Thank you for standing by. My name is Gail, and I will be your conference operator today. At this time, I would like to welcome everyone to the Farmland Partners Inc. Q4 and fiscal year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, kindly press star one again. I will now turn the call over back to Luca Fabbri, President and CEO of Farmland Partners. Please go ahead.

Thank you, Gail. Good morning, everybody, and welcome to Farmland Partners' full year 2024 earnings conference call and webcast. We truly appreciate you taking the time to join us for this call because we see it as a very important opportunity to share our thinking and strategy in a format that is somewhat less formal and more interactive than public filings of press releases. I will now 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 fourth quarter earnings was distributed after market close yesterday. The supplemental package has been posted to the Investor Relations section of our website under the subheader 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, February 20th, 2025, 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, 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 full year 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 February 19th, 2025. 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 in documents we have filed with or furnished to the SEC. I would now like to turn the call over to our Executive Chairman, Paul Pittman. Paul?

Thank you, Christine. So my comments this morning will be a little bit shorter than normal. Let the rest of the team go through the details of the success of the year. But I want to hit a couple of high points. We have said for a long time that owning farmland is fundamentally a total return story. I think the last twelve months truly proved that to our shareholders. We did a substantial amount of asset sales at very high gains. We distributed basically all of that cash to our shareholders in the form of a $1.15 special dividend early in January. And if you recall, we did a similar but somewhat smaller distribution a year earlier, also based on asset sales at very good prices. Farmland is a function of current yield plus appreciation. The public markets for most of our life have frankly ignored the second element. It is the bigger return element of the asset class. We've always said it's there. Now, two years in a row, we've delivered on that. You know, we also have focused very, very hard on driving revenue higher and therefore AFFO higher. That's all about increasing rents over time and getting very good pricing in our specialty crops at least for the most recent year. The other thing we focused on is reducing cost. All of that has delivered to shareholders a substantial increase in stock price, particularly in the context of having handed out a $1.15 this year, which should fundamentally make your stock kind of go down when you think about the distribution of the underlying assets of the company. We've delevered substantially and bought back quite a bit of stock. And all of these things together have delivered very substantially for all shareholders, including myself, of which we should all be quite happy. With that, I'll turn it over to Luca and the rest of the team to make some more comments, and I'll see you all in the Q&A.

Thank you, Paul. I just want to highlight a couple of points that Paul already alluded to. This 2024 has been a very, very strong year for the company. And if I had to point out very specific elements that drove this performance, one would certainly be the fact that now for several years, we've had very strong performance in our branch renewal, and that is showing up in the numbers for our base rent revenue. This year, we also had a very strong performance of some of our specialty crop farms, delivering very good returns in terms of valuable rents as well as direct operation revenue. So that all contributed to the strong performance, including also some structural cost reductions that we were able to perform this year. Looking more broadly at what we've done this year, we've done significant asset sales, as you are all aware, and we were able to not only, as Paul mentioned, deliver some of that gain to our shareholders in the form of a special dividend, but we also created some liquidity that allowed us to reduce our indebtedness and also do some stock buybacks. That has resulted also in a much reduced interest expense in conjunction with the reduced interest rates that we all saw. If I look forward at 2025, you will see that we are putting out a guidance for the year in terms of AFFO per share of between $0.25 and $0.30. That is above our current dividend rate of $0.24. As you're all aware, dividends are decided by the board on a quarter-to-quarter basis. For the time being, we are staying on course with the $0.24 per share. But the board will, of course, as the year progresses, evaluate a different approach on the dividend. But, again, that will be on a quarter-by-quarter basis, a decision made by the whole board. With that, I will turn the call over to Susan Landy, our Chief Financial Officer, for her overview of the company's financial performance. Susan?

