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

Thank you, Latanya. It's a nice introduction. This is David Gladstone, and welcome to the quarterly conference call for Gladstone Land. I want to thank you all for calling in today. We appreciate you taking the time to listen to our presentation. Before we begin, we always ask Catherine Gerkis, the Director of Investor Relations and ESG, to share her updates. Catherine, please go ahead.

Thanks, David, and good morning. Today's call may include forward-looking statements, which are based on management's estimates, assumptions and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website, gladstoneland.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Q and earnings press release, both issued yesterday for more detailed information. You can also sign up for our e-mail notification service and find information on how to contact our Investor Relations department. We are also on X at GladstoneComps as well as Facebook and LinkedIn. Keyword for both is the Gladstone Companies. Today, we'll discuss FFO, which is funds from operations, a non-GAAP accounting term defined as net income excluding gains or losses from the sale of real estate and any impairment losses on property plus depreciation and amortization of real estate assets. We may also discuss core FFO, which we generally define as FFO adjusted for certain nonrecurring revenues and expenses and adjusted FFO, which further adjusts core FFO for certain noncash items, such as converting GAAP rents to normalized cash rents. We believe these metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance. Now I'll turn it back to David Gladstone.

Thank you, Catherine. I will begin with a brief overview of our farmland holdings as we do each time. Currently, we own approximately 100,000 acres across around 148 farms and nearly 56,000 acre-feet of water assets, equating to over 18 billion gallons. Our farms span 15 different states, with all our water assets located in California, where conditions are the driest. We lease our farms to over 80 different tenant farmers who cultivate more than 60 crop varieties, primarily fruits, vegetables, and nuts commonly found in grocery store produce sections. We are maintaining a disciplined approach to new investments, meaning we are not pursuing any new farms due to high interest rates that hinder financing. We will continue to be cautious with investments while the cost of capital remains elevated, and we hope banks will lower their rates in the future. Additionally, cap rates for most row crop farmlands are still too low to make economic sense. During the quarter, we completed the sale of a property comprising two farms in Florida for $21.5 million, which represents a 36% premium over our original purchase price, yielding approximately $6 million in gains. We may explore the sale of additional selected farms in the upcoming quarters as we review our portfolio, remaining conservative in our evaluations of prospective deals. I will now provide an update on modifications we've made to certain lease structures on our permanent crops farms in the West. As mentioned in previous calls, due to market conditions affecting specific permanent crops like nuts and grapes, we've adjusted the lease structures on six properties to help both us and our growers manage costs while allowing us to share in the profits, as we are investing some capital. Essentially, we've shifted to a model based on a percentage of gross crop sales rather than a fixed rent payment. We have also taken on the operation of two properties with help from third-party operators, driving our confidence from their strong production history. Since crop insurance is based on historical yields, we were able to secure a high level of insurance coverage on these farms. This year, we surpassed our performance expectations on several farms. We are wrapping up harvest activities for last year, specifically for almonds, pistachios, and grapes. Earlier this month, we completed the pistachio harvest on three farms and expect to recognize about $17 million in revenue in the fourth quarter from these orchards, with the first cash payment being just over $5 million. Additionally, after the quarter ended, we transitioned a lease on a large vineyard in Napa, California, back to a traditional crop share arrangement, moving away from a structured lease that included a significant incentive payment. Our aim is to shift all leases back to a more traditional structure that provides consistent fixed rents rather than waiting for crop sales at the year's end. We've also executed two lease renewals post-quarter, expecting an aggregate increase in annual net operating income of about $65,000, or 7%, from those farms. Looking ahead, we have 11 leases set to expire throughout the remainder of 2025. Some of these leases involve no fixed rent, with others providing cash incentives in exchange for higher participation rent. These leases contribute negatively to lease revenue, totaling approximately $651,000, but we won’t account for earnings from crop sales until after the fourth quarter, when we will have details on amounts produced. I have a positive outlook for our nut crops, and we're engaging with both existing and potential new tenants for these farms, which may include reverting some leases back to fixed rent agreements. Presently, we have six vacant farms, and two properties encompassing four farms are operated with third-party management agreements. We are working through revenue recognition on a cash basis for leases with four tenants leasing seven of our farms and are diligently pursuing solutions for each of these situations, optimistic about resolutions in the next several months. Now I will pass it over to Bill Reiman, who has some positive updates to share.

