Thank you for your patience. My name is Cath, and I will be your conference operator today. I would like to welcome everyone to the Farmland Partners Inc. First Quarter 2024 Earnings Conference Call. I will now hand the call over to Luca Fabbri, President and Chief Executive Officer. Please proceed.

Thank you, Cath. Good morning, everybody. Welcome to our quarterly update call after the announcement of our earnings last night. Before we jump into the call, I will turn over the call to our General Counsel, Christine Garrison, for some customary preliminary remarks. Christine?

Thank you, Luca, and thank you to everyone on the call. The press release announcing our first quarter earnings was distributed after market closed yesterday. The supplemental package has been posted to the Investor Relations section of our website under the sub-header Events and Presentations. For those who listen to the recording of this presentation, we remind you that the remarks made herein are as of today, May 1, 2024, and will not be updated subsequent to this call. During this call, we will make forward-looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions, impact of acquisitions, dispositions and financing activities business development opportunities, as well as comments on our outlook for our business, rents, and the broader agricultural markets. We will also discuss certain non-GAAP financial measures, including net operating income, FFO, adjusted FFO, EBITDAre, and adjusted EBITDAre. Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing first quarter 2024 earnings, which is available on our website farmlandpartners.com and is furnished as an exhibit to our current report on Form 8-K dated April 30, 2024. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the risk factors discussed in our press release distributed yesterday and in documents we have filed with or furnished to the SEC.

Thank you, Christine. This is a really strong quarter for the company. I'm going to talk in a minute about the transaction where we received some nonrefundable deposits that we ran through the quarterly P&L, but I'll come back to that in a minute. The really important things about the quarter are we materially increased the annual guidance. Our cost control efforts are working with our overhead down around 13%. With all the asset sales, we decreased our assets last year by around 12%, but our rents have only gone down about 5% overall. So clearly, we sold off assets that weren't as strongly performing as the ones we held on to. And that's really what we're trying to accomplish here, to drive efficiencies and higher AFFO into the company. The one comment I want to make about the transaction with the nonrefundable deposits is the following. I saw in several of the analyst reports that there was sort of an immediate reaction to call that a one-time event. And yes, it is an unusual event, but in an annual sense, we have about twice a year something like that that runs through our P&L. So yes, it's unusual in the context of any given quarter. And it's not true, which is the reason we disclosed it the way we did. It's not traditional rents. But we get approximately every other quarter some major payout related to the way we negotiate our various real estate transactions. In this particular case, it was someone who wanted to buy a farm from us. We required them to make a nonrefundable down payment toward the purchase of that farm, and they eventually decided they could not complete the purchase, and we kept their money. In the fourth quarter of 2023, we had a similarly large payment from a solar company because we had negotiated a one-time payment from them when they initiated construction. And so on and so forth. So I just wanted to add a little bit of clarity. We will always disclose these things that are unusual, but I'm not quite sure it's appropriate to immediately pull them out of our P&L, if you're an equity analyst because these things happen over and over again for us, which is good. With that, I'm going to turn it over to Luca to make further comments about the quarter.

Thank you, Paul. I want to discuss a few key areas. First, let's talk about acquisitions and dispositions and how our strategy for 2024 differs from 2023, along with the reasons behind our strategy this year. We recently had meetings with some investors, and questions arose, prompting the need for clarification, even if some points seem clear to many. In 2023, we had substantial disposition activity, both in terms of the number of transactions and their dollar volume. I believe we effectively used those proceeds to pay down debt and repurchase stock, and we plan to do something similar in 2024. However, we face regulatory constraints. As a real estate investment trust, we must adhere to specific limitations on our total disposition activity for the year. We typically rely on various safe harbors each year. Last year, we relied on a safe harbor based on a total aggregate dollar amount of transactions calculated over three years, which would have limited us to a small number of dispositions this year. Therefore, we are using a different safe harbor this time, which focuses solely on the number of transactions—specifically, seven—regardless of the individual or total dollar amount of those transactions. We have already utilized one of those transactions through a disposition related to the opportunity zone fund, where we hold a 10% equity interest, which counts as a disposition for us. While in the past, we acted quickly when disposition opportunities arose, this year we need to be more strategic because we only have six remaining transactions available. Consequently, we are being more deliberate in planning and prioritizing the opportunities we have. Although we haven't completed any dispositions thus far, I anticipate we will engage in these transactions later this year. However, I do not have any public information to share at this time regarding specific timing, volume, or regions of these transactions. Another point I want to address is cost management. We made significant progress in 2023 by reducing some G&A costs and will continue this approach this year, including staff reductions and limiting senior executive compensation. We will seek further opportunities throughout this year to minimize expenses whenever possible. Now, I will turn the call over to James for an overview of the company's financial performance. James?