Thank you, Luca. I'm going to cover a few items today, including a summary of the full year for 2024, a review of capital structure, a comparison of full year revenue, and guidance for 2025. I'll be referring to the supplemental package which is available in the investor relations section of our website under the subheader Events and Presentations. First, I will share a few financial metrics that appear on page two. For the full year ended December 31st, 2024, net income was $61.5 million or $1.19 per share available to common stockholders, which is higher than the same period for 2023, largely due to the impact of dispositions that occurred in the fourth quarter of 2024, the significant debt reductions, which resulted in interest savings, and the impact of several years of strong lease renewals. AFFO was $14.1 million or $0.29 per weighted average share, which was significantly higher than the same period for 2023. AFFO was positively impacted by lower property taxes, lower interest expense as a result of the debt reductions, increased volume of avocado and citrus sales on our directly operated properties, and increased variable farm rents. Next, we will review some of the operating expenses and other items shown on page five. Gain on disposition of assets was higher due to dispositions of 54 properties in 2024, with an aggregate gain on sale of $54.1 million compared to dispositions of 74 properties in 2023, with an aggregate gain on sale of $36.1 million. As a result of these meaningful dispositions, we were able to lower interest expense by reducing our outstanding debt by $158.5 million, net of borrowings. In addition, the dispositions lowered both property operating expenses and depreciation expense. General and administrative expenses increased due to a one-time severance expense of $1.4 million and a special bonus of $2.1 million to executive officers during the year ended December 31st, 2024, partially offset by lower compensation and travel expenses throughout the year. The severance expense was incurred in connection with the previously announced departure of the company's former CFO and Treasurer, part of the company's cost-cutting initiative. Next, moving on to page twelve, there are a few capital structure items to point out. We had undrawn capacity on the lines of approximately $167 million at the end of the year. We have no debt that is subject to interest rate resets during 2025. Page fourteen breaks down the different revenue categories with comments at the bottom that describe the differences between the periods. A few points that I'd like to highlight are, as expected, fixed farm rent did decrease, and that's because of the dispositions in 2023. The decrease was partially offset by several years of strong lease renewal rates. Note that the company negotiated to retain the full year of 2024 rent for the property sold in October of 2024. Management fees and interest income increased primarily due to the increase in loan issuances in 2024 under the FPI loan program. Direct operations is the combination of crop sales, crop insurance, and cost of goods sold. It was up relative to 2023, largely due to an increase in sales of citrus, avocado, and walnuts as well as lower impairment and cost of sales. Page fifteen is our outlook for 2025. The assumptions are listed at the bottom of the page. On the revenue side, fixed farm, solar, wind, and recreation rent reflects the full year impact of 2024. Management fees and interest income is higher due to the increased activity in the FPI loan program. Variable payments decreased due to the outlook for citrus and row crops, plus the absence of grape farms sold. The change in direct operations, again, that's crop sales, crop insurance minus cost of goods sold, is primarily due to increased costs associated with maintenance and water. On the expense side, property operating expenses decreased as a result of savings on the sales during the year. G&A decreased due to events such as the one-time $1.4 million severance expense and the $2.1 million special bonus. Interest expense declined primarily due to realizing a full year impact of debt reductions that occurred in Q4 of 2024. And the weighted average shares also decreased with the full year impact of the 2024 share buybacks. The forecasted range of AFFO is $12.1 million to $14.7 million or $0.25 to $0.30 per share. This summarizes where we stand today, and we will keep you updated as we progress through the year. This wraps up our comments this morning. Thank you all for participating.

Thank you so much. At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Rob Stevenson with Janney Montgomery Scott. Please go ahead.

Good morning, guys. Just would love to get your thoughts right now on where the pricing environment is, relative to where you need it to be to do net acquisitions in 2025. And if there are any sort of areas of the country or crop types that you want to be in longer term that are making sense to do deals today versus the ones that are just far too pricey.