Thank you, David. To elaborate on the eight properties that are under modified lease agreements or being directly operated with third-party operators, the harvest for the 2025 pistachio, almond, and grape crops is nearly finished. The pistachios are all stored, and as David mentioned, we have received our first payment for that crop. There are only a few tons of grapes left to harvest, and some of the almonds remain in stockpiles, but all have been removed from the fields. We anticipate completing everything in the next few weeks. Last quarter, we mentioned that growing conditions have been nearly ideal, and these favorable conditions continued through the fall. Despite some higher-than-normal rainfall in California's Central Valley, the harvest went smoothly, which is something we appreciate. Our pistachio orchards performed significantly above state averages and our own internal projections in terms of both crop quality and volume. While a few almond blocks underperformed, most exceeded our expectations. We expect to receive crop insurance payouts for several blocks that fell short, which should cover our growing costs. The grape crop also yielded strong results with excellent quality. The optimal growing and harvest conditions experienced in 2025 have set the trees and vines up well for the 2026 season. Although we need adequate chilling hours, winter precipitation, and favorable weather next year, we’re off to a promising start for the 2026 crop. Irrigation and fertilization practices are already in progress, and we will soon begin some curing activities this winter. Regarding crop markets, ongoing tariffs, trade tensions, and geopolitical issues continue to create uncertainty in many export markets. However, nut crop markets, particularly for pistachios, exhibit notable resilience and strength. We are currently seeing stronger demand for pistachios from the EU and the Middle East, which lessens our reliance on the Chinese market. While the Chinese market remains crucial, diversifying our crop distribution helps mitigate risk. Consequently, our base guaranteed price for the current pistachio crop remains consistent with 2024, and we expect the final price, while not announced for a year, to be comparable to 2024 levels. Almond prices have rebounded from a mid-summer dip and have returned to early spring levels, with prices continuing to rise weekly. Sellers and marketers are finding this favorable as pricing and demand increase, and everyone anticipates this trend to continue for several months. Conversely, wine grape markets continue to struggle, as strong yields in the past couple of years alongside declining global consumption have led to a significant oversupply in the industry. This has resulted in many vineyards being removed worldwide. At the current pace, we hope to see a turnaround in the next year or 18 months. Overall, the weakening U.S. dollar is advantageous for our exported products, making them more appealing to international buyers. Finally, on water resources, we're experiencing a similar situation to last quarter. We've been in a normal to wet cycle for the past few years, including this winter. We are focusing on improving our water delivery and storage infrastructure across our portfolio. With these wet years, there is a strong availability of inexpensive water, and we are strategically acquiring more assets. We continue to build on our nearly 56,000 acre-feet of water assets, ensuring that several of our farms have enough water supply for immediate irrigation needs, regardless of weather conditions. We feel confident about our water situation regardless of this winter's outcome. For the federal systems, we anticipate a minimum allocation of 35% and potentially as high as 50% if the winter is dry. If we experience a normal to wet winter, we expect an even stronger allocation. So, there is very positive news regarding water resources. Now, I will hand it over to Lewis Parrish, our CFO.

Thanks, Bill, and good morning, everyone. I'll begin with a brief update on our recent financing activities. During the quarter, we repaid a $10 million bond that was due, which was backed by a property we sold during the same period. On the equity front, since the start of the third quarter, we've raised around $10 million through our ATM program. These issuances were made in preparation for redeeming our Series B term preferred stock, which matures at the end of January 2026. This will help us avoid an increase in the coupon rate from 5% to 8% and decrease our dependence on our variable rate line of credit for funding that redemption. Now, regarding our operating results. For the third quarter, we recorded a net income of approximately $2.1 million and a net loss for common shareholders of $3.9 million, or $0.11 per share. Adjusted FFO was $1.4 million, or $0.04 per share, compared to $4.5 million, or $0.13 per share, for the same quarter last year. The decline in AFFO year-over-year was due to recent changes to lease structures on certain farms, loss of revenue from farm sales over the past years, and ongoing tenancy issues that resulted in vacancies, leading to lower revenues and higher costs. Fixed base cash rents were about $5.4 million lower than in the prior year quarter primarily because of the lease modifications on certain properties where we either reduced or eliminated fixed base rents or, in some cases, offered cash lease incentives in return for significantly higher crop share participation. The results from these crop share components will not be known until the harvest is completed and the crops are sold, which is currently in progress. Participation rents grew by approximately $1.9 million, largely due to accelerated recognition payments associated with the 2024 harvest on certain farms as we received additional information earlier this year. This increase was also supported by much stronger pistachio pricing compared to last year. We expect to see higher participation rents in the fourth quarter of 2025 due to the lease modifications we implemented on certain permanent crop farms. As noted in previous calls, these changes have led to lower fixed base rents in fiscal year 2025 compared to 2024, and most of the resulting crop share proceeds are anticipated to be recognized as participation rent in the fourth quarter of 2025, with a smaller portion recognized in the second half of 2026. Essentially, we are transitioning revenues from fixed base rents to participation rents over the next few years. Consequently, most of our earnings for 2025 are expected to materialize in the fourth quarter, with earnings being wider during the first nine months of the year. On the expense front, excluding reimbursable items and certain one-time or noncash charges, our core operating expenses decreased by about $140,000 this quarter. Total related party fees dropped by around $110,000, driven by a reduced base management fee due to recent sales. Our other recurring cash operating expenses remained relatively stable as higher property operating costs were offset by lower G&A expenses. Additionally, other expenses fell mainly due to decreased interest costs stemming from loan repayments made over the past year. Regarding liquidity, we currently have over $170 million of readily available capital and nearly $150 million of unpledged properties that we can utilize as additional collateral if necessary. More than 99% of our borrowings have fixed rates with a weighted average interest rate of 3.39%, locked in for at least three years. This structure has shielded us from interest rate volatility in recent years. Looking forward, we have about $17 million in scheduled principal amortization payments due over the next twelve months and around $25 million in loans with fixed rate terms expiring in the coming year, although these loans are not maturing. Lastly, concerning our common distributions, in October, we declared a monthly dividend of $0.0467 per share for the fourth quarter of 2025. At our current stock price of $9.24, this translates to a 6.1% annualized yield, which is significantly higher than the average in the REIT sector. Now, I’ll turn it back over to David.