Thank you, Luca. I will discuss several topics today, including a summary of the first quarter of 2024, a review of our capital structure and interest rates, and updated guidance for 2024. I will reference the supplemental package in my comments, which is available in the Investor Relations section of our website under Events and Presentations. First, I will present some financial metrics from Page 2. For the three months ended March 31, 2024, net income was $1.4 million, with net income per share available to common stockholders at $0.01, which is lower than the same period in 2023, primarily due to the impact of sales from last year. AFFO was $2.8 million, with AFFO per weighted average share at $0.06, significantly higher than the same period in 2023. Although Q1 2024 AFFO was negatively affected by sales that occurred in 2023, it benefited from $1.2 million in income from forfeited deposits that Paul mentioned, which I will explain further shortly. Next, I will go over some operating expenses and other items on Page 5. Depreciation, depletion, and amortization were lower in the first quarter of 2024 because there were fewer depreciable assets in service. Property operating expenses decreased in Q1 2024 due to lower property taxes, insurance expenses, and repair costs. General and administrative, as well as legal and accounting expenses, saw minor changes between the periods. Gains on dispositions declined in Q1 2024 since no farms were sold, only minor fixed assets from a few properties. Income from forfeited deposits relates to the sale of a farm initiated back in 2020, where we received a series of non-refundable deposits over time. The sale was mutually terminated in the first quarter of 2024, leading us to recognize $1.2 million in forfeited deposits. Interest expense increased slightly in Q1 2024 due to higher rates. Moving on to Page 12, there are a few points regarding our capital structure. Total debt as of March 31, 2024, was $383 million, with floating rate debt net of the swap making up about 18% of total debt. The fully diluted share count as of April 25 was 49.4 million shares. We had approximately $179 million of undrawn capacity on our lines of credit at the end of Q1 2024. In 2024, we have three MetLife rate resets on debt totaling about $44 million. We have agreed to a new rate of 6.37% for MetLife loan #9 for the next three years, effective May 5. There was a change in the Rabobank debt during the quarter, with $2.1 million in annual amortization eliminated. The spread on the Rabobank debt remains unchanged, with the next spread reset in two years. The Rutledge facility also maintained its spread, with the next reset scheduled for the beginning of Q2 2025. Page 13 provides an overview of our income statement and the components that generate revenue and cost of goods sold. Please note that we made a small presentation change in our GAAP financials in the fourth quarter of 2023. Tenant reimbursements are now included in rental income on the income statement, as reflected in the 10-K and the first quarter 10-Q. Note 2 of the K and Q outlines the components of rental income, including fixed farm rent, solar, wind, recreation, tenant reimbursements, and variable rent. Page 14 compares these components for the first quarter of 2023 and the first quarter of 2024, with notes describing the differences between the periods. Notable points include: fixed farm rent decreased as expected due to dispositions in 2023. Changes in solar, wind, and recreation were mainly due to the land rental for a large solar project in Illinois, which had higher rent in 2023 than in 2024, as the project shifted from construction to operational status at the very end of 2023. This difference will impact throughout the year, particularly in the fourth quarter. Tenant reimbursements fell in Q1 2024 due to a one-time tax reimbursement in Q1 last year, various dispositions in 2023, and some leases that renewed with higher fixed rent in lieu of lower tenant reimbursements. Management fee and interest income increased with more loans and financing receivables outstanding. Variable payments rose in Q1 2024 due to grapes. Direct operations, which include crop sales, crop insurance, and cost of goods sold, increased compared to 2023 primarily due to citrus. Other items saw a slight decrease between the periods. On the following Page 15, we show the outlook for 2024 using the same format as previous pages, with assumptions listed at the bottom. We completed three acquisitions in the first quarter of 2024, and no additional transactions are accounted for in these projections. Revenue changes for fixed farm rent reflect the full-year impact of 2023 transactions, the three Q1 2024 acquisitions, and a few lease changes occurring in Q1 2024. Direct operations revenue is up due to expected better performance in citrus farms. On the expense side, general and administrative expenses slightly decreased in Q1 2024. Interest expense is higher due to updated forward curves. Please keep in mind that we are not showing the entire income statement here, but the Q1 impact from the forfeited deposits is included in AFFO. The projected range for AFFO is $9.4 million to $12.8 million, translating to $0.19 to $0.26 per share, which is an increase from the outlook given last quarter. This summarizes our current position, and we will keep you posted as we continue throughout the year. That concludes our comments this morning. Thank you all for joining. Operator, you may now begin the Q&A session.