Yeah. Let me take that, Luca may have additional comments. Hi, Rob. So if you looked at our portfolio overall today, it is extremely focused on the state of Illinois, and a little bit more broadly Indiana and Missouri. A small set of holdings is still in Eastern Colorado. And then basically, California. So Illinois is incredibly strong. We've talked about this in the past. We've reached a plateau stage in terms of valuations in Illinois. Meaning, the market's not driving higher; not every single sale is a new record. But the prices, particularly for good properties, remain very strong. We would continue to buy in Illinois if the valuations make sense. As we all know, it's a relatively low current yield environment, but a very, very high appreciation environment. When you think about the portfolio for all investors, recognize that the gains we achieved on the sale of the portfolio at the end of last year, we sold essentially the southeast United States, most of Nebraska, and most of our Delta properties in Arkansas, Louisiana, and Mississippi. Those were very high gains. But that's not the best assets with the most embedded value gain that we own. The best assets with the most embedded value gain since we bought them is really our Illinois properties where we own a protein forty thousand. Turning to Colorado, it's, you know, frankly, a little bit, you know, like Goldilocks, not too hot, not too cold. We are long-term not particularly excited about that region because of water limitations and their likelihood that those limitations will just become more extensive through time. I think we will likely gradually exit the High Plains region. If we were going to buy more in any of the regions where we sold a lot of properties last November, the place we would go back into is the Delta. Super high-quality farms, particularly northeast Louisiana and Southeast Arkansas, are very attractive. They have many of the characteristics of the Midwest, with a slightly higher current yield. Now turning to California, California remains an area of concern. We've talked about this in the last, you know, probably three or four, at least, if not, you know, a couple of years worth of conference calls. California has a variety of challenges, water being probably the first and biggest challenge, the second being over-planting of many of those crops around the world, and the third being labor and regulatory challenges, particularly in California. What that has done is put a lot of pressure on asset values in that region. We think in many cases, institutional investors are very scared of that region right now. There are people exiting that region. So that's a place in our portfolio where we continue to monitor it. We're not going to be, you know, we're long-term value players. I don't get excited about, you know, whether the value's up or down in the last ninety days. That's not how I read an article like that; I kind of recognize it's written by somebody that doesn't understand the asset class. Nothing moves on a ninety-day cycle in this asset class. So we're going to kind of monitor it, watch it if we did approach a fair price on something we own, we'll likely lighten our exposure to California. We're very unlikely to buy additional assets in California right now, but we would likely lighten up there. Hope that answers your question, Rob.

Yeah. That's very helpful. And I guess the other question regarding deployment of capital is how are you thinking about you guys bought the Ohio Deere dealerships? How are you guys thinking about that business and, you know, is it hitting whatever return thresholds that you were looking for and coverage, etc., and whether or not you would expand and do more of those either in Ohio or other states or something of that sort going forward to deploy capital?

Yes. So a couple of thoughts on that. And I've talked to many individual investors, particularly our largest ones about this. And some of them, frankly, love the idea of doing more of that, and some of them hate the idea. So here's the intellectual challenge when you think about it. One of the problems we face as a company is not enough current income in any given year. Those assets are solid six percent current yield sorts of assets, maybe even six and a half. In some cases, they're great current yield tools for us. And I believe that the long-term appreciation of a John Deere dealership footprint, you know, we don't own the dealership. We own the land underneath the buildings. As long as you pay fair value going in, and fair value is about appraised value, in this case really not just cap rate, on the lease payment. So as you pay the fair price for that, my view is that asset is likely to appreciate more or less with farmland or even higher than farmland. Many of these dealerships are located at important highway intersections or places like that. There's no reason to think they won't go up as land values go up. So that would be the argument to do more of that. We don't have very much exposure to that in the overall portfolio sense today. The counterargument, which is also sensible, it's not the argument I hold, but it's a sensible argument, is that look, you know, stick to your knitting. At some level, that John Deere dealership is really just a triple net industrial lease. Don't, you know, don't confuse it with farmland. You know, stay away from it. Both of those things are true. To answer your question, Rob, is you know, I think we might do a few more of those. I don't think you'll see us get into it super aggressively because, you know, if I was having this conversation with the board and the rest of management, you would have people in amongst that group of, you know, six or seven people with both points of view that I expressed. So I guess is we'll we may do a few more of those if they're particularly attractive, but don't expect us to do a lot.

