Greetings. Welcome to Gladstone Land Corporation's Year-End and Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. At this time, I'll now turn the conference over to Mr. David Gladstone, Chief Executive Officer and President. Mr. Gladstone, you may begin.

Thank you, Rob. It's a nice introduction. This is David Gladstone and welcome to the quarterly conference call for Gladstone Land. Thank you all for calling in today. We sincerely appreciate all the time you take to listen to our presentations and hope we can give you some really good news this time. Before I begin though, we have to start with Michael LiCalsi. He's our General Counsel. So, Michael, take it away.

Thanks, David. Good morning, everybody. Today's report may include forward-looking statements on the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. Now, these forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. The many factors may cause our actual results to be materially different from the future results expressed or implied by these forward-looking statements, including all the risk factors in our Forms 10-K, 10-Q, and other documents we filed with the SEC, you can find them on our website, specifically the Investors page, or on the SEC's website. And we undertake no obligation to publicly update or revise any of these forward-looking statements whether as a result of new information, future events, or otherwise, except as required by law. Today we'll discuss FFO, which is funds from operations. FFO is a non-GAAP accounting term defined as net income, excluding the gains or losses from the sale of real estate and any impairment losses from property, plus depreciation and amortization of real estate assets. We may also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses. Also adjusted FFO, which further adjusts core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. We believe these are better indications of our operating results and allow better comparability of our period-over-period performance. Please visit our website once again, gladstoneland.com, sign-up for our email notification service. You can also find us on Facebook, keyword there is the Gladstone Companies, and on Twitter we're @gladstonecomps. Today's call is an overview of our results so we ask that you review our press release and Form 10-K, both issued yesterday for more detailed information. Now with that, I'll turn it back to David Gladstone.

Thank you, Michael. I'll start with a brief update on our Farmland Holdings. We currently own approximately 112,000 acres across 168 farms, along with over 46,000 acre-feet of water assets, which equates to around 15 billion gallons of water. The combined value of the land and water is about $1.6 billion, and we are eager to see how the value of the land and buildings evolves over the next year or two, especially with anticipated economic changes. The current valuation of our water assets is between $250 and $500 per acre-foot, which means they are valued at around $23 million. Water is essential for agriculture, so we are well-positioned. Our farms span 15 states and are located within 29 growing regions, while all our water assets are in California. We lease our farms to over 90 independent tenant farmers who cultivate 60 different crops, primarily fruits, vegetables, and nuts, with these products being sold predominantly to grocery stores. Regarding tenant matters, we currently have five properties vacant, which is about 15 of our farms. We are generating revenue from leases with two tenants who lease five farms on a cash basis, which puts us slightly behind on revenue collection. We are discussing possible sales or leases for the vacant farms and hope to finalize these arrangements by summer. Of the two tenants on non-accrual status, one is current with their rent, and we are working to collect from the other. The overall impact of these tenant issues led to a decrease in operating income of approximately $1.4 million in the fourth quarter and around $1.7 million for the year, though we anticipate improvement next quarter. As mentioned in previous calls, we are cautious with new investments due to high borrowing costs and land prices that still seem excessive for many potential acquisitions. Consequently, our acquisition activity has slowed and is likely to remain that way for a few more quarters. With inflation above the Fed's target, we expect interest rates to remain high in the near term. Even after any potential rate cuts, it may take time before we can increase our land holdings significantly. However, our existing farmland portfolio is performing well, barring the previously noted issues. After year-end, we sold a property in Florida, yielding a solid gain. We purchased it for about $54 million seven years ago and sold it for about $66 million in January, resulting in a cash gain of around $10 million after closing costs. This sale price was approximately $2 million higher than its recent appraised value, suggesting our properties might be undervalued based on the appraisals used for net asset calculations. On the leasing side, we have renewed or amended seven leases in two states this quarter, resulting in an expected decrease in annual net operating income by approximately $682,000 compared to prior leases. One lease was executed to replace a previous tenant on non-accrual status, shifting from a fixed rent to a crop share basis, which will help the new tenant gauge their rental capabilities. Excluding this particular lease, the remaining renewals are projected to increase net investment income by about $504,000, a 5.4% increase from previous leases. Looking ahead, we have only one lease expiring in the next six months, which accounts for less than half a percent of our total annual lease revenue. We are currently in talks with a group interested in leasing this farm, and we don't anticipate any new vacancies. In 2023, we had a successful year regarding water management in our Western portfolio, critical to operations on the West Coast. As we start 2024 positively, ongoing rains are benefiting our crops. Under the Sustainable Groundwater Management Act, we have until 2040 to achieve groundwater sustainability. Our California team is focused on understanding SGMA's impact and developing projects in areas at risk for water shortages in the upcoming decades. In 2023, we built a significant groundwater recharge facility on two farms and secured long-term water contracts in the western San Joaquin Valley, enhancing our portfolio’s sustainable water supply. We plan to continue prioritizing water security in 2024, building on the projects secured last year, especially as we experience beneficial rain. If this trend continues, it could lead to further opportunities in California agriculture and allow additional acquisitions of water rights. We also have more water projects planned for 2024 to enhance our rights. It is essential to note that our current water supply is adequate, and so far, none of our farms have needed to reduce plantings or fallow any land. Our aim is to comply fully with SGMA moving into 2024 and beyond while maintaining stable production levels on all our farms. In Florida and the East Coast, obtaining groundwater is generally simpler. Lastly, we've faced recent storms in California, but fortunately, none of our farms experienced significant damage. Our runoff management programs are effective, ensuring our farms remain unharmed. I also want to address a recurring question from shareholders about our relationship with Gladstone Securities, which helps sell our preferred stock. They primarily serve as an intermediary, passing on most of the fees they receive to various parties involved in the offering. Essentially, their operations break even, and their compensation does not lead to any profits for us when selling your securities. Please remember that preferred stock is not factored into any advisory fees we pay. I’ll pause here and turn it over to our CFO, Lewis Parrish, for further insights into the financial numbers reported in the 10-K.