And your first question comes from the line of Scott Fortune with ROTH MKM.

Just want to follow up real quick on the Farmland acquisitions you did in 1Q, $16.3 million. Just kind of a sense for what type of farmland was geography and kind of how are you looking at acquiring opportunistically going forward? Just some color on what you're seeing out there from an acquisition standpoint? Obviously, the liquidity and higher interest rates and spread mix is difficult, but just kind of your strategic opportunities as you look into 2024 here on the acquisition side.

Sure. This is Paul, and I'm in a different location today than the rest of the team, so I'll address the general aspects of your question. Luca, please share your insights on the specific locations of the farms we acquired. Generally, our approach to acquisitions this year, due to high borrowing costs, is to limit ourselves mainly to add-on properties that are either adjacent to or very near our existing farms. When a valuable opportunity arises to expand one of our current farms, we will almost certainly pursue it, provided the price is reasonable, because we strongly believe that increased scale enhances the profitability of our farmers and consequently the rental income we can generate from those farms. Therefore, those are the types of acquisitions we will pursue this year. It’s crucial to understand that the return from Farmland isn’t solely based on current yield; it includes both current yield and appreciation. We believe that currently, the combined appreciation and yield are at least equal to the long-term average, which is around 11% annually. Our cost of capital on the debt side remains well below 11%. Hence, we will occasionally engage in transactions that may have a slightly negative current yield relative to interest rates, as long as we believe they will overall add net value. Luca, would you like to discuss the specific locations of the three small transactions in that $16 million acquisition?

Sure, Scott. So we did three acquisitions, all in Illinois. It was really one acquisition that was the overwhelming majority and two very, very small acquisitions. These were all farms that were either directly adjoining or in the immediate vicinity of something we already owned. Especially the very large one was right next to another very large farm that we own. That offers us to have significant economies of scale and therefore better ability to pay strong rent and more stability and more value for the combined assets. So this is why we pursue these acquisitions despite the cost of capital because we thought that in the long term, they are absolutely value adds for our portfolio as a whole.

I really appreciate the information. It's helpful, especially considering the challenging spread environment we are currently facing. As a follow-up, you mentioned in your remarks that there are potentially six transactions left for asset sales. I understand you're looking at these from a timing perspective in the second half of the year, and you mentioned a decent size of around $25 million. Could you provide any estimate on what potential asset sales might reach in 2024? You previously indicated a figure around $50 million, so any additional details regarding asset sales for 2024 would be helpful.

So again, this is Paul. I'll share a few thoughts on this. I believe we might reach around $50 million in sales for the calendar year, although that isn't guaranteed, it's quite probable and possibly even more. Most of these transactions will occur later in the year. We want to be careful, as we can only complete six transactions, so we don't want to use them up too early. It's important to keep the option open for potential buyers who may want to acquire something we own without us needing to decline the opportunity. Therefore, our asset sales will likely be focused in the fall, probably towards the end of the third quarter and into the fourth quarter. These sales are expected to be relatively larger since we are limited to six transactions this year. The main factor pushing us toward asset sales will be if our stock price remains at a $5 or greater discount compared to the underlying value of the portfolio. If that situation persists, we will proceed with asset sales later in the year and repurchase stock. It's quite surprising; as many of you know, I own nearly 6% of the company, and that valuation gap needs to be addressed. I believe our stock is worth well over $16 based on the underlying asset value. Even after the recent increase, we still see about a $5 discount, which seems absurd. The assets are very valuable and liquid. So if this gap is still present late in the year, we will aim to create value for everyone by, as I jokingly put it, investing in what I consider the cheapest farmland on the planet, which is our own stock. I hope this provides some clarity.