Okay. That's helpful. Thanks, guys. Appreciate the time this morning.

Well, let me chime in while Susan here kind of pulls up the correct number. You have to look at it in two different ways because we have liquidity that is immediately available to us under lines of credit. And that's a short-term kind of spread over SOFR kind of rate. But we can also, if we are to structurally increase our debt again, we would actually use more traditional kind of loan agreements on three-plus year terms that will come with different interest rates and different interest rate exposure risks. Having said that, Susan?

Yeah. We're right around six percent right now for the incremental borrowing rate.

Okay. That's very helpful. Thanks, guys. Appreciate the time this morning.

Again, I would like to remind everyone that if you would like to ask a question, press star one on your telephone keypad. Thank you. Your next question comes from the line of Buck Horne with Raymond James. Please go ahead.

Hey, guys. Good morning. Congrats on the great quarter and all the progress last year. The asset sales. Great job. Curious if you could just share maybe a few high-level thoughts on some of the headlines and articles that are out there about, you know, the freezing of funding that seems to be going around for the various USDA programs that a lot of farmers had been exposed to and some sort of cost-sharing agreements and wondering if that, you know, if there are any particular tenants or farmers in your portfolio that are exposed to any sort of funding freezes? Or how do you think that plays out over the course of the year?

Yeah. So, Buck, thank you. Thank you for your kind words, and here's my perspective on that. So when you look at the USDA budget, you need to think about it in two relatively large separate buckets. The first bucket is SNAP. That's basically food stamps, aid to low-income people, and food purchasing. That is a huge percentage of the budget. I don't have off the top of my head what it is, but it's a large, large percentage of the overall USDA budget. I think there is a sense in Washington DC that the Trump administration felt there needs to be a little bit less of that. Not that nobody wants to be hurt, but they think there is some waste, fraud, abuse, you know, in that program. And I'm pretty sure there is. They also think, remember back to the Clinton administration, I'm older than most of you on the call, you know, Bill Clinton got very focused on the fact that providing a long-term boot camp program disincentivizes individuals from going out and creating, you know, a successful and fulfilling life for themselves. So maybe we need some program changes that make it a short-term safety net, not a lifetime safety net. I think those things are coming back around. The second bucket of the farm program involves the various pieces delivered to farmers. These include direct payments, ad hoc disaster payments, and crop insurance. To my way of thinking, the most important piece is crop insurance. That is a very good program. It benefits farmers, but it is also good for all US citizens. What that program does is ensure food security. We are such a productive country regarding food production that one bad year does not cause a food supply problem. It causes a slight increase in pricing, but nobody goes hungry. The problems would arise if the United States had two bad years in a row. Crop insurance ensures that a farmer who had a poor year can plant again the subsequent year, guaranteeing we do not experience two bad years in a row. And so that program is crucial. Again, there is waste, fraud, and abuse in direct payments and emergency payments. I am confident that the current USDA team will focus on eliminating that. My understanding of the policies we will see will likely center around discouraging abuse. We as a company, partly because I was a real farmer for an extended period, avoid tenants we believe are abusing the system entirely. We want nothing to do with those tenants. We make sure we're focused on farmers who demonstrate sensible economic results, regardless of government payment implications. Therefore, I don't think anything happening in that area is going to adversely impact us significantly; in fact, it might benefit us as those who have relatively higher quality land have higher yield potential.

No. That definitely helps, and I appreciate the thoughts. I just want to also I kind of want to clarify. Maybe I wasn't clear in the question because I was, you know, the intent, I think, was more thinking through these inflation reduction act CapEx projects that a lot of farmers had undertaken, you know, putting in a lot of money to, you know, whether it's, you know, doing environmental upgrades or such, you know, some other funds that they were putting upfront that they were going to do a cost-sharing arrangement with the government on, just wondering if any of your portfolio farms had, you know, taken advantage of that program or spent a lot of CapEx money or, you know, at some sort of financial risk due to, you know, funding being cut back?