Thank you, David, and good morning, everyone. I'll begin by briefly going over our recent financing activity. We did not incur any new borrowings, but we have repaid about $24 million of loans since the beginning of the fourth quarter that were scheduled to either mature or reset. On the equity side, since the beginning of the quarter, we've raised net proceeds of about $556,000 from sales of the Series E Preferred Stock. Moving on to our operating results, for the fourth quarter we had net income of about $1.8 million and a net loss to common shareholders of $4.3 million, also per share. For the year, we had net income of about $14.6 million and a net loss to common shareholders of $9.9 million or $0.28 per share. On a quarter-over-quarter basis, adjusted FFO for the current quarter was approximately $5.4 million or $0.151 per share compared to $6.6 million or $0.189 per share in the prior year quarter. Dividends declared for common share were $0.139 in the current quarter compared to $0.137 in the prior year quarter. On an annual basis, adjusted FFO for 2023 was approximately $20.3 million compared to $24.3 million in 2022 and AFFO per share was $0.569 in ‘23 versus $0.701 in 2022. Dividends declared were $0.554 in 2023 and $0.546 in ‘22. Primary drivers behind the decreases in AFFO were the lost revenues and increased expenses associated with properties that were either in the vacant, self-operated, or non-accrual status during portions of the year, as well as a decrease in the amount of participation rents recorded and an increase in dividends paid out to preferred shareholders during the year. Despite the lost revenues from vacant, self-operated, and non-accrual properties, fixed-based cash rents increased by about $255,000, or 1%, on a quarter-over-quarter basis, and by about $990,000, or 1%, on a year-over-year basis. These increases were largely driven by additional rents earned on capital improvements projects that we completed on certain of our farms. During the fourth quarter, we recorded about $3.3 million of participation rents compared to $4.7 million in Q4 of last year. And for the year, we recorded participation rents of about $5.9 million versus $7.7 million in 2022. Participation rents decreased primarily due to lower yields, coupled with lower pricing for last year's crops. The lower yields were expected due to the fact that these crops were harvested at the end of a multi-year drought and of course the water landscape in California and the West in general have changed drastically since then. Pricing continued to be somewhat lower due to oversupply, particularly in the almond market; however, we are starting to see almond prices rebound a bit as global inventories get used up. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses remain relatively flat for both comparable periods. Total related party fees decreased for both periods and that's primarily due to a lower incentive fee earned by our advisor during the current quarter and year. This decrease was largely offset by increases in certain other core operating expenses, namely property operating expenses and general and administrative expenses. Property operating expenses increased in the current year periods due to higher property taxes and additional property management fees incurred as a result of certain properties being either vacant or self-operated during portions of 2023. And G&A expenses increased due to higher professional fees and additional costs incurred in connection with amending our credit facility with MetLife. One final thing to note on our income statement, we sometimes get reimbursed by our tenants for certain costs or they will sometimes pay these costs directly on our behalf as stipulated in the lease agreement. In these cases, we record additional lease revenue and also additional property operating expenses with the amounts offsetting each other and netting out to zero. In the past, this amount has been averaging about $50,000 per quarter. However, that figure jumped to nearly $550,000 during the fourth quarter. It still nets out to zero on the income statement, but I just wanted to point out that each of these individual line items, that is lease revenue and property operating expenses, are both inflated by about $500,000 in the fourth quarter from what it has been recently. Finally, other expenses decreased due primarily to lower interest expense incurred as a result of loan repayments made over the past year. With that, we'll move on to net asset value. We had 31 farms revalued during the quarter, and it's all via third-party appraisals. Overall, these valuations decreased by about $13 million from their previous valuations from about a year ago. So at December 31st, our portfolio was valued at about $1.6 billion, and all of this was supported by either third-party appraisals or the purchase prices. Based on these updated valuations and including the fair value of our debt and all preferred securities, our net asset value for common share at December 31st was $19.06, which is down from $20.33 at September 30. The majority of this decrease was due to the change in fair value of our fixed long-term borrowings and preferred securities as interest rates retreated somewhat from $9.30 to $12.01, as well as decreases in valuations of certain farms that were reappraised during the quarter. Turning to liquidity, including availability on our lines of credit and other undrawn notes, we currently have access to over $200 million of liquidity, including about $60 million of cash on hand, and we also have over $130 million of unpledged properties. Over 99.9% of our borrowings are currently at fixed rates, and on a weighted average basis, these rates are fixed at 3.34% for another 4.2 years. As a result, we have experienced minimal impact on our operating results from increases in interest rates. And with respect to our current debt outstanding, we believe we are well protected should interest rates remain high. Regarding upcoming debt maturities, we have about $35 million coming due over the next 12 months. However, about $17 million of that represents various loan maturities. Given the value of the underlying collateral, we do not foresee any problems refinancing any of these loans if we choose to do so. So removing those maturities, we only have about $18 million of amortizing principal payments coming due over the next 12 months, or about 3% of our current debt outstanding. Additionally, we have about $10 million in loans that are not maturing but have a fixed rate term that is set to expire over the next 12 months. One last item to note here, our lines of credit with MetLife were set to expire in April 2024. However, during the fourth quarter, we amended the MetLife facility to extend the maturity date of both lines of credit to December of 2033, so almost a 10-year extension on those lines of credit. Finally, regarding our common distributions, we recently raised our common dividend again to $0.465 per share per month. This marks the 33rd time we've raised our common dividend over the past 36 quarters, resulting in an overall increase of 55% over that period. With that, I'll turn the program back over to David.

