Greetings and welcome to the Gladstone Land Corporation second quarter 2026 earnings call. At this time, all participants are in a listen-only move. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Mr. David Gladstone, Chief Executive Officer. Please go ahead, sir.

Well, thank you, Melissa, for that nice introduction. This is David Gladstone, and this is the quarterly call for Gladstone Land. Thank you all for calling in today. We appreciate you taking time out of your busy day to listen to our presentation and get some updates from us. First, we'll hear from Catherine Gerkley. She's our Director of Investor Relations. She'll provide a brief disclosure regarding certain regulatory matters concerning this call. And, Katherine, go ahead.

Thank you, David, and good morning, all. Today's call may include forward-looking statements, which are based on management 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 email notification service and find information on how to contact our Investor Relations Department. We are also on X at Gladstone Comp, as well as Facebook and LinkedIn. Keyword for both is The Gladstone Company. 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 non-recurring revenues and expenses, and adjusted FFO, which further adjusts core FFO for certain non-cash items, such as converting gap 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.

All right. Thank you. Let me just talk about the portfolio we have. We currently own about 98,000 acres across 142 firms and About 56,000 acre-feet of water, which is about 18 billion gallons. Our farms are in 14 different states, and our water assets are all in California. We didn't have any acquisitions or dispositions this active quarter, but quarter in, we sold a property consisting of two citrus farms in Florida for about $3 million. It was a small amount of acreage. The original tenant had defaulted on the lease, and the replacement tenant was at a substantially lower rental rate. And given the continued weakness of the citrus market, we felt it was best to sell a property and use the proceeds to pay off some related mortgages or some other assets that we want to do something with. We may consider selling some additional farms over the next few quarters as part of our ongoing portfolio review. If we use most of the proceeds to pay down debt and buy back preferred stock, it would be very strong for us. We continue to take a disciplined approach to the acquisitions and staying active in the market so we're ready when the conditions improve. And it makes sense for us to start growing the portfolio again. And that will be when interest rates have gone down, so anything you can do talking to the Fed and telling them to lower that rate will be pleased to do some more transactions. As we've discussed in all of our prior calls, I think forever now, due to the market permanent crops, particularly nuts and wine grapes, We modified the leases structure there so that a handful of farms to reduce the grower's fixed cost while allowing us to participate more in the upside through higher crop share participation. So we're becoming much, much more involved in the operations. Overall, the 2025 almond and pistachio harvest were very strong with yields generally exceeding expectations. while the final pricing of the pistachio crop has not yet been determined. Believe that. It just takes forever to get all these things done. We received indications from certain processes that our final price is expected to be higher than the prior year. So we expect to recognize a meaningful amount of additional revenues from that harvest in the fourth quarter of this year. We entered into similar arrangements for most of these farms for the 2026 crop. So we're continuing down the same path that we set up to get us through all of that past problems. Majority of the related revenues and earnings, again, being recognized during the fourth quarter. So you'll hear from our accounting staff about how much we've got of that later. and I also want to remind everyone that the crop insurance continues to play an important role here as it helps to limit the downside risk on the farms particularly given their strong production history we could be a big year and then have some problems and the insurance always protects us from the big downside our goal is still eventually transition these farms that we're doing on a shared basis back to more traditional structures with fixed based rent at the time of that will depend on several factors such as crop productions pricing interest rates input costs and most importantly water availability we're finding some problems out there with the water availability looking ahead we have six leases scheduled to expire over the next six months and total these leases are about three and a half percent of our leasing revenue for the year ending 2026 we're currently in discussions with both existing and prospective tenants that we expect to be able to renew each of the leases prior to the expiration we're also pursuing several alternative revenue opportunities including water leases we've got prong we've We've got farms that have water, and we can lease that out. And following the programs and some of the solar things that we've been talking about in four of our tenants, we've received some cash rent payments from a couple of these tenants during the quarter. But we'll keep them on nonaccrual status until we see a consistent pattern of time and payments. We'll stop here and turn it over to our Executive Vice President, Bill Ryman. He's out in California. Is that where you are today, Bill?