No. No. So the quick answer is no. I mean, we as a company do not, in incredibly rare circumstances, would we ever directly pursue some sort of government program payment either by pushing a tenant to get it and share it with us or by obtaining it directly, although seldom eligible, from the kind of direct pay. So we just don't want to play in that space. We really don't. Now, I mean, to be fair, if you had a massive reduction in cash flow coming from the USDA to the agriculture community, that would have a negative impact on a large landowner like us, because you would see less capital moving into that space. But the impact on us is very unique for the reasons I just explained. Regarding the specifics, again, I'm not sure exactly what the new administration will do, but I’m confident that anything that is a pre-existing contractual obligation or cost-sharing on something will be fulfilled. I think it's just contract law. The more relevant question is how those programs might change going forward.

Gotcha. Gotcha. Very helpful. I appreciate that. And just one quick last one is if you could share, you know, what your renewal lease terms in terms of your asking rates on new renewals for this spring are going out at and, you know, kind of how you think that plays through for the year.

Sure. So on renewal rates, if you look back over the last couple of years, the three-year average on renewal rates is up 12.4%. That is based on incredibly strong renewals in the last two years prior to the 2024 year. The 2024 year was essentially flat to slightly down. We had about a 0.8% negative rent renewal rate. Now recognize that number is really kind of weird this year because we had, you know, worked our way through renewing most of the rents on those properties we sold, and those were very high-quality properties. We sold those properties, so they're not in that statistic, so it's kind of a sloppy statistic this year due to selling 25-30% of the portfolio. But the big takeaway is really strong rental increases three years ago and two years ago, and sort of flattish this year because even if we had had all those properties we sold still in the statistic, it might have been slightly positive, but it wasn't going to be ten or twelve percent again. So we have a kind of plateau in land values. You got that kind of plateau in rents as well. Now for the coming year, I think we're going to be back in a cycle where we can push rent increases again. If you pull up a soybean or corn chart, particularly corn, over the last six months, you've seen a relatively significant increase in corn price, therefore, increasing profitability for farmers. When you go out to have that rental discussion, particularly in our portfolio, which is very row crop centric, the happiness related to grain price makes that rent negotiation easier.

Got it. Very helpful, guys. Congrats again on all the progress. Good job.

Your next question comes from the line of Darren Ravenu with DTR Partners. Please go ahead.

Thank you for your comments today. Following up on you said that you think you can raise rents. How do you think of that in terms of income levels being hit so badly in the last year? I mean, do you think that's going to be changing on a go-forward basis? And I'm asking that because what can we think about dividends being paid through cash flow versus selling of assets or, you know, historically being able to access the credit markets, which, you know, with interest rates this high, I assume you're not going to want to do that. So where do you see farmers' income? You mentioned you think farmers' income in corn is going to go up. Is that more looking forward that income levels have bottomed out given where commodity prices are now?

Yeah. So, you know, recent data coming out of the USDA and other places suggest that farm income is kind of climbing back up. That's partly due to these large direct payments that were authorized at the end of last year, but it's also kind of increasing grain prices. That depends on what you're looking through. If you look at the narrow-angle lens, we're probably a little better than we were last year. But now let's look at the wide-angle lens because that's what's important. This idea that farmers are on their last legs is just overdone. We are right now in certainly the top ten economic return years ever for American farmers. You know, I read something recently that said, without government payments, it would be the eighth best year ever, and with them, it's the sixth best. So that is, you know, to be blunt. I don't care. I mean, I'm someone who really understands these statistics. Our company understands these statistics. This is just blown out of proportion. Farmers are doing well, grain prices are going up, profitability is going up, and you'll be able to push rents up a little bit. When prices are going down and profitability is down, you're probably not going to be able to push rents very far, which is a year we kind of just went through. That’s why we, as a company, anytime times are good, we grab those rent increases while you can. Be a little more gentle in a year where you can’t. So we think we will be able to continue to push our rents. To give you context, the long-term average rent increase is three or four percent a year. This year, we see it around ten or twelve percent. Don’t think about that as ten or twelve percent forever in your model. Think of it as making up for the year of zero. So, right, long-term average if your modeling is around three or four percent.