Your next question comes from the line of Rob Stevenson with Janney.

I guess, Luca or Paul, anything changing in terms of availability of financing for people to buy farms? I'm assuming that the issues surrounding the forfeited deposit was specific to that person. But figured I'd ask, if anything is changing at the margin these days given the higher for longer rates and what's happened with some of the banks?

So, the answer is the farmland market itself is incredibly strong. It's the power of a market that's largely dominated by the thousands and thousands of small farmland holders around the country; the farmers themselves who drive the market, particularly in the grain-producing regions. California, which is a much more institutional ownership market, there getting transactions done is a little more difficult. But for the overwhelming bulk of our portfolio, we haven't seen any real weakness. Turning to the one specific transaction, that potential transaction would have been relatively large. And so the person that walked away from those deposits, as a percentage of the entire purchase price of the property that we were talking about, it's not that much money. I'm guessing they have some financing challenges; we don't know that for sure. I'm also thinking they just kind of changed their mind. It wasn't in the context of the overall transaction an incredibly huge amount of money. And they just decided that the asset they thought they desperately wanted, they decided they didn't need.

Okay. But you're not seeing any type of reticence on the standpoint of banks or some of the government programs...

Not really, but I’ll expand on your question for everyone’s benefit. I see your question as related to the farm economy facing challenges that could affect us. The answer is yes, there’s more trouble now than there was a year ago. We’ve had some farmers come to us asking if we can re-rent their farms. We’ve managed to re-rent those farms at the same price or even slightly higher. So far, we aren’t significantly affected by these issues, but we’re aware of them. The main factor is lower commodity prices for row crop farmers, combined with high-interest rates, leading to some distress in the market. However, it's important to note that the worst bad debt this company experienced during the last downturn was still minimal. This asset class has zero vacancy, and we won’t end up with vacant or unrented farms, though we might face occasional tenant issues. We work to replace those tenants without losing any money. For those unfamiliar with our operations, we have a first lien security interest in the growing crop in almost every jurisdiction, allowing us to seize revenues if we’re concerned about rent payments at harvest time. This is why our bad debt numbers remain very low, even when the farm economy faces difficulties. I hope that clarifies things, Rob.

Yes, that helps. And then a clarification on the six remaining dispositions that you guys could do. Do 1031 transactions count in that? So if you bought a $10 million farm and sold $10 million of farms, is that accepted?

A 1031 does not count. It doesn't. And you may see us do some of those for exactly that reason.

Okay. And then last clarification. Luca, the three Illinois assets that you just bought, what are they growing these days? And is that what's going to wind up being grown on there going forward?

It's row crops. So corn and soybean rotation.

Okay. And I mean, where are you guys seeing the best opportunities pricing-wise? Is it Midwest row crops? Is it something else? As you're looking out there to potentially do any more acquisitions?

We have reviewed our portfolio over time, particularly focusing on the farms I personally owned that were included in the REIT when it was founded ten years ago. We have 25 years of historical data and a decade of being a public company. Our insights indicate that the best long-term returns have come from the Corn Belt, followed closely by the Delta. These two regions are the most significant farming areas in the U.S., specifically the upper Midwest and the lower Mississippi River Valley. This is not surprising as they are recognized for their agricultural productivity. The rationale behind this includes three factors: current yield, long-term appreciation rates, and operational efficiency, which contribute to lower property operating costs and reduced overhead for personnel and other expenses. The Corn Belt may have lower current yields but boasts higher appreciation rates and highly efficient operations. In our company, we have a single farm manager overseeing the Nebraska and Illinois assets, which represent a significant portion of our Upper Midwest holdings valued at around $600 million. This level of efficiency is unmatched anywhere else in the country. Therefore, we are enthusiastic about acquiring assets in the Corn Belt as historical data indicates they provide the best financial returns in the long run.