Thank you, Lewis. Nice report. We continue to stay active in the marketplace should a good opportunity present itself, but we're still being more cautious on the acquisition front. Interest rates are still too high, but we're hopeful that the rates will be lower this fall so that we can start buying more farms again. And just a few final points. We believe investing in farmland, growing crops that contribute to healthy lifestyles such as fruits and vegetables and nuts, follows the trend that we're seeing in the marketplace today. Overall demand for prime farmland growing berries and vegetables is stable to strong for almost all the areas where our farms are located, particularly along both coasts, either East or the West. So please remember that purchasing stock in this company is a long-term investment in farmland. It's an investment of a stock of two parts. One part of course is for strong assets similar to gold. It's a hard asset. Farmland is dirt and that has intrinsic value because there's a limited amount of good farmland in the United States and it's being used up by urban developers, especially in California and Florida where we have many farms. The second part of investing in this stock is, unlike gold or other alternative assets, it's an active investment with cash flows to investors and we believe we're better than a bond fund because we keep increasing the dividend whereas bonds are fixed. We expect inflation, particularly in the food sector, to continue to increase over time. We expect the value of the underlying farmland to increase as a result and we expect this especially to be true in the fresh produce food sector as the trend continues toward more healthy food choices in the United States. We have the cash, as mentioned by our CFO, to back any loans that are coming due. We have cash and credit facilities, the banks that we deal with would love to lend us more money. So we are very secure here. If we had to sell off our farms, I know we would get money to pay off any debts that we have. So we're strong in that regard. The downside, from my perspective, is very low. Farmers need dirt to grow food, and we have plenty of dirt. And so we're great for farmers, while people also need to eat. Farmers need dirt to produce the food that they eat. I'm going to stop here. Let's have some questions from those who follow us. Operator, would you please come on and help our listeners ask some questions?

Sure, Mr. Gladstone. Thank you and our first question today comes from the line of Rob Stevenson with Janney Montgomery Scott. Please proceed with your questions.