And are you seeing distress buyers coming into California at all, which maybe signals a bottom of the market? Because, you know, the banks are giving away assets right now. I mean, is that what you're looking for?

We see the California farmland market as still being fairly dislocated. There are a lot of, as you probably know very well, properties on the market. There are probably willing buyers that haven’t stepped into the market yet. So there is a fundamental misalignment between supply and demand for farmland assets that will take probably a little longer to resolve. Unfortunately, the long-term uncertainty regarding sigma and water availability remains top of mind for a lot of operators. However, good performance, for example, walnuts have performed better than expected. Almonds have performed pretty well in 2024. We're expecting a little bit of an uptick in interest. What we are seeing specifically, more than from investors, is from smaller operators who had a pretty good 2024, and they are now looking to buy little parcels here and there. So far, we haven’t seen really any big investors swooping into the market to buy in large quantities, mostly because many of those investors are already present in California and feel they have considerable exposure to the market.

To your specific question, I think we're at or near the bottom right now. But it's, you know, you can never predict the bottom exactly.

Thank you. Your next question comes from the line of Craig Kucera with Lucid Capital Markets. Please go ahead.

Yeah. Good morning, guys. I'd like to talk a bit about the FPI loan program. You had a pretty sizable increase in your loans outstanding in the fourth quarter, and would just like to get your thoughts on where you see demand. Do you expect to see continued higher demand in that segment?

Yeah. I mean, it's partly demand, Craig, and it's partly focus on. As we have shrunk the portfolio, we've done a good job controlling costs. But, you know, we are a public company. So there is a floor to how much we can lower costs. Being public is expensive due to expenses for the board, outside legal, filing fees, accounting, etc. So, as we got deep into the transaction we did last fall where we sold a substantial portion of the portfolio, we consciously decided we've got to reach out and increase the loan program. Not by taking on a ton of additional risk, we hope, but by making loans at high interest rates and fees that help with our cash flow. With the sale of so many properties, this was important. That’s what you really see in the numbers. Again, we’re an asset-based lender. What we do is serve a role in the marketplace where farmers and people who own ag land are often cash poor but asset rich. Most lenders don't want to touch that. It's not because it's a bad loan, but it's because they are not in a position to own that asset if necessary. We, on the other hand, are in the business of owning agriculture assets. As long as I and our team feel we are covered in terms of collateral value, we'll make a loan. That's what we do. We welcome that situation. When we take that approach, it's an obvious question. How do you receive payment if the borrower’s cash flow is terrible? The reality is he's got lots of those assets. That borrower will probably get lots of those assets. What he’s really doing is trying to buy a little time. You either sell the asset you lent against or sell some other asset to clean up the family business balance sheet. That's the role we play in the market. As I said, as long as we have a good position about the loan-to-value, then it doesn’t scare us, and we can generate strong interest rates and fees related to those transactions.

Right. I know that that's always been a program you hope to grow more than it had in the past. Just one more for me. Has there been any increase in inbound calls since the administration change and all the shakeup that we discussed in the call today?

Luca, you may be, you know, Luca runs the company on a day-to-day basis now. Luca, I don't know. It’s the answer. If you have a point of view, you should express it.

Yeah. We've seen a bit of an uptick in inbound inquiries related to the loan program. I don't really think personally that it’s directly related to the administration change. It’s just more of a marginal operators feeling a little squeezed in 2024, and that has increased the need for the type of product that we offer. I’m not sure what’s going to happen here in the coming months, especially given that commodity prices have kind of bounced back quite a bit.

Okay. Great. Thanks for the color.

Thank you, Craig.

Thank you, everyone. And that concludes our Q&A session for today. I will now turn the call over back to Luca Fabbri, President and CEO of Farmland Partners. Please go ahead.

Thank you, Gail, and thank you, everybody. We appreciate your interest in our company and look forward to updating you on our activities and results in the quarters. Have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Have a nice day, everyone.