thinking about your commentary on wine grapes, I guess when we think about when you restructured the leases last fall, should we take away from this that any sort of weakness in wine grapes has more or less been offset by strength in tree nuts as far as sort of what you had budgeted at the time you renegotiated those leases?

That's exactly right. How’d you get so smart?

[Operator Instructions] The next question comes from John Massocca with B. Riley.

Maybe kind of thinking about both the repayment of the Series D and just generally kind of the market out there to pay down debt or even potentially even buy back common stock, how are you looking at the disposition market right now? Are there disposition opportunities, particularly maybe outside of California that are interesting? I know you closed the deal in Florida recently. So just kind of curious what potential for generating capital via selling farms there is today?

I think on the East Coast, it's very good. The West Coast is still pretty poor in terms of generating new farmers with lots of equity credit to pay their debts. So, we're still waiting for that to come back. And it has moved in the right direction. But it's still going to take a while for it to catch up where last year was and maybe the year before. John, more I look at that, the more I say, gee, this is going to work out just fine. And I hope you are on the call for the fourth quarter because I think the fourth quarter will tell you whether we made a great decision to go variable rates or fixed rate. That is fixed, meaning we have an amount that we get every month or every quarter, whereas variable, we have to wait until the products are sold. And while they're all growing, this has been a great growing season. There's really nothing going on other than these plants will continue to grow no matter whether -- as long as they're fed water and any kind of stimulant such as some of the things we put on those crops. I think, John, this is a real turning point in this. And we're seeing some really good numbers. And the lady who does all the projections for these crops is sitting here at the table and smiling, and she wasn't smiling a couple of years ago. She was pretty frustrated. We've gotten a new guy out on the West Coast who's going to go to the farms more than we have in the past, although the last person that was there was going to the farms on a -- recently a very frequent basis. And now we're going to have somebody that knows growing and can go out and spot the crops and help us adjust things that needs to be adjusted. This is a great time to be in the business. There are going to be some people that buy crops and we talked to some people. We've had people who want to buy -- want to buy crops, but they want to pay us with promises, and we'd rather have cash than promises. So, we're working hard to get cash in as we have -- how much do we have, Lewis? Cash?

Right now, we have $25 million in the bank and a fully undrawn $75 million line of credit and other undrawn notes as well.

So, we're not in problems’ territory now because liquidity is pretty much assured. We expect the fourth quarter to be a great quarter. We only got $5 million last time we got a payment coming in. I think we'll do much better in the fourth quarter. In fact, we're making sure of that by cutting deals as soon as we can. We have one large farm that a group who's trying to start over again is saying they will buy it from us. I don't know. John, you have to play your cards when you get them. But this time, I think if they come up with the amount of money that we're talking about, it would certainly send us in a direction of maybe buying some good farms. Sure miss the ability to go out and buy farms. It's a different world out there for the nut guys. Not that they're nuts, but they're growing nuts.

I just think on the disposition front, I mean, the Florida transaction seemed like it was kind of opportunistic. Is there more potential for those type of deals as we look into the remainder of the year and '26 to maybe sell more assets either to capital recycle if you do have attractive buying opportunities or to kind of pay down pieces of the capital stack?

Well, certainly, we will pay down the loans in the capital stack. If they're close to maturity, we're definitely going to get them out of the way. So, I don't have any worry about that happening. As Lewis mentioned, the rate might go to 8% unless we do something to get rid of the loan altogether, but the loan itself is not due. It's just the rate is going to change if we don't pay it off. So, we're working on that. And I think we're going to be in good -- once the money starts rolling in from our variable rate charge to some of the farmers, I think we're going to be in extremely good shape. Nothing is taken for granted though. So, we're still praying a lot that things will continue the way they're going in the direction now. And quite frankly, after the downturn that we had in which people weren't eating nuts nearly as much as they had in the past, it was a real shocker when those people didn't step in and order again. They're back ordering now. They're not ordering as much, but we can live where they are now. So, I feel comfortable today. And I just hope our projections are correct. If they are, we will have made a lot of money on the switch from fixed payments to variable payments from the farmers. Other questions?

And then Lewis, maybe thinking about the Series B a little more, where do you think you are today in terms of having the liquidity you'd like to fully pay that down? It seems like you could, given the availability on the line, the cash today. But I mean, is there any need for kind of fresh capital in your mind to finish that repayment? And I guess, could you also maybe if you wanted to partially redeem it? Or does it have to be fully redeemed or fully kind of left out there to kind of pay that higher rate or that higher dividend yield?

So, a few things there. We definitely could do a partial redemption but having any kind of -- any product in our capital stack at 8% is not ideal for us right now. We -- and yes, we do have the current liquidity to take it out today if we wanted to, but it's at 5% and which is lower than the current cost of capital we would use to take it out it, so it makes sense to let it go at that 5% as long as we can. But the idea between the -- mixing the common stock and line of credit is while the line of credit is a little bit cheaper, based on yesterday's closing price for our common stock, it's variable. So just having to draw less on our line of credit just reduces our exposure to future interest rate volatility there. And as David mentioned, there are some farm sales that are potentially in the works down the line, so that could be some additional capital. But to answer your question, we could take it out today if needed, but it's just a matter of managing interest rate risk and getting the lowest cost of capital and [indiscernible] that we can.

Okay. Any more questions?

Mr. Gladstone, there are no further questions in queue. I would like to turn it back to you for closing comments, please.

We don't like that. We'd like you to ask more questions. It's more fun when you do that. We'll live with it, and we'll see you next quarter and don't miss the opportunity to listen in next quarter and see how well we did in projections. That's the end of this. Thank you very much.