Good morning guys. David, the 15 vacant farms, what crops are those in Michigan and Washington and does that have more to do with the crop type and its demand today or is it just the financials of the previous tenants there?

A lot of it is previous tenants. This is mostly blueberry farms and we've had one tenant that has had some personal problems and hasn't been able to take care of the farms and we are going to get those farms back and lease them to somebody else. The crops are coming out just fine. It's the problem of the farmer in many of these cases that's giving us a problem. They haven't done a good job of managing their funds, and as a result, it impacts us, but it won't be for long. As some of you remember, some time back, we had a family who had a large farm from us. I guess there were two farms in that. And they got in trouble. The farmer died. There were real problems there. We took them back the first year, and then after we got everything stabilized, we rented it out. It's still paying as agreed. We signed a 10-year lease then. So the same thing will happen here. It just takes us a while to get them. Farming is a slow process and people just don't jump on a farm and say, oh, I'm going to grow some blueberries. They have to wait for it.

How should we be thinking about the delta between the NOI between you guys operating it versus having it leased to a third-party tenant for an entire year? Is there a meaningful difference in terms of how that all sort of factors into the bottom line that we need to be thinking about or is that fairly close?

It's close, but generally speaking, we have hired people to manage some of the vacant farms for us. This means we are partially involved in farming with those individuals. However, it’s a different process compared to someone who is experienced in both growing and selling crops like blueberries or strawberries. When you bring in someone else to run the farm, you are essentially supporting the farmer, which creates a different scenario. Many people underestimate the expertise needed in farming. I remember one politician simplifying it by saying farming is just about planting seeds, but it's much more complex than that. Farmers have extensive knowledge about their specific land. If any issues arise, it can take us about a year to address them, and sometimes these problems consume our time. We are also using this time to focus on the water aspect of our operations to ensure we comply with government requirements. Our staff is highly skilled in this area, and we want to assure the government that we are proactive and ready. We aim to avoid the need to leave any land fallow. Did I answer your question, Rob?

Yeah, that's helpful. And then I know the rains and floods in California caused some damage to some structures on one farm, but are they having any negative impact on any of the crops, especially the permanent ones? And, if this continues to go on, is that something we need to be careful about?

We are indeed cautious and have insurance that provides significant support. The situation you referred to from last year's rainstorm involved a few wooden structures that were not prepared for the weather, leading to their replacement. The tenant there wasn't insured for the trestles, which resulted in a slight loss for them. However, I believe that issue is not ours. For instance, one of our farms is located near the San Andreas fault. While that won't lead to the destruction of the farms, it could create challenges in accessing crops. Fortunately, we have insurance for such scenarios. We also have fire insurance for our structures, so we are well protected overall, with the exception of some issues faced by our tenants. The banks are recovering and in strong positions now, primarily because most are federally licensed. I hope interest rates decrease soon; it would greatly assist us in purchasing farms. We're currently being cautious, focusing on managing water effectively across our farms. Markets can shift; for instance, the almond industry faced challenges recently due to decreased demand from international markets during the pandemic. Many stored almonds weren’t sold initially, but almost all of that inventory has now been cleared. Almonds can be stored for extended periods, unlike perishable goods, so we are managing well. If there are no more pandemic disruptions, demand for our products should stabilize. Thankfully, over 90% of our sales go to grocery stores, which managed to increase their prices, though they did not pass those costs on to us. All banking issues have aligned, except for the Federal Reserve’s interest rates. Once that changes, we should return to growth. We support our farmers with any necessary enhancements on their farms and adjust their rent accordingly, which has been effective. Our farmers understand they have access to the resources needed to sustain their operations. Did I address your question?

Yep, that's helpful. Thank you. Lewis, how much of the quarter-over-quarter NAV decline of $1.27 was the change in farm values versus the change in debt and other balance sheet items?

The decline of $1.27 consisted of just over $0.80 attributed to changes in our long-term financing, including fixed-rate debt and preferred securities, while just under $0.40 was due to valuation changes.

Okay, and then what did you do with the Martin County disposition proceeds? I think it was $66 million or so on a gross basis. Is that just paying down debt? Is that sitting in earning interest? How should we be thinking about that?

We had about $1.5 million of closing costs. We repaid $16 million of debt that were encumbering the property. We repaid another loan since then, a small loan, and the rest of it right now is earning about 4.5% interest in the bank.