Your next question comes from John Massocca with B. Riley Securities.

I know you've discussed the Corn Belt region extensively, but could you also provide insight into the farms you own in California and the Western region? How are those performing currently? Specifically, are the challenges related to tree-nut farms beginning to improve, or is that market still facing difficulties?

When you examine California, it’s important to consider the farms on a crop-by-crop basis. California remains a challenging environment due to water issues, whether they're the result of water politics or the actual availability of water. In both scenarios, these factors adversely impact farmers. As we have discussed for over a year in these conference calls, we plan to gradually reduce our exposure to the U.S. West Coast and the Colorado High Plains area, primarily because of water limitations. These water issues affect all crops in California. This situation will lead the most exceptional farms we own in that area to appreciate quite rapidly, particularly the farms with superior water resources. California has a unique climate that allows for the cultivation of high-value crops that can only be grown in a few other locations worldwide, especially none in North America. Thus, those premier farms are expected to continue appreciating quickly. However, the more average farms in our portfolio are facing challenges, specifically due to water availability and varying supply-demand dynamics for different crops. For instance, walnuts are currently struggling with global supply-demand issues. Pistachios and almonds are dealing with some challenges, but not to the extent that walnuts are. They are likely to recover, despite some concerns about over-planting in those categories. In contrast, citrus is predominantly a local U.S. market. Although we import a considerable amount of citrus from South America, competition diminishes significantly when the U.S. crop is harvested. Therefore, I expect this year’s citrus crop to perform well for us. For example, we own a vegetable/strawberry farm in California that is quite profitable and successful, and that trend should continue. Overall, while the situation varies across different crops, due to the overarching issue of water, we will progressively decrease our exposure in the Western U.S. markets, especially in Colorado and the West.

I mean, is there a market to sell maybe kind of just a specific crop, California tree-nut farms right now, just given all the kind of stress that particular industry has seen in recent months and years?

Yes, there is a market, although it's at a lower price point than it was some time ago. We are very patient and only let go of properties in rare instances. We consider our portfolio from a long-term perspective. The key question is whether we believe that a specific crop or farm will increase in value over the next three to five years, rather than focusing solely on the next 12 months. If we determine that a farm won't provide long-term value, we will dispose of it. For example, last year we sold blueberries in Michigan and a small citrus farm in Florida at a loss. While we achieved significant gains on other sales, we decided to move on from Florida citrus and Michigan blueberries because we didn’t foresee a meaningful recovery for those farms in the near future, and it was time to reinvest our capital elsewhere. Currently, we aren't in that situation with any properties in California. I hope that clarifies things.

It definitely does. And then I saw that kind of the gross profits for the kind of operated farms went up in expectations for what you can do for the year went up, and it was just maybe notable that part of that was a reduction in kind of cost of goods sold. Just can you provide some color on what's driving that?

I'm going to leave that to you, James or you Luca; they're in the Denver office because it's fact specific, and I don't have the facts right in front of me.

Yes, John, on the cost control change in our outlook, that was mostly caused by kind of revised budgets for spend for the year. In the beginning of the year, some of it was kind of rolled over from prior years and with more time before the manager had a chance to sharpen up, if you will. And there's going to be decreased spend associated with those farms. So that's what's causing the change there.

Is there a possibility for further reductions in that line item now that we have more clarity on the budget, or is it fairly finalized as we approach the growing season?

Yes, there are always small changes available potential, but we think it's pretty sort of the range of outcome to converge. So we think it's narrowing. But there are some little tweaks that can be made later in the year. But for now, we don't expect any big changes.

That concludes our Q&A session. I will now turn the conference back over to Luca Fabbri for closing remarks.

Thank you, everybody, for your time and your interest in our company. Stay tuned for further updates in the quarters to come. Have a great day.

Ladies and gentlemen, that concludes today's conference call. Thank you all for joining. You may now disconnect.