Yeah, actually in Idaho today, David. Okay, go ahead. As David said, you know, the second quarter really is highlighted by really strong demand in almond and pistachio markets. We've seen almost weekly price increases in almonds and really strong bumps in pistachio grower pricing. We also reported last quarter about early marketing bonus that was announced in February. We received that in April. So, yeah, and I also read that just yesterday that these are the strongest almond prices we've had in 10 years. I haven't done that research myself, but those trends are really good. This upward trend in crop prices, coupled with really a largely uneventful quarter as far as weather and growing conditions are concerned, has kept our budget projections on track to outperform the 2025 crop year and tracking really well for 2026. Our primary pistachio processor recently announced an expected final pricing for 2025 crop of at least $2.70 a pound for split-in shell. Certainly is higher than we had projected all year. They also announced initial pricing for 2026 of $2.50 a pound for split-in shell, which is two-thirds higher than it was for last year. So, these are significant growth price increases that will have a major impact on all of our properties under modified lease arrangements, ones that we operate directly, and even our crop share lease agreements. We began shaking almonds on July 28th, so harvest season is here. The almond crop in our properties looks slightly larger than last year's crop, so we expect at least the same yields, maybe a little bit better. Reports across the state are saying yields in general are slightly lower, which is one of the factors supporting these price increases. Stash orders everywhere are extremely light, like we reported last quarter. We believe the overall industry was a little overly optimistic initially because we were projecting a much lower crop than many of our neighbors. But in the last 30 days or so, that reality has settled in, And that, in turn, has caused buyers to bump up offers for new crop to level way above last year. Crop expenses continue to track within our original budgets. There's been a lot of discussion in marketing circles about how to handle such a down year without jeopardizing what's likely to be a very strong production year in 2027. We feel our processors are positioned in the industry to maintain pricing so that 2027 will be 2025, even if we have a barn door-busting crop yield. The wine grape market really hasn't changed a lot. The 2026 crop is early. Harvest has started all over the West. so we expect that 26 crop to be to be down and not just because of vineyard removal it's just the crop looks light it's an encouraging sign and couple that with bulk line inventories finally getting closer to manageable levels we hope to see better demand for new crop this year and in the next couple of seasons so it may be finally we may finally be at a place where the industry is on the backside of the oversupply situation. In real estate markets, we talked last quarter, you know, we think in the western U.S., I think most real estate markets have bottomed out and are starting to get stronger again. We're seeing a strong divergence in valuations around water cost and availability. So, properties with good cash flow potential are also getting strong attention. Coastal California values remain flat with higher than normal inventory. Pacific Northwest is stable with really good properties, you know, transacting swiftly. I'd say values and rents are stable. Stable interest rates combined with profitable crop price and tree nuts is resulting in a little more lending activity. We're seeing growers a little bit easier getting lines of credit. It appears these banks have money to lend. There's a clear path to cover debt payments. Financial deals can get done. And I'll end this, my portion on water. You know, winter was a little disappointing, particularly from a snowpack perspective, and federal water allocations were really disappointing. We We did get an additional 3% bump in allocation yesterday, which doesn't sound like a lot, but it helps not only free up a little bit of water, but lowers the pricing in some of our water deals that we have in place. We're finding decent purchase opportunities, but we remain diligent and conservative for what we go after. Our goal is to only acquire water at a price that fits into the economics of a particular crop in a particular area. Looking at the long-term forecasts, weather forecasts, I think everybody sees it in the newspapers and online, a very strong El Nino situation coming this winter. So, we're making preparations for a long water situation for this upcoming winter. So, there should be some really good opportunities for water acquisitions and beyond just acquisitions, flood flows. That's kind of what we're keeping an eye on, being able, being prepared to take on excess water during, you know, stormy periods. So, the team continues evaluating all these opportunities, and the goal continues to be to strengthen the overall water security of the portfolio, both through long-term, short-term strategic water purchases, and continue to invest in water delivery, storage infrastructure, and identifying opportunities to create synergies across our farm assets. That's it for me, and I'll turn it over to our CFO, Louis Parrish.