Okay. And then last one for me. David, given your comments about getting a good price if you sold some of your farms, stock’s trading at more than a 30% discount to your NAV. What are your thoughts and the Board's thoughts on potentially selling a few farms and doing some stock buybacks at these levels?

I hate it. I don't want to buy back stock. I think we're going to use the money to grow. I watch Warren Buffett a lot and he doesn't buy back stock often. I don't know. We could do that, but we'd just be injuring ourselves for the long-term future. Next question, Rob.

Yes, the next question will be from the line of Mike Albanese with EF Hutton. Please proceed with your questions.

Good morning, everyone. I think most of my questions were answered by the previous caller. However, I would appreciate more details on crop prices and the supply-demand situation for almonds, berries, and pistachios. You mentioned that the global oversupply is normalizing as inventories decrease. How much longer do you anticipate this normalization process will last? Any additional context would be helpful.

I believe the situation with almonds is mostly resolved, and any excess supply is gone. That's a positive development. There has never been an oversupply in strawberries or blueberries. Occasionally, if a farmer uses blueberries to make almond juice, they might have some leftover, but overall, supply is very low right now. No one has a substantial surplus. Even apple growers are doing well, although I personally find the apple business challenging because they tend to spoil easily. While we do have some apple products, other crops occasionally face challenges, like cherries, which can be completely wiped out by frost. We are fortunate not to have many cherries. I don't see much difference between the prices and supply from 2021 to today moving forward. I anticipate that 2024 will be an excellent year for us, as we will return to the profitability we experienced before the pandemic and market downturns. If interest rates improve, 2024 looks promising. Currently, the market is favorable, and growers in general are doing well. Sometimes, as seen in the blueberry sector, an individual may encounter personal troubles that affect their business, but that’s manageable. Transitioning to a new operator can take time, as they need to familiarize themselves with the farm before we can move to a fixed price lease, which they typically agree to after negotiations. We have had good experiences with some interesting farmers, including one of the largest in the world who collaborates with us. In the strawberry sector, our largest grower is doing exceptionally well on our largest farm. Pricing and market conditions have returned to levels similar to 2021 or early 2022, and whatever is grown can be sold, creating a positive market environment. This contrasts significantly with disruptions experienced in the past, like in 2008. Overall, I believe we are well-positioned for positive changes in the business.

Got it. That's helpful. That's pretty much exactly what I was looking for. Okay, and then can you just remind me kind of overall portfolio exposure to I guess the participation, the rent structure and then how much of that is, if any is captured with these tenants, that are having issues?

About a third of our leases have a participation rent component, primarily on our permanent crop farms, with just one or two exceptions. In the last couple of years, we've generated around $90 million in total lease revenues, with participation rents ranging from $6 million to $7 million. This seems to be our usual rate for participation rents as a share of total lease revenues.

Yeah, that's helpful. Thank you. That's it from me again.

Okay. Operator, would you come on and see if there's anyone else with a question?

Sure. The next question is from the line of Barry Oxford with Colliers.

Great. Thanks, guys. David, when you think about acquisitions and let's say interest rates stay roughly where they are, just move down ever so slightly, what would you have to see in the cap rate environment movement to make buying farms attractive to you?

Well, if this farmer will drop the price, then it works. But most of the farmers are long-term holders. When you offer them something that makes the numbers work but it's lower than they believe their farm is worth. Remember, a lot of these farms have been in families for years, so they're not willing to get rid of them. They'll just continue to farm them. I don't think at the end of the day, you're going to see much happen unless interest rates come back in line where they were in 2021.

So they approach it more from a personal than an institutional marketplace?