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

The first question comes from Rob Stevenson with Janney Montgomery Scott.

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

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

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

The Series D is due on January 31, 2026, and currently has a 5% coupon. If it's not redeemed by then, the coupon will increase to 8%. Our current plan is to redeem it to avoid the higher coupon rate, using a combination of common stock and a line of credit. We have been issuing common stock at around 6.1%, and the line of credit is just below 6%. Therefore, the cost would be approximately 6%, which is higher than the current 5% yield but significantly lower than the potential 8%.

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

Correct. Yes, $60.4 million.

The next question comes from Craig Kucera with Lucid Capital.

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

The banks are not lending at the lower rates they used to when we first made these purchases, but they are moving in that direction, and we are optimistic for a lower rate. The good thing about the note we are paying off is that it doesn’t have a due date; it simply changes its rate. Therefore, liquidity is not an issue. We know the funds are available, and we don’t have to pay them back. If we do pay it back, we can reduce the rate to zero. Overall, I believe we are in a strong position. Last year at this time, we faced some challenging moments as we assessed the market conditions. However, currently, there seems to be a renewed sense of optimism in the market. I think there is possibly one farmer experiencing significant issues, which could result in a loss for us, but beyond that, the market appears to be stabilizing. This assessment mainly pertains to California; in Florida and the Midwest, clients are meeting their payment obligations, and we are in a solid position.

Got it. Yes, it does. Regarding your comments on wine grapes, should we conclude that any weakness in wine grapes has been largely balanced by strength in tree nuts compared to what you budgeted when you renegotiated those leases last fall?

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

The next question comes from John Massocca with B. Riley.

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

I think the situation on the East Coast is quite positive. However, the West Coast is still struggling to bring in new farmers with sufficient equity to manage their debts. We're still anticipating improvement, and while there has been some progress, it will take time to reach the levels we saw last year and perhaps even the year before. John, the more I analyze this, the more I'm confident it will turn out well. I hope you join us for the fourth quarter call because the fourth quarter will determine if our decision to choose variable rates over fixed rates was wise. Fixed means we receive a set amount each month or quarter, while variable means we have to wait until we sell the products. Even though all the crops are growing well this season, there isn't much else happening; as long as they're provided water and the right nutrients, they'll continue to thrive. John, I see this as a pivotal moment, and we’re starting to see some encouraging numbers. The analyst responsible for the crop projections is here with us today, and she's happy, unlike a couple of years ago when she was quite frustrated. We've also brought on a new team member on the West Coast who will visit farms more frequently than before, though the previous individual was visiting often as well. This new person has a strong background in agriculture and will help us evaluate the crops and make necessary adjustments. Right now is an excellent time to be in this business. Some buyers are interested in purchasing crops and we've had conversations with them, but they prefer to pay us with promises instead of cash. We are focused on ensuring we receive cash, so how much do we currently have, Lewis?

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

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

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

We will definitely pay down the loans in the capital stack, especially if they are nearing maturity. I don't have any concerns about that. As Lewis pointed out, the interest rate may increase to 8% unless we can eliminate the loan entirely, but the loan itself isn't due yet; the rate will only change if we don't pay it off. We are addressing this, and I believe we will be in a good position once we start receiving revenue from our variable rate charges to some farmers. We are not taking anything for granted, so we are hoping things continue to progress in the current positive direction. It was quite unexpected when there was a downturn and demand for nuts decreased significantly, and it's taken time for orders to resume. While they are back ordering now, the volume is not as high, but we can manage with the current situation. I feel comfortable and hope our projections hold true because if they do, we will benefit greatly from the switch from fixed to variable payments from the farmers. Any other questions?

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

There are a few points to consider. We could do a partial redemption, but having any product in our capital structure at 8% isn't ideal for us right now. We currently have the liquidity to take it out today if we wanted to, but since it's at 5%, which is lower than the cost of capital we would use, it makes sense to keep it at that 5% as long as possible. The plan behind combining common stock and a line of credit is that while the line of credit is a bit cheaper, it's variable, so drawing less from it reduces our exposure to future interest rate fluctuations. Additionally, as David mentioned, there are potential farm sales in the pipeline that could provide more capital. To address your question, we could take it out today if necessary, but our focus is on managing interest rate risk and securing the lowest cost of capital available.

Okay. Any more questions?

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

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

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.