Thank you, Bill. Good morning, everyone. I'll start with a brief update on some recent financing activity. We did not secure any new borrowings or repay any loans during the quarter. However, after quarter in, we repaid a $3 million mortgage loan in connection with the property sale that David mentioned earlier. In addition, during the quarter, we added several unencumbered properties to certain existing and new credit facilities that increased our immediately available capital by about $50 million. We issued about $14 million of common stock under the ATM program earlier in the quarter, and an average cost of capital of about 5.5%. Those proceeds were used to repay our line of credit and fund preferred stock repurchases. We have not issued any additional shares since April, given where the stock has been trading. Also, since April 1st, we've repurchased $13 million of preferred stock at an average repurchase yield of 7.2%, resulting in a total gain of about $1.1 million over that time. Turning to our operating results, for the second quarter, we recorded a net loss of about $8.5 million and a net loss to common shareholders of $13.5 million, or $0.32 per share. Adjusted FFO for the second quarter was negative $1.6 million, dollars or negative four cents per share compared to negative 3.5 million dollars or negative 10 cents per share in the same quarter of last year. The improvement in ASFO was primarily driven by higher operating cash revenue and lower interest costs partially offset by higher property operating expenses. Year-over-year fixed-based cash rents increased by about nine hundred thousand dollars and it was driven by rent that we collected from certain tenants that remain on non-accrual status, as well as leases executed over the past year. These increases were partially offset by the lost revenue from farms that were sold over the past year. Anticipation rents increased slightly, primarily due to higher almond prices for the 2025 crop. Direct farming operations generated a net profit of about $590,000 during the quarter, primarily driven by the harvest and sale of an orange crop on a Florida farm following the early termination of the prior tenant's lease as well as higher almond prices on the expense side are recurring cash operating expenses increased by about $560,000 total related party fees increased primarily due to a higher administration fee and the increase in property operating expenses which was largely driven by higher professional fees associated with protecting water rights on certain farms in california and also additional costs related to properties that were vacant, directly operated, or on non-accrual status. And G&A expenses increased primarily due to higher stock-related expenses and increased professional fees. And finally, cash flows from operations increased largely as a result of higher cash receipts from participation rates of crop sales, a decrease in cash allowances paid to certain tenants, and lower interest payments. Turning to liquidity, we currently have about $125 million of immediately available capital and we also have about $110 million of unpledged properties that could be used as additional collateral. Over 95% of our borrowings are currently at fixed rates with a weighted average interest rate of 3.45% locked in for an average of another 2.3 years. Looking at upcoming debt maturities, we have roughly $33 million of loans maturing over the next 12 months. Given the value of the underlying collateral, we do not anticipate any issues refinancing these loans should we choose to do so. In addition, we have $17 million of scheduled principal amortization payments due over that time, representing less than 4% of our total debt outstanding. We also have about $148 million of loans with fixed rate terms that are scheduled to reset over the next year, though the loans themselves are not returning. This includes about $130 million of loans under our MetLife facility that are scheduled to reprice in January of 2027. We are actively evaluating all of our options with respect to these loans ahead of the scheduled resets. Finally, regarding the common distributions, in July, we declared a monthly dividend of 4.67 points per share for the third quarter of 2026, keeping the dividend flat. The third stock price of $8.21 is a 6.8% annualized yield, which is well above the REIT sector average. With that, I'll turn it back over to David.

Well, thank you, Louis. overall demand for prime farmland growing berries and vegetables remain stable across most of the regions particularly along the coast of California we're also starting to see some signs of improvement in certain permanent crops both the pricing and the broader economics around those crops so we are very hopeful that the worst is over and behind us but it's still too early to say that we're fully in the clear. In closing, over the long run, we expect inflation, particularly in food sectors that we're in, to continue to move higher, and we expect the values of the underlying farmland to increase over time as a result. And we expect this especially to be true with regard to healthy foods such as fresh fruits and vegetables and nuts and long-term trends toward healthier eating habits continue to grow. Now, I'll open up for questions. Operator, would you come on and please direct us?

Thank you. If you'd like to ask a question, please press star 1 on your telephone card. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove a question from the queue. For participants using speaker, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Gaurav Mehta with Alliance Global Partners. Please proceed with your question.

Thank you. Good morning. I wanted to ask you on the participation rents if you could provide some color on how much participation rents are you expecting in the second half of this year?

I don't think we're prepared to give a final number yet just because the pistachio pricing is still in flux, the bonus for the 25 crop. We do have a pretty good handle. We know what the initial pricing for the 26 crop is, but yields are still unknown at this point. But I'll let Bill comment on this more. But given where we think we see yields and given higher pricing, we are expecting higher amounts this year. but I don't think we're prepared to get a final range of what that number is going to be. But, Bill, anything you want to add to it as far as what yields are looking like?

Yeah, I would just say it's so early. Of course, we started almonds, like I mentioned, but we're literally just less than two weeks in, so it's just too early to have a lot of confidence in any trends we see so far. so far so good, but there's a long way to go. And then pistachios, we probably aren't going to start anything till closer to the 1st of September. So yeah, just way too early on the crop yield side to give any decent guidance there. But pricing is so much stronger than a year ago. So we feel that those things are pushing us towards the positive.