I hear this phrase every time. My great-grandfather started here, migrated from wherever. It's a beautiful story. Unfortunately, the tax implications that are going on now by the government keep a lot of these guys from selling because they owe so much money when they sell. They do try to do 1031s. Of course, we offer to give them stock in our company or partnership interest which we have a partnership beneath our company. Some of them take it. We have not gotten many to take all of it in terms of stock and with the stock down as far as it is today, it's almost better just to try to do everything in cash. It's a peculiar situation we’re in, but it happens every now and then just as it did in ‘08, ‘09 when people were scared to death. A lot of these farmers are people who want to get out of the business altogether. They want to sell the operating part and they want to sell their land. The land is the piece we love. We don't really want to be in the operating part often for various reasons. Generally speaking, we want to be in a passive position rather than in the operating business. If the world changes a little bit on interest rates, I think it will be explosive in terms of what we can do. Many of the farmers are 58, 59, 60 and they want to sell and liquidate simply because they're tired and worn out from years of farming. Farming is a very difficult situation for almost everybody. You're chewing your nails over the price of fertilizer and it just goes on and on and on. From my perspective, I think eventually people like us and maybe a few others who are out there will end up owning most of the farmland. We haven't seen what people keep arguing about and that is that China is buying up this farmland. They are only interested in the ones that are right next to an airport or something like that. For example, the buyer of our farm down in Florida was not buying it for anything other than they believe that in the next 10 to 20 years, they'll be able to sell pieces of that farm to people who are in the home-building area. As you probably know, millions of people have moved to Florida, and housing prices there just keep housing people very busy. That farm that we sold down there will probably have two golf courses and God only knows what else on it with hundreds of houses. But it's not going to happen to work for us because we need ordinary income coming in every month to meet our dividends. So we sold it to somebody who's going to end up holding it for a while and selling off big chunks of it to home builders down there. We have another big farm right next to that farm. We will be the benefactors of that craziness that's going on in Florida in terms of housing prices. I just don't see anything to hold us back except the interest rate craziness that's going on now. I think they're going to drop the rates somewhere along here if the Fed will drop it by a quarter of a point. All hell will break loose because the banks will be dropping their rates so that we can go use it. There are plenty of farmers who want to sell. I don't know how we solve the problem unless we can find somebody who wants to operate the farm, because the people who are selling really want to get out. I think for us, our time is here today.

Right. No, that makes all the sense in the world. And then, David, in your prepared comments, you mentioned something about California and water and banking more water. Are you seeing opportunities there? Will we start to see some dribbles here in the first quarter or first half of the year?

We have banked 15 billion gallons of water and we plan to acquire more to sustain us for the rest of the century. Once water is stored in the aquifers, it can be retained for a long time. We have been approached to purchase water at exorbitant prices, such as $1,000 per acre-foot, which would cost us around $50 million for water we previously sold at $1,000. Under $500, our calculations suggest a cost of about $20 to $24 million. We have implemented a unique approach by utilizing runoff from farms and directing it to vacant areas on our land. We’ve constructed berms and pumped water there, allowing it to seep into the aquifer, earning us credits. We are managing this at a cost of $20 to $30 per acre-foot. Our team excels in navigating California’s water challenges. I hope there is a way to transport water from Florida to California, as Florida will likely surpass California in vegetable production by the end of the century, shipping produce to us instead. Water is critical in California; without it, nothing can thrive. There's a group interested in developing land near California's capital, despite its poor water conditions, and I’m curious to see their plans. They're considered high-risk technology investors, referring to their initiative as New California. Our focus remains on acquiring property with sufficient water sources, as many properties are currently undervalued. Each of our farms has at least one water source, and by purchasing additional water, they now have multiple sources. This could potentially increase our asset values, especially if we stockpile water during a drought, allowing us to sell it to others under agreements we now have in place. We have financed pipelines connecting different farms and aquifers, positioning us well in this landscape. We are evolving our business model in response to the Sustainable Groundwater Management Act, which emphasizes the need for water for crops. There are reports about losses in almond and pistachio farming due to insufficient water, highlighting the vulnerability of these crops. Maintaining healthy almond trees requires a significant amount of water, and many are struggling. We are well-prepared now, thanks to our team's efforts to secure enough water to avoid future difficulties. Are there any other questions?

No, that's it for me. I'll yield the floor. Thanks so much, David, for the commentary.

Okay. And we got anybody else? One more coming.

Yes, we have one more question. It's from the line of Michael Diana with Maxim Group.

Okay. Thank you. My question is just on the impact of the sale in the first quarter here of that farm, the impact on net asset value, just that in and of itself, the sale. Is it going to be $10.4 million, in other words, the amount over cost, or is it $2 million, the amount over the appraised value?

It would have been $2 million more than the appraised value because the earlier appraised value was what we recorded for the NAV calculation. However, we did adjust that value as of December 31 since we had a purchase and sale agreement in place at that time. Therefore, the increased sales price is included in the NAV calculation as of December 31.

No problem.

Thank you. We have no further questions, Mr. Gladstone. I’ll turn the floor over to you for closing remarks.

Well, we certainly appreciate all of you listening to this and asking good questions and hope to see you next quarter. If you can, jot down a couple of extra questions to ask. We have time to talk to you and we only talk to you once a quarter, so get your questions ready so we can talk some more about what's going on out there in the farming world in California and in Florida. That's the end of this. Thank you very much.

Thank you, Mr. Gladstone. This will conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.