Palm Valley Capital Fund (PVCMX) Third Quarter 2023 Commentary

Bought a small new position in Q3. FPI is a farmland REIT owning 159,000 acres with $1.1 billion book value as of June 30, 2023; stock has declined YTD as higher rates increased borrowing costs and pressured earnings; management believes farmland value net of debt exceeds market cap and is repurchasing stock. Company plans to sell $190 million of farmland in 2023 to fund more buybacks and debt reduction; stock trades at a discount to reported book value and the Fund's higher net asset valuation, despite near-term interest-rate risk.

“We bought a small position in Farmland Partners (FPI) during the quarter. FPI is a real estate investment trust (REIT) focused on farmland. As of June 30, 2023, FPI owned 159,000 acres of farmland with a book value of $1.1 billion. FPI’s stock has declined year-to-date as higher interest rates have increased its borrowing cost and pressured earnings. Management believes the value of its farmland, net of debt, exceeds its market capitalization, and they have been repurchasing stock. The company intends to sell $190 million of farmland in 2023 and will use the proceeds to buy back more stock and reduce debt. While rising interest rates are a risk to FPI’s near-term earnings, the stock is trading at a discount to reported book value and our higher net asset valuation.”