Second question follow-up on the second quarter, fixed revenues. Were there any non-recurring one-time items in the revenue number for the second quarter?

There was one item that we received a cash payment from a tenant who we placed on non-accrual status last quarter, Q1 to 26. We did receive a cash payment from them this quarter. I think for the quarterly revenue, that was about $700,000. We would like for that to be recurring, but given that we're keeping that tenant on non-accrual status, I wouldn't make it in as a recurring payment at this time.

All right. And the last question, can you provide some details on the impairment charge you recognize on four farms in Arizona?

Yes. Yeah, so that was one property that that property consists of four different farms. Down in Arizona, we signed a PSA with a buyer subsequent to quarter end. So we marked it down to the purchase price, sale price per that agreement. That transaction is not closed, but we are expecting it to close hopefully in late Q3, possibly early Q4 at this point.

All right. That's all I had.

Other questions?

Yeah. Our next question comes from the line of Craig Kubica with Lucid Capital Markets. Please proceed with your question.

Yeah, thanks. I want to walk through the pistachio market update. I appreciate the additional color. I think last quarter we were discussing how you received about 50 cents a pound in your first quarter marketing bonus. Thought it might be anywhere from an additional 40 to 90 cents. Based on this update, it looks like maybe expecting towards the high of that range, like an additional dollar per pound this year? Yeah, I would say yes.

No, I would say, yeah, you know, I would definitely say it's on the upper end of that range.

Just based on what the – Craig, just to add to that, just based on what the processor said, They didn't necessarily commit to it, but with the expectation being at least $2.70, that would imply an additional bonus of at least $0.70 per pound. Read into that quote-unquote at least part what you will, but that does have us thinking that it's going to be on the higher end of that range that we gave.

Got it. Okay. And I guess just mechanically, how should we think, you know, you're starting here at $2.50, which is up two-thirds from last year. How should we think about the timing of when that's recognized? Like, should we think, you know, maybe a third this year and then two-thirds next year? Or how should we think about that?

Well, I think a lot of it's going to play into the – a lot of it's going to depend on the yield. But just speaking from a pricing standpoint, that $2.50 is the initial guaranteed price. So we will get $2.50 per pound that gets delivered to the processor. The bonus on top of that, which could be a dollar, could be more, that will be recognized in 2027 of Q4. Now, the yield piece of that equation is what's not known yet. Again, I'll let Bill comment further, but this is an off year for pistachios. Couple that with the weather event, the yields are expected to be down from last year. is it going to be fully offset by the large increase in pricing? That's kind of TBD at this point. So any further from your side on that?

Yeah, I mean, yields, you know, obviously we haven't started yet, but, you know, it is a down year. You know, the fruit on the trees is kind of a mess. There's blanking. You know, you start with a down year to begin with, them naturally down year. And then you have this heat spell in March, the messed up pollination, so you had a lot of crop drop. Then the crop that's hanging in the trees, there's a lot of blanks, a lot of issues, small sizes. We're seeing that in almonds as well, and that's across the border, small sizes. So that puts down pressure on yield. So it's just, this year is just a bit of a wild card on crop yield, but we will know, we'll know by mid, you know, everything should be in by mid-November on pistachios, and so we'll know what that, our total production is going to be, and like Louis said, you know, multiply that by the 250, and that's, you know, that's this year's pistachio revenue, plus any blocks that we have in crop insurance claims on, which we've already opened some crop insurance claims because we know we have some blocks that we just know we're going to be under our crop insurance breakpoint. So, it's a little bit hard to forecast at this point in time crop yield and how the crop insurance is going to get paid out.

Got it. Okay, thanks. That's it for me today.

Any questions? Any other questions?

Yes. Before we get to that question, please, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of John with E. Riley Securities. Please proceed with your question.

Good morning, everyone. So, maybe starting with the vacant assets you still have today, any update on potential resolutions for those 10 farms?

The majority of acreage, we think we are close on getting some alternative leases in place that David mentioned, you know, solar leases, maybe some cattle leases on some of that, following programs. We do think we'll have some of those executed before the end of Q3. Others, we're still talking with new tenants, hoping to get somebody on. Bill, any more progress that you want to note on some of these alternative leases that we're working on?

Yeah, I mean, everything just seems to move slower these days. But we have, you know, activity on virtually all of them of getting, you know, getting something in place. In some cases, the deal is already made and we know what we're going to receive and when we receive it. We just don't have the contracts completed. So there's minutia there that we're dealing with. But, yeah, I would say, you know, in most cases, we're getting there. I would also note that, you know, most of the acreage that's been vacant recently was, you know, the reason for that was a transition. A lot of, you know, we pulled a lot of almond trees out, and those are properties that are classified as vacant. But, you know, it took a long time to get the trees out. It took a long time to get those properties cleaned up. And then, you know, at the same time working on, you know, what is next for those has been going on. So, I don't think that is – I just think it's important to note that there's sort of a – the timing here is getting stretched out primarily because of that transition that we had to go through.

And just maybe kind of rough brackets, any potential ballpark on what the NOI contribution could be from those vacancies being resolved?

Well, some of – we could get close to their historical performance.

From the three that we think we're closest on, that could be an annual ad of about $1.5 million.

Okay, and then in terms of upcoming lease expirations, any color you can provide on how discussions are going with existing tenants, new tenants, just outlook for those properties as those leases roll?

Just looking at the next, I guess, the next six months out, you know, they're pretty standard leases. We expect to probably renew with each of the existing tenants at similar terms. The rent from these expirations over the next six months, they make up about 3.5% of our current annualized rent. So we would expect those numbers to stay pretty flat.

Anything to maybe be aware of going forward that could cause kind of oscillations in property operating expenses? You mentioned water. I know some of your leases have kind of water contribution agreements. I don't know if that could be kind of a variable given we might be in a bit of an interesting patch in terms of water availability between now and El Nino, but just kind of curious how to think about that operating expense line item going forward.

So there is one. I'm sorry, go ahead, Bill.

No, go ahead. I was just going to say that with yesterday's announcement on federal water allocations, And I, you know, I touched on it that it was a 3% increase and without getting too complex in how water is priced, you know, there is a published, you know, tiered system on water pricing and by increasing allocation by 3%, it bumped us into the next category. will bump down to the next category in terms of pricing. So the domino effect is that pricing and valuation of supplemental excess water from for now until the next water year starts all goes down, right? So, you know, I would say, you know, maybe like even, you know, last quarter we were feeling like, oh man, maybe water pricing as we get towards the end of the year is going to be uh going to be up and that might you know cost us a little bit more money to finish out the year now we're looking at the opposite where um that feels like it's going to um that water expense that pressure on upper pressure on water expense is actually going to be going to be reversed so just that little move uh is going to have a could have a big impact for us and then we see uh more water becoming available here as we get towards the end of the season. One of the things that happens, you know, the state's been a little more aggressive than the feds, but they've been pretty conservative with releasing water out of reservoirs. So reservoirs are, you know, above average for their historical levels. And then with the threat of a wet season coming, they need to make room. So, different owners of different water are going to be looking to sell stuff, and as we get closer to winter, those prices go down. So, we feel like water is an operating expense. There's some downward pressure here as we head into winter.

And, John, just a little bit more clarity of color as far as how that impacts the financial saving line items, there is one property where we are responsible for bringing a portion of the water to the property. I think in Q, we usually recognize the cost of that water usage one quarter in a rear, and that's just because it takes time for the final numbers and costs to get processed through the water district and made known to us. So I think in Q1, we recognized about $200,000 of that water cost, and that's water that was actually used in Q4. Now, most of this water is probably going to get used in the second half of the year, so I would expect maybe a slight uptick in Q4, recognizing water that was used in Q3, as well as Q1 of that 27.

And then lastly, just because it's kind of topical, I mean, any tenants with exposure to kind of leafy green cultivation and any impact you're seeing there at all? I know it's probably not a big portion of the portfolio, but just kind of want to check.

I was wondering when this question might come up. Definitely negative impacts from that. the, you know, a lot of our farms are on those areas are growing berries, but the cyclospora outbreak, which hasn't been linked to any domestically grown fresh produce, it just seems that the way that information is moving around has caused a decrease in demand for all fresh produce. And in fresh produce, we're used to it. We're used to quick moving markets and ups and downs um you know so as long as this doesn't last very long um it'll be just a blip on the screen uh but uh but as of right now uh across all of uh across all of fresh produce demand is down markets are down um and we'll see planting sort of back off um and um you know we'll see how this how this plays out as we transition into winter i appreciate all that detail that's it for me thank you very much right or any further questions no mr gladstone there are no other

questions i'll turn the floor back to you final comment okay thank you very much well this is a kind of bumpy call that we have but the second quarter is probably our worst quarter in trying to figure out what's going on in the marketplace. We'll have a lot more for you next quarter, and hope you save up all those good questions for us to answer. That's the end of